Going For The Global Thrust

BANGALORE'S Church Street is a narrow bustling lane that runs parallel to the city's main artery, Mahatma Gandhi Road. Amidst the numerous multi-storeyed shopping plazas on the street is an old-style bungalow. With its quiet air, this throwback to the past stands out amidst the constant buzz.

One of the occupants of this building, Ajit Nambiar, is equally quiet. Both man and building seem anachronisms in today's hyper-active Bangalore, a city with more action than a western flick. Then, as he begins talking—cautiously at first—Nambiar, vice-chairman and managing director of the Rs 1,749-crore BPL Ltd, his reticence gradually lifts as he discloses his grand plans for this Rs 2,981-crore group. "I want to make BPL an international brand," he says matter-of-factly.

Did one hear right? After all, Indian consumer goods manufacturers haven't been too successful defending their domestic turf in the face of the onslaught from transnational corporations. So why would BPL want to beard the lion in its own den? Besides, can anyone in his right mind dream of, let us say, a Britisher mentioning an Indian brandname in the same breath as Sony, Philips, Panasonic and Thomson?

Nambiar obviously does. "We are targeting three international markets in one go: the Gulf countries, Europe and Japan. The idea is to focus on hard currency markets, and slowly work on building the brand. We believe we have products of international standards," he says. The company expects to clock an export turnover of Rs200 crore this year (up from Rs 89 crore last year), and if events go according to plan, the figure should touch Rs 500 crore by the year 2000. And by 2002, one million BPL televisions should be selling in the international markets.

One million? "Our strong domestic growth gives us the strength to go international," says marketing director T.C. Chauhan. Well, "strong domestic growth" is the right phrase. BPL is one of the very few Indian companies which have been able to hold their own against the TNC onslaught.

Over the years, it's been a ritual across markets in developing countries. TNCs with their imposing brands, cutting-edge products and deep pockets enter newly opened markets and begin wiping out domestic competition. Indian colour television manufacturers have had their share of bloodshed. The assault began in 1995, and it's taken a heavy toll. Four of the country's top colour television manufacturers of that time— Videocon, BPL, Onida and Philips—have seen their collective marketshare shrink from 81 per cent at that time, to 53 per cent today. TNCs have forced Onida to put its devil to sleep; and the company's marketshare is down from a high of 20 per cent to roughly 8 per cent today.

The sound of Videocon's bazooka isn't heard in the big cities anymore; the company's sales are concentrated in the hinterland, and it has witnessed a 7 per cent fall in market-share to 18 per cent. And Philips—a company of foreign parentage but 60-year-old roots in India—has watched its share of the colour television market halve to 6 per cent, forcing the company to rejig its entire marketing approach.

But BPL (whose figures for brand shares are slightly different from those above; see table) has deviated from the script. Even the most pessimistic estimates indicate that BPL's share of the colour television market has shrunk by a mere 3.5 per cent to 20.6 per cent; and if one goes by the company's own claims, its marketshare has gone up by 3 per cent. In either case, the company recorded the country's highest colour TV sales at 627,000 pieces in 1997-98 (which earned the company Rs 851 crore, or nearly half its turnover), a 19 percent increase over the previous year. What's more, the company's post-tax profit went up 77 per cent to Rs 85.57 crore.

In other markets too, BPL has had its share of success. Despite launching washing machines in 1989, two years after market leader Videocon (47 per cent market-share), it today occupies second place with a 26 per cent share of the market. It's a respectable player in the refrigerator market—which is carved out among seven consumer goods companies—with a 7 per cent marketshare. BPL leads the pack in the microwave oven category, with a 33 per cent share; the nearest competitor is IFB with a 12 per cent share.

So now, BPL has decided that it can take on global giants on their own turf.

To an extent, a beginning has already been made. Last year, it exported computer monitors to the US. BPL branded the products Kleer, spent Rs 15 crore on marketing, and managed to sell a very impressive 110,000 monitors. "The 'Made in India'

label is no problem in the US. Monitors are a commodity, and we compete on price and features with just about everybody," says Nambiar.

But what about the other markets? "The BPL brand has high acceptability among the Gulf populace. Our exports to those countries are ongoing," says Nambiar. In fact, most of the 23,000-odd colour TVs exported by BPL last year were to this particular region.

But it's in Europe that Nambiar is planning the big push. "Over the next few months, we plan to acquire a manufacturing base in Europe," informs Nambiar. A company with an annual manufacturing capacity of 500,000 colour TVs has already been identified in a central European country. That location will enable BPL to service the entire European market, though the nodal marketing office will be in London. "We'll spend far less on the acquisition than initially envisaged. The company is merely short of working capital, and our expenses should be in the range of Rs 15 crore to Rs 20 crore. And of course we may spend further on expanding capacity," says Nambiar.

The acquisition is a necessity for BPL. Thanks to import duty concessions for European Union (EU) members, TV sets manufactured outside the EU member countries become 14 per cent more expensive, and uncompetitive.

But, typical of BPL, and perhaps Nambiar himself, there's no big bang approach being followed. Instead, it's all on slow burn. "We expect 75 per cent of our initial televisions to be sold as original equipment to foreign brands. Sales of our branded products will increase gradually," says Nambiar.

THE company has already had reasonable success in the Japanese market. That's courtesy its long-standing technology partner, the $16-billion Sanyo Electronics. In December 1996, BPL's alkaline battery factory commenced production. It has been set up with technology from Sanyo. The Japanese company is also BPL's buyback partner. The plant, with a capacity of 10 million units a month, is currently operating at a capacity of 6 million a month, most of which is bought by Sanyo and Fuji Film for the Japanese market. "We shall soon be selling to Kodak and Philips as well," says Ajay Baijal, vice-president, soft energy. If all goes well, BPL should export alkaline batteries worth Rs 40 crore in 1998-99.

What gives BPL confidence? "BPL never lost the mind game," says Rajeev Karwal, vice-president, marketing, at South Korean giant LG Electronics' Indian subsidiary. "They knew they had quality products, and they worked on pulling the customer by upping the value of their brand. Today, BPL is one of the strongest Indian brands across all industries. Internally, we benchmark many of our marketing functions against BPL, because that's a tough yardstick. " Indeed. BPL had the confidence to drop its foreign collaborator's brandname (after being known for years as BPL-Sanyo) and kept on doing well. Trisys, an independent research agency, has valued the BPL brand at Rs 1,102 crore. The company has also consistently come in as India's first or second most-admired consumer durable marketing firm in annual surveys by A&M magazine. BPL's ad spend has been going up consistently, and today stands at Rs 80 crore. Even though rival Videocon spends Rs 110 crore, it pushes many more brands—Kenstar, Kenwood, Sansui, Toshiba—apart from Videocon. And Rs 80 crore pushing one monolithic brand is an awesome force.

Before the TNCs moved in, BPL occupied the premium slot among Indian consumer electronics brands. The TNCs pushed BPL down the image ladder, but its massive brand-building effort has given it ownership of the upper-middle segment of the market, which has both numbers and margins.

The other fact that has worked for BPL is that unlike most TV manufacturers, it has a high level of vertical integration, manufacturing 90 per cent of its components. That enables a check on both pricing and quality. In these times of tumbling TV prices—where, by Nambiar's own admission, pricing is market-determined and not cost-based—BPL has actually managed to increase its operating margins. Due to vertical integration, it can rotate its inventory 10.34 times in a year, up from 5.74 times in 1996-97. Adds Karwal: "Customers have always associated BPL with quality."

Vertical integration, though, may head for a change. Hear out Nambiar: "It may just be crystal ball-gazing, but I may have to change the way I do business in the future. I believe that in the 21st century, brands are going to be the capital. In future, you'll have specialist manufacturers who can supply anywhere in the world. And then you will have the companies who own the brands."

 But doesn't that go against the grain at BPL? "I recognise that my cost-competitiveness and quality are linked to my manufacturing skills. We won't out-source if we are not sure of maintaining quality," states Nambiar. For instance, he doesn't intend farming out the production of hi-fidelity music systems, or the 28-inch multimedia television with an inbuilt computer and remote keyboard, slated for launch soon. BPL's black and white televisions, though, have been outsourced for the last three years. Ditto with the low-end Sangeet range of radios.

But that shouldn't be his immediate concern. "BPL isn't very strong in the premium product categories," says an industry source. Admits Chauhan: "In music systems we have ignored the 500 watts and above category." In televisions too, its 25 inch and 29 inch televisions give BPL a far lower price realisation than that of TNCs. That's probably the last domestic bastion left for BPL to conquer.