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Integrated Case Studies œ I (MB371) : April 2007 Case Study (100 Marks)

ñ This section consists of questions with serial number 1 - 5. ñ Answer all questions. ñ Marks are indicated against each question. Read the case carefully and answer the following questions: 1. Analyze the various issues involved in the joint venture with respect to BPL . (25 marks) < Answer > 2. Critically analyze the problems faced by BPL in specific as a result of its foray into various business ventures. (20 marks) < Answer > 3. With respect to BPL‘s restructuring process, discuss a. The various initiatives taken by the company and their rationale. b. Its ability to cope with intense competition in the white goods segment. (12 + 9 = 21 marks) < Answer > 4. —The joint venture was a new chapter in the shared history of the two entities. During the period of their association, which began in the early 1980s, both BPLL and SECL experienced drastic fluctuations in their fortunes“. Analyze the future for BPL in terms of the BPL & SECL joint venture? (18 marks) < Answer > 5. Branding and positioning are considered to be the key to success. In this light, explain a. The branding and promotional strategies adopted and b. Positioning of BPL Sanyo. (8 + 8 = 16 marks) < Answer > BPL Ltd & Sanyo Electric Co. Ltd: An Enduring Alliance "We are excited to be in and are totally committed to growing the Indian market. We are bringing the best [1] on offer from Sanyo, which reflects - Keiji theOshima, importance President of this & market. COO, “Sanyo BPL Pvt. Ltd., i n 2006. —We have been out of the market for over two years now. We are confident we will regain our market [2] share. “ - Ajit G Nambiar (Ajit), Chairman and CEO, Sanyo BPL Pvt. Ltd., in 2006.

INTRODUCTION

In July 2004, Sanyo India Private Ltd (Sanyo India), the wholly-owned subsidiary of Sanyo Electric Co. Ltd. (SECL), Japan‘s third largest consumer electronics company, entered into a 50:50 joint venture with BPL Ltd. (BPLL), the flagship company of the BPL group. The color television (CTV) business of BPLL, including two assembly lines, sales, service, marketing, and distribution infrastructure, was shifted to the new joint venture, and was christened Sanyo BPL Private Ltd. (Sanyo BPL). —We have cemented our close long-term relationship with [3] Sanyo through this agreement,“ said T.P.G. Nambiar, founder of the BPL group. [4] [5] [6] The new JV Company was to manufacture and market all types of televisions œ CRT , LCD , and plasma . However, the JV Company began operations only in the last part of 2005 and made known its intention of entering the Indian CTV market with both the BPL and Sanyo brands. In early 2006, the JV company officials informed the press that they aimed to capture 17 % of the Indian television market in three years. SECL had also decided to sell high-end refrigerators, washing machines, air-conditioners, etc., through Sanyo India, and aimed to gain 18% of the appliance market by fiscal 2009. Suggested Answers with Examiner's Feedback Page 2 of 22 Edited by Foxit PDF Editor Copyright (c) by Foxit Software Company, 2004 For Evaluation Only.

The joint venture was a new chapter in the shared history of the two entities. During the period of their association, which began in the early 1980s, both BPLL and SECL experienced drastic fluctuations in their fortunes. In the late 1990s and early 2000s, BPLL, with technical assistance from SECL, was the market leader in several categories in the Indian consumer electronics and home appliances market. By 2003, however, BPLL was facing serious financial problems. In 2004-05, owing to intense competition in the global electronics market, SECL too posted record losses and was teetering on the edge of bankruptcy. BPLL embarked on a debt restructuring exercise under which it retired high cost debt and sold off ”non-core‘ businesses. SECL too undertook a revival plan and decided to concentrate on emerging markets, eco-friendly products, etc. Although Sanyo BPL would be operating in a market which had witnessed dramatic changes over the previous five years, the partners were optimistic about their future prospects. BPLL: THE RISE AND FALL BPLL was established in 1963 as a private limited company (Refer Exhibit I for BPL logo). It was promoted by T.P.G.Nambiar (Nambiar) in collaboration with UK-based British Physical Laboratories Instruments Ltd. Initially, the company manufactured electronic test and measuring instruments, electro-medical instruments, electro-cardiac graft patient monitoring systems, etc. In 1979, the company entered into a technical collaboration with UK-based Gestetner for the manufacture of plain paper copiers. In 1982, the company diversified into consumer electronics. It started manufacturing black & white and color television sets and video cassette recorders in technical collaboration with SECL. In 1994, the company went public, issuing 8,200,000 equity shares of Rs 10 at a premium of Rs 105 per share. The shares were offered to promoters, directors, and their friends (75,000), financial institutions like UTI, ICICI, SCICI (1,000,000), employees (197,600), and the public (6,927,400). In addition, 900,000 shares were issued at a premium of Rs. 155 per share to Foreign Institutional Investors (FII). In 1994, BPL Power Projects (AP) Ltd (BPP (AP)), a subsidiary of BPLL, planned to build a 520 MW power plant at Ramagundam, Andhra Pradesh. The Andhra Pradesh State Electricity Board (APSEB) signed a Power Purchase Agreement (PPA) with BPP (AP) the same year (Refer Exhibit II for more details). In 1995, the company started manufacturing alkaline batteries, primarily for the export market. In the same year, it expanded and modernized its TV manufacturing facilities, after which its TV production capacity crossed the 400,000 sets per year mark. In 1995, the company again issued one million equity shares at a premium of Rs 120 per share to warrant holders. BPLL then entered the telecommunications sector through its subsidiaries, BPL Telecom Ltd. and BPL Communication Ltd. [7] In 1996, BPLL was the leading company in exports growth (1995-96) in the consumer electronics category. [8] In 1997, it bought UPTRON Colour Picture Tubes Ltd. . BPL Automatics Ltd was formed the same year. BPLL started marketing its alkaline batteries within India. It also formed BPL PTI Chemical Industries Pvt. Ltd, a 50:50 joint venture with Indonesia-based PT International Chemical Industries Co. Ltd. The joint venture company set up a plant to produce dry manganese dioxide batteries at Maddur in Karnataka. This later became a wholly-owned unit of BPLL.

In 1998, the company launched cooking ranges with Italian technology.Continuing its efforts to bring the latest medical technology to the country, the company launched state-of-the-art ultra-sound scanners and electro cardiographs. The same year, BPLL issued five million redeemable preferential shares at Rs. 100 each.

In 1999, BPLL joined hands with Microsoft Corporation India Pvt. Ltd. to provide interactive voice response, computer telephony, and call center applications under its telecom business. In February 1999, the company entered into a joint venture with Rites, a public sector company under the Ministry of Railways, to build an optical fiber cable-based broadband network between Mumbai and Chennai along the railway track. In 2000, BPLL launched bplnet.com (Internet access services) and oyeindia.com (a youth portal). During the same period, the company also merged its Net and broadband businesses to form BPL Internetworks Ltd.

In 2000, BPL Mobile, a subsidiary of BPL Communication, was awarded the gold medal for corporate image at [9] the International Advertising and Multimedia Festival . The same year, BPLL issued four million cumulative redeemable preference shares of Rs 100 each to banks and financial institutions. Around this time, the company [10] partnered with Denon , Japan, and other premium brands to bring hi-end digital audio products to India.

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[11] These products were launched under the Pro-FX brand. In 2000, BPLL acquired a CTV manufacturing plant located in Slovenia, Eastern Europe. In 2000, BPLL test launched Evelux, a low-end CTV brand, in the Indian market as part of a flanking strategy. However, the initial sales reports were not very encouraging, and the company decided to drop the brand. The head of the entertainment electronic business, Ajay Bijal, said, —We have currently decided to withdraw Evelux from the market, as we found that it is difficult to support two [12] independent brands, given the current situation in the market.“ In 2000, BPL Telecom was renamed as the BPL Innovision Group and BPLL‘s businesses in the telecommunications sector, wireless (BPL Communication), Internet and broadband (BPL Internetworks), and technology solutions (BPL Innovision Technologies) were all brought under it. Nambiar‘s son-in-law, Rajeev Chandrasekhar, was appointed as Chairman and CEO of this group.

In April 2001, the Securities Exchange Board of India (SEBI) debarred BPLL from approaching the primary [13] capital market for four years (beginning April 19, 2001) on the charge that BPLL had manipulated its share [14] [15] prices in collusion with Harshad Mehta in 1998. However, the Securities Appellate Tribunal (SAT) later reversed SEBI‘s order stating that there was —not enough material evidence to establish direct/indirect [16] indulgence in market manipulation.“

Newspapers reports about financial problems in the BPL group began appearing in late 2001. The numerous diversifications by the group had resulted in high levels of debt, and servicing this debt was proving to a major drain on the finances of the company. The high cost of capital was partly to be blamed. Ajit Nambiar (Ajit), CEO, BPLL and Nambiar‘s son, said, —Indian companies, which built manufacturing infrastructure in the early 1990s financed in rupee borrowings at the then high costs of capital, (saw a) higher fixed cost structure vis-a-vis [17] foreign brands that have enjoyed the benefits of no infrastructure and lower costs of capital today,“ In October 2001, it was reported that the BPL group was carrying out a major restructuring of its businesses. The Rs. 14 billion restructuring exercise involved reorganization of the company‘s businesses, retirement of high- cost debts by raising fresh loans at lower interest, infusion of fresh capital, sale of non-core businesses, etc. The company planned to create eight strategic business units after the restructuring. Ajit said, —We are dividing our businesses into eight focused groups ù entertainment electronics, home appliances, soft energy, healthcare components, networking & information technologies, wireless, Internet, broadband & technology solutions, and [18] [19] power generation.“ Around that time, BPLL engaged Accenture to carry out an evaluation of its mobile telephony business (cellular circles).

In November 2001, K.S. Jayanth Kumar, who till then had been the Managing Director of BPL Communications, was appointed as the CEO of BPLL. The company made known its plans to convert its manufacturing facilities in Palakkad, , into an EOU (Export Oriented Unit). It also had plans to sell off its ”non-productive and unutilized‘ assets, spread across the country, especially those in Delhi, , and Pune. The same month, the BPL Innovision Group sold its Internet Service Provider (ISP) business to Data Access [20] .

In October 2002, BPLL launched a promotion campaign for its dealers. The best performers could win a free trip to South Africa for the Cricket World Cup. The company also spent around Rs 200 million on a consumer campaign. Despite the campaigns, the company‘s sales dipped. According to company officials, the decline in sales was due to production problems.

By late 2002, BPLL was fast losing ground in the consumer durables market to the Korean companies, LG and . According to ORG estimates in January 2003, BPLL found itself relegated to the fourth position in the CTV market, with a 9.2 per cent market share. LG with 16.3%, Samsung with 12.8%, and Onida with 12.6% market share were first, second, and third respectively.

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The company tried to revive its fortunes by launching new models. In March 2003, Ajit said, —We will be launching 16 new CTV models including 21 inch pure flat and 29 inch super flat models in 2003-04. With the [21] new launches we are eyeing 16 per cent market share.“ However, the new launches were not enough to halt the slide in the company‘s market share. The company also planned to introduce new products. Ajit said, —We plan to launch several multimedia products [22] including LCD projectors, digital cameras, DVD Players, and Worldspace Radio,“ In December 2003, BPLL [23] entered into an OEM deal with Haier . As part of the deal, BPL was to supply televisions to Haier, which were to be sold under the Haier brand.

To add to its troubles, in early 2003, the personal assets of Nambiar and Ajit were attached after the Bangalore [24] city court‘s interim order following petitions filed by unsecured creditors who claimed dues of around Rs. 100 million.

In August 2003, the company announced that it planned to consolidate its components businesses. Listed companies and privately held companies in the components business (BPL Engineering Ltd, BPL Display Devices Ltd, Electronics Research Ltd, and the automation and the printed circuit board divisions which were directly under BPLL) were to be brought under one company (Refer Table I for BPL Group Companies). It was also on the look out for a strategic partner who could help it expand its components business. Ajit said, —We are considering consolidation of some of these companies depending upon the synergies of the business. There is also the possibility of a strategic equity partner being inducted. The nature of consolidation in the components [25] business will depend on the interests of the partner as well,“ This restructuring was not connected to the corporate debt restructuring of the BPL group. Table I BPL Group Companies (as of 2003) Nambiar International Investments Co. Ltd. BPL Engineering Ltd. BPL Power Projects (AP) Pvt. Ltd. BPL Telecom Ltd. BPL Power Project (Kerala) Pvt. Ltd. BPL Power ventures Pvt. Ltd. Phoenix Holdings Pvt. Ltd. Electronic Research Ltd. BPL Display Devices Ltd. BPL Soft Energy Systems Ltd. The list is not exhaustive. Compiled from various sources. Even with all its troubles, the company managed to continue bringing out new products under the BPL brand. In 2003, it launched BPL branded laptops as well as a new range of CTVs called i-sort. In 2004, Jayanth Kumar resigned from the post of Director and CEO of the company. In the financial year 2003- 04, BPLL‘s subsidiary in the refrigerator business ù BS Refrigerators Ltd., incurred a total loss of Rs. 802.9 million. It suspended operations in January 2004 and requested the Government of Karnataka for permission to close down operations. BPLL remained inactive in the market for the better part of 2004 and 2005, leading to its rapid disappearance from all categories in the consumer electronics industry (Refer Exhibit III for comparison of CTV market shares in 2001 and 2005). In October 2004, BPLL‘s corporate restructuring proposal was [26] approved at a creditors‘ meet by 20 banks , insurance companies, and financial institutions led by ICICI. These institutions, together, had lent Rs. 9.87 billion to BPLL. There were other institutions who had lent around Rs. 4.81 billion, who did not attend the creditors‘ meet. In October 2005, BPLL reported a net loss of Rs. 347.6 million for the second quarter of 2005. Its gross revenues from sales were just Rs. 347.1 million (Refer Exhibit IV for BPLL‘s financials). As a part of the financial restructuring, the promoters brought in around Rs. 500 million which was used to pay pressing creditors, dealers, employee dues, and to meet working capital requirements (See Table II for shareholding pattern in BPLL as of June 2005). Table II Shareholding Pattern in BPLL (as of 30.06.2005)

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Category No. of shares % of shares A PROMOTERS i Indian Promoters 15,443,200 55.77 ii Persons acting in concert 919,000 3.32 Sub-Total 16,362,200 59.09 B NON-PROMOTERS a Institutional Investors i UTI and Mutual Funds 900 0 ii Banks, financial institutions, insurance companies, 548,310 1.98 state and central government institutions iii FIIs 1,500 0.01 Sub-Total 550,710 1.99 b Others Private corporate bodies 1,486,553 5.37 Indian public 9,047,991 32.68 NRIs/OCBs 241,646 0.87 Other 800 0 Sub-Total 1,07,76,990 38.92 TOTAL 27.689.900 100 Source: www.sebiedifar.nic.in.

The company also sold off some of its businesses at around this time. The battery business was sold to Eveready [27] Industries India Ltd (EIIL) for Rs. 670 million in September 2005, with BPLL‘s subsidiary in the battery business œ BPL Soft Energy System Ltd. ù becoming a wholly-owned subsidiary of Eveready. As per the sale agreement, Eveready was entitled to use the BPL brand for the batteries for a period of 30 months. In December [28] [29] 2005, BPLL sold its stake in the mobile company, BPL Communication Ltd (BC), to Essar . BC held 74% in BPL Mobile Communication (which operated in the Mumbai telecom circle) and 100% in BPL Cellular (which held licenses in three telecom circles œ Kerala, Tamil Nadu, and Maharashtra, excluding Mumbai). As on December 2005, BC had around 1.56 million subscribers. Following the sale of some of its businesses and its withdrawal from loss-making lines of business, the company‘s product profile contracted considerably (Refer Exhibit V for the product profile of BPLL in 2005). ABOUT SECL SECL began as Sanyo Electric Works in 1947 in Moriguchi, Osaka. Initially, it manufactured bicycle generator lamps. Right from the start, it was known for the quality of its products. In 1950, it changed its name to Sanyo Electric Co. Ltd. In 1952, SECL became the first company to launch plastic radios in Japan. In 1953, the company started manufacturing televisions. It also launched washing machines with the ”pulsator‘, a revolutionary technology then. In 1954, the company was listed on the Tokyo and Osaka stock exchanges. In 1956, the company launched electric fans and heaters. In 1961, it started manufacturing home-use split air conditioners in Japan, the first company to do so. In 1969, it established two subsidiaries ù Sanyo Electric Credit Co. Ltd (SECCL) and Sanyo BC. In 1970, the company established a product development center. In 1971, Sanyo Electric Distribution Co. Ltd. (later to be renamed Sanyo Electric Logistics Co. Ltd.) was established. In 1975, SECL acquired Fisher, a European consumer electronics company. In 1975, SECL became the first company to develop manganese-dioxide-lithium batteries and it started mass producing these by 1978. In 1979, it launched Amorton, the world‘s first amorphous silicon solar battery. In 1983, it launched a refrigerator with a [30] chiller, a breakthrough feature then. In 1986, the company adopted a new wordmark (Refer Exhibit VI for the company‘s wordmark). In 1989, SECL launched the world‘s first fuzzy logic camcorder and LCD projector. [31] In 1991, SECL developed the world‘s first HIT solar cell. In 1992, the company introduced the world‘s first cordless telephone with answering machine. In the same year, Sanyo Electric Software Co. Ltd was established. In 1994, the company started selling photovoltaic cells for residential use. In 1995, it developed a low- temperature TFT LCD. In 1996, SECL reorganized its companies in North America under one company œ Sanyo North America Corporation. The same year, it launched digital cameras and Internet televisions. SECL merged its sales company based in Antwerp with Sanyo Fisher. In 1998, Sanyo Fisher was combined with SECL‘s European

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companies to form Sanyo Fisher Vertriebs GmbH, based in Munich, Germany. The same year, SECL secured ISO certification for all its manufacturing facilities. In 1999, Sanyo Lithium polymer batteries were introduced. In 2000, SECL celebrated its 50th anniversary. The same year, SECL‘s companies in the air-conditioning business were regrouped under Sanyo Electric Air Conditioning Co. Ltd. In 2001, SECL entered into an agreement with Ford Motor Co. under which it was to provide battery systems for Ford‘s hybrid electric vehicles. The same year, it acquired the nickel metal hydride battery business of the Group. In 2002, the construction for the giant photovoltaic power generating system, Solar Ark, was completed (Refer Exhibit VII for a photo of the Solar Ark). In 2003, SECL entered into an agreement with Korea-based Samsung Electronics Co. Ltd for the joint development of home-use air conditioners for the global markets. [32] In March 2004, SECL announced that it planned to enter into a joint venture with Seiko Epson Corporation (Epson) by integrating its LCD businesses (SECL‘s LCD business, Sanyo LCD Engineering Co. Ltd, and Tottori Sanyo Electric Co. Ltd.) with that of Epson‘s. This was done to cut costs and compete with the larger players in the business. By October 2004, the JV company œ Sanyo Epson Imaging Devices Corporation, was established with SECL holding 45% equity and Epson holding 55%. The decline in the prices of digital cameras and other consumer electronic goods, and an earthquake in North- west Japan which seriously damaged the company‘s chip-making facility, led to SECL posting a record loss of ¥ 171.5 billion in 2004-05, with the semi-conductor business accounting for more than half of the loss. Cut-throat competition among Japanese players and low-cost players from China and other countries in the consumer electronics market added to the company‘s problems. In July 2005, SECL announced that it would lay off 15% of its workforce (about 14,000 people) in the next three years and announced a comprehensive revival program (Refer Exhibit VIII for more details). Newspaper reports also said that the company intended to sell SECCL. In March 2006, SECL estimated a loss of ¥ 233 billion (US$ 2 billion) for 2005-06 (Refer Exhibit IX for financial information on SECL). It also announced that it would spin off its loss-making semiconductor business into a new entity œ Sanyo Semiconductor Co. ù in July 2006. To further cut costs, SECL entered into a joint venture with Taiwan-based Quanta Computer Inc. (Quanta) to manufacture and market LCD TVs. Under the agreement, Quanta was to manufacture LCD TVs under the Sanyo brand. Earlier, the company had entered into a joint venture with Finland-based Corp under which some of SECL‘s cell phone operations were [33] combined into the JV Company. BPLL AND SECL: AN ENDURING ALLIANCE Technical Collaboration: The relationship between SECL and BPLL began as early as 1982. SECL provided technology to BPLL in diverse product categories. For example, BPLL‘s alkaline battery business used state-of- the-art technology from Sanyo Energy Tottori Co. Ltd., a subsidiary of SECL. SECL was a major player in the battery business and its batteries had even been approved by NASA, USA, for its space application programs. The batteries manufactured at BPLL‘s plants were also shipped to SECL. SECL also held stakes in several companies in the BPL group. However, until 2005, it stayed away from assuming management responsibilities in any of the companies. In early 2001, SECL picked up a 14% stake in BPLL‘s subsidiary in the home appliances business œ BS Appliances Ltd. The subsidiary manufactured and marketed appliances like washing machines, microwave ovens, vacuum cleaners, dishwashers, gas tables, and cooking ranges. SECL also secured 18% in BS Refrigerators Ltd. BPLL proposed to merge BS Appliances and BS Refrigerators to form a 50:50 joint venture between the merged entity and SECL. Ajit said, —We have agreed for a 50:50 joint venture with Sanyo in the [34] home appliances business. We are working on the nitty-gritty…“ However, plans for the joint venture suffered a setback when SECL demanded a controlling stake in the company. The Joint Venture: In July 2004, newspapers reported that BPLL had signed a 50:50 joint venture agreement with SECL. BPLL was to hive off its CTV business including two assembly lines, sales, service, distribution, and marketing infrastructure to form the joint venture, which was to operate primarily in the CTV market. Reports also suggested that BPLL would receive $ 80 million from SECL and that most of the money would be used to restructure its debts. —The cash being paid to BPL for the purchase of the CTV business is to be used to partially pay off the restructured debts. The partnership with Sanyo gives BPL Ltd $ 80 million (Rs. 3.68 billion), of which $ 70 million (about Rs. 3.22 billion) will be used to meet commitments toward lenders and [35] creditors,“ Ajit explained. With BPLL‘s CTV facilities being transferred to the joint venture, Sanyo-BPL was all set to enter the Indian CTV market. Ajit said, —We believe that Sanyo and BPL, in tandem, will create an impressive platform of

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[36] global, technologically advanced products for the Indian consumer.“ The CTV manufacturing units of BPL were also to be utilized to export Sanyo brand TVs to Europe and West Asia. However, it was not until the last quarter of 2005 that Sanyo-BPL began operations. The delay was mainly due to SECL‘s insistence on getting clearance letters from BPLL‘s creditors and partners, which took a lot of time, and also because the joint venture company was required to secure court clearances in several matters. The joint venture company organized a nation-wide meeting of dealers in September 2005. The company sources said that the dealers showed a lot of interest. —BPL is still a brand to reckon with, despite LG, Samsung, [37] and Haier getting a foothold in India,“ one dealer commented. The new company was left to raise its own funds. Company officials said, —The joint venture will take care of the working capital requirements on its own, and it will be backed by a letter of comfort from Sanyo if needed. The new company is in the midst of finalizing its business plans and would approach both domestic and overseas banks for raising up to $30 million. We are looking at the possibility of involving Sumitomo Mitsui Banking [38] Corporation, given their close ties with Sanyo,“ Initially, the management at Sanyo-BPL toyed with the idea of co-branding (BPL-Sanyo) its products. Ajit said, —The new company has been given complete freedom to decide on the use of the two brands, BPL and Sanyo. Various options are being considered on how best the two brands can be utilized for achieving this. Consumer [39] and trade insights are being evaluated and a final decision on this is expected to be taken by August end.“ He added that though the joint venture would consider entering the markets for all product categories in consumer durables, the immediate goal was to achieve leadership in the CTV market. In August 2005, plans for co-branding were dropped and the company decided to sell products under both brands individually. Earlier, SECL had only been a technology partner and all products were sold under the BPL brand. In the new arrangement, Sanyo brand products were also to be sold. A BPLL spokesperson said, —Our objective is to clearly re-establish BPL‘s franchise. While Sanyo has been the technology partner for years, this will be the [40] first time the brand is being launched across all durable categories.“ With the two brands, Sanyo-BPL expected to cover all the price points in the consumer durables sector. With respect to positioning, the Sanyo brand was to sell high-end products on the technology platform, while the BPL brand would cater to the value-conscious customer. Company sources said, —We expect BPL to lead the [41] volume growth with Sanyo positioned as an aspirational brand in the urban market.“ The Sanyo brand products were to be imported from SECL‘s manufacturing facilities in Japan and other countries. Sanyo-BPL selected Bangalore-based Triton Communications as its ad agency for creative duties. It was reported that the ad contract was to the tune of Rs. 180 million. Ganesh Kamath, vice-president, Triton Communications, said, —Our task includes promoting both BPL and the Sanyo brands simultaneously. The client [42] liked the clarity in our creative idea, which can be expanded across all media.“ In January 2006, Sanyo BPL appointed Initiative, an ad agency, for media duties. The size of the ad contract was more than Rs. 180 million. Initiative had earlier worked for LG. The ad agency planned to use different media for the two brands. —Sanyo and BPL are two brands with distinct identities. Therefore, we will have a separate strategy for each of [43] them.“ While more than 85% of the ad budget was reserved for the BPL brand, the remaining was to be used to establish the Sanyo brand, which was to be advertised primarily in outdoor media. CTV sales in India were estimated to be between 9.5 and 10 million units in 2005-2006 and this was expected to cross 11 million units in 2006-07, with the rural market contributing nearly 45% of the volumes. With the rural market witnessing an annual growth of around 9%, Sanyo-BPL decided to avoid a confrontation with the leading brands œ LG and Samsung -- which had established themselves in the urban centers ù and to focus instead on the rural market with the BPL brand. Also, consumer research in 2006 showed that the BPL brand still enjoyed high brand recall in the rural markets. And in the states of Tamil Nadu and West Bengal, the research revealed that the BPL brand had strong recall even in urban centers. The company planned to capitalize on this to the fullest extent. By early 2006, Sanyo-BPL indicated that the Sanyo brand would be used for products in entertainment electronics (LCD TVs, plasma TVs, home theaters), digital products (digital camcorders, digital cameras, mobile phones, etc.), and appliances (refrigerators, washing machines, microwave ovens, etc.) categories, while the BPL brand would be used for consumer electronics products (CTVs, DVD players, etc) alone. The company also decided to concentrate on specific product categories and announced that it would initially launch six models of

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washing machines, six models of refrigerators, and three models of microwave ovens. —We are going to pick and [44] choose our battles,“ said V.G. Rajagopalan, Marketing Head, Sanyo-BPL. The company began building up its distribution network. In early 2006, it inaugurated its first exclusive store which showcased the entire range of products of both the BPL and Sanyo brands. Kallol Basu, Regional Manager (east), Sanyo BPL, said, —We have opened our first brand store ”Gallery‘ in the country in Kolkata. [45] Soon, such brand stores will be opened in cities like Delhi, Hyderabad, and Chennai,“ Sanyo BPL planned to open 15 exclusive stores by the end of 2006. Sanyo brand slim TVs were also launched in the early part of the year. Both partners were confident that the JV company would be able to capture a significant share in the Indian market. Ajit said, —The rapid growth in the CTV market in India offers a great opportunity to Sanyo BPL. BPL, with its existing brand equity coupled with sales, distribution, marketing, service, and manufacturing infrastructure, can greatly leverage on Sanyo‘s state of art technologies and R&D capabilities to enhance the [46] product offering.“ Keiji Oshima, President and COO of Sanyo BPL, said, —Our entry into India in a strategic alliance with BPL is a major step in Sanyo‘s plan to enter new international markets, which offer scalability and volume. We are excited to offer our environment-friendly products based on our new ”Think GAIA‘ vision and [47] are confident of replicating Sanyo‘s global success, in India.“ CHALLENGES Sanyo BPL was faced with a competitive environment that was dramatically different from the environment in which BPLL had operated a few years earlier (Refer Exhibit X for more information on competition in the Indian consumer durable industry in 2006). In the early 2000s, BPLL was the leading company in the Indian consumer durable market and enjoyed credibility and trust of consumers and dealers. Analysts felt that it could prove to be an uphill task for the new company to earn back this trust, especially among dealers. A management [48] consultant with Abacus , D.K. Sabharwal, commented, —Once you vacate the space, it is extremely difficult [49] for the player to return to the same place in one of the fastest growing markets in the world.“ However,

according to research conducted by the company, consumers still perceived the BPL brand to be trustworthy but felt that it had lost its dominant position because it had fallen behind in technology. Though Sanyo-BPL was not burdened with debt, there were fears that the financial problems of the partners in the joint venture might hamper its growth. Also, high marketing costs were expected to put more pressure on the company‘s finances. The emergence of new retail formats also posed a challenge. Large retailers like RPG Group‘s Spencers‘, Future Group‘s Big Bazaar, and Videocon‘s Next were changing the face of retailing in India. Also, the Reliance Group‘s planned retail venture was being touted as the next big thing in Indian retail, with the potential to alter the dynamics in this sector. These retailers had the potential to sell any product in very large numbers. Analysts were of the view that in the future, the success of electronic companies would depend, to a considerable extent, on the kind of arrangements they were able to enter into with the big retailers. Another major challenge for all consumer durable and electronics companies in India, including Sanyo-BPL, was that the country was entering into trade pacts with several countries. India‘s Free Trade Agreement with Thailand was of particular concern. As per the Early Harvest Scheme (EHS) under the agreement, tariffs were to be phased out on a common list of items, which included electronic goods, by March 01, 2006. In the months of March and April 2006, imports of electronic goods into the country showed a sudden increase, causing apprehension among the electronic companies based in India. Similarly, India‘s Preferential Trade Agreement with Nepal was allegedly being misused by certain importers, who used that country as a transit point to bring in [50] cheap electronic products from China, thus flouting the ”country of origin‘ clause and avoiding duties. As mentioned earlier, the BPL brand was initially confined to the CRT CTV market, while the Sanyo brand was used on LCD TVs, plasma TVs, jumbo size refrigerators, high-end washing machines, etc. However, the number and variety of products on offer from Sanyo-BPL was limited at a time when Indian consumers were demanding [51] the latest in technology and design. —Technology and innovation are playing a critical role as never before,“ said Girish Bapat, Vice President (Marketing), LG Electronics India. The competition œ LG, Samsung, Videocon, Sony, Philips, and a host of smaller players -- had flooded the market with an array of models in every product category. It seemed that the joint venture would have to bring in more products, and technologically superior ones at that, if it hoped to gain back market share. Industry observers felt that more products from the

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Sanyo range available internationally should be brought into India (Refer Exhibit XI for Sanyo‘s worldwide product profile). It also appeared that Sanyo-BPL‘s plans to focus on the rural markets would not be all smooth sailing. With the urban markets nearing saturation, the major players in the consumer durables and electronics market had also set up offices and distribution networks for the rural market. LG, the market leader in the CTV market, was also beefing up its presence in the rural areas. OUTLOOK In March 2006, SECL announced that it would launch several energy-related products in the Indian market through its subsidiary, Sanyo India, both for individual consumers and commercial establishments. It was also considering launching products with new technology, like Aqualoop in washing machines, which would clean the water used for rinsing and reuse it in the washing process. The high technology products were to be sold through 2,500 or so outlets that were to distribute BPL CTVs as well. The number of such outlets was to be increased to around 15,000 in one year. In April 2006, the BPL group too was seriously evaluating its businesses and preparing a road map for the future. The long-drawn-out debt restructuring exercise was successful in reducing the company‘s debt burden from Rs.1.5 billion in March 2003 to Rs. 2.6 billion in March 2006. With a fresh infusion of capital, the Nambiar family had raised their stake in BPLL from 56% to 75% in early 2006. The group was aiming to improve its profitability by building businesses that had the potential for growth and divesting others which were operating in declining markets. The group‘s strategy consisted of: bringing clarity to the company‘s mission in terms of industry, customer segment, geography, etc; recognizing the company‘s strategic business units (SBUs); assigning resources to the various SBUs according to the industry-attractiveness and company‘s competitive strength; and, expanding current businesses and building up newer ones. The BPL group identified eight growth areas which included consumer electronics & telecom with focus on wireless, energy communications, enterprise communications, healthcare, tooling & precision plastics components, power generation, and technology services. In May 2006, BPLL announced that it was looking for strategic investors for its businesses in medical electronics, tooling, and telecommunications. It was also keen on entering into a JV with a mobile handset OEM that wanted to establish a manufacturing unit for mobile phones in India. However, it had no plans to revive its appliance business. The BPL-Sanyo partnership had enjoyed great success in the past, when BPLL had launched cutting-edge products for the Indian consumers, with technical assistance from Sanyo. With SECL, BPLL had managed to become a leader in the Indian consumer electronics industry in the late 1990s and early 2000s. However, with financial mismanagement and intense competition having weakened both BPLL and SECL, it remained to be seen whether their joint venture could accomplish the Herculean task of becoming one of the top consumer electronics companies in India.

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Exhibit I BPL Logo

Source: www.bplworld.com.

Exhibit II About BPL Power Projects (P) Ltd

BPL Power Projects (P) Ltd was set up to build power plants. The plant at Ramagundam was to be a coal- based thermal power plant and was to be built in two phases (260X2 MW). Thirty seven percent of the equity in the company was held by the promoters (the Nambiar family) directly and through other companies in the BPL group. Wellesley Investments, a company based in Mauritius in which BPLL was a majority equity holder, held 26%. Another 26% was held by Marubeni Corporation, a Japan-based procurement and construction contractor. The remaining 11% was held by Electric Power Development Corporation, a Japan-based operation and maintenance contracting company. The Ramagundam project faced obstacles from the very beginning. The APSEB signed the first PPA with BPP (AP) on October 31, 1994. The PPA was later amended in January 1999. However, the amended PPAs were rejected by the Andhra Pradesh Electricity Regulatory Commission (APERC) on three occasions (August 17, 2001, November 6, 2001, and July 29, 2002) over issues concerning project cost, threshold level of plant load factor (PLF), incentives, etc. The Ramagundam project was initially estimated to cost Rs. 16.2 billion in 1994. By 2001, after several upward revisions, the cost was estimated at Rs. 27.5 billion. Finally in December 2002, the APERC cleared the PPA with BPP (AP), though with some modifications. BPP (AP) announced in late 2002 that it expected to achieve financial closure for the project by March 31, 2003. It also said that the first phase of the project (260 MW) would be operational by December 2005 and the second phase by June 2006. BPP (AP) was not able to achieve financial closure even by August 2004. Newspaper reports in late 2004 suggested that BPLL was considering exiting the power project, in line with its restructuring program which included divesting itself of non-core businesses. —We are in talks with various strategic investors for [52] sale of the power project,“ Ajit Nambiar said. However, as of 2006, BPLL was still on the look-out for a prospective buyer who would help it exit the power project. Compiled from various sources.

Exhibit III Market Shares in the Indian CTV Market œ 2001

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18%

35% 8%

10%

4% 9% 5% 11% BPL LG Onida Samsung Videocon Akai Philips Others

B. Market shares in the Indian CTV Market œ 2005 11%

34%

25%

17% 13%

Videocon LG Onida Samsung Others

Source: www.magindia.com.

Exhibit IV BPL Financials

31 March 2005 30 September 2003 (18 31 March 2002 (18 months) months) (12 months) Profit & Loss a/c Rs. Million Rs. Million Rs. Million Net Sales 4139.74 9618.23 11813.06 Operating Income 4164.20 9687.04 11891.14 OPBDIT -1359.66 -34.81 1742.59 OPBDT 1426.31 -2277.79 816.70 OPBT -2053.29 -2918.16 415.83 Non-operating Income -630.53 19.16 6.12 Extraordinary/Prior 1943.41 753.23 0 Period Tax 0 0 0.36 Profit after tax -740.41 -2145.78 3.19 Cash Profit -113.43 -1505.40 6.56 Dividend equity 0 0 0 Balance Sheet Assets Gross Block 6880.81 6874.71 6759.01 Net Block 3623.15 4403.37 4917.15 Capital WIP 407.40 402.65 406.00

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Investments 2768.59 3400.98 2499.37 Inventory 433.55 1160.48 2474.63 Reveivables 648.49 1154.71 3480.88 Other current assets 6812.70 7197.91 2520.91 TOTAL 14693.88 18110.10 16298.93 Liabilities Equity share capital 276.91 276.91 276.91 Reserves 2781.38 3485.29 5547.47 Total Debt 8853.45 12885.46 8002.94 Creditors and acceptance 2076.57 917.53 1805.23 Other current liabilities 705.57 544.91 666.39 TOTAL 14693 18110.10 16298.93 Source: www.myiris.com.

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Exhibit V BPLL‘s Product Profile in 2005* A. Consumer Electronics S. No. Product Category Remarks 1 Digital Mobile Phones 3 models of GSM phones. 2 DVD Players 3 models 3 Digital Color Monitors One model (15“ TFT). Technology from Sanyo. 4 Digital Cameras One model. 5 Digital Video Recorder One model (DVR 1000) 20 GB 6 Portable Lighting Four models (Flashlite, Beacon, Duolight and RLF 650)

B. Healthcare Products S. No. Category 1 Cardiology ECG (Cardiart 108T MK VII, 6108T, 6208R, 8108R, 8408) Defibrillators (DF 2509, DF 2509R, DF 2603) Stress Test System, Ambulatory Monitors (Holter Recorder, BP Monitor) 2 Patient Monitors Multi-parameter monitors (Ultima, Accura, Viva, Aegis, Maxima) Dual parameter monitors (Endura, Magma) Single parameter monitors (Agenta, Cleo, Elixir) Central nursing station (Centra) 3 Imaging Ultrasound scanners (US 9501, US 9101M) 4 Gynecology Fetal Monitors (FM 9513, FM 9534) Fetal Doppler (FD9613) 5 Oxygenators OG 4203, O-Zone OG 4114 6 Spirometers Arpemis 7 Home Care Nebulisers (Airjolie 3, Airjolie 2 Deluxe), BP Monitor (Wrist BP Monitor) * - BPLL was also present in Engineering, Technology Solutions, Telecommunications, Power, etc. Source: www.bplworld.com.

Exhibit VI The Sanyo Word-Mark

Source: www.sanyo.jp.

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Exhibit VII The Solar Ark

Source: www.sanyo.com

Exhibit VIII Sanyo‘s Revival Program ”Think Gaia‘ is SECL‘s new vision. Its new mission is to ”restore a beautiful Earth to the children of the future‘. It aims to ”become a company that pleases life and the Earth‘. To realize the vision, the company has established four programs. They are Sanyo Blue Planet œ to tackle global environmental problems; Sanyo Genesis III œ to pioneer the expansion of a sustainable and clean energy society; Sanyo Harmonious Society œ to create a compassionate and prosperous society; Sanyo Product Circulation œ to realize zero-emission, 100% recycling, and a detoxified product life cycle. The vision, together with the four programs, gives direction to the company‘s revival program -- Sanyo Evolution Project. The project has the following three plans: 1. Business Portfolio Evolution Plan (Portfolio Evolution - focus on six business areas œ ecological co-existence solutions; recycling oriented environmental solutions; global energy solutions; next- generation commuter solutions; family relationship solutions; lifestyles of health and sustainability solutions. R&D Strategy Evolution - concentrate efforts on selective areas. Facilities Evolution - move away from product-based facilities to concept-based), 2. Corporate DNA Evolution Plan (Establish a brand identity, set up a worldwide headquarters, and strengthen governance). 3. Financial Evolution Plan (Business selection and focus, improve profitability, reduce interest- bearing debts, targeting a 5% operating margin in fiscal 2007). Source: www.sanyo.com. Exhibit IX Sanyo Electric co. Ltd. Financial Information 31.03.2005 31.03.2004 31.03.2003 31.03.2002 31.03.2001 Net Sales 2,484,639 2,508,018 2,182,553 2,024,719 2,157,318

Operating Income 42,316 95,551 78,299 53,074 106,591 Ratio to net sales 1.7% 3.8% 3.6% 2.6% 4.9% Annual growth -55.7% 22% 47.5% -50.2% 71.7% IBIT -64,991 45,992 -74,157 163 72,372 Ratio to net sales -2.6% 1.9% -3.4% 0.0% 3.4% Annual growth - - - -99.8% 52.2% Net income -171,544 13,400 -61,671 1,315 40,414 Ratio to net sales -5.5% 0.5% -2.8% 0.1% 1.9%

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Annual Growth - - - -96.7% 34.0% Source: www.sanyo.web-ir.jp.

Exhibit X Competition in the Indian Consumer Durables Market - 2006 S.No. Company /brand Categories 1 LG Televisions, Audio, Home Theatres, Air conditioners, Refrigerators, Washing Machines, Vacuum Cleaners 2 Samsung Televisions, Audio, Home Theatres, Air conditioners, Refrigerators, Washing Machines 3 Onida Televisions, DVD Players, Air conditioners, Microwave Ovens, Washing Machine 4 Videocon Televisions, Home Theatres, DVD Players, Air (Sansui, Akai, Hyundai, conditioners, Refrigerators, Washing Machines, Home Kenstar, etc) appliances 5 Godrej Air conditioners, Refrigerators, Washing Machines, DVD Players, Microwave oven 6 Sony (Aiwa) Televisions, Audio, DVD Players, Home Theatre, Handycam, Digital Cameras 7 Philips Televisions, Audio, Home Theatre, Home appliances 8 Sharp Televisions, Air conditioners, Refrigerators, Microwave Oven The list is not exhaustive. Compiled from various sources.

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Exhibit XI Sanyo Worldwide Product Profile

S.No. Product Category Remarks 1 Televisions LCD, Plasma, Digital HDTV 2 Remotes Universal multimedia remotes and standard remotes 3 DVD Players Several models of DVD players and home theatres 4 DVD Recorders Two models. 5 Audio Systems Mini and Micro systems 6 Digital Cameras Several models in 5 mega pixel and 6 mega pixel 7 Refrigerators & Freezers Several models of refrigerators, coolers, and freezers 8 Microwaves Several models with and without grill 9 Small Appliances Oven, Rice cookers, tea and coffee makers 10 Vacuum Cleaners Several models in upright, canister, stick varieties. 11 Massage Chairs Several models under 3 series. 12 Mobile Phones Seven models 13 VCRs Eight models. 14 Mobile Electronics Touch screen portable navigation & DVD entertainment system and car audio systems 15 Digital Media Camera Several models of cameras and camcorders 16 Business/Office Display panels, LCD projectors and Dictation devices 17 Industrial Products Micro motors (stepping motors, geared motors, brush motors), Solar products (photovoltaic modules, amorphous solar cells) Security equipment (cameras, monitors, digital and analog recorders, controllers, etc), Heating and air conditioning (wall- mounted, ceiling, portable), Industrial batteries 18 Bio Medical Biomedical freezers, biomedical refrigerators, cryogenic freezers, ultra-low freezers, incubator (gas and non-gas), incubator shakers, accessories (temperature recorders, inventory racks, back-up systems, etc) 19 Batteries Rechargeable batteries 20 Others Semiconductors (transistors, laser diode, microcontrollers, etc) and components Source: www.sanyo.jp.

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Suggested Readings and References: 1. Brand BPL tuned in to the rural story, www.exchange4media.com, April 26, 2006. 2. K. Giriprakash, BPL on the comeback trail, www.hinduonnet.com, February 16, 2006. 3. K. Giriprakash, What BPL should do…, www.hinduonnet.com, February 16, 2006. 4. Sanyo BPL pumps $ 20 mn cash in the JV, www.eprodz.com, February 05, 2006. 5. Sanyo BPL announces three-year plan for India, www.indiantelevision.com, January 31, 2006. 6. Devina Joshi, Initiative bags media duties for Sanyo BPL, www.agencyfaqs.com , January 27, 2006. 7. Sanyo-BPL joint venture takes off, www.sify.com/finance, January 26, 2006. 8. Sanyo BPL strategic partnership enters Indian market, www.indiainfoline.com, December 17, 2005. 9. Sanyo-BPL plans new strategy, www.thehindubusinessline.com, September 01, 2005. 10. Devina Joshi, Triton bags creative duties for Sanyo BPL, media pitch is still on, www.agencyfaqs.com, August 30, 2005. 11. BPL-Sanyo CTV venture to raise $ 30 million, www.thehindubusinessline.com, November 03, 2004. 12. Boby Kurian, BPL plans co-branding exercise with Sanyo œ Debt restructuring to be over by Sept, www.thehindubusinessline.com, August 14, 2004. 13. BPL: Switching to a new track, www.magindia.com, August 07, 2004. 14. Boby Kurien, BPL group to merge components biz œ plans to bring in strategic partner, www.blonnet.com, August 20, 2003. 15. BPL to launch new products to regain leadership, www.economictimes.indiatimes.com, March 27, 2003. 16. S. Vaidyanathan, SEBI, over-ruled! www.blonnet.com, June 23, 2002. 17. Boby Kurien, BPL will go for selective divestment, www.thehindubusinessline.com, October 11, 2001. 18. BPL to replace Evelux with Prima, www.eprodz.com, July 04, 2001. 19. BPL Ltd, Company History, www.invest.economictimes.indiatimes.com. 20. www.magindia.com. 21. www.eprodz.com. 22. www.bplworld.com. 23. www.blonnet.com 24. www.sanyoindia.com 25. www.sanyo.co.jp. 26. www.thehinduonline.com

END OF QUESTION PAPER

Suggested Answers Integrated Case Studies œ I (MB371) : April 2007 Case Study

1. Joint venture involves the creation of a third entity, representing the interests and capital of the partners involved in a joint venture, both the partners contribute their own proportional amounts of capital, distinctive skills, managers, reporting systems and technologies to the venture. In July 2004, BPLL had signed a 50:50 joint venture agreement with SECL. BPLL was to hive off its CTV business including two assembly lines, sales, service, distribution and marketing infrastructure to form the joint venture, which was to operate primarily in the CTV market. Following characteristics are taken into account while describing joint ventures: 1. Contribution of money, property, effort, knowledge, skill or other asset to a common undertaking by the partners involved. As part of agreement BPLL would receive Rs. 3.68 billion from SECL and the most of the money would be used to restructure its debts. 2. Joint property interest in the subject matter of the venture. With BPLL‘s CTV facilities being transferred to the joint venture, Sanyo-BPL was all set to enter the Indian CTV market. For this JV it is expected that a impressive platform of global, technologically advanced products for the Indian consumer will be created. The CTV manufacturing units of BPL were also to be utilized to export

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Sanyo brand TVs to Europe and West Asia. Advantages that accrue to BPL because of the Joint Ventures are: i. BPL can restructure its debts using the money from Sanyo. ii. The CTV manufacturing units of BPL can be used to export Sanyo brand TVs to Europe iii. Can enter the markets for all product categories in consumer durables iv. Can cover all the price points in the consumer durables sector v. Can have better control over marketing, as the company began building up its distribution network. In the early 2006, it inaugurated its first exclusive store which showcased the entire range of products of both the BPL and Sanyo brands. Sanyo BPL planned to open 15 exclusive stores by the end of 2006. The future is bumpy for the joint venture: ñ Different present competitive environment than was it before ñ Regaining the earlier position ñ Emerging new retail formats may pose a challenge to existing selling and distribution scenario ñ Though Sanyo-BPL was not burdened with debt, there were fears that the financial problems of the partners in the joint venture might hamper its growth. ñ The marketing costs ñ India‘s free trade agreements with various countries may be misused by certain importers to flood the market with cheap goods from various countries. ñ Saturation in the urban markets < TOP >

2. BPLL was established in 1963 as a private limited company. It was promoted by TPG Nambiar in collaboration with UK-based British Physical Laboratories Instruments Ltd. Initially, the company manufactured electronic test and measuring instruments, electro-medical instruments, electro-cardiac graft patient monitoring systems, etc. in 1979, the company entered into a technical collaboration with UK- based Gestetner for the manufacture of plain paper copiers. In 1982, the company diversified into consumer electronics. It started manufacturing black & white and color television sets and video cassette recorders in technical collaboration with SECL. Various businesses forayed into are: ‹ Consumer electronics ‹ Power ‹ Telecommunication ‹ Alkaline batteries ‹ Building optical fiber network for railways ‹ Internet and broadband ñ Numerous diversifications by the group had resulted in high levels of debt and servicing this debt was proving to a major drain on the finances of the company ñ By 2002, BPLL was fast losing ground in the consumer durables market to the Korean companies, LG and Samsung. ñ BPLL remained inactive in the market for the better part of 2004 and 2005, leading to its rapid disappearance from all categories in the consumer electronics industry. ñ Because of numerous unrelated diversifications, BPL has lost the focus on the core business ñ BPL‘s all ventures have come in a hurry perhaps to capitalize on the liberalization. This resulted in foray into various unrelated business which was not matching with the resources at the disposal. < TOP >

3. a. Reports about financial problems in the BPL group began appearing in late 2001.In October 2001, it was reported that the BPL group was carrying out a major restructuring of its business. Following steps were taken ñ Retiring of high-cost debts by raising fresh loans at lower interest, infusion of fresh capital, sale of non-core business

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ñ Plan to create eight strategic business units after restructuring for more focus in the respective areas. ñ Plan to sell off its non-productive and unutilized assets spread across the country to infuse cash into the business. ñ In December 2003, BPLL entered into an OEM deal with Haier to supply televisions to Haier. This arrangement was made to keep the production facilities engaged. ñ In January 2004 BPLL suspended operations of BS refrigerators Ltd., and requested Government of Karnataka for permission to close down operations. This move was aimed at stem the loss the company has been incurring. ñ As a part of the financial restructuring, the promoters brought in around Rs. 500 million which was used to pay pressing creditors, dealers, employee dues and to meet working capital requirements. ñ With a view to come out of non-core business, the battery business was sold to Eveready Industries India Ltd (EIIL). ñ In December 2005 BPLL sold its stake in the mobile company, BPL communication Ltd to Essar. (b) Its ability to cope with intense competition in the white goods segment. No doubt because of the problems faced by BPLL, it has been left miles behind by the competitors like LG, Samsung etc. but following points may be encouraging regarding its ability to cope with intense competition and regain the lost ground. 1. The debt restructuring started yielding results. Debt burden has come down from Rs.15 billion in March 2006 to 2.6 billion in March 2006. 2. The brand of BPL though was inactive in the market, did not lose the customer preference as a brand of quality. 3. BPL by restructuring the entire operations, focusing more intensely on various segments where in it can give competitors run for their money. < TOP >

4. In July 2004, newspapers reported that BPLL had signed a 50:50 joint venture agreement with SECL. BPLL was to hive off its CTV business including two assembly lines, sales, service, distribution and marketing infrastructure to form the joint venture, which also to operate primarily in the CTV market. ñ Using the Sanyo‘s close times with Sumitomo Mitsui Banking Corporation, the JV company is planning to raise capital ñ They can enter into all product categories in consumer durables and all the price points ñ With respect to positioning, the Sanyo brand was to sell high-end products on the technology platform, while BPL brand would cater to the value-conscious customer. ñ It is planned to import Sanyo brand products from SECL‘s manufacturing facilities in Japan and other countries. ñ Keeping in view Sanyo‘s and BPL‘s brand‘s distinct identities, the company is planning to have a different strategy. ñ The estimations of CTV sales in India i.e.9.5 million and 10 million units in 2005-06. And it is expected to cross 11 million units in 2006-07. In this context, the JV will definitely have bright future. ñ It is expected that rural market will contribute nearly 45% of the volumes. Most of the top players like LG and Samsung had established themselves in urban areas. ñ The JV started making the right moves. It has already started building up its distribution network. In early 2006, it inaugurated its first exclusive store which showcased the entire range of products of both the BPL and Sanyo brands. ñ Sanyo‘s brand slim TVs were also launched in the early part of the year. The challenges

ñ The Sanyo BPL was faced with a competitive environment that wad dramatically different from the environment in which BPLL had operated a few years earlier.

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ñ It is going to be an uphill task for the new company to earn back this trust, especially among dealers. ñ Though Sanyo-BPL was not burdened with debt, there were fears that the financial problems of the partners in the joint venture might hamper its growth. ñ High marketing costs were expected to put more pressure on the company‘s finances. ñ The new retail formats also pose a challenge. ñ All the consumer durable and electronics companies in India, including Sanyo-BPL are going to face competition from various cheap products from Thailand. ñ They need to come out with innovative products; especially since a comeback is being made. It is also appeared that Sanyo-BPL‘s plans to focus on the rural markets would not be all smooth sailing. With the urban markets saturation, the major players in the consumer durables and electronics market had also set up offices and distribution networks for the rural market. LG, the market leader in the CTV market, was also beefing up it presence in the rural areas. < TOP >

5. a.

ñ Wanted to promote both BPL and Sanyo brands simultaneously. ñ Wanted to use to different media for the two brands, because Sanyo and BPL ar two brands with distinct identities. 85% of the ad budget was reserved for the BPL brand; the remaining was to be used to establish the Sanyo brand, which was to be advertised primarily in outdoor media. Brand enjoyed a high recall value. This can be capitalized to the fullest extent. Various things done were; ñ Promotional campaign for dealers ñ Co-branding was an option initially. However, later on the co-branding idea was dropped and individual branding was adopted. ñ Brand loyalty still exists, BPL is seen as a trusted brand with good service-back up b. With respect to positioning, the Sanyo brand was to sell high-end products on the technology platform, while the BPL brand would cater to the value-conscious customer. Sanyo positioned as an aspirational brand in the urban market. < TOP >

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[1] —Sanyo BPL announces three-year plan for India,“ www.indiantelevision.com, January 31, 2006. [2] —Sanyo-BPL joint venture takes off,“ www.sify.com/finance, January 26, 2006. [3] —BPL signs a strategic partnership with Sanyo,“ www.bplworld.com, July 27, 2004. [4] The CRT or the Cathode Ray Tube, invented by Karl Ferdinand Braun, is a display device used in televisions, computer displays, radar displays, video monitors, etc. It was the only such display device available until the late twentieth century. The popularity of CRTs is primarily due to their affordability. [5] An LCD or Liquid Crystal Display is a thin, flat display device made up of many color/monochrome pixels arranged in front of a light source or reflector. It is energy efficient and light weight. Initially, LCDs suffered from technical problems œ fast moving images were hazy, images were distorted when viewed from an angle and the size of LCD televisions was limited. However, the latest LCD televisions have largely overcome these drawbacks. [6] The Plasma display, invented at the University of Illinois (Urbana-Champaign) by Donald L. Bitzer and H.Gene Slottow, is an emissive flat panel display where light is created by phosphors excited by a plasma (ionized gas) discharge between two flat panels of glass. Plasma displays are bright, have a wide color gamut, and can be produced in fairly large sizes (up to 102 inches). (Source: www.wikipedia.com) [7] BPL Ltd, Company History, www.invest.economictimes.indiatimes.com. [8] UPTRON Colour Picture Tubes Ltd. was a public limited company incorporated in 1985. It was promoted by UP Electronics Corporation (UPTRON), a wholly-owned undertaking of the Uttar Pradesh state government. Following bankruptcy, it was referred to the Board for Industrial and Financial Reconstruction (BIFR). It was bought by BPLL in 1997 and was renamed as BPL Display Devices Ltd. (BDDL).

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[9] International Advertising and Multimedia Festival is an annual event which began in 1989 to encourage high standards in the advertising industry. The awards are given away under several categories such as corporate image, humor, music, animation/special effects, retail, automotive, travel & tourism/utilities, cosmetics/pharmaceutical, etc. The festival is conducted at Montreux, Switzerland. [10] Denon is a Japan-based high-end consumer electronics company which sells DVD players, stereo amplifiers, A/V receivers, cassette decks, etc., under the Denon brand. [11] BPLL sells high-end/ audiophile brands of global repute (Denon, Polk Audio, KEF, and QED) under its ProFX brand. [12] —BPL to replace Evelux with Prima,“ www.eprodz.com, July 04, 2001. [13] Following the 1998 Indian stock market crisis, the Securities Exchange Board of India (SEBI) conducted an investigation which revealed that a group of brokers who acted on behalf of a common set of clients, who in turn acted as a ”front‘ for Harshad Mehta, had bought BPLL shares (and that of Videocon and Sterlite) in large numbers. This led to a steep rise in the share prices of these companies. In December 1999, SEBI, suspecting the involvement of the top management of the companies involved, issued show-cause notices to BPLL and Videocon. [14] Harshad Mehta was the mastermind behind the April 1992 securities scam on the Indian stock market. The scam involved the embezzlement of Rs. 2.5 billion from 2.7 million ”missing‘ shares of 90 blue chip companies. It was later found that Mehta engaged in bogus transactions of government securities and diverted money from the bond market to the stock market. In 1998, he surfaced again, this time being accused of ”rigging‘ the shares of BPL, Videocon, and Sterlite. He was eventually arrested by the Central Bureau of Investigation (CBI) in November 2001. He died on December 31, 2001, following a massive cardiac arrest. [15] SAT was established under the Securities and Exchange Board of India Act, 1992 to settle cases related to securities. [16] S. Vaidyanathan, —SEBI, over-ruled!“ www.blonnet.com, June 23, 2002. [17] —BPL: Switching to a new track,“ www.magindia.com, August 07, 2004. [18] Boby Kurien, —BPL will go for selective divestment,“ www.thehindubusinessline.com, October 11, 2001. [19] Accenture, a consulting firm, was created in August, 2000 from the erstwhile Arthur Anderson. [20] Delhi-based Data Access is an associate company of Hong Kong based Pacific Century Cyberworks. [21] —BPL to launch new products to regain leadership,“ www.economictimes.indiatimes.com, March 27, 2003. [22] —BPL to launch new products to regain leadership,“ www.economictimes.indiatimes.com, March 27, 2003. [23] Haier, established in 1984 in China, is one of the largest consumer durable manufacturers and marketers in the world. [24] The petitions were filed by Dastur Investments, MN Dastur and Co Pvt Ltd, and Mehroo Minar Dastur, who had provided loans to BPL Sanyo Finance, a company under BPLL, in 1999. [25] Boby Kurien, —BPL group to merge components biz œ plans to bring in strategic partner,“ www.blonnet.com, August 20, 2003. [26] Four banks namely -- Bank of Rajasthan, IndusInd Bank, UTI Bank, Bank of India, and one insurance company, LIC, had initiated legal action against BPLL for defaulting on its loan repayment. One of the main conditions in the corporate restructuring proposal was to withdraw all such cases, to which the banks agreed. [27] The history of EIIL dates back to 1934, when Eveready Company was incorporated as a private company. In 1941, it merged with Union Batteries to form National Carbon Company (NCC). In 1951, NCC became a subsidiary of Union Carbide and Carbon Corp. (later named Union Carbide Corp.) and its name was changed to Union Carbide India Ltd. (UCIL). In 1994-95, UCC sold its stake (51%) in UCIL to Mcleod Russel (I) Ltd (a company under the Williamson Magor Group, owned by the Khaitan family) and was renamed as EIIL. Later MRIL was merged into EIIL. [28] The BPL group exited the mobile telephony business by selling BPL Communications. The sale, however, became controversial when Rajeev Chandrasekhar, Nambiar‘s son-in-law, claimed that the company belonged to him. In September 2004, Nambiar filed a petition with the Company Law Board (CLB) to restrain Chandrasekhar from selling the company. In July 2005, Nambiar and Chandrasekhar reached an out-of-court settlement. [29] The Essar group was established by Nand Kumar Ruia in the 1950s. As of 2006, it had business interests in steel, oil & gas, power, telecom & BPO, shipping, construction, agro-technology, and media. [30] A wordmark (also referred as logotype) is a standardized visual representation of an organization‘s/ product‘s name. A wordmark is usually made up of only text with typographic treatment to create a unique identity. [31] Heterogenous with Intrinsic Thin layer or HIT solar cells are hybrids, made of thin mono crystal silicon surrounded by ultra-thin amorphous silicon layers. (Source: www.sanyo.com) [32] Seiko Epson Corp., established in 1942, is a major player in imaging, robotics, precision machinery, and electronics. It is headquartered in Nagano, Japan. It employs over 90,000 people (as of early 2006) across the globe. [33] SECL entered into a joint venture with Nokia in February 2006 to develop and manufacture CDMA phones. The joint venture involved the integration of the CDMA operations of both companies. The JV Company was to start operations in the third quarter of 2006 and was expected to become the world‘s largest CDMA phone maker alongside Korean electronics major, Samsung. [34] Boby Kurien, —BPL will go for selective divestment,“ www.thehindubusinessline.com, October 11, 2001.. [35] Boby Kurian, —BPL plans co-branding exercise with Sanyo œ Debt restructuring to be over by Sept,“ www.thehindubusinessline.com, August 14, 2004. [36] —Sanyo BPL strategic partnership enters Indian market,“ www.indiainfoline.com, December 17, 2005. [37] —BPL: Switching to a new track,“ www.magindia.com, August 07, 2004. [38] —BPL-Sanyo CTV venture to raise $ 30 million,“ www.thehindubusinessline.com, November 03, 2004.

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[39] Boby Kurian, —BPL plans co-branding exercise with Sanyo œ Debt restructuring to be over by Sept,“ www.thehindubusinessline.com, August 14, 2004. [40] —Sanyo-BPL plans new strategy,“ www.thehindubusinessline.com, September 01, 2005. [41] —Brand BPL tuned in to the rural story,“ www.exchange4media.com, April 26, 2006. [42] Devina Joshi, —Triton bags creative duties for Sanyo BPL, media pitch is still on“ www.agencyfaqs.com, August 30, 2005. [43] Devina Joshi, —Initiative bags media duties for Sanyo BPL,“ www.agencyfaqs.com , January 27, 2006. [44] K. Giriprakash, —What BPL should do…“ www.hinduonnet.com, February 16, 2006.] [45] —Sanyo BPL pumps $ 20 mn cash in the JV,“ www.eprodz.com, February 05, 2006. [46] —Sanyo BPL strategic partnership enters Indian market,“ www.indiainfoline.com, December 17, 2005. [47] —New Sanyo BPL JV enters Indian market,“ www.deccanherald.com, December 17, 2005. [48] Abacus Consultants Pvt Ltd is a consultancy headquartered at Kolkata, West Bengal. Its clients include the Indian operations of MNCs like Pepsico, Whirlpool, etc. [49] K. Giriprakash, —BPL on the comeback trail,“ www.hinduonnet.com, February 16, 2006. [50] When products are shipped from one country to another, they have to be marked with the country of origin in their export documents. Importing countries charge duties which are lower than their usual rates for products originating from countries with which they have entered into Preferential/Free Trade Agreements. However, many products are made up of a large number of parts and pieces that come from different countries and are then assembled together in a third country. Different rules apply then on how to determine their original country of origin. Generally, articles change their country of origin if the work or material added is a ”substantial transformation‘ or the article changes its name, tariff code, etc. [51] K. Giriprakash, —BPL on the comeback trail,“ www.blonnet.com, February 16, 2006. [52] Boby Kurian, —BPL in talks to exit AP power project,“ www.blonnet.com, August 14, 2004.

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