COMMERCIAL APPLICATIONS

PROJECT
BY

HEMAL.M

BISHOP COTTON BOYS’ SCHOOL

CLASS- IX
SECTION- ‘A’
Study the growth of Consumer Durables Industry in India. Take any
4 firms of the industry and group them according to ownership
structures.
The Consumer Durables industry consists of durable goods and appliances for
domestic use such as televisions, refrigerators, air conditioners and washing
machines. Instruments such as cell phones and kitchen appliances like microwave
ovens are also included in this category. The sector has been witnessing significant
growth in recent years, helped by several drivers such as the emerging retail boom,
real estate and housing demand, greater disposable income and an overall increase
in the level of affluence of a significant section of the population. The industry is
represented by major international and local players such as BPL, Videocon, Voltas,
Blue Star, MIRC Electronics, Titan, Whirlpool, etc. The consumer durables industry
can be broadly classified into two segments: Consumer Electronics and Consumer
Appliances. Consumer Appliances can be further categorised into Brown Goods and
White Goods. The key product lines under each segment are as follows.

Consumer Durables
White Goods Kitchen Appliances/Brown goods Consumer Electronics

• Refrigerators • Mixers • Mobile Phones

• Washing • Grinders • Televisions
Machines •Microwave Ovens • MP3 Players
• Air-conditioners • Iron • DVD Players
• Speakers & Audio • Electric Fans • VCD Players
Equipments • Cooking Range
• Chimneys

Industry Size, Growth, Trends

The consumer durables market in India was estimated to be around US$ 4.5 billion
in 2006-07. More than 7 million units of consumer durable appliances have been
sold in the year 2006-07 with colour televisions (CTV) forming the bulk of the sales
with 30 per cent share of volumes. CTV, refrigerators and Air-conditioners together
constitute more than 60 per cent of the sales in terms of the number of units sold.

Key Consumer Durables – Share by Volume

Colour Television sets (CTVs) 30%

Refrigerators 18%
 Air-conditioners 13%
Washing Machines 5%
Others 34%

In the refrigerators market, the frost-free category has grown by 8.3 per cent while
direct cool segment has grown by 9 per cent. Companies like LG, Whirlpool and
Samsung have registered double-digit growth in the direct cool refrigerator market. In
the case of washing machines, the semi-automatic category with a higher base and
fully-automatic categories have grown by 4 per cent to 526,000 units and by 8 per
cent to 229,000 units, respectively. In the air-conditioners segment, the sales of
window ACs have grown by 32 per cent and that of split ACs by 97 per cent. Since
the penetration in the urban areas for these products is already quite high, the
markets for both CTVs and refrigerators are shifting to the semi-urban and rural
areas. The growth across product categories in different segments is assessed in the
following sections.

Consumer Electronics
The CTV production was 15.10 million units in 2006-07 and is expected to grow by at
least 25 per cent. At the disaggregated level, conventional CTV volumes have been
falling while flat TVs have grown strongly. Market sources indicate that most CTV
majors have phased out conventional TVs and have been instead focusing more on
flat TVs. The flat segment of CTVs now account for over 60 per cent of the total
domestic TV production and is likely to be around 65 per cent in 2007-08. High-end
products such as liquid crystal display (LCD) and plasma display CTV grew by 400
per cent and 150 per cent respectively in 2006–07 following a sharp decline in prices
of these products and this trend is expected to continue. The audio/video player
market has seen significant growth rates in the domestic market as prices have
dropped. This trend is expected to continue through 2007- 08, as competition is likely
to intensify to scale and capture the mass market.

Mobile Phones – The New Opportunity

Mobile phone production in India is expected to grow at a Compound Annual Growth
Rate (CAGR) of 28.3 per cent from 31 million units in 2006 to 107 million units in
2011. Production of mobile phones is expected to be a US$ 13.6 billion industry by
2011. The current US$ 4.9 billion industry revenue is growing at a CAGR of 26.6 per
cent. The growth of mobile telephony market is highest in India with 6 to 7 million
subscribers being added on a monthly basis compared to the US, which adds 2
million subscribers and China, which adds about 5 million subscribers. India is also
emerging as a global base for handsets as key global players. India produced nearly
31 million mobile phones in 2006 worth about US$ 5 billion. This segment made the
largest contribution to overall electronics production revenue and the total available
market for semiconductors. For 2007, it is projected that the handset production will
increase by 68 per cent in volume to about 51 million units and 65 per cent in value
terms. Starting on an already strong base, over six million users are being added
every month and are building a large local market for mobile manufacturers. Low
mobile penetration and favourable government policies are driving global mobile
phone manufacturers to set up manufacturing facilities in India. Nokia started its
manufacturing unit in Chennai in January 2006 and produced about 25 million
handsets in the first year of its operation. India has now become the second largest
market for Nokia phones in the world. Nokia is also exporting mobiles from its Indian
facilities to Sri Lanka. Motorola and Electronics Manufacturing Service vendors
(EMS) like Foxconn and Flextronics have also set up plants in India. According to a
study by Gartner, though the world’s top five handset makers will retain a major
share of production volume, local manufacturers can be expected to capture up to a
fifth of India’s overall mobile phone production volume by the end of 2011. Growing
demand for low-cost mobile phones and the need for EMS vendors to reduce their
revenue exposure to Nokia, Motorola and Sony Ericsson, for whom they are now
manufacturing in India, are the key factors expected to contribute to this trend. Most
of the components are imported today. Development of local component
manufacturing industry will be essential for continuous growth of total handset
manufacturing. Given the price-sensitivity of the Indian consumer, access to lowcost,
feature-rich and local-specific chip designs, as well as a strong distribution network,
remain key considerations in this market. Key stakeholders in the mobile phone
industry value chain provide these, and local manufacturers could be expected to
look to form alliances and partnerships

White Goods
Increased consumer demand is expected to boost the white goods segment to
achieve production levels of US$ 5.09 billion by the end of 2007-08 against US$ 4.54
billion in 2006-07, with a growth rate of 12.5 per cent.
Air-Conditioners
Growth in the white goods segment was largely driven by the Air-conditioner (AC)
segment. Within this, split ACs have been the main growth drivers, recording a
growth of over 90 per cent in 2006. Growth, albeit at a slower rate of 32 per cent, has
also been experienced in the segment of window ACs. The window AC segment is
slightly less organised as compared to split AC segment. The market for air-
conditioners is divided quite uniformly across customer segments, with about 45 per
cent share for private sector corporates, 20 per cent for domestic use, 15 per cent
each for public sector companies and government use and 5 per cent for hospitals.

Washing Machines
The sales of washing machines have grown from about 780,000 units to 1,948,000
units during the period, fiscal year 1999 to 2007, registering a near 12.2 per cent
annual growth rate.
The washing machine market may be segmented into semi-automatic and fully
automatic machines. Semiautomatic washing machines enjoy a dominant share of
85 per cent. Fully automatic washing machines have been gaining share as a
consequence of product improvement, competitive pricing and resultant
convenience. However, semi-automatic machines will continue to play a major role in
the Indian market for quite some time. Fully automatic washing machines have been
the growing at 44.5 per cent and semi-automatic segment, at about 18 per cent. The
entry of MNCs has widened the range to more than 10 brands with a proliferation of
models, while ensuring technology upgradation. A visible impact of this churn has
been the exit of a few established players from the market.

Refrigerators
Refrigerators are one of the most sought-after appliances in Indian middle-class
homes. The refrigerator market has two segments: Direct Cool and the relatively new
Frost-Free type. The market for refrigerators in 2006-07 was about 6.5 million units.
The growth of refrigerator segment is projected to be between 18 to 22 per cent over
the next 5 years. A critical success factor for the refrigerator market, given its
widespread use, is deeper reach into the market and increased penetration.
Recently, the market is getting reinforced by the replacement segment as well.

Vacuum Cleaners
Vacuum Cleaners are an emerging segment in the Indian market, still at a nascent
stage. The drivers for demand have been the improvement in life style and higher
aspirations of urban middle class and the top income brackets. While the market has
been growing, this segment is not expected to reach significant volumes soon. Part
of this could be attributed to the lifestyle compatibility of Indian customers with the
product. In the large majority of Indian houses, for instance, floors are not carpeted
and the product will have to meet dual requirements of sweeping and mopping.
Another impediment to the adoption of vacuum cleaners has been the availability of
cheap domestic help in most cities.

Domestic Electrical Appliances

Brown goods or domestic kitchen appliances are indicators of the changing
consumer scenario in post-liberalisation economic environment. The major products
constituting the brown goods market are mixers, grinders, irons, microwave-ovens,
rice cookers, water heaters or geysers, electric fans and exhausts. The branded
brown goods market has expanded at a significant pace and is expected to retain the
momentum into the future as well. The market has been transformed by the entry of
over a dozen new brands, moreover competition has intensified. While focus on
price competency remains a key priority, players have also started focusing on other
product features such as safety and total cost of ownership of the device. Goods, like
the rice cooker have been continuously growing in a slow and steady manner over a
significant period of time, while microwave ovens have grown exponentially after the
initial period of customisation to local requirements. The electrical iron market can be
divided into two segments: heavy and light-weight. The market is also segmented
into two sub-segments: steam and non-steam irons. India being a tropical country,
electric fans are an essential utility for more than six months of the year in most parts
of the country. The present market size is estimated at around 11.6 million pieces.
The market is divided among ceiling, pedestal, wall and table fans. Industrial and
exhaust fans are another important segment. The major players include Orient Fan,
Crompton Greaves, Jay Engineering, Bajaj Electricals, Polar, Khaitan and Alsthom.
The electrical appliances industry, which had been focused on the urban market, is
now reaching out to semi-urban and rural markets as well, because of the shift in
living style of the population, increasing electrification of villages and relatively higher
purchasing power of consumers. As the market penetrates into the core middle class
segment in both urban and rural areas, it is expected to expand phenomenally,
offering large volumes to the industry.

Trends Favouring the Growth of the Consumer Durables Industry

The key trends that impact the Indian Consumer Durables Industry today are
reflected in the diagram and discussed separately in the following sections.

Increasing Share of Organised Retail

The urban and rural markets in India are growing at an annual rate of 7 to 10 per
cent and 25 per cent respectively. One of the key enablers of this growth has been
the increasing penetration of organised retail. While there are established distribution
networks in both rural and urban India, the presence of well-known brands and
organised sector is increasing. At present around 96 per cent of the more than 5
million retail premises of all types in India are smaller than 50 sq. metres. This
situation is, however, transforming. Shopping malls are becoming increasingly
common in Indian cities, and based on plans announced by key developers, a
proliferation of new malls is expected over the next three years. Although many of
the new malls would be much smaller than their western counterparts, Indian
consumers will have a far larger number of attractive, comfortable, brand-conscious
outlets in which to shop. As a result, the organised retail industry is expected to
cover a market share of 15 to 18 per cent by the end of 2010, from just 3 per cent at
present. This will have a positive impact on the consumer durables industry, as
organised retailing would not only streamline the supply chain, but also facilitate
increased demand, especially for high-end and branded products.

Narrowed Price Gap and Increased Affordability of Products

Advanced technology and increasing competition are narrowing the price gap
between products in this sector, which has driven demand and enabled high growth.
Products that were once beyond the reach of the middle-class Indian are now
affordable to many. Growth in demand for products, once considered luxuries, such
as air-conditioners, washing machines and high end CTVs, is a reflection of this
phenomenon.
Entry of Large Players Increasing Competition
With potential heavyweight retail stores like Croma, E Zone and Reliance Digital, the
high-end segment has been exposed to a new form of purchase, allowing the
consumer to feel/experience the product in a suitable ambience (significant in
decision-making). Part of the growth momentum in high-end segments of consumer
electronics could be attributed to the competitive evolution of organised retail,
stimulating the demand through exposure to high end shopping experiences.
Rupee Appreciation
Raw material cost constitutes more than 75 per cent of expenditure incurred by
consumer durable manufacturers in India. The rapid appreciation of rupee vis-à-vis
the US dollar in 2007 is expected to ease raw materials costs for Indian
manufacturers and benefit those addressing the domestic market
Income Growth and Structural Changes
Apart from steady growth in income of consumers, consumer financing has become
a major driver in the consumer durables industry. In the case of more expensive
consumer goods, such as refrigerators, washing machines, colour televisions and
personal computers, retailers are marketing their goods more aggressively by
providing easy financing options to the consumers by partnering with banks. While
this is aimed at the lower- and middle-income groups, the higher income groups are
also being attracted by opportunity
Critical Success Factors for Manufacturers in the Sector
All key segments of the Indian consumer durables industry are growing and the
industry offers an attractive investment option. Success would require players to
address a few key factors, based on the industry drivers and trends.

Distribution and Service Network

As the market spreads out from saturated urban regions to low penetration rural
areas and tier II/III towns, distribution network and brand recognition will continue to
play ever more significant roles in determining market share and profitability. The
market for consumer durables is moving towards a stage where it could soon be
defined “as broad as it can be reached”. The central government plans of making
electricity available for all by 2012, will also open up immense opportunities for the
consumer durables segment.

Product Technology
While the market is continuously expanding, there are several concerns that will
have to be addressed while moving the focus towards tier III towns and rural areas.
Total cost of ownership would be a key factor that would drive purchase in these
regions. From an organised industry’s perspective, success would be determined by
superiority of product technology, which could provide added benefits to the
customer, for example; low power consumption, low service requirement and low
cost of operation.

Innovation in Advertising and Promotions

Increasing competition and technology adoption has led to a situation where the
basic function of most of the consumer durable goods has been largely
commoditised. This has created a situation were identifying a unique differentiating
factor and promoting it effectively has become imperative. The advertising and
promotions spend in the industry have been growing steadily. Significant focus has
been laid on mapping key concerns, that could act as demand drivers and proactive
marketing campaigns aimed at addressing specific concerns of prospective
customers. For instance, instead of focusing on the basic space conditioning
attribute, LG’s AC marketing campaigns focus on health benefits resulting from their
superior air filtering technology, thus striking a chord with urban consumers for whom
safety from pollution and dust is perhaps as significant a need as air-conditioning.
Consumer financing has become a major engine of growth in the consumer-durables
industry. In the case of more expensive consumer goods, such as refrigerators,
washing machines, colour televisions and personal computers, retailers are joining
forces with banks and finance companies to market their goods more aggressively.
Among department stores, other factors that will support rising sales include a strong
emphasis on retail technology, loyalty schemes, private labels and the sub-letting of
floor space in larger stores to smaller retailers selling a variety of products and
services, such as musical recordings and coffee.

Attractive locations
Since raw materials account for more than 75 per cent of the manufacturing cost of
consumer durables and with a significant part of it being imported, Maharashtra’s,
Gujarat’s and Tamil Nadu’s proximity to ports, high demand for durable goods and
factor consolidation in manufacturing sector make them amongst the more
considered destinations for investment in manufacturing.

OPPORTUNITIES FOR INVESTING IN CONSUMER DURABLES INDUSTRY

The rapid growth in the consumer durables industry offers several attractive
investment options. Based on the industry size, growth trends and key drivers, the
following segments can be outlined for their sustained growth:
• High End CTV
• Mobile Phones
• Distribution & Retail
• Air-conditioners

Conclusion
The consumer durables industry in India is set for sustained growth over the long
term, fuelled by favourable consumer demographics, overall growth in services and
industrial sectors and infrastructure development in suburban and rural areas.
Several Indian and MNC players are looking to strengthen their presence in India to
leverage this opportunity.
Success in the long-term will require firms to develop a wide and robust distribution
network, differentiate their products in areas of relevance to the consumer and
innovate in the areas of promotion, product financing, etc. The product and approach
to market need to be customised to suit the unique needs of the Indian market.

S.No. Industry Group Name of the Firms Ownership Structure

1 Electronics Sony India Ltd. Public multinational

L.G. Electronics Private multinational

Videocon International Public Indian company
Whirlpool India Ltd. Public multinational
UPTRON Government company
Samsung India Private multinational
2 Automobiles Maruti Udyog Joint sector company
Hyundai Private multinational
Bajaj Auto Public Indian company
Hero Honda Joint sector company
Punjab Tractors Ltd. Government company
3 Watches Hindustan Machine Tools Government company
(HMT)
Titan Industries Public Indian company
Citizen Private multinational
Sakura Private Indian company
4 Garments National Textile Corporation Government company
(NTC)
Reliance Industries Public Indian company
Raymonds Public Indian company
Century Textiles Public Indian company

Study the working of Fast-Moving Consumer Goods (FMCG)

Industry in India – Take any 4 firms of the industry and group them
according to their Objectives (Profit/Non-profit making).
The fast-moving consumer goods (FMCG) industry or consumer packaged goods
(CPG) industry is mainly responsible for producing, distributing and marketing fast-
moving consumer goods. The FMCG industry is the fourth largest sector in
the Indian economy. Household and personal care products accounts for 50% of the
sales in the industry, healthcare accounts for 31-32% and food and beverage
accounts for remaining 18-19%.
What is FMCG and India’s FMCG sector?
A consumer good, simplistically, is a final product that is purchased by the
consumer. How giant and widespread the consumer goods industry is, is realised
when one absorbs common facts like 94% people around the world recognise Coca-
Cola's classic red and white coloured logo, or when one processes the fact that the
DMart hypermarkets across India generated total revenue of Rs 19,916 Crores in the
year 2019 with a staggering market value of 39,988 Crores.
 FMCG or Fast-moving consumer goods, as the name itself suggests, are
those types of goods that are consumed on a day-to-day basis and hence
have a large supply and demand chain.
 This FMCG sector has the responsibility of producing, distributing, and
marketing goods so that their continuous consumption by the public takes
place smoothly.
 In the last 10 years, the revenue of FMCG in India has been growing at an
impressive rate of 21.4%.
 In 2018, India’s FMCG market growth was 14.8%, which was the fastest
market growth recorded in the entirety of the Asia Pacific.
The chart depicting the Asia-Pacific FMCG market average growth had India on 1st
place followed by:
1. Vietnam,
2. Malaysia,
3. China,
4. New Zealand,
5. Thailand,
6. Japan,
7. Philippines, and other countries.
Types of FMCG
FMCG are those categories of industrial or non-industrial products that are heavily
consumed and often sold at a lower retail price. These are often further categorised
into three different sections:
1. Durable goods,
2. Non-durable goods, and services.
 As is understood from the names, durable goods are those that have a shelf
life of more than three years, for example, electronic goods, leisure
appliances, etc.
 While non-durable goods have a shelf life of less than one year from their
date of manufacture, for example, food and beverages, over-the-counter
drugs, etc.
 Goods like detergents, toiletries, cosmetics, personal and overall hygiene
products, are some of the FMCGs that dominate the Indian consumer markets
today.
Some of the top FMCG Companies in India by brands and their revenues are as
follows:
1. Hindustan Unilever Limited (Rs 40,511 Cr),
2. ITC Limited (Rs 51, 321 Cr),
3. Dabur (Rs 8813 Cr),
4. Nestle (Rs 12,117 Cr),
5. Marico Limited (Rs 7465 Cr),
6. Britannia Industry (Rs 11, 211 Cr),
7. Godrej Consumer Products Limited (Rs 10,156 Cr),
8. Procter & Gamble (P&G),
9. PepsiCo, &
10. Coca-Cola
The FMCG products list have a wide range which include:
 Food products,
 Stationery,
 Personal care products,
 Naturally concocted,
 Ayurvedic consumer products,
 Beauty products,
 Mineral and herbal products,
 Baked food like biscuits, bread, rusk, cakes, etc.
 Dairy products,
 Home appliances,
 Security products,
 Hair care products,
 Toiletries, &
 Electrical products.

Market size and projected growth rate

In the last 10 years, the revenue in FMCG industry in India has been growing at the
rate of 21.4%. There was a drastic change in revenues in FMCG sector growing from
US$ 31.6 billion to US$ 52.8 from 2011 to 2017-2018 respectively. FMCG industry in
India is expected to grow at the rate of 27.9% CAGR (Compounded Annual Growth
Rate) to sum to US$103.7 billion by 2020. Additionally, the rural FMCG market is
projected to grow at a CAGR of 14.6% to reach US$100 billion by 2020 and US$220
billion by 2025. The rural setting accounts for 45% revenue share while the urban
setting dominates with 55% revenue share of the total revenue of the FMCG
industry. More than 65% people in India stay in rural places and those people spend
around 50% of their total expenditure on FMCG products. The number of people
buying consumer goods online in India is projected to reach 850 million by 2025.

Driving factors leading to growth rate

 Increased population of working women
 Increased disposable income and growing per capita expenditure
 Increased purchasing power of the customers
 Increased awareness of online shopping
 Higher brand recognition and consciousness
 Constant change in consumer preference
 Banking policies and government's regulations
 Growing interest for foreign investors

FMCG marketing

In the Indian market, household and personal care products accounted for 50% of
the sales in the FMCG industry followed by healthcare accounting for 31-32%, and
finally, food and beverage accounting for the remaining 18-19%.

Even though FMCG are classified into three basic types of goods based on their
shelf life, from a marketing approach, these fast-moving goods are of four types
which are:
1. Convenience Products,
2. Shopping Products,
3. Specialty Products, and
4. Unsought Products.

The table below will help in understanding the characteristics of each type.
Let us understand better with some FMCG Examples :

- Convenience Products
1. Since these products are bifurcated in terms of their marketing abilities, the
consumption of these goods displays varied consumer purchasing behaviour.
2. For example, the convenience products that are easily available at all retail
spaces are bought more frequently and do not require the consumer to make
an informed, well-thought decision before buying it. Examples of the same are
listed above.

- Specialty Products
1. On the other hand, Specialty products are those kinds that are not consumed
regularly. Rather, they cannot be purchased regularly because of their brand
and characteristics.
2. This category comprises products like cars and other motor vehicles, designer
clothes, expensive jewellery, and the like.
3. The purchasing behaviour is observed when it is noticed that for obvious
reasons, the Convenience products will have a much larger selling and
demand index than the Specialty category of products.

The majority of India’s population makes up for the middle-class section of the
society.
- Understandably, the demand for Convenience products will be exponentially more
significant than the demand asserted for Specialty products.
- This is dependent on various factors like low price, extensive and widespread
distribution, availability, accessibility, requirement, etc.

Below are the names of the four firms and their classification as profit making or non-
profit making.
 Profit Making FMCG firms: Profit making FMCGs in India are;
 (i) Nestle.
 (ii) Amul.

 Non-Profit Making FMCG firms: Non-profit making FMCGs in India are;

 (i) Eastern Condiments.
 (ii) Adani Wilmar.

Market share (by revenue)

Company’s Name Market Share (%)

ITC 14%

Hindustan
12%
Unilever (HUL)
Nestlé 3%

Britannia 3%

Patanjali Ayurved 4%

Dabur 2%

Godrej Group 2%

Marico 5

GlaxoSmithKline (GSK) 1%

Colgate-Palmolive 1%

Characteristics
Technology
Since the emergence of internet, people have adopted the Research online,
purchase offline (ROPO) method. As a result, FMCG companies have installed
advantaged manufacturing machines for better quality purpose and have decreased
their profit margin to match with their competitors.
Marketing drive & research
Indian customers prioritise getting the best deals possible and as a result are less
likely to stay loyal to a brand. Thus, FMCG companies are constantly trying to
influence customers with their promotional deals and many firms offer combo deals
to attract customers to buy their product.
Low-capacity intensity
Most of the companies operating in FMCG require relatively less capital for
investments in manufacturing plants, machinery, equipment and other fixed
assets. The turnover is typically about five to eight times the invested capital at fully
upgraded manufacturing plant. Companies have low capital intensity as transactions
in businesses are still carried out on credit and cash basis.
High initial launch cost
Unlike FMCG industry in US which is dominated by few big companies, India's
industry is highly fragmented. Increasing the market share for companies is getting
more challenging due to increase in number of competitors. Promotions and
advertisements, cost of product development, testing market compatibility, market
research and mainly, the launch of the product to create awareness requires high
initial costs.
Challenges faced and overcome/yet to overcome for the FMCG Industry in
India
 India’s financial year starts in April and ends in March. The above graph is the
indication of the value growth of the FMCG sector in India from the 1st quarter
financial year 2019 (Q1 FY 2019) to the 3rd quarter financial year 2020 (Q3
FY 2020).
 As is visible from the details in the graph, the 3rd quarter of the financial year
2020 recorded the lowest growth of the FMCG sector compared to the last six
quarters.
 After the value growth of FMCG skyrocketed in Q2 FY 2019 to 16.2, a steady
decline was observed, which resulted in the growth being valued at a mere
6.6% in Q3 FY 2020.

Whether one likes it or not, it is very much evident that the slope of decline is very
steep. The factors that led to this are multiple.

 Reasons like the falling GDP of the country, the rising inflation, insufficient
rural demand, are some of the many reasons that have contributed to the
decline in the percentage of the growth of the Indian FMCG sector.
 With the ongoing pandemic taking its toll on the economies all over the world,
no less India, the growth rate can be expected to plummet even further.
  Given the current scenario of the world, such a turn of events is bound to
happen sooner or later. In this case, the FMCG sector in India will suffer a
huge loss of revenue.

FMCG Industry in India

 The presence of the FMCG products is across all areas of the countries.
 The distribution of FMCG is not only limited to urban spaces.
 Even though the urban market contributes about 55% of the consumption
revenue of the Indian FMCG sector, the rural area's standing is not far behind.
 With a growth rate of 14.6%, the semi-urban and the rural FMCG markets
gain about 45% of the overall revenues.
 As 12.2% of the Indian population occupies rural areas, the investors are
keenly observing the rise in rural consumption.
 It is predicted that rural markets will grow slightly more than urban markets
this year and will experience a growth rate of 4-5%.

FMCG Business Scope

1. The FMCG market is expected to grow by 9-10% in the financial year 2020. It
is also estimated that by 2020, 40% of the FMCG market will be operated
online.
2. The consumption habits, especially of the young demographic situated in the
urban spaces, will have a massive impact on the FMCG sector of the
economy.
3. With shifting habits and changing lifestyle, it is predicted that there will emerge
new product categories even within the FMCG sector, which shall satisfy the
demand of the new consumer living in the new world.
Critically evaluate the ways (verbal and non-verbal) of business
communication in a commercial organisation. Write the factors
which make one or the other method appropriate based on your
understanding of commercial organisations.

1. Verbal Communication – Written, Oral:

The word verbal means ‘connected with words and use of words.’ Any

communication using words is verbal communication.

Words are the most precise and powerful sets of symbols. Words denote as well as

connote meanings. That is why all serious or formal communication is usually in

words. Words, as we are all aware, can be written or spoken.

Thus, verbal communication can further be divided into two types:

(a) Oral Communication:

“A wound inflicted by speech is more painful than a wound inflicted by a sword”. As

the term itself suggests, communication through the spoken word is known as oral
communication. Of the working time spent in verbal communication, 9 % is in
writing, 16 % in reading, 30 % in speaking and 45 % in listening.
In oral communication, words should be chosen very carefully so that what they

connote has the precise shade of meaning. The sender of the message or his

representative is usually the speaker, while the receiver or his representative, the

listener. Listening is also an important aspect of oral communication.

Factors in oral communication:

(i) The speaker

(ii) How he speaks

(iii) What he speaks

(iv) To whom he speaks

(v) Whether he receives a feedback

Pre-requisites of oral communication:

(i) Clear and proper pronunciation of words

(ii) Clarity and exactitude

(iii) Conciseness

(iv) Right tone

(v) Right style and vocabulary

Merits of oral communication:

(i) Saving of time and money:

Oral communication saves money as well as time. No money needs to be spent for

producing oral communication since it involves only the spoken word. Oral

communication is, therefore, economical.

Secondly, there is hardly any delay from the time when the sender sends the

message and the receiver receives it. The words are received and understood as

soon as they are spoken. Oral communication, therefore, saves time, too.

(ii) Immediate feedback:

The feedback in most oral communication is immediate. The words are received as

soon as they are spoken, and the receiver can also give his reaction immediately.

The speaker can gauge the mood and the response of the listener. The immediate

feedback is an advantage for the speaker.

(iii) Saves paperwork:

Paperwork is minimal since communication is in the form of spoken words.

(iv) An effective tool for exhortation:

When the communication is oral, you can try to persuade the listener. Doubts can be

cleared immediately.

(v) Builds a healthy climate:

A friendly atmosphere is created when you communicate orally since there is less

formality. You can also make modifications in the communication immediately on the

basis of the feedback and response from the listener.

(vi) Best tool during emergency:

Oral communication is the quickest tool during an emergency. It is the best method

of communication when an immediate and fast response is critical.

Demerits of oral communication (limitations):

(i) Greater chances of misunderstanding:

Unless it is recorded, you cannot refer to an oral message again. There are,

therefore, greater chances of a message being misunderstood or misinterpreted. In

fact, there is also a chance that the message may not be understood at all.
(ii) Bad speaker:

Only an individual who can satisfy all the requisites of effective oral communication

can produce good results. More often than not, a bad speaker may send the wrong

message. When speaking, one communicates through the articulation, voice

modulation and body language, too.

A message may be misunderstood if there is a disharmony among these

components. Also, as mentioned earlier, what the words connote and what they

denote should be in harmony, else the message may lead to a conflict in

understanding.

(iii) Ineffective for lengthy communication:

Oral communication is not useful for lengthy communication. Because of human

limitations, there is every likelihood that something important will be missed out.

(iv) Lower retention rate:

Oral communication suffers from the drawback of a low retention rate. A listener may

absorb only some part of an oral message since the attention span differs from

person to person. People also tend to forget an oral message quickly.

(v) No legal validity:

Oral communication lacks proof of record. There is no permanent record or proof of

what has been said. An individual who has given a message may deny it later;

similarly, an individual who has been given an oral message or instruction may say

he never received it. Hence, oral communication has very little value from the legal

point of view.

(vi) Difficult to fix responsibility:

Since a message is transmitted orally, it is difficult to fix responsibility. This may also

lead to carelessness in the implementation of a message.

(b) Written communication:

A message constitutes written communication when it is put in “black and white.” It is

a formal type of communication. The sender of the message or his representative

constitutes the writer.

Written communication is usually considered binding on business organizations and

is often used as evidence. Technological advancement has enlarged the gamut of

written communication through email and other such facilities.

Factors in written communication:

(i) The writer

(ii) The content

(iii) The language used

(iv) The purpose of the communication

(v) The style adopted – formal or friendly

(vi) The receiver

Pre-requisites of written communication:

(i) How much to put in writing

(ii) What to leave out

(iii) When to stop

(iv) When to convey

(v) By what means to convey

Merits:

(i) Precise and accurate:

Written communication is generally prepared with great care and precision. The very

prospect of writing makes a person conscious. You have to be very serious and

organised while communicating in the written form, because written communication

is open to verification.

(ii) Easily verified:

Since written communication is on paper etc., it can be read and re-read. It also

offers itself to verification. There is also, thus, less ‘chance of someone twisting the

message to his or her own advantage.

(iii) Permanent record:

Written communication constitutes a permanent record. It also acts like evidence. It

proves very useful for future reference as it can be preserved for years. For example,

old orders and decisions can serve as the basis for new ones.

(iv) Suitable for lengthy and complicated messages:

Lengthy and complicated messages can be understood better when they are in the
written form rather than in the oral. There is less chance of misinterpretation and

misunderstanding. Also, the language used is less subject to change.

(v) Responsibility can be easily fixed:

In written communication, responsibilities of sender and receiver can be fixed easily.

People have the tendency of shifting responsibilities for mistakes, but this is difficult if

the onus is obvious in black and white.

(vi) Has legal validity:

Written communication is acceptable as a legal document. Written communication

has been used as evidence since time immemorial.

Demerits:

(i) Slower method of communication:

Written communication can be time-consuming since it may take even two or even

three days to reach the receiver (by letters, for instance). By contrast, oral

communication is immediate.

(ii) Further delay if clarifications are required:

Written communication hampers quick clarifications. The receiver may write back for

clarifications and wait for a reply, making the process tedious. Even if clarifications

are not needed, there is still a delay between the time the sender writes a message

and the receiver receives it.

(iii) Leads to too much of paperwork:

Since written communication is basically done on paper, one may tend to use it as

escape mechanism Paper-free offices remain a dream.

(iv) Always a possibility of ambiguity or lack of comprehensibility:

It is quite possible that the receiver is not able to comprehend the exact meaning of a

written message that he has received. The clarity of a written message also depends
upon the skill, or the lack of it, in the sender. If the message has not been written

properly, it will not be understood, either.

(v) Costly in terms of money and man-hours:

Writing letters is a costly process not only because you need to spend money on

postage, but also because several persons are involved in the process of sending

out a letter from an organisation. Their time costs organisation money. While oral

communication can be short and quick, written communication, because of its very

nature, tends to be lengthy.

(vi) No flexibility:

The written word is not subject to instant change after communication. Therefore,

conveying an afterthought may prove very lengthy, and, at times, even impossible.

(vii) Literacy essential:

It goes without saying that in written communication, the sender as well as the

receiver should be literate. In fact, we may wrongly presume that they are so. In

many Asian Countries, where literacy is low, a written message will be meaningless

for large masses of illiterate persons.

Literacy also means literacy in the language of the message. The receiver should

know the language in which a message has been written. It is no use receiving a

message in English if you are not conversant with that language.

Notwithstanding its limitations, it can be safely concluded that written communication

remains the spine of an organisation. Almost all formal communication is in the

written form.

Visual Aids:

A visual aid is an illustration in tabular, graphic, schematic or pictorial from. Visual

aids help communicators to get their message across more effectively to their

audience. Visual aids help by making the material more interesting, clarifying and

simplifying complex subjects and highlighting important points for better retention by

the audience.

A checklist for creating effective visuals is given below:

(i) Visuals should be simple and easy to understand and the design and layout

should contribute to the overall understanding of the subject.

(ii) Visuals should depict the data accurately and important points should be

emphasized.
(iii) Visuals should be appropriate for the intended audience.

(iv) Care should be taken that the type-face and fonts are clear and readable and the

captions short and informative.

2. Non-Verbal Communication:

Scientific analysis has shown that body movements and gestures constitute 55% of

effective communication. Hence, non-verbal communication merits great

consideration.

Non-verbal communication involves things such as gestures, posture, physical

appearance etc. It takes place without written or spoken words.

Non-verbal communication is those messages that are expressed by means other

than linguistic. While you can refuse to speak or write, it is impossible to avoid

behaving non-verbally.

Non-verbal communication is classified here in two different ways:

I. a. Visual and b. Auditory

II. a. Body language or kinesics – body movement, facial expressions, posture, etc.

b. Vocal characteristics – paralanguage

c. Space – proxemics

d. Surroundings

e. Silence

Kinesics:

The study of bodily movement stoat forms a part of non-verbal communication is

known as kinesics. It is an integral part our communication. Existence as a receiver

is supposed to observe non-verbal communication 55% of the time. Our body

consciously as well as unconsciously, conveys messages, moods attitudes etc. in

the same way as language uses sets of symbols to convey meaning.

(i) Facial expressions:

The face is said to be the mirror of the mind. Whatever we feel reflected on our face.

The face can convey energy, anger, grief, sincerity and a host of other feelings and

emotions. A smile means friendliness, while a frown means anger.

A creased forehead shows worry while a raised eyebrow shows surprise hence it is

very important to exercise a check and control over our feelings. Although this is a

difficult task, you can get positive results with continuous efforts.
(ii) Gestures:

Gestures are small body movements that transmit some message. It can even be

the transmission of specific information. Some gestures maybe conscious while

others may be involuntary. Some gestures have an almost universal meaning, such

as a headshake for a “no” or a handshake as a “hello”.

Then there are other gestures that may have regional meanings. Strictly speaking,

gestures are a part of body language because our head and hands tend to

communicate by themselves in their own Way.

(iii) Posture:

Posture is the position adopted by the body. It helps in conveying a message. Each

movement or position of the body has expressive or defensive functions. Thus, the

posture is an important element in non-verbal communication. It reveals a great deal

about an individual.

Posture concerns the overall bearing of the body. It includes the angle of inclination

and the position of the arms and the legs. A raised head indicates openness, while a

tilted head indicates curiosity.

However, one should remember that none of these postures have any specific

meanings of their own. They acquire meanings in association with other symbols and

in the context of communication.

(iv) Clothes:

A man is often judged by his appearance. His clothes play an important role in

enhancing his personality. Shabbily dressed people may cut a sorry figure. It is vital

for one to look professional and efficient. Accessories also play a major role in non-

verbal communication.
Clothes and accessories relate to physical as well as socio-cultural characteristics.

Sometimes, clothes and accessories manage to live up to the expectations of the

receiver, while at times they send a message through a violation of these

expectations.

(v) Eye contact:

Eyes are the windows to the soul. Eye contact constitutes a very important factor of

face-to-face communication. Through eye- contact, the speaker gets signals whether

the channel of communication is open.

Discomfiture or nervousness results only in a brief eye contact; on the other hand, a

long and fixed gaze shows interest. Depending on our feelings, we have smiling

eyes, angry eyes, painful eyes, evasive eyes, and so on.

(vi) Silence:

Silence speaks louder than words. It lays down the relationship between

communicators and their attitude towards each other. Silence shows the inability to

converse further. A student who has not done his homework will stay mum when the

teacher asks him for it.

Indicators of Non-verbal Communication:

Positive:

(i) Smile

(ii) Open posture

(iii) Interested expression

(iv) Moderate eye contact

(v) Accurate pitch and volume of voice

Negative – Submissive:

(i) Floundering voice

(ii) Defensive arms / legs

(iii) Slow speech

(iv) Fretting expressions

(v) Deceitful looks

Negative – Aggressive:

(i) Harsh voice

(ii) Wagging finger

(iii) Fast speech

(iv) Supercilious expressions

(v) Immoderate eye contact

Body language:

Body language stands for the way the body communicates without words, through

the movement of its parts. The nodding of our heads, blinking of our eyes, waving of

our hands, shrugging of our shoulders, etc., are expressions of our thoughts and

feelings.

All these movements are the signals that our body sends out to communicate. That

is why this area of study has been called body language. Just as language uses sets

of symbols to convey meaning, our body, consciously as well as unconsciously,

conveys messages, attitudes, moods, status relationships, etc.

The body language is very important. It has been observed that we may play fast

and loose with words, but our body speaks out the truth. Even if we try to hide the

truth or anything that we want to suppress, our body, our eyes, our gestures may

speak out loud and clear.

Paralanguage:

The world of communication that involves signs, signals, pitch, tone and fluctuations

to convey meaning is paralanguage. Para means ‘like’ or ‘akin’. Paralanguage

means “like language,” but not actually a language.

Anything that performs the task of communication as a language without being a

language in the conventional sense of the word falls within the purview of

paralanguage. Paralanguage is used to describe a wide range of vocal

characteristics which help to express and reflect the speaker’s attitude. It is non-

verbal because it does not consist of words.

Verbal communication is concerned with the content of the message – what is being

conveyed? On the other hand, paralanguage is concerned with the manner in which

the message is conveyed – how is it being conveyed?

Paralanguage depends on voice, intonation, pitch, pause, volume, stress, gestures,

and signals. Through pitch and volume variation, stress on words, etc. one’s voice

can convey enthusiasm, confidence, anxiety and the speaker’s mental state and

temperament.

Voice:

Voice is the first signal that we receive or use. A good listener can gauge a lot from

the voice itself. There are various categories of voices. A voice can be sweet, soft,

musical, cultivated, pleasant, nasty, clear or indistinct, among other things. The voice

can help reveal a speaker’s background, mental state, education, sex and

temperament.
Intonation:

Intonation is the modulation of the voice and the shift in stress. Intonation is a part of

effective communication. For example, a message with serious content should not

be delivered in a high tone, but in a sombre tone.

Pitch:

Pitch is the vocal slant of the voice. It is very important because it reveals the

speaker’s frame of mind. An unusually high pitch may reflect agitation. An

unchanging pitch maybe boring or monotonous, decreasing the listener’s span of

attention.

The pitch may also help us understand the speaker’s social position. A person in a

position of authority uses a higher pitch than a subordinate. The flaring of tempers

usually results in a change in the pitch.

Pause:

A pause emphasizes a message. A pause is to speech what a comma is to prose. A

pause at the wrong place may lead to miscommunication. For example, the

difference between ‘fruit trees’ and ‘fruit, trees’ is vast.

Volume variation:

The speaker should adjust the volume of his voice depending on the size of the

audience. Larger the audience, the louder the voice should be. Volume variation

makes the speech effective. Sometimes changing from loud to soft and from soft to

loud have the desired effect.

Mixed signals:

Mixed signals occur when the tone, pitch and facial expressions of the speaker do

not match the words that he is speaking. This confuses the listener as to the exact

motive of the speaker.

For example, an individual may congratulate another, but his tone may be cold. In

this case, the listener will not be sure whether the speaker is really happy or is

merely fulfilling a formality. Praise delivered in a sarcastic tone conveys mockery.

Proper word stress:

Communication can be made more effective by putting proper emphasis or stress on

the right words.

Overall impression:

A message is understood by the listener not only by the content, but also by the

manner in which the speaker conveys it. The speaker’s bearing, attitude, dressing

style, physical appearance, age, gender, accent and the quality and tone of the voice

also affect the message that gets communicated. For a message to be effective, the

overall impression given by the individual should be in consonance with the message

that he wants to convey.

Advantages of paralanguage:

(i) No oral communication is complete without paralanguage as it is closely

connected to language itself.

(ii) To a large extent, paralanguage indicates the position and situation of the

speaker, whether in an organisation or in society.

(iii) It also reflects the speaker’s personality and background to a great extent.

(iv) Paralanguage is indicative of the mental state of the speaker. A discerning

listener can derive the right conclusions from the pitch, tone and speed of a

message. This can often be very useful.

Limitations of paralanguage:

(i) Paralanguage is ‘semi’ or ‘like’ a language. It is not language by itself. Therefore,

not all the advantages associated with actual language can be attributed to

paralanguage.

(ii) Paralanguage involves the drawing of conclusions on the basis of a number of

peripheral (side) attributes. Such drawing of conclusions need not always be right. In

such a case, they may also serve to create undue bias. This, in itself, makes

paralanguage misleading or confusing at times.

(iii) Also, as speakers may come from different backgrounds, cultures and situations,

the conclusions from paralanguage may be difficult to draw, especially to convey a

message in its entirety.

Proxemics or territory or space:

Proxemics is another important type of non-verbal communication. The term,

proxemics is derived from the word proximity, which means closeness. Proxemics is

used with reference to space or territory. A lot of communication takes place non-

verbally through the sheer manner in which we use the space around us.

Scholars have also attributed a lot of non-verbal communication to the colour,

design, layout and utilisation of the space around us. This is also proxemics. The

space around us can be broadly classified as under:

Intimate space:

Most body movements take place within 18 inches around us. It is our most intimate

circle of space. Only very close people or family members can enter this space, be it

through a whisper, a pat on the back or a handshake. It means that the less the

space between the two persons communicating, the more intimate is the nature of

communication.
Social Space:

This can be anywhere between four feet and 12 feet. It reflects a formality of

relationship. It also reflects a lack of spontaneous behaviour. An individual’s

responses are more collected and well thought-out. Social space reflects reason,

planning and control, usually associated with business communication within a

formal relationship.

Proxemics:

(i) Feelings and attitudes are reflected by the way people use space around them.

(ii) Proxemics helps us to understand relationships and interaction patterns between

people.

(iii) Proxemics is also concerned with the use of space by groups of people.

Surroundings:

How you organize the surroundings also contributes to the communication. The

room where you meet your visitors may be dazzling or simple. It may be gaudy or

sober. The decor of the place, the furniture, and the artistic pieces that adorn your

office, talk about yourself and your taste.

Write an essay/play showing how two organisations (one with uses
communication effectively and one which does not) have an effect
on their total working and profitability.

Mr. Sudhir Bose founded a small textile firm in Maharashtra in the late fifties.
From this small beginning came one of the country’s largest textile firms in India. By
1996, it had recorded annual sales of Rs 700 million, with 7000 employees and five
manufacturing locations. Throughout its growth, the founder remained an active,
imaginative and driving force behind his company. In earlier days, every manager
and worker knew him. He was able to call most of them by their first names. Even
after the company grew fairly large, people felt they knew the founder and chief
executive. Their strong feeling of personal loyalty had much to do with the fact the
company’s workers never formed a union.

However, as the company prospered and grew, Mr. Bose thought that it was
losing its small company’s spirit. He also felt that communications were suffering,
that his objectives and philosophy were not being understood in the company. Much
wasteful duplication was occurring through poor knowledge of what others in the
company were doing. As a result, new product development and marketing were
suffering. Likewise, he was concerned that he had lost touch with the people. To
solve the communication problems, he hired a Director of Communications reporting
directly to him. The issues were discussed in detail between the two. They then put
into effect every communication device they found in other large companies namely:

a) Bulletin boards in every office and plant throughout the country;

b) A revitalised company newsletter carrying detailed company and personal

news affecting all locations;

c) “Company Facts Book” for every employee giving significant information

about the company;

d) Regular profit-sharing letters;

e) Company sponsored courses to teach communication methods;

f) Monthly one-day meetings held at headquarters for the top 100 executives;

g) Annual three-day meetings of 400 executives at all levels, at a resort town;

and
 h) A large number of special committees to discuss company matters

After much time, effort and expense spread over a year, Mr. Bose was
delighted to find that his efforts have brought spectacular results. The level of mutual
understanding, cooperation and teamwork in different manufacturing locations and
other departments of the company have improved significantly. The productivity and
profitability of the company have also increased by more than twenty per cent.

Another large company, Modern Textile Mills, located in Southern India has
been operating since 1960. It has recorded in 2002-03 a sales turnover of Rs 400
million with 5000 employees at 5 different locations. The company’s management
believes in maintaining a distance from workers. There exist formal communication
forums in the company in the form of Works Committees and Joint Management
Councils at factory level and middle management level respectively. The company
has also set up a grievance procedure and a suggestion scheme. Over the years,
however, communications and interactions between management and workers have
become increasingly formalised. Workers have developed a feeling that
management is not interested in listening with empathy. Suggestion scheme of the
company has become dormant. Upward communication is limited to grievances and
complaints. Regular feedback on real feelings and perceptions of workers is not
available to managers.
In the absence of regular and effective communications and off-the-job
interactions, misunderstandings and distrust among management and workers have
increased. Each side suspects the initiatives and actions by the other side. Disputes
and conflicts take place frequently on trivial issues. Cooperation and teamwork
between divisions, departments and branches have suffered. As a result, the
productivity and profitability of the company have declined continuously over the last
three years.