Wednesday, March 06, 2013

CARRIER INDIA: GOING GREEN

Though Carrier was one of the early entrants into the residential AC segment in the country, it somehow got overshadowed when rivals arrived. However, it’s clawed its way back into the sweepstakes by sheer market tactics. B&E does a walkthrough across Carrier’s strategic plants and plans
We point out, and creditably, Pandya accepts that the industry has far more potential. But he says Carrier has a killer app, as they say, “If you look at the size of the market in India, it’s huge. But the key difference between other markets and India is that what we term ‘green activity’, Westerners call sustainability. This change in India is being bought about at a very fast rate, which offers us a much bigger opportunity in the future.” Carrier is basing its complete strategic focus on the bet that India would move the environmental route faster than competitors would expect. And to that extent, Carrier has been preparing the battleground rules much in advance. Not many know that for the past two years (2008 and 2009), Carrier was awarded the top rank in the nation in the National Energy Conservation Awards. That’s the reason Carrier India has been working closely with Bureau of Energy Efficiency. The 5-star AC segment is expected to account for over 25% of AC sales in the coming years. In fact, Carrier’s products like variable speed chillers, which have the capability to cut operational AC expenditure by almost 40%, are lynchpins in this key leadership competitive warfare that Pandya is planning.

But Carrier is up against tough consumer buying behaviour. While all the other manufacturers are planning to drop down their prices further to ensure market spamming, Carrier’s ACs are in general priced at 10-15% above competitors’ products. “We don’t want to sell the cheapest product. Our target segment is pretty much evolved and is not particularly the first time buyers. Instead, we cater to customers who are looking for a repeat purchase,” explains Pandya. That leaves a paradoxical question unanswered, as Pandya himself accepts that the market penetration of ACs in China is ten times more than that in the Indian market, which still stands at a minuscule 3%. This leaves an immense scope for the company to expand its market share, both in residential as well as commercial segments.

But somehow, Carrier is addressing the issue. Though the company currently manufactures its full range of residential products in India, 50-60% of its commercial range is still imported from its factories in US, China and other parts of the world, one reason for the upper marked pricing. The company is now planning to localise its offerings in India to control costs. They already have a sustainable design centre in India and are planning to take it forward to a higher level, particularly with respect to localised products. But Carrier will still need to work a way to fight the sheer behemothic dealership size and investment might of competitors like LG, which not only has 2,200 dealers and 22,000 sub-dealers across the country selling its various products, but also is investing close to Rs.450 crores directly and through its business partners to increase production. And LG itself has brilliant environmental friendly 5 star ACs selling like hot pancakes. How do you compete with such a competitor?

A long time ago, the invention of air conditioners by Carrier was the reason cinema halls in the US started showing movies during summers too. Pandya believes he can recreate history... For now, we believe him...


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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