Baron - Rewriting Indian Consumer Electronic Goods Marketing

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Themes : Innovation
Period : 1994-2002
Organization : Baron
Pub Date : 2001
Countries : India
Industry : Consumer Electronics

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Case Code : MKTG007
Case Length : 7 Pages
Price: Rs. 200;

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The Baron Group Contd...

In the 1990s, the brand was virtually wiped out from the market. In 1992, Baron² International led by Kabir and Shakun Mulchandani (J.R.Mulchandani's son and wife respectively) tied up with the Akai Electric Co., owned by the US based Semi-Tech Corporation, for marketing its CTVs and audio products in India. In August 1998, Baron tied up with Akai's global competitor Aiwa (a subsidiary of Japan's Sony) for a similar marketing arrangement through a new venture, Baron Electronics.

Asked whether Akai and Aiwa brands would cannibalize each other, Kabir said, "Both the brands will compete, there will be no preference for any particular brand." He said Baron's 'value for money' marketing approach would be extended impartially to both the companies.

While with Akai, Baron offered a low-priced product to maintain volumes, with Aiwa the gameplan was to target the mid-priced segment to earn higher margins. However, Akai was reported to be unhappy with this development. In November 1998, differences intensified between Akai and Baron when Baron International refused to take delivery of completely knocked down (CKD) CTV kits from Akai.

The next month Kabir visited Akai's Yokohama headquarters as well as its Hong Kong offices to talk things out. However, this did not yield any positive results and eventually Baron and Akai parted ways. Baron held that Akai did not have the size that its global competitors had, and hence its competitiveness was getting eroded.

Hence Akai was unable to bring down the prices of its kits to the extent Baron desired. It thus became difficult for Baron to continue with Akai. Moreover, Aiwa was giving Baron CKD kits at lower prices that were 10-15% lower than those of Akai. Also, unlike Akai, Aiwa had a wider range of products, comprising mid-size hi-fi systems, VCPs, home theatre systems, car audios, and hybrid products.

Baron saw more potential in the Aiwa venture to generate additional income for the group. Though Akai re-entered the market in a tie-up with Videocon, it failed to generate the kind of volumes it achieved during the Baron tie-up days. In October 1999, Baron re-acquired the 10% stake held in it by Akai. In 1999, Baron entered into a deal with another Japanese consumer electronics company Hitachi Home Electronics Asia Ltd.

However, pressure from Aiwa and Hitachi's failure to generate volumes resulted in this venture being terminated in 2000. In the same year, Baron transferred the Aiwa business from Baron Electronics to Baron International, in which Aiwa picked up a 5% stake. In addition to equity participation, the two partners agreed to extend the strategic relationship from 2003 till 2007.

In May 2000, Baron Electronics entered into another marketing and distribution joint venture with the China based TCL Holdings. The 51:49 venture (TCL: Baron) was for TCL's CTVs, cellphones and other consumer electronic items. Initially, TCL products assembled through OEM dealers were sold by Baron International through an exclusive marketing arrangement.

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2] An offshoot of the Bush venture, Baron had clearly defined plans of confining itself to marketing and distribution of consumer electronics. The group's belief was that to successfully market consumer electronic goods, a good marketing philosophy, and a well-connected distribution network and service options were the most important pre-requisites.