The Carrier spin

It came, saw and conquered. Carrier is still the market leader with a 28 per cent share, though there's been a drop by four per cent over the past two years.

Last fiscal (1998-99) saw promising performance by the company, with sales turnover increasing by 17 per cent, from Rs 345.6 crore to Rs 404.4 crore, mainly due to higher volume sales of window air-conditioners.

However, sales of compressors and chillers went down and though the company's emphasis on improving service income succeeded in improving overall income, in the nine months ended Dec 31,1999, turnover declined to Rs 292.8 crore, from Rs 313.1 crore of the corresponding period the previous year.

Again, in the first quarter of 1999-2000, Carrier's turnover was lower at Rs 125.74 crore against Rs 127.83 crore in the previous corresponding period, while net profit stood at Rs 8 crore against Rs 9.64 crore in the corresponding period the previous year.

The company's facing tough times ahead. While there is increased competition from manufacturers like LG and Samsung, who are offering state-of-the-the-art products by importing their products directly and marketing them at extremely competitive rates, Carrier is faced with the problems of having surplus manpower at its factories, which is pushing up costs.

Last year, it embarked on a massive cost-cutting effort. It initiated a movement to prune its workforce in order to realise cost efficiencies. The move backfired as it led to unrest at its plant in Haryana, leading to disruption in production. This took a toll on the company's sales.Ultimately, it was able to offer VRS to 200 employees.

However, Carrier's competitive position within the industry in the long run is strong, owing to an established brand name, a widespread dealer network, strong support from the parent company and backward integration into compressors, which gives it a unique competitive advantage. It has the wherewithal to face up to international majors, both in terms of technology and marketing thrust.

In the short term, however, Carrier is facing pressure on its operating margins. Its chairman has announced possible reduction in margins in 1999-2000 due to increase in competitive pressures.

Three years ago, Carrier had a market share of 26 per cent in the entire AC market and a 32 per cent share in the window air-conditioners market. Today, it runs the danger (along with Voltas)of new competition eating away into its shares, something that has already happened with its window AC shares, where there's been a dip of four per cent, with market share now standing at 28 per cent.When Carrier came in 1994, it managed to make a good impact thanks to its aggressive marketing and advertising strategy, besides, of course, more sophisticated products as compared to the domestic players, Voltas and Blue Star.

Initially, Carrier's strategy was focused on the customer instead of high technology. In 1993,it came out with an advertising blitz in the mass media to sell the proposition of 'cooling'India. It positioned its air-conditioners as a regular need and launched some catchy and glitzy ads aimed at the residential buyer.

In the first phase of the campaign, it positioned itself as a global leader in air-conditioning and as the company that invented air-conditioning. In one of its print ads, it showed a picture of Adam and Eve with the copy stating: "Carrier. The first air-conditioners on Earth". Another ad showed a young man seated inside a refrigerator, with the ad copy saying: "Most folks in 130 countries keep their cool with Carrier. But then what's the choice."

In the next phase, Carrier targeted the institutional decision-maker. For these clients, it displayed its supremacy in the field of technology. The strategy paid off,as was proved in a survey conducted in 1995. Brand recall had risen to 62 percent. By 1996, the company changed the focus to stressing on the end benefits -- comfort and convenience and not just cooling. It launched a series of ads that highlighted the fact that though small in size, Carrier ACs are workhorses.

One of its ads showed a black ant with the caption: "Its size lies about its performance".Carrier has graduated towards a strategy that focuses on the quality of indoor air vis--vis ambient conditions. This strategy may just prove correct given the high level of awareness about the detrimental effect of air pollution in Indian towns and cities, as a direct correlation has been established between higher productivity and working in an air-conditioned environment.

The key focus areas of Carrier's year 2000 strategy are: a new range of products in the room AC segment; focused brand building; and tapping retail in a big way for the household segment. The aim is to position itself as a company offering the best in contemporary products.

Carrier will launch an entirely new upgraded range of air-conditioners; the earlier models are to be phased out. According to Anil Srivastava, managing director, Carrier, the new products are based on the DFX (designed for extra) philosophy. They will be value-for-money products, with the focus on aesthetics and technology.

As part of its focused brand strategy, the company is planning to run a series of brand and corporate campaigns. It is hiking its ad budget of Rs 6 crore to Rs 12 crore for this year.