Prithvi Electricals1

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Gopal Sharma, was thoughtful while driving his car on his way back to his office in
Jayanagar, Bangalore. He had just finished a meeting with the managing partners of
Prithvi Electricals, at their company headquarters in Rajaji Nagar, Bangalore. He was
thinking about the job offer that Prithvi Electricals had made to him to takeover as the
marketing manager of the company.

Company

Prithvi Electricals was a partnership firm with two brothers as its partners - Jayantilal and
Gordhandas. The firm was set up in 1976 by Jayantilal, the eldest of the two brothers. He
had completed his diploma in electrical engineering in 1975 and had soon put up a small
shop in Bangalore to undertake repairs of electrical appliances. The business grew
steadily and by 1979 his brother Gordhandas, immediately after his graduation in
commerce, had joined the business. By 1980 the firm began vertical activities in electrical
jobs which mainly consisted of copper winding work for motors. The company had its
factory in Peenya, Bangalore.

In 1984, Prithvi Electricals entered the manufacturing field by making table top mixers
(called mixies). They began in a small way, by procuring the molded plastic casings and
other components from outside. The 250 watt AC motors 2 required for the mixie were
manufactured in-house by Prithvi. In the first year of its operation Prithvi sold 300 mixies.
By 1996 the company was selling about 2000 units per month. The mixies were branded
as “Prithvi” mixies.

The Product

Prithvi mixies were small, compact tabletop units with fewer features than heavy-duty
models. The product came with two jars - a big one for wet applications and a small jar
for dry applications. The blades came fixed with the jars. The unit consumed less power
but made a little more noise than other mixies. It had three variable speeds of operation
and a "power on" indicator. The manufacturer's label was a printed sticker glued on the
back of the unit. The unit serial number was written on the underside of the unit using a
permanent marker. The unit was supplied with one-year warranty. Prithvi had only one
model of mixie. Prithvi had acquired BIS (ISI) certification for its product in 1998.
1
Case written by Dr. Gururaj Kidiyoor, Professor, T A Pai Management Institute (TAPMI), Manipal
- 576104 © 2001. Revised in 2012

The case is written for the purpose of classroom discussion and does not demonstrate a correct or
incorrect handling of an administrative situation.
2
Motors are basically prime movers having numerous applications. The wattage indicates the
power rating of the motor and AC stands for Alternating Current.
1
Distribution

Prithvi sold all their mixies through their dealers and as of 1999, Prithvi mixies were being
sold mainly in south India. Their sales break up was as follows

Region % of sales (units)

South 64%
West 28%
East 5%
North 3%

In south 50% of the units were sold in Karnataka, mainly in Bangalore. Initially the mixies
were sold only in Bangalore, directly to some retailers. Later as the demand increased,
dealers were appointed in Bangalore who sold the product to retailers. The Bangalore
dealers had slowly started penetrating up-markets in Karnataka by appointing sub-dealers
in almost all the district headquarters. Later Prithvi itself appointed dealers in places like
Belgaum, Hubli, Gulbarga, Mangalore, Mysore, Hassan, Davanagere and Shimoga in
Karnataka. This had made their Bangalore dealers unhappy and some of them had pulled
out of Prithvi dealership. However, Prithvi was able to find replacements for them
without much problems.

In Tamil Nadu, Prithvi had dealers in Chennai and Madurai. In Andhra there was a dealer
in Secunderabad. In the west, the company had dealers in Ahmedabad, Baroda, Mumbai,
Pune, Nashik, and Nagpur. In the east there were two dealers in Calcutta and in North
there was only one dealer in Delhi.

Prithvi did not give any credit to its dealers. The relationship with dealers was primarily
being handled by Gordhandas and the sales personnel in the field were basically
managing the transactions. Active dealers were patronized and relationship with inactive
dealers was allowed to dilute and new dealers were constantly being searched. All the
distributors were non-exclusive middlemen who sold a variety of household appliances.
Most of them were stock and sell type operators with sufficient warehouse space of their
own.

Pricing and Promotion

The mixies were targeted at lower middle class people who wanted to buy a tabletop
mixer but could not afford the regular Rs.3500.00 + models. Prithvi's model was priced at
around Rs.2000.00 per unit. Prithvi believed in aggressive pricing and strong local
advertisements and promotions. Sustained advertisements (classified types) in local
language newspapers, magazines and movie houses (slide advertisements) created
awareness and some demand for the product. Price ads and finance schemes during
festival seasons were employed extensively and attractive quantity discount schemes
were offered to dealers to create push for the product. Price schemes were also offered

2
during inventory pile ups at the factory. The distributors made a margin of around 15% 3
when they sold it to retailers and the retailers made around 18% margin. This margin was
reduced during promotional schemes to offer better prices to the end users. Of late the
distributors had started complaining about this practice saying that it affected their
overall bottom-line. Prithvi was not able to address these issues as it deemed pricing to
be the most important tool in its selling strategy.

Customers

The customers for Prithvi mixies were urban lower middle class, small families. Salaried
class due to finance options given by the company patronized the product. Prithvi had tie-
ups with finance companies like Countrywide etc and soft payment options were
available to customers. Word of mouth publicity by housewives had also played a
significant role in the success of Prithvi Electricals. A small upper middle class segment
purchased Prithvi brand as a stand-by unit. Prithvi Electricals as an organization was
hardly known by the customers though Prithvi as a mixie brand was known to customers
in the target segment.

Manufacturing

Prithvi had a small manufacturing unit in the industrial suburb of Peenya in Bangalore.
This was mainly divided in to two sections - motor assembly and the mixie assembly
shops. The installed capacity for 250 watt motors was about 2500 units per month. The
mixie assembly line used both permanent and casual workforce and hence the capacity
was slightly flexible. The line however provided for about 3000 units per month. Both for
mixies and motors, random sampling method was used for quality testing. The company
had no other certification except for BIS.

Manufacturing schedule was primarily based on the gut feeling and past experience of
Gordhandas and Jayantilal. They produced more during the "season" and also when they
had raw material inventory procured in bulk at lower prices. The product had not
changed much since introduction in 1984 except for the fact that the reliability had
improved due to experience over a period of time.

Branch operation

Prithivi had branch offices in Mumbai and Chennai. Both offices were located in
residential areas and had solitary executives looking after sales as well as service. The
executive in Chennai looked after Tamil Nadu, Andhra and eastern region. The executive
based in Mumbai looked after the entire western region. Also a small section in the
headquarters at Rajajinagar was being operated as a branch sales office. There were two
sales executives looking after Karnataka and Kerala markets. The primary responsibilities
of these executives were to visit the dealers and prospect for new dealers. They also
repaired the units at their office or the dealer's office. They were provided with spares for
this purpose from the factory on requisition through indents. Their jobs were more

3
Margins were calculated on their selling price to retailers. Retailer margins were on the selling
price to end customers.
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operational and coordination oriented. The dealer in Delhi interacted directly with
Gordhandas.

All the executives employed by Prithvi were diploma engineers 4 and they were given one
time training on product features and on servicing. They were employed mainly through
personal contacts of Gordhandas and Jayantilal.

Competition

With the opening up of economy in 1990's the competition in the area of consumer
durables had intensified. The aggressive marketing and sales practices of MNCs had now
percolated to segments where MNCs were not present. The mixie market too became
very competitive and aggressive with national level players like Sumeet and Maharaja
adopting innovative marketing strategies. These firms introduced various attractive
models due to which the buyer had more choices in different price ranges. The
conventional stone grinders, which were available in stationery and tilting models, were
now available in tabletop form also. Mixies became bigger and bigger where as grinders
became smaller and smaller. Households with a grinder plus a mixer also became quite
common.

Emergence of large retail outlets and departmental stores provided a new channel of
distribution for consumer goods. Departmental stores primarily stocked very well known
brands and pushed the brands which gave them higher margins. Efforts were made by
Gordhandas to have Prithvi mixies stocked at the departmental stores but he was not
able to make any breakthrough in this segment due to heavy demands made by the
departmental stores in terms of price, quality, aesthetics and warranty.

New Markets

From 1996 onwards there was no growth in the sale of mixies for Prithvi and in 1999 the
sales came down by 10%. This was attributed to channel constraints and competition.
With more companies expected to enter the Indian mixer market (Chinese & Korean
companies) in the years to come, Gordhandas aptly analyzed that the situation was only
going to get worse. Moreover the installed capacity for motors was a matter of concern
for Prithvi. As it is they were making only 2000 as against the installed capacity of 2500
per month and with the mixie sales coming down, the motor business needed a fresh
thinking as per Gordhandas. After a detailed discussion in late 1999 with Jayanti Lal and
the Chartered Accountant for the company, Gordhandas decided that the motors could
be sold separately to potential customers. After further deliberations, it was decided to
enter the motor business separately with an initial target of around 500-1000 motors per
month and if need be, Gordhandas prepared himself for further investments in motor
installed capacity enhancement. At this stage, as per the suggestion of the Chartered
Accountant, Gordhandas hired an MBA student from a reputed b-school to study the
market for motors in Karnataka. The student spent two months in the field and submitted
a report to Gordhandas.

4
Diploma Engineering is a 3 year professional course open to persons after their 12 th standard. It is
not a graduate engineering course.
4
According to the report motors were widely used in Industries, Railway, Defense,
Agriculture, Projects, residential, Lifts, Machine shops etc. Motors were basically classified
into AC & DC versions. AC motors were highly versatile and operations were very easy.
These were used in innumerable number of applications and were produced in high
volumes by various manufacturers and were available with many stockists /dealers
throughout the country. DC motor applications were limited as compared to AC motors.
The market share of AC motors was 85% and for DC motors it was 15%.

The report also indicated that the market potential for 250 watt motors in Karnataka was
about 185000 units per year (2000) and was growing at a rate of 10% per year. Customer
profile could be classified into

1. OEM5: Motors become part of their machinery. Segment potential was 50%
2. Contractors6: Middlemen between manufacturer & user. Segment potential was 15%
3. Projects: Consumers for expansion purpose. Segment potential was 15%
4. Industries: Procurement for replacement/maintenance. Segment potential was 10%
5. End-users: Various uses in small numbers. Segment potential was 10%

As for competition, motors were manufactured both in the organized and unorganized
sectors. The major motor manufacturers were -

Organized Sector Unorganized Sector

 Kirloskar Electric Company  Lakshmi Hydraulic Pumps
 Crompton Greaves Limited  Suguna Motors
 Asea Brown Boveri  Texmo Motors
 GEC Alsthom  Sharp Motors
 NGEF  Remi Motors
 Bharat Bijlee Limited  New Era Motors
 Siemens India Limited  American Universal Motors

The motor technology did not change much and designs were stabilized long time ago.
Motors were available from fractional Kilowatts to 250 Kw and above. A majority of
customers bought a variety of motors and they preferred to buy from vendors who
offered efficiency in procurement. The vendors competed fiercely for a larger share of
motor business from customers.

The share of motors in the organized sector was about 55% and all manufacturers
(organized /unorganized) offered a wide variety of motors in different wattage ratings.
Customer preferences varied a lot. Some preferred motors only from organized sector
while some preferred to buy from unorganized players. Some customers did not mind
buying from both as long as it suited their needs. There were situations where a customer
bought from organized sector at one time and from unorganized sector the next time.
5
OEM stands for Original Equipment Manufacturer. These are the customers who used motors in
their product as a component part.
6
Contractors seldom acted as the middlemen between manufacturers and industries/projects.
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The MBA student had also met and interviewed 48 motor buyers in Bangalore to find
their purchase criteria. The observations of this exercise are given in the following table.

Price/ Quality Delivery Service Company

Discount Image
Very Important 37 40 45 35 38
Not very Important 11 8 3 13 10
Total 48 48 48 48 48

New Marketing Manager

Having decided to enter the new market Gordhandas felt it was necessary to hire
someone experienced to lead this business. It was at this point in time that Gopal
Sharma’s name was suggested by a vendor common to Prithvi and the company where
Gopal Sharma worked. Gopal was a mechanical engineer with 6 years marketing and sales
experience in the valves industry having worked for AK Industries at Mumbai and at
present working in the same company’s branch office in Bangalore as the Area Sales
Manager. Gordhandas had had couple of discussions with Gopal during which he had
explained that the best use of all existing resources have to be made for the new line of
business and it is with this constraint that Gopal had to come out with a strategy for
Prithvi's motor business immediately after joining. The mixie business would continue to
be handled by Gordhandas.

As for the motor business, Gopal knew that if he accepted the job he had to start from
scratch. Pricing was a main issue. Earlier practice was to transfer motors to mixie
assembly operation as a component with some input cost. Should the motors be priced at
the same level? or higher? or lower? How to provide the after sales service? Gopal would
also be asked to come up with a promotional plan for the new line of business. Since
Prithvi's strong area is Karnataka, the company was thinking of starting the motor
business first in Karnataka. Distribution was another area where decisions were to be
made. Gopal would have the liberty to design distribution channels on his own and he
had three options, selling through existing dealers or going for a new channel network
altogether or to sell directly to customers. Gopal also knew that the core issue, however,
was to bring Prithvi Electricals back on track.

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