This paper presents a marketing analysis for TPI Corporation's proposed entry into the Indian market with its 18-inch Self-Contained Power Mister. It examines India's cooling appliance industry, including competition from air-conditioning giants such as Voltas and LG, and evaluates the market opportunity for affordable misting fans among budget-conscious urban consumers. The paper conducts a SWOT analysis of TPI, reviews India's regulatory environment for foreign investment, and provides a broad environmental scan covering demographics, infrastructure, communications, and transportation. It concludes with recommendations for targeting high-growth urban markets through local distribution channels.
The market in India for water fans — also called misting fans — is problematic at best. Without doubt, the climate (except in the northern mountains) is hot; the problem is that it is also quite humid. Still, the Indian people have been looking for ways to stay cool for centuries. It was India that gave the world the slatted shutter: when air comes in through small spaces — as in shutters, adopted in the American South before air conditioning, or in lattice-work walls as in parts of India — it is cooled. Indians did not, however, develop a cooling system like that of the ancient Romans, which used water running through channels to create condensation. The reason, of course, is the problem of water quality. While industrial pollution has now added immeasurably to water quality problems in India, the sluggish flow of its rivers had always rendered free-flowing water murky at best.
These are historical impediments to using water or misting fans in India. There is also the problem of intermittent electrical outages common to virtually all less developed countries (LDCs). There is also the price factor: in a nation just beginning to attract good-paying jobs from overseas firms, there could be a reluctance to spend on cooling for the home — both to conserve cash flow and because newly employed professionals who could afford it might conclude that air conditioning at work is sufficient.
Still, there is an air-conditioning "war" going on in India at present, with giant electrical appliance company Voltas at the center of it.
In six weeks spanning April and May 2004, Voltas sold 7,000 of its "super-cheap" 0.8-tonne and 0.6-tonne air conditioners. The price for the 0.6-tonne unit: an eye-catching Rs 9,999. In 2003, the summer was unaccountably cool and Voltas had only weak growth. In 2004, however, the company expected growth of 25%, pushing sales up from 800,000 units in 2003–04 to around the 1 million mark for 2004–05. However, it was being beaten by Korean giant LG, which took the top spot with 29% of the market.
While Voltas is working to hold its prices below the "magic" Rs 10,000 mark, some companies are competing on convenience. In a price-sensitive market where no one wants to spend an extra rupee on electricity, LG allows homeowners who purchase its top-of-the-line Whisen model to phone a number that will automatically and remotely switch on their unit — so that they can return to a cool home without running the unit while they are away at work or elsewhere. Voltas also acknowledges that "electricity consumption is more important than any other feature in the customer's mind."
That, in fact, is the main opening for truly inexpensive units such as the TPI Corporation 18-inch Self-Contained Power Mister. The opportunity is supported by a market study by Rama Bijapurkar, which concluded that "if monthly bills for air conditioners could be brought to less than Rs 1,000, the overall market would triple to 3 million annually."
While Bijapurkar was speaking of air conditioners specifically and not portable water fans, these units are designed for on-demand use and should therefore command a robust market share as well. In addition, those who choose air conditioning often want to bridge seasons with minimal cooling during parts of the year when it is wasteful to run a whole-house unit. There is also likely to be a burgeoning market for water fans among apartment dwellers and renters, particularly as the Indian economy attracts more industry employing young people living independently. Water fans could plausibly capture a share of the room air-conditioner market, which currently accounts for about 20% of total cooling sales — with the cheapest LG room unit selling for almost twice the cost of Voltas's whole-house units, at Rs 17,500.
While TPI Corporation produces a number of models, the one it plans to introduce in India is its 18-inch Self-Contained Power Mister. This unit uses a 1-speed, 1-phase, 120-volt motor. It has a simple toggle switch for fan-only or fan-and-mist operation, and a 130 psi diaphragm pump. It can be mounted in various configurations to obtain a water supply; one of the most popular arrangements is mounting it on top of a 10-gallon cooler-style container. It can also be mounted on plastic drums. While not the most elegant-looking unit, it is possibly the most versatile, and can be used in the home or at picnics and other outdoor events to provide a cooling oasis.
The U.S. price is $139 (approximately INR 6,081), but TPI expects to be able to lower the price to about INR 5,500, making it an attractive alternative especially for budget-conscious apartment dwellers.
TPI is a privately held company and is not traded on any major exchange; public information about it is therefore difficult to obtain. However, it has an excellent history of merger and acquisition success. The company was founded in 1949 by Robert E. Henry Sr. and his brother Ed Henry to produce extruded plastic cable for ceiling heat applications — an alternative heating form found mainly in mild climates such as that of East Tennessee, where winter heating needs are relatively minimal.
The following is a list of TPI's successful acquisitions:
1972 — Sunwarm, a company producing heating products located in nearby Kingsport, Tennessee. This acquisition expanded TPI into the retail and hardware markets.
1982 — The Markel Electric Company of Buffalo, New York, producers of highly engineered space heating equipment for residential, commercial, and industrial applications. This acquisition was relocated to Johnson City, Tennessee, bringing 250 jobs to the area and doubling the company's sales volume.
1982 — A Controls Division of the Singer Company of New York, which manufactured safety devices for space heating equipment. Relocating this acquisition to the Johnson City area created 45 additional local jobs.
1982 — Transcon of Hialeah, Florida, the third successful acquisition of that year. This company manufactured high-velocity processing equipment capable of processing materials at up to 1,000 feet per minute, required for the pulp and textile industries. The company was subsequently relocated to the Fostoria, Ohio, division, expanding its product offerings.
1983 — TPI entered the residential ventilation market by acquiring the Delta Fan Company located in Sardis, Mississippi. This company manufactured ventilation products including whole-house fans, attic ventilation, roof-mounted domes, and gable-mounted exhaust fans. This acquisition moved the company into the growing home cooling market and was focused mainly on offsetting the seasonal trends in the heating business cycle, thus balancing TPI's manufacturing capacity.
1986 — TPI acquired Columbus Electric Manufacturing Company, located in nearby Piney Flats, Tennessee, and later relocated it to the Gray, Tennessee facility. This company produces sophisticated switches and controls used in a broad variety of products and industries sold worldwide, including high-tech and aeronautical markets, and is known for its dependability and high quality standards.
1988 — TPI further strengthened its position as the leading electric space heating manufacturer by acquiring Carolina Products Equipment Company (CPE) and integrating selected products into its product offerings.
1990 — TPI purchased Riteway Products Company of Atlanta, Georgia, which manufactured ventilation products, skylights, and roof windows. Relocated to Gray, Tennessee, these products are now included in local manufacturing operations.
1992 — TPI purchased the Frigid Fan product line from the Robeson Company of New Jersey. This product line consists of portable room fans, window fans, and pedestal fans for residential, commercial, and industrial markets, adding a broader product base to TPI's air ventilation program.
1993 — TPI purchased Redd-i Company of Chattanooga, Tennessee, manufacturers of specialized heating products ranging from insert-type duct heaters to highly specialized VAV-type heat and air-moving devices. This acquisition further broadened the electric space heating products offered in commercial and industrial markets.
1993 — TPI completed the acquisition of American Stabilis Inc. (ASI), manufacturer of Sill Line heaters and the Digistat line of Electrosil and programmable thermostats.
1993 — TPI acquired Sensors & Switches Manufacturer in Lexington, Ohio. They market thermal limit switches and snap limit switches for highly specified OEM applications. Now part of the Columbus Electric division, they provide TPI with thermal cutouts for all baseboard heating units.
1995 — TPI's newest division, TPI Industrial, was created and tasked with driving the company's expansion into industrial and commercial markets.
The company is headquartered in Johnson City, Tennessee.
With its expertise across a wide range of alternative small and freestanding heating and cooling products, TPI has the product-mix experience suited to entering the Indian marketplace. In addition, its negotiation and legal experience gained through multiple acquisitions will help it successfully complete dealings with Indian government officials and business partners.
While not explicitly stated, TPI's company philosophy appears to be supplying reliable, low-end products at fair prices while contributing to the local economy. This approach should be well received in India. Similarly, though the company does not offer a formal mission statement, its actions suggest that its mission is growth, pursued in part by acquiring complementary businesses and integrating them into core operations. Its competencies suggest a need for expanded markets for its lower-end HVAC products.
Because the company is not publicly traded, its financial information is difficult to obtain. However, it would be safe to characterize the company as conservative in its financial dealings. East Tennessee, where TPI was founded, is a traditional area — one where a handshake is as good as a contract — and very few business ethics or finance problems have been reported in the local press, as a scan of the Business Journal of the Tri-Cities confirms.
The management and organizational style of the company is also traditional; it is not unionized. TPI appears to have strong financial management skills, evidenced by its many successful acquisitions. Its marketing skills are relatively untested in an open consumer market — as it is planning to enter in India — because its U.S. sales, with the exception of the Power Mister, are directed mostly toward the building industry.
TPI's key strengths include a long track record of successful acquisitions and a well-developed product line in the HVAC segment. Its primary weakness is a lack of overseas market experience. The main opportunity lies in India's expanding consumer market for affordable small appliances. The principal threat is direct competition not only from other water fan and misting fan manufacturers, but also from the low end of the air-conditioner market.
There are virtually no home country constraints on TPI exporting its products to India.
"India's FDI rules and hiring regulations"
"Demographics, economy, infrastructure, and communications"
"Media channels and advertising costs in India"
The largest single drawbacks to entering the Indian market are the fragmentation of the market, the difficulty of local ground transportation once a shipment is taken by rail to the destination region, and the enormous number of small manufacturers already competing — and likely to continue entering — the market for water fans and misting fans.
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