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Background & Issues

Voltas, a part of the Tata Group, ruled the air conditioner market with a 40% market share for

over five decades. However with the entry of multinational players in the market Voltas’

performance was badly affected and its market share dipped to around 7% by the end of 2001.

• Was the advertising strategy followed in 2006 appropriate?

• Should Voltas target the common man or should it target the upper middle/rich class?

• What strategic changes need to be made by Voltas to capture the Indian market and

compete with international players?

Analysis

Air conditioners were then perceived as a luxury item and the running costs were also

exorbitant. Thus air conditioners were purchased only by the upper sections of the Indian

society. The rich class constituted only a small portion of the Indian society and hence was a

niche segment. Entry of multiple players into this niche segment only fragmented the

segment into pieces shared by each of the players.

In the pre-liberalization era Voltas did not face much competition and hence the zeal to

innovate was minimal. This led to Voltas’ products being perceived as old fashioned

outdated bulky dabbas. New entrants in the market came up with sleeker and technologically

superior products at a lower cost. This hit Voltas’ revenues badly and its market share

dipped. It was perfectly understandable if the market size had remained constant over the

years. This would have led to sharing of the same market by an increasing number of players

with each player dominating a particular segment or niche. However in this case the industry

recorded an impressive growth rate of more than 19% between 1991 and 2001. Despite this

the share of Voltas started declining.

Voltas then adopted a string of new measures to counter competition and bounce back to its

original position. It planned to launch a new range of Vertis Premium window air-

conditioners for sec B & sec C and Vertis Gold for sec A. In line with the proposed strategy

the theme of the ad campaign changed and became “India ka dil, India ka AC” since the focus

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was on the mass market. When the mass market is targeted the focus is on the volume rather

than value. Margin obtained in volume brings in the much needed value.

Room

AC

LG Voltas Amtrex National Blue

Star

Carrier Videoco

n

Samsung

Market

Share

(2001)

15% 7% 11% 11% NA 14% NA 7%

Market

Share(2006)

36% 16% NA NA NA NA NA 13%

The market share of Voltas had dipped to an all time low of 7% in 2001. With the adoption

of new technologies and change in target segments and/or approach it improved its market

share by the year 2006.

Re commendation

The advertising tag-line is appropriately selected as it blends patriotism and brand selection.

The Indian touch “India Ka Dil, India ka AC” differentiates it from the foreign brands. The

increase in the disposable incomes in the Indian middle class fueled the demand for lifestyle

products. So the educated urban middle class was under the lens of every intelligent

marketer. Voltas rightly leveraged on the household but still global Tata brand to fight off

competition from multinational players.

It is recommended that Voltas enters Tier II cities where competitors have not yet made an

entry. There are many Tier II cities in India which house many business houses and are on

the verge of becoming metros in near future. It is essential to penetrate such markets to create

brand awareness. The “India” tagline can sell better at such places and ensure a much

brighter future for Voltas.

The running costs need to be lowered by making the equipment more efficient and energy-

saving. A lower initial cost clubbed with a lower running cost and entry into multiplegeographies can definitely make Voltas AC a thumping success.