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Case Study - Titan Watches Limited
01 A.K. Sudeep08 Ankush Adlakha59 Sandeep Majumdar70 Sripathy Balaji 79 Vinay K Ele81 Vipin Shivashankaran
Index
Case Summary Environmental Analysis Forces of Competition Future Direction
Case Summary- Titan’s EnvironmentKey Areas Considered
Industry Sector & Competitors
Titan A JV between Tata and TIDCO incorporated in 1987 Nature of business Watches & Jewelry Explicit limits on the number of watches that can be imported / exported has been relaxed (QR) The total market size of the segment is 45 Million (2000-1)
Market segmented into 4 High End (Prestige) (Key Players Citizen, Swatch and Esprit, Omega, Seiko) Mid market (HMT, Maxima and Timex, Chinese Watches) Low end (Smuggled watches and Chinese Watches) Fashion watches (Guess & YSL)
Segment Behaviors Prestige End with selected target customer groups Mid market is sluggish The low end market is a high volume market Fashion brands have diverse accessories along with Watches
The market has become more competitive with the new entrants both in the top end as well as in the low end volume markets
Titan is the market leader in India with 15% of the market share with 6.9 million pieces
Case Summary- Contd…
Raw MaterialsTwo prong approach for selling watches Manufacture
Watches designed with fewer moving parts (Reduction from 150 to 50) Cutting down on gold plating costs Effective lean process to effectively manage inventories Planned capacity of 10 million units in a couple of years
White labeling Chinese Watches( in ideation stage ) Using the spare capacity of Chinese manufacturers
Human resourcesPrimary Staff accounts for 11.2% of the total revenue is distribution Employees: 3,629
Secondary No of CFAs: 32 Towns covered: 1,543 No. of outlets: 5,596 Titan showrooms: 117 Boutiques: 38 Stockiest: 58 Auth service centers: 290 Co. service centers: 41 Service points: 141
Case Summary- Contd…Financial Resources
The Capex so far has been $100 Million from inception The year wise sales in (Crores)
Tanishq the jewelry brand of Titan is high in working capital
Market Sector Domestic Market
High end Luxury watches (Titan Insignia, Gold Nebula) The Fashion/style segment - (Fastrack) Mid segment – (Sonota)
International Market Segment accounts for 8.7 % of the total sales In West Asia market, Titan is no 2 or 3 In Europe Titan is trying to get past the 100,000 mark Potential to get into Portugal, Spain, France and UK markets
Year Sales PAT1996-97 408.5 24.21997-98 442.1 14.61998-99 482.0 17.01999-00 630.3 19.32000-01 750.0 (Projected) -N.A.-
Case Summary- Contd…
Technology Reduction in moving parts for watches from 150 to 50 20% reduction in working capital due to ERP implementation for effective use of raw materials
Marco Environment
Tax burden provides a way for thriving grey marketers Government machinery has been ineffective in curbing smuggling of watches Lifting of quantities restrictions on import of watches The affordability at the bottom of the pyramid Youth has carved out to be a separate segment with specific requirements The Conversion value has played a key role in overseas spend for promotions
Identification of important environmental factors affecting the Industry.
PESTEL – Model
Political NotesPotential Impact
Implication And Importance Comments
Timeframe Impact Type Relative
Importance
Trade Policies
Quantitative restriction on watch imports were withdrawn since April 2000 in compliance
with the WTO agreement
High Immediate Increasing Negative Critical
As the availability of brands and the number of goods
that a distributor or retailer might wish to stock
increases, pressures on the deployment of available funds of a wider range of goods will also increase,
causing a thinning of stock levels for individual brands
Home Market Pressure
No support/stringent measures to stop smuggling of watches in
place high Immediate Increasing Negative Important
The unregulated market provides a stiff competition
to the watch companies
Shareholders / Stakeholder
Demands
Analyst views in terms of projects due to completion and also against the declared profits which has predominantly come
from selling of shares in RDI Print & Publishing which constitutes 97% of PAT
Medium 0-12 months Unchanged Negative Important
The impact may change if there are promising quarterly results. There will definitely
be impact in terms of investments for any
expansions due to investor sentiments
PESTEL - ModelEconomic Notes
Potential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
General taxation issues
The Tax burdens on branded watches does
not provide a competitive price point to the
customer in comparison to the Smuggled goods
market High 0-12 Months negative Increasing Important
Tax for imports and rebranding stands at 35% in 2000-2001. Tax rates
might get reduced to curb smuggling.
Market and trade cycles
Significant shift in the market demand for simple time keeping
machines to a trend of style based approach, prestige, fashion etc. A
hit in terms of traditional watch lines. Mid market
segment is a bit saturated and may move to the reach of high end
segment. A further segmentation in the
market for the younger generation High 0-24 months Positive Increasing Critical
Titan has always positioned watches as
accessories of style and part of the wardrobe and
a means of self-expression. Titan will have an edge with
respect to its Indian counterparts like HMT
and Maxima
Distribution Routes and retailers
Shelf Space and distribution channels in
the wake of foreign competition might
significantly thin out investments to showcase
a single brand instead the marketers might go for a muti brand shelf High Immediate unknown Unchanged Important
Acquiring shelf space can work well with Titan due
to its price point of luxury watches much lesser than competitors can open up significant demand from
lower segments. Diversified approach with
Sonata, Fastrack along with presence in jewelry
market can provide significant ability to bundle watches with Jewelry. The impact
depends on the reaction
PESTEL - Model
Economic NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
Exchange Rates
Exchange rates have not been stable and import of watches for rebranding or Export of watches due to Forex fluctuation will have
a significant impact medium 0-6 Months Positive Increasing Important
Titan's strategy for entering into markets abroad in Asia as well as
Europe will be significantly impacted incase the rupee
strengthens, a weak rupee would bring about significant profits.
Disposable Income
The Low end segment within the market consider
Watches as a luxury but aspiration acquisition and a lower price point would
help in penetration medium 0-6 months Positive Increasing Important
Entry of Chinese watches have proven a threat in the short terms.
Titan's view of using the spare capacity of Chinese
companies/Rebranding will provide a edge for Titan to meet the price point, the brand image will provide Titan to penetrate to the low end
market
Financials
The net margin has significantly reduced in the business from 5.9% in 96-
97 to 3% in 99-00 Medium0-12
Months Negative Increasing Critical
The cost of manufacturing have gone up since 47.1% is the inputs for the production. The Others +
Rest constitutes 22.1% of the revenues. There is scope of relooking at this 22.1% and
optimize. The inventory management via ERP has brought about 20% efficiency in WC needs which would improve on the net
margins
Production Level
Over production by 300000 pieces, The company does
not seem to have the necessary production
levels given a market size of 45 Million. But there are
plans to increase the capacity to 10 Million from
6.9 Million Pieces Medium0-24
Months Positive Increasing Important
Increase in the capacity in specific low-cost segment will help Titan.
There is a significant loss of opportunity in terms of the 45
Million. It is very unlikely that Titan will loose its market leadership due
to the stiff competition between the new entrants.
PESTEL - Model
Social NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
Customer Attitude and opinions
Customer attitudes have changed by the advent of foreign brands as well as
segmentation in the market space with
importance to style and prestige Medium 0-24 Months Positive Increasing Important
Titan's positioning in the youth segment as well as positioning watches as a
accessory of style will help Titan to boost its
sales
Consumer buying Patterns
Customer buying pattern clearly indicates that the mid segment and lower segments consume very
little of domestic sales for Titan High 0-12 Months Positive Increasing Critical
Customer buying pattern in terms of purchases
attached with cost is high in the lower segment.
Though Sonata has done well at Rs 500. The
market is much more at the lower levels of 150-
250 per piece. An opportunity that Titan
can use and procure low cost watches from China
Major events and Influences
Ad campaigns are the major influences in India as
well as markets abroad High 0-24 Months Positive Increasing Critical
Titan has an advantage in countries with the Indian satellite-TV footprint like sri lanka, Myanmar etc.
The idea of creative blend of diverse skills resulting in extraordinary beauty can be leveraged the most by Titan. With its
multi country presence as well as presence in the jewelry sector where
designs are a key thing can be leveraged for
promotions
PESTEL - Model
Economic NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
Age, Gender preferences
Age and gender have had a greater influences in selection of watches
High 0-24 Months Positive Increasing Important
The youth segment has specific requirements
which Titan is trying to cover via the fastrack
range of watches. Smart designs based on gender have been already as part
of the shelf Via Titan's Fastrack range. There is
significant potential in this area and it will be a challenge to foreign brands as the social
preference of this segment if specific to the Indian
subcontinent
PESTEL - Model
Technology NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
Competing technology
Watch makers from the Swizz were the creators of the time keeping machines and have evolved to create modern watches. On the
other hand the Chinese have been fast to adopt technology and to
create low-cost production capabilities as compared to others
High 0-24 Months
Negative Unchanged Important
Titan has not been able to adopt / create specific
technology itself. Instead the strategy
seems to be aimed at revenue generation instead of R&D. The
model might be good in a short term for revenue
generation but in the long run competitors could refuse sales to
Titan.
Maturity of technology
Technology adoption has been key with various vendors in terms of evolving from Jewels to Quartz to
Digital watches
Medium 0-6 months Negative Increasing Important
Adoption of Quartz and reducing the number of components from 150 to
50 was a natural advantage for all watch manufacturers. Chinese
and Japanese manufacturers had adopted technology better which have
brought down the costs
PESTEL - Model
Economic NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
Manufacturing maturity
The industry is ever evolving due to change in tastes and modern requirements. The industry
evolution provides an opportunity to various vendors to provide innovate
products
Medium 0-24 monthsPositiv
e Increasing Critical
Titan has certain geographical advantage
and could define a product that suits with the
local conditions. On the other had given a
potential for using the capacity of Chinese watch
makers Titan can potentially invest more on the product development
side and operate with Chinese watchmakers
spare Capacity
information Technology
Inventory Management and Internal IT adoption have been high and brings about a good amount of
process automation and control
High 0-12 Months Positive
Increasing Important
Titan has been able to implement ERP and thin down on the inventory
holding by a reduction of working capital by 20%
Environmental NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
Company Values
The focus has been to be a
significant player globally in
Watches and Jewelry and The core strength to
change to counter
competition. A diversified view
for product lines. Ability to change depending on the market patterns
High 0-24 Months Positive Increasing Critical
Titan as an organization has a blend of Jewelry and watches in their
product line and given the idea of being a seller does not limit it to react to the market demand does
not limit to source the products from internal manufacturing capabilities.
An average 30 days to reach to market changes points to a
significant amount of customer behavior data being in place with
the company to interpret this.
PESTEL - Model
Economic NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
Global Factors
Competition in domestic and international
markets, With well know names
around the world. The purchasing power and the
brand adoption is easy in Advanced economies with better per capita rather than the
Asian and Indian markets
High 0-24 Months Negative Unchanged Critical
Titan has been trying hard to expand globally and given the
massive sustenance and launch costs in the western markets, It seems difficult to reinvest the
rupee income in brand building abroad. Titan has to think of
upfront investments for establishing the brand abroad. In
cases where demand is phenomenon due to market
conditions of viewing a watch as a fashion / style accessory, Titan
has a play if case there is a supply issue which does not seems so in
the current scenario
PESTEL - Model
Economic NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative Importance
EU based factors
It’s a chance a new entrant will have in terms of
acquiring a stable defined market in EU
Medium 0-12 Months Negative Unchanged Important
Titan to get into larger EU markets has to bring in a specific differentiator in
terms of the product range. Current players have a mixed range and a cost advantage
is not a significant selling point. A strategy to carve out a segment around a jewelry line or a mixed positioning may provide Titan with an
edge
PESTEL - Model
Economic NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
Management Style
Rigidity of management to
think in a conventional mode
of questioning Citizen and
Omegas salability in the market as also a strategy to
position in a market created by
competitors
High 0-6 Months Unknown Increasing Critical
Titan rigid approach might provide cash rich companies to go for a massive market capture strategy
and eat away Titan's share. Currently the operational model
seems to be working on a pivot and a player with significant experience and cash can reverse the trends via
a low profit entry model, The international brands overweigh the
brand image of Indian players. A team up strategy in a "sell with" and "Sell to" strategy in specific
segments may help Titan
PESTEL - Model
PESTEL Model
Legal NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
Regulation bodies and
process
US has standardized an ISO based model
for standardization of watch definitions in Federal Register /
Vol. 64, No. 110 /Wednesday, June 9, 1999 /Rules and
Regulations
Medium 0-12 Months Positive Increasing Important
India is a participating country and will provide Indian watch
makers to position their products with an ISO label in the
international market. Titan can leverage on this participation
International regulations
WTO agreement and a significant
impact on opening up the market
High 0-24 Months Positive Increasing Critical
Titan apart from facing competition also has a way to
make inroad into countries who are part of the WTO. New
markets will open up for Titan
PESTEL-Model
Economic NotesPotential Impact Implication And Importance Comments
Timeframe Impact Type Relative
Importance
competitive regulations
There are no competitive
regulations in the market
High 0-12 Months Positive Increasing Important
Titan will have a fair play in the market due to non existing of any competitive
regulations. The sales and revenue
will be purely driven via their internal
strategy
Competitive Diamond
Strategy Structure
Demand Conditions
Factors
Cluster
"+"local market with a huge potential of 45 Million units
"+"Right positioning of Products and segmentation
"+" Mixed focus on Domestic and Exports"+" Brand building
"-"Lack of focus at the bottom of the Pyramid
"-"Production capacity gaps for local companies
"-" Fierce competition in pricing
"+"Good Demand Forcasts internally as well as internationally
"+" Specilization and defined segments
"+"Demand not fulfilled is not recorded in domestic market to ascertain the gap
"-" Competetors with International experience
"-"Significent product positioning experience by competetors
"-" Innovation not driving demand
"+"Good Local base for related industries (Jewllery and Fashon products) natual clusters
"+" A good exchange of segment information
"+"Down Stream and Up Stream facilities for raw materials and Distribution Networks
"-" Innovation and R&D investments
"-" Foreign dependency for accelerated Production
"-" No specific government policies for the Cluster
"-"Growth of alternate time keeping systems (Mobile Phones)
"+"Proximity to Markets both local markets
"+" Good technology support
"+" Good tecnology knowhow
"+" Well connected transport facility
"+" Good Infrastructural Facilities"-" Heavy taxes
"-" Weak investments
Medium/Weak
Medium
StrongMedium/Weak
Invest/Adopt
Innovate
Nature of Industry & forces of competition
The Watch Sector
Manufacturers SellersSpare Parts
Component manufacturers
Gold Plating
Straps and accessories
Watch Assembly
Rebranding
Provide Trends
Supplementary and Co-branding
Inputs
High end Watches
Fashion Watches
Basic Watches
IndustryThe Industry consists of Watch Manufacturers Importers & Exporters Segment focused companies like fashion/ sports etc
Competitors Highly competitive industry with Indian and International brands The industry does not have perfect substitutes at the moment though Mobile phone manufacturers can be
potential threat
Sector Watch Manufacturers Watch Sellers ( Important because Ability to bundle it with their product line) Component providers
Market segment
The market segment is divided into 5 groups High-end (Prestige ) segment Mid-market Low end Youth segment Export Segment
Changing industry boundaries Positioning watches with Fashion goods Low end market focus Competitor advantage to customers for selection from a wide range of brands. Designs and Features
Industry Competition
New Entrant
BuyersSuppliers
Substitutes
Economies of scale due to Chinese Invasion of the segment
Defined market segment and leadership by foreign brandsA long life time for the products Brand Building Capital Requirements
Shelf space a scarce commodityShelf life and sales cycle
Segments Covered by existing vendors
Industry growth potentialLack of clear leadership in the marketOpportunities untapped providing backdoor entry Diversity of competitorsBrand identity Lower Churns to market swingsSignificant CapexIndustry standards Supply chain creation
Not a basic necessityPer piece salesSeasonal driversStatus callsPrice and Features
focused requirementsVisibility ImpactIncome barriersDurability Recurring Costs
Warranty to damages
Supplier of raw materials (Local Demand/Supply factors)47% of raw material costsSellers and WarehousesSuppliers being competitors in the industry and control over prices
Industry Competitors
No Major Substitutes
Inference
New Entrant Competitive environment looks attractive due to the demand and fragmented markets The New entrant with a significant experience in the industry will have an edge The existing capacity does not seem to cater to demand so the gap can be a easy area for a new entrant The neglected segments will provide opportunity to new entrants
Suppliers Supplier impact depends on the model of the new entrant, if there is a local manufacturing intention
suppliers needs to scale up Supplier is important and critical to the business in terms of churning out the products as the industry is
highly input intensive Flexibility of supplier product lines will be key and a supplier could become a feeder to a specific group
Substitutes No known substitute in this areas possibly mobile phones may prove a competition but will be weak
Buying Power The product is not a basic necessity and stills falls under a luxury or a wish list significant advertising required to popularize the need and the style The need for style supersede the requirement and the utility of the product to the buyer Unit sales demands a personalized approach to the buyer / market segment
Probable future directions for Titan.
Possible Future Directions Domestic market looks more attractive due to demand and lower cost to market and operate The competition has widened the thought process of the customer so the follower strategy will help as Indian market
is slow to adopt Rebranding of Chinese goods might be a viable proposition for low-end segments The investments in capacity uplift will help cater to the demand Titan could consolidate its position given its brand value and reach With additional product lines Change in attitude of customers to possess watches as fashion accessories could boost sales Production costs is a big issues Titan may look at low cost countries Attractive Ad campaigns may bring about a boost in sales Titan’s Sub branding is unique and this will help titan to grow as there is a special segment based association Jewelry market as a fashion accessory is growing and Titan will have opportunities to bundle watches with Jewelry Titan’s international market share may not grow till there is a focused approach for investments for brand positioning
in europe
Probable future directions for Titan Contd
Possible Future Directions Other international markets with similar value to rupee and similar market segmentation would accept Titan product
as India Titan could effectively use its supplier network to counter competition Current ERP implementation could come in handy for analyzing behavior patterns and better position products
The current statistics in terms of sales / number of pieces clearly indicates a market leadership in the industry. So the future direction is more centered around consolidation and uplift rather than a recovery
Thank You