The Company’s Microenvironment
The microenvironment consists of the actors close to the company that affect its ability to serve its customers – the company, suppliers, marketing intermediaries, customer markets, competitors, and publics.
The Company
In designing marketing plans, marketing management takes other company groups into account – groups such as top management which sets the company’s mission, objectives, broad strategies etc., finance, research and development (R&D), purchasing, operations and accounting.
Top Management: The Tata Group is headed by Group chairman Ratan Tata. The Group Executive Office and the Group Corporate Centre are the two decision-making bodies that define and direct the business endeavours of the Tata Group. Each company has its own management.
The people at the helm of Tata Group companies:
Bhaskar Bhat: Bhaskar Bhat is the managing director of Titan Industries. Since 1983 he has been associated with the Tata Watch project that later became Titan Watches and is now Titan Industries. At Titan, he has handled sales and marketing, human resources, international business and general managerial assignments. Most of his working experience has been in sales and marketing.
He started as a management trainee at Godrej & Boyce Manufacturing in 1978. After spending five years at Godrej, he joined the Tata Watch Project initiated by Tata Press. Bhat holds a B Tech (mechanical engineering) from Indian Institute of Technology (IIT), Madras (1976) and has completed his postgraduate diploma in management from Indian Institute of Management (IIM), Ahmedabad (1978).
Company Policies
The Tata Group has always sought to be a value-driven organisation. These values continue to direct the Group's growth and businesses. The five core Tata values underpinning the way they do business are:
The Tata Group has always aimed at improving the quality of life of the communities that they serve and they do this through leadership in sectors of national economic significance to which the Group brings a unique set of capabilities. The Tata name is a unique asset representing leadership with trust. Leveraging this asset to enhance Group synergy and becoming globally competitive is the route to sustained growth and long-term success. The heritage of returning to society what is earned evokes trust among consumers, employees, shareholders and the community. This heritage is being continuously enriched by the formalisation of the high standards of behaviour expected from employees and companies.
Manufacturing and R&D: Titan's state-of-the-art watch and jewellery manufacturing plants are located in Hosur in the southern state of Tamil Nadu. Spread over 55,000 square meters of built-up space, Titan employs about 3000 highly skilled personnel. This watch manufacturing facility was set up in 1987, with technical know-how from Europe and Japan. Over the years, the Company has established highly integrated manufacturing facilities and has grown to become the sixth largest watch manufacturer brand in the world. The Company manufacturers watch movements, watchcases in steel and brass, and bracelets in solid as well as sheet steel. The manufacturing processes include micro precision operations (manufacturing of components and sub assemblies) Hot & cold forging, stamping, injection moulding and tool making. The product development cycle is facilitated by state-of -the-art CAD/CAM technology that enables seamless integration from aesthetic styling and 3D and solid modelling to engineering design, tool design, tool making and prototype making.
Marketing and Advertising Strategies: Titan revolutionized the Indian watch market thanks to its formula that allied industrial power with modernity and combined consistent quality with a new form of marketing hitherto unheard of in India. Rapidly, an extensive distribution network covered the entire country and the Titan name would become a household word in India. In an article published in 1999 by the trade magazine Advertising & Marketing, Titan was Number One among the "Most admired durables companies" present in India, as well as Number One in the following categories: "Meet consumer needs", "Different from competitors", "Best new launches", "Long-term stability", "Market leaders", "Value for money", "Best Marketing", "Best distribution network", "In touch with markets". It became the most recognizable brand name among all Indian consumers, and the most often cited spontaneously.
Titan had a dream run for several years. Its spirit of innovation guided its fortunes. It pioneered the concept of gifting watches. People gifted watches and only watches to parents, spouses, girlfriends, boyfriends and children. The brand was the market leader by far, and dominated the category. And then, it started to lose its momentum. People got used to the stylish faces and looks of the Titan watch. Everybody seemed to possess at least one. To many, as a gift, a watch seemed to lack the element of surprise. People seemed to be travelling more often than not and were exposed to cheaper, and in some cases, better-looking, watches. Timex broke up its alliance with Titan and entered the market on its own. Brands like Citizen that had apparently got the Indian market wrong initially, started to come into their own. Every possible foreign watch brand was in the country. And the actual reality was that Titan was not resting on its laurels. It launched Fast Track for the youth and Edge, the slimmest watch in the world.
The onus of promoting the category is very often the leader's; Titan, although equal to the task, was finding the demand sluggish and the task difficult. The reasons for this were fairly simple. The young, upwardly mobile person of 1987 was now middle-aged, and though affluent, wanted to own a Swiss watch. Everyone, however, seemed to be quite happy with his existing Titan watch. This left Titan with two challenges as a leader:
- To make people feel that it was necessary to wear different watches with different clothes, and
- To make watches an impulse purchase.
If people could buy a shirt priced Rs 2,000 on an impulse, couldn't they be persuaded to buy a Titan watch in the same price range?
The came the Aamir Khan campaign which worked on parameters such as brand salience and recall, not to forget market share. Notwithstanding its reference to gifting, these commercial too are about matching watches with one's clothes. Titan, it is apparent, realises that selling concepts like these cannot be done overnight. It is an interesting long-term strategy and Titan obviously has met with the same success as its strategy of gifting. Titan has to a large extent succeed in its desire to move people towards owning multiple watches and actually prod them into matching them with their clothes.
You can either claim to be innovative or actually be innovative. The reason of Titan’s success is simple – it has been constantly innovative. In case of Titan the spirit of innovation has to extend to everything the company did in marketing, product design, advertising and distribution.
Suppliers
Suppliers form an important link in the company’s overall customer value delivery system. They provide the resources needed by the company to produce its goods and services.
In case of Titan Industries the important raw material required are steel, dials, quartz, leather, plastics etc. Some important suppliers of Titan as identified from its Annual Report are AAA Products Pvt. Ltd., Classic Dials Pvt. Ltd., Hitech Times, Chennai Felt Mills Pvt. Ltd., Indo Plast, Plastic Moulding Services, Sona Horologicals Pvt. Ltd., Spiral Tools Pvt. Ltd., Diamond Triumph Metallplastic Pvt. Ltd., P & S Galvasols and Medicon Leather Pvt. Ltd.
Marketing Intermediaries
Distribution in India: A key business partner of Titan in the market place, is the redistribution stockist. The distribution channel handles well over 50% of the watch business of the company. The main focus of this channel is market penetration and coverage. Currently we have 65 distributors handling well over 6000 dealers across the country. Titan's growth rate in the marketplace requires us to appoint new distributors every year. The combined stockholding and credit to the market is controlled to stay within stipulated limits. The distributor channel operates independent of all other channels and reaches out to its own set of distinct dealers.
Distribution Worldwide: It distributes through an exclusive distributor in each country, who is responsible for indenting, distributing, servicing, assisting and providing marketing support for the brand.
The unseen star of Titan's achievements in securing and retaining customer trust is its supply-chain methodology.
Whatever be your station in life, at Titan you can expect to be treated like a celebrity. Lavishing that kind of attention on its customers is one reason why the brand stands head and shoulders above the competition in the market for watches. The precision and sharpness that enables such unwavering customer focus are products of Titan's standout supply-chain systems. Titan design has come at the right time and the right place through a complex supply chain. The rapidity with which the company rolls out new products — it currently has some 2,000 variants in the market — keeps the clock at Titan ticking at all times.
Five years ago, Titan had about Rs 180 crore stuck between its finished goods, raw material and working capital, and the company turned its inventory twice a year. Titan has since then put its assets on the treadmill to sweat them slim. Last year, while it cut the flab down to Rs 110 crore, it also increased its inventory turns to four. Coming soon is a new inventory plan of six times in a year at a mere Rs 80 crore. A decade back Titan would predict market requirements for each month of the year a good six months before the year began. Gradually, by breaking down its array of products into discrete buckets, Titan reduced its response time significantly. The cycle of forecasting sales, creating a production plan, mobilising components and assembling them into watches was pared down to four months. But with the market getting competitive, Titan was faced with the danger of a style's star appeal getting crusty even quicker. So now this watch wizard can bring you a watch in one or two months and, in case of urgent requirements, even in 15 days. This makeover has not been merely skin-deep. To ensure a better shot in fewer takes, the company has scoured each link of its long and many-stringed supply chain and hammered it into maximum efficiency mode. Here is a glimpse of Titan's architectonics.
Link 1: Reorganising the structure
Titan's management stepped back and looked at the big picture. The company supply chain then consisted of two discrete departments: manufacturing, and sales and marketing. The idea for one supply chain banner became self-evident following the implementation of an enterprise resource planning solution in 1999. Information suddenly became transparent and the company was able to 'see' the stocks across the entire system at a single glance, in terms of quantum as well as the financial investment, and for both finished goods and raw materials. That led to activities under the heads of sales forecasting and production planning becoming one continuous whole. Then the company sorted out its watch categories and made distinct processes for each. This happened when the management noticed that the time required to make Sonata products, which catered more to semi-urban and rural markets, was less than that needed for other watches under the overall Titan brand. The batch sizes for Sonata were also larger. The company realised that the components for these could be outsourced from vendors, while the Titan watches could be taken care of in-house.
A third category emerged from the styles for which international vendors supplied components; the time required for these was the highest. At the end of this brainstorming, Titan created three different segments according to the lead-time required from the start to the end: Sonata watches that needed 30 days, Titan watches that needed 60 days and Titan watches that needed 90 days.
Having set its house in order, it was time now for Titan to woo customers with what their hearts desired.
Link 2: Forecasting demand
Securing the future of a Titan product is a scientific and rigorous exercise. To accurately predict which watch the market needs and in what quantity, Titan uses a time-tested method. First, it studies the historic sales of different styles. The primary information comes from an account of its own sales. Retail or secondary information is gathered from showrooms and distributors. The company also keeps in mind elements such as marketing schemes and advertisement campaigns to foresee demand. Seasonality is factored in because sales shoot up during festivals like Diwali, Onam and Pongal. Considering that there are about 1,300 variants in the domestic market and 700 internationally, there is a lot of estimating to do. Instead of forecasting for all its varieties, Titan focuses on about 400 variants that contribute to 75 per cent of the company's overall sales. To hit on the optimal mix of products, the company has also come up with an iterative demand-planning method. It is currently setting up an 'advanced planning and optimising' (APO) tool. This monster of an engine takes into account the historic sales pattern for three years and applies a forecasting model to that data and develops a heuristic. The forecast thrown up by this formula is then vetted by the sales and marketing group, which may want to modify it based on specific sales or market inputs they have received.
Link 3: Utilising manufacturing capacity
Mapping the demand projection of all the styles to the available production capacity can make science fiction seem as simple as running around trees.
The forecasts may add up to a requirement of say 800,000 watches in a month. But the production capacity may be pegged at 650,000 or 700,000. Titan cannot simply be partial to styles that make larger contributions to the sales; it may end up under-utilising some of its manufacturing capacities while others get overused.
When the new APO tool is put in place by April 2005, the demand for each watch variant will be matched with the capacity within each of the company's manufacturing shops, as well as those of its vendors. In case the two do not fit advantageously, the forecast will get modified till a concrete production plan emerges.
As some of the components are bought from vendors, the company will maintain what it calls its 'supplier network planning' (SNP). Through a portal for its vendors, orders can be placed keeping lead-times in mind. Vendors will upload information daily on this portal, helping the company keep track of the production in real time. "It will give us a good feel of whether the vendor will meet our production plan," says Mr Kurien.
It is through this complex web of considerations that the number of watches is reached, while ensuring that resources are used effectively.
Link 4: Sales and after
Titan reaches the nooks and crannies of its market through 170 exclusive 'World of Titan' showrooms and 8,000-odd dealers. The availability of spares and accessories is critical to ensure that every watch sold can be quickly and reliably repaired so that Titan's customers remain loyal and satisfied. Titan has a network of spares distributors across the country, and stays connected using a web application. In fact, they are able to place approximate orders before the production begins, thus helping Titan produce closer to market requirements. If there is excess inventory after all the orders are met, it gets released into this system for all prospective buyers. As the consignments are dispatched, the company's logistics service provider ensures that distributors can track their consignment online without manual intervention.
The journey Titan watch, thus, passes along a long and intricate string, for which precision and finesse at each stage is vital. But the best never rest. The company has stepped up pressure by comparing itself to retail chains and apparel. These have dynamics similar to those of watches but have achieved lower lead times. Titan has upped the ante for itself and will keep fine-tuning its supply chain even further. It is this thoroughness that makes a perfectionist such as Aamir Khan the ideal brand ambassador for the Titan of our times.
Competitors
The overall Indian watch market amounts to more or less 48 million wristwatches per year, with a growth rate between 8% to 10%. The organized sector represents only 30% of this amount. Nearly 34 million watches are sold through grey market channels, accounting for around 114 million Euros sales, including import of cheap parts which can be easily assembled in India. The major contributing sector in volume is the under 20 Euros watches segment, but with the opening up of the Indian market, foreign brands are now flooding in, rapidly gaining new shares. Among them, luxury brands (over 2000 Euros watches) can be afforded by more or less than 7 millions people (0,5% of the population). Gold plated watches account for 70% of the market.
The history of Indian watch making over the last fifteen years is intimately related to the extraordinary growth of Titan. The company’s success is also closely associated with the very progressive manner in which India is opening to foreign imports. Tied historically to the regaining of India’s political sovereignty and to the Nehru family, the Tata group played a central role in the country’s independence and subsequent construction of a modern and democratic state. For Tata, as for the other large groups in the nation, the opening of the economy and Indian market was only thinkable if the group could react from a position of strength. To open its markets, India must clearly dispose of its own industrial resources, capable of competing on an equal footing with foreign companies. By reacting in this way, the Indian economy was thus able to avoid the damage suffered by many other countries.
Clash of the Titan
For many years, Xerxès Desai (the charismatic founder of Titan, then its CEO before recently retiring -- now replaced by Bhaskar Bhat) opposed, and often vigorously, the efforts of François Habersaat, who was then the head of the FH. The ‘plenipotentiary ambassador’ of the Swiss watch industry, Habersaat fought to open India’s borders to Swiss watch brands, to lower import duties and taxes, and to liberalize the sector.
On the other hand, Xerxès Desai was building his own brand and taking it global with a fair amount of success (especially in the Middle East and other areas with large Indian communities). He also tried in vain to get Titan accepted into the inner sanctum of the Basel Fair. By starting his own Swiss Made brand, he had hopes of circumventing the rules preventing brands from protectionist countries from exhibiting at the prestigious Swiss show. The clashes between Habersatt and Desai would eventually ease when Titan, having partially given up its dreams of conquering the European market to concentrate on consolidating its grip on the Indian market, began to consider that a gradual opening to outsiders was possible. Desai then began to use his influence with the Indian government, which had always taken Titan’s side, to open the nation to Swiss watches, as demanded by the Swiss Government. By accepting this request, India also satisfied international trade requirements.
The opportunity of quartz
Before Titan appeared on the scene, Indian watch making was dominated by another giant, HMT. The state-run HMT produced robust mechanical watches with an elementary classic design yet they were well made. They were also designed to last a lifetime. Resting on its comfortable monopoly, HMT missed the opportunities that the quartz revolution offered in a country such as India. Titan did not miss them, however, and took advantage of HMT’s strategic error. Diving headlong in to fill the void, it nonetheless took Xerxès Desai ten years of struggle to finally get the equipment, technology and savoir-faire necessary to construct a large Indian watch industry. Thanks to an agreement with France Ebauches (the company has since disappeared), Titan acquired the necessary know-how and was able to train its people, resulting in the exceptional industrial base that now exists in Hosur.
Major players
1. The Swiss have four-pronged strategies: to remove myths from the Indian mind that Swiss watches are only for the "super rich"; to introduce faces Indian can relate to; to market their products in the same category as jewellery; not to touch on anything that decreases the "snob" value.
2. The Japanese are feeling the Swiss pressure intending to market watches as "objets d'art" rather than as mere gizmos. The Japanese are ready to counter this strategy with digital innovations. They plan to flood the Indian market with user-friendly timepieces, maintaining cost advantages.
3. Amongst the Indian players, Titan is the undisputed leader. But to keep the same share of the medium market (50%) means constant upgrading and innovation. Titan is now flooding the market with international style and features watches at highly competitive prices.
4. Taiwanese and Hong Kong/China products are available in the grey market. They are pushing in sleek, sporty, electronic gizmos with a very strong cost advantage. The major revenue sources are organized Indian players for whom they act as OEM suppliers.
Apart from these other major competitor of Titan in the domestic market is Timex. Today, Titan controls 60% of the Indian national branded watch market with a network of more than 7,000 sales points in 1,800 cities, and this is without even counting the 153 ‘World of Titan’ first-class boutiques and the 143 ‘Time Zone’ stores. In addition to watches, Titan is India’s largest manufacturer of gold jewellery sold under the Tanishq brand. The enterprise’s turnover for its 2001-02 fiscal year was around US$ 150 million. Titan also manufactures its 7 million watches entirely in-house, including its quartz movements, in an ultra-modern factory in Hosur (50 kilometres from Bangalore), which employs more than 2,500 people.
Customers
The Indian Consumer
Based on a research conducted amongst a representative panel of retailers both in Delhi and in Mumbai, Indian consumers can be divided into different categories.
Men
1. Elite / Professional class. Prefer to wear branded watches with variety of styles. This category generally prefers to have a small collection of watches suited to various occasions.
2. Traditionnal Businessmen / "Nouveaux riches". Not much concerned by the utility of the watch, this category bears timepieces as status-symbols to communicate their "wealth" achievement. They ideally prefer watches with high jewellery value, gold, diamonds, etc…Preferred brands: Omega, Rolex, Rado.
3. Market savvy, high profile executive. This category prefers branded and designer watches. Cost doesn't matter much to them. They are fashion conscious and update their choices as per the trend. Usually foreign brands with a classic look is preferred.
4. Middle income group (Men). This category generally prefers to buy an all-occasion watch, preferring branded/economical products with a "decent" style. Most preferred watch styles are Day/Date, scratch proof watches, waterproof watches. This category possesses knowledge about the variety of brands available but is price sensitive.
5. Young men. New generation is highly trends conscious and prefers functionnalities (whether useful or not) with hot looks. The categories most sought after are chronographs, scubas, digital, sports watches. Nike, Swatch, Esprit are at the top list of the most popular brands in this category.
6. Young men from higher middle families. They prefer branded watches. One young man contacted in the field survey commented: "I get respect in my friend's circle because of the uniqueness and the value that my watch carries."
7. Young men from middle class families. They change watches frequently, but solely rely on the grey market, where they can get cheap imitations of high value brands. The are equally trend conscious but highly price sensitive.
Women
1. Jewellery is supposedly Indian women’s prime "weakness". Some of the Indian watch manufacturers, like Titan, have launched solid gold collections. This range has been immensely appreciated by women having good disposable incomes and has also established itself as a regular marriage gift item.
2. Indian women want accessories to match their different dress codes and colours. This particular fact has been noticed by all the major watch manufacturers who are flooding the Indian market with "vibrant" colours and rich designs.
3. The popular "James Bond" Omega watch is very much in demand among the men (in 2000 Omega sold 12'000 pieces). However this trend is also shifting towards the women wanting to project a "confident, bold" image.
4. Sports watches and digital watches with futuristic designs are fast becoming very popular amongst college girls.
5. The upper income group and upper middle class women are very conscious about their respective choices in terms of apparels and accessories. Watches are in no way different and designers watches are logically taking the lead in this snob value society.
6. Middle class women prefer to buy an all occasion watch. They are price conscious and prefer to buy not very expensive branded watches.
7. The new young women generation is hyper-conscious about their preferences and choices, if compared to the previous generation. Widely exposed to international brand names but highly price sensitive, they search to buy different watches according to various occasions and dress combinations.
If we consider only the haut de gamme market in India, which means price tags of €2,000 and over, estimates are that some 7 million people, or 0.5% of the population, would be potential customers. For the upper mid-range, with prices between €800 and €1,000, the ever-increasing target population is about 100 million people. If we consider that 20 to 25 watches of all kinds are sold per year for each 1,000 inhabitants in India (compared to 100 watches per 1,000 inhabitants in developed countries), it is clear that the potential for growth is quite large. In the area of the low and lower mid-range segments, the potential volumes are obviously much greater.
Rural Consumer: The rural market exists, but it is dominated by the unorganised sector. Titan successfully targeted this segment with the launch of Sonata. 80 per cent of rural Indians did not wear a watch. The reasons ranged from functional to socio-cultural. The need to know time accurately is low; the sunrise (and sunset) is their timekeeper, as is their body clock. The ringing of the school bell, the arrival or passing of a train or bus also indicates the time. Most houses have a wall clock. In keeping with these aspirations, Sonata launched project Swades, aimed at changing people's mindsets and making them aware of the value of time.
Public
The company’s marketing environment also includes various publics. A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. There are different types of publics like Financial publics, Media publics, Government publics, Citizen-action publics, Local publics, General public and Internal public.
Looking at the marketing plans for these major public as well as its customer markets in a broad way is to strengthen its Corporate Social Activities. Titan Industries has a clearly defined policy on social responsibility and believes that an organisation cannot be an island of excellence in a sea of troubled waters. CSR initiatives include children's education, abling the disabled, Artisan Parks, Women's empowerment, environment management programmes and other community initiatives. Titan is a signatory to the Global Compact and has been awarded the Helen Keller and Mother Teresa awards. Significantly, the President of India's Award for employing the disabled has also been awarded to the company. Both the Watch and Jewellery Divisions are certified under ISO 9001 : 2000 Quality Management System standards as well as ISO 14001 Environment System Standard.
Conclusion
Today, the Indian market is in a period of rapid evolution. The game is wide open and the hierarchies can be upset very quickly, with major positions going to the most ‘unexpected’ brands. Now that the Indian market is widely open to importations, it will be extremely difficult for the Indian players to maintain a sustainable growth. Only price, degree of innovation and continuous brand personality enhancement can protect them from foreign invasion. Internationally branded innovative watches are flooding in. The counter strategies of the top Indian watch companies will be an interesting thing to observe.
- Vibrant colours and futuristic designs will be a major trend.
- The majority of the market share will be taken away by renowned global brands which are pushing brand name, style, design and price in a highly price sensitive environment.
- The main brand war will be fought in the sub 1000 Indian Rs
(1 US$ and 1 Euro = approximately 50 Indian rupees) .
- The top premium brands will see a rise but there is a question mark: people spending that much of money are frequent overseas travellers and prefer to buy watches from foreign outlets rather than Indian.
- The unorganized sector will grow further. Chinese watches will flood the market to the advantage of the unorganized players and smugglers.