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Titan is the largest watch company in India and the fifth largest in the world. Titan manufactures
over 90 million watches across 30 countries, cumulative.
Background
Titan Industries was established in 1984 as a joint venture between the Tata Group and Tamil
Nadu Industrial Development Corporation (TIDCO). The company set up its corporate office in
Bangalore (Karnataka) and its watch manufacturing facility in Hosur (Tamil Nadu). In two decades the
company has built an impressive watch business to become India’s largest manufacturer and the world's
fifth largest manufacturer of watches. This has mainly been achieved by developing a formidable
distribution network. The company has amongst the world's largest retail chain of exclusive retail
showrooms for watches called ‘The World of Titan’ spread over 100 towns.
It also has multi-brand outlets named ‘Time Zone’, service centers and dealer outlets. Globally
Titan has a presence in over thirty countries through its marketing subsidiaries.
Titan has also entered the jewellery business in 1995. Jewellery is sold in India through an
exclusive company controlled retail chain, comprising of owned and franchised outlets. It is also
exported to Singapore and the Middle East.
The company has watch assembly plants at Dehradun (Uttar Pradesh) and Baddi (Himachal
Pradesh) and a plant manufacturing electronic circuit boards in Goa.
The majority stake in the company is held by the promoters, with TIDCO having 28 per cent of
the shares and Tata Group companies owning 25 percent of the shares. Public holding in the company is
around 28 per cent. The rest of the stake is held by foreign institutions, non-resident Indians, mutual
funds and other institutions.
In watches, the company has two flagship brands – Sonata and Titan. Sonata is positioned in the
low-end segment in the market with a price band of Rs 250 to Rs 1250, thus addressing the affordability
issue of Indian consumers. The brand Titan is positioned in the middle and upper segment and has a
range of sub-brands like Edge, Fastrack, Nebula, Raga, Steel, Regalia, Bandhan and Flip. The jewellery
business selling under the brand name ‘Tanishq’ has a share of slightly over 50 per cent in the total
revenues of the company while watches have about 45%.The balance is accounted for by the new
businesses viz. Precision Engineering, Accessories & Licensed Products. In jewellery, gem studded
jewellery, which has higher margins as compared to plain gold jewellery, has seen its share rise steadily
to 30 per cent.
The company is involved in retailing of accessories like sunglasses (brand Fastrack) and
manufacturing of precision engineering products, mainly in automotive and aerospace. Watches under
the license of designer wear brand Tommy Hilfiger have also been launched. In the international markets
Titan has also introduced a perfume under the brand name Evolve.
The idea of using the flamboyant third movement from Mozart's 25th Symphony in G minor, written
when Mozart was only 17 years old, came from Suresh Mullick who was O & M's creative head in 1986
when Titan's first TV campaign was being planned. Mozart's symphony had already been immortalised
for contemporary non-cognoscenti in one of the greatest movies of our time, AMADEUS, which was
released in 1984.
The music was such a resounding success that it was never ever dropped, and no thoughts were ever
entertained of making a change.
But the original score did go through numerous metamorphoses as it was rendered with musical
instruments that Mozart could not have even heard of, leave alone heard. Perhaps it is in the nature of
great and enduring music that it can be adapted to such a variety of powerful visual images united only
by a single mood and message.
The music was singularly appropriate: it exuded enthusiasm and energy, flamboyance and power,
tenacity and triumph. It was young and full of zest, typical of the composer himself. Yet it was classy
and elegant. And, of course, it was very European. Both the music and the man who wrote it perhaps the
greatest musical genius of all time had all the right connotations and fitted so very well with the
character of the brand and of the organization that we were seeking to create.
The company's watches are sold in over 1,800 towns across India and in 40 countries across the world.
Titan has changed the rules of the game in the Indian watch industry by its reasonably priced sleek
models, elegant showrooms and imaginative advertising have helped create one of India's most well
known brands.
Keywords
The Titan brand has three attributes - leadership, innovation and pride in the consumer's mind.
Research tells us that even to an up-market SEC A customer, Titan means style and elegance. Where we
fell short was in these "softer" attributes. Primarily because innovation was less frequent and less
visible from Titan in the last few years. However, we are back on the track with innovation, which is the
essence of Titan, apart from leadership and pride.
The history of watches in India dated back to 1957. During a visit to Japan, Prime Minister, Jawaharlal
Nehru (Nehru), received a watch as a gift. This sparked off his dream of seeing watches being
manufactured in India.
The dream became a reality in 1961, when the government owned Hindustan Machine Tools Ltd.
(HMT), entered into a tie up with Citizen of Japan, to set up the first watch factory. Citizen also trained
select Indian people from HMT at its watch manufacturing facility in Japan.
The first watch model manufactured by HMT- the Janata model- was gifted to the senior most employee
of the company by Nehru. In the next ten years, HMT's production increased to 15,000 - 20,000
mechanical watches every month. The early 1980s saw a technological revolution, with the invention of
the integrated chip in the US. Digitals were in demand and LED (Light Emitting Diode)2 watches gained
in popularity. Japanese companies took over the manufacture of LCD (Liquid Crystal Display)3 for
digital watches. There was a discernible shift in focus from mechanical to quartz watches in the
international market. The Swiss watch industry declined because of its attachment to the mechanical
watches. HMT made the same mistake in India.
Titan's Entry
Titan came into existence in July 1984, as a joint venture between the Tata Group and the Tamil Nadu
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In the 1990s, liberalization brought with it a host of luxury watch brands into India like Piguet, Cartier,
Christian Dior, Omega, Raymond Weil, Rolex, and Tissot.
The Exim policy announced on 31st March 1999 removed all quantitative restrictions on the import of
fully assembled watches, three years ahead of the commitment made to the World Trade Organization
(WTO).
With a penetration level of 20 pieces per 1000, the Indian market presented a great opportunity for
watchmakers...
Marketing strategies
TIL’s communication strategy evolved over time. In 1987, the company was known only for the parent
brand.
Through the 1990s, the company introduced several collections and sub-brands for different segments of
the market. Though innovative and appealing, the marketing and communication efforts of these sub-
brands were not integrated. Initially, they were advertised under the mother brand, but with the
development of the market, it became necessary for TIL to develop separate communication and
marketing campaigns for its sub-brands...
TITAN
Though the decision had been made to use Aamir, the company was apprehensive that the actor might
dominate the brand (Titan) or the message (multiple ownership).
The marketing team at Titan wanted to keep the focus on the brand and the message. A TVC created by
Ogilvy & Mather (O&M) was launched in October 2004.
The commercial showed Aamir packing to leave for a tour and his assistant bringing him his collection
of watches to ask which ones he should take out for the trip…
Segmentation
Titan had traditionally focused on the premium segment. In the late 1990s, Titan segmented the market
into different groups based on lifestyle, socio-economic groups and personalities...
Over the years, TIL launched several collections/ranges under the mother brand Titan
Sonata
In 1998, to exploit the huge potential in the budget segment, TIL launched Titan Sonata. Priced between
Rs.300 and Rs.1,050, Sonata watches were available in plastic, leather, stainless steel and gold plated-
straps. The brand Sonata did remarkable business, (it sold around three million watches during 1998-
2001) but the company had to contend with two issues...
Dash!
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TIL tried to tap the children’s watch market, which was an unpenetrated segment, and believed to be as
large as Rs.35 million. the company aimed to achieve volumes of around one million units from Dash!
Within a period of 2-3 years of the launch…
Fastrack
Fastrack was launched in the late 1990s as a product range within the Titan umbrella. These watches
were positioned as ’cool watches from Titan’ and as the youth face of the Titan brand. The
communication of the brand also reflected the heavy fashion quotient of the watches.
In the early 2000s, the company started developing Fastrack as a distinct sub-brand. A commercial
featuring ace Formula-1 driver Narain Karthikeyan, with the tagline—Are you on it? Was launched in
2002…
Steel In September 2001, TIL launched Titan Steel watches in Kolkata. As the name suggests,
the watches were created out of steel. The Titan Steel collection had a range of bracelets and leather
strap watches for both men and women and were priced between Rs.1,250 and Rs.6,000...
TIL launched Titan Flip in July 2004 at Mumbai's Taj Mahal Hotel. And again a celebrity -- film star
Akshaye Khanna -- was invited for the launch.
The watch was unique in the sense that it was India's first dual face watch with dual functionality and
styling and had two movements. One could use two watches with the mere 'flip' of the dial.
The dual-faced watch allowed customers to switch between international time zones and alternative
lifestyles - formal/casual, minimal/sporty etc...
Product expansion
In June 2004, the company diversified into other lifestyle products like
eyewear by extending its watch sub-brand Fastrack and perfumery with a new brand Evolve, launched in
early 2005. The main manufacturing plants of the company were situated at Hosur in Tamil Nadu.
Distribution
Titan opened its first specialty shop 'The World of Titan', in December 1987 in Bangalore. Apart from
Titan controlled outlets, Titan watches were sold in thousands of other stores, franchisee showrooms and
multi-brand Time-Zone outlets...
Ogilvy & Mather Advertising (O&M) had been handling the Titan watches account since the brand's
inception in 1987. Titan initially positioned its quartz watches as international watches from the Tata
group...
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Raga was introduced as a range for women, with a distinct ethnic character. Though popular among
women, the range was not considered 'up-to-date'. Moreover, TIL wanted to broaden the customer base
for the brand. Till 2004, many efforts, short of a full-fledged campaign, were made to revive the brand
and infuse new energy into it...
Nebula
In August 2004, TIL launched four new 'bridal collections' of Nebula designer jewellery watches. The
watches in the collection were embellished with precious stones and crowned with sapphire crystal glass
and priced between Rs.35,000 and Rs.40,000.
The collection targeted the luxury segment. "Nebula is an asset, which has lifetime warranty and can be
passed on from generation to generation...
xylys
Staying ahead of the innovation curve once again, Titan Industries demonstrated that it is at the forefront
of the Indian wristwatch market, with the launch of its premium watch brand, Xylys in July 2006.
Infused with style, attitude and power, Xylys enters the premium watch segment in India, which is
presently dominated by well-known European brands. The new brand was unveiled by actor Rahul
Bose, one of the brand ambassadors for Xylys.
Priced between Rs. 10,000 and Rs. 33,000, the Xylys range of watches comes in three collections -
Contemporary, Classic and Sport and offers over 60 distinctive models. Xylys will be available at select
World of Titan showrooms, key multi-brand outlets and at exclusive flagship boutiques in select cities.
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Tissot
Omega,
Rado
Sonata
Hmt Nebula
maxima Titan Citizen
xylys
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Strategy Evaluation
Titan banks on Cutting edge technology that has helped Titan create value-for-money price and the
result is extraordinary marketing presence in about 40 countries, with a network of some 3,500 retailers
abroad and high volume of domestic presence. Till date Titan is able to single-mindedly convey a point
of differentiation that strikes the consumer then whether it is in terms of price (Sonata) or extraordinary
beauty (Slim “Edge” watches). But the point is that whether the strategies which Titan is following will
take Titan to a position of global uniqueness: a brand which brings information and ideas together from
around the world, to fulfill human needs in novel ways and still go on for profitable growth. But maybe
what's required is a campaign with executional variety a TV campaign that uses attention-getting devices
to drive home the message. This would require greater creative risk. But then, if the stakes are reaching
gigantic proportions it's time to get one's eyes in.
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Positioning Strategies
Since its introduction, Titan has been positioned as a premium brand, providing high quality products.
With its numerous sub-brands catering to different segments, the challenge that Titan faces is to create a
strong brand image. It follows different positioning strategies, these strategies can also be analysed in
the present context of Sonata, Fastrack, dash and Raga, Classique and Regalia as ;
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User positioning:
Titan caters to several user groups- children (the Dash), sportspersons and adventurers (PSI4000 and
Fastrack range). The Fastrack range is seen as being contemporary, sturdy and reliable. The advertising,
packaging and merchandising of this range is young, vibrant and ‘cool’ (the ad line says “Cool watches
by Titan”)
Benefit positioning:
The Fastrack Digital range offers the customer a functional watch that is also attractive. The digital
watch has a “techno-geek” image, but Titan seeks to differentiate its offering on the basis of superior
style and attractiveness.
Competitor positioning:
With the entry of several foreign watchmakers into the market, Titan had to counter the threat. Most of
the entrants are catering to the upper end of the market- Omega, Tissot, Cartier etc. Titan already had the
Tanishq brand in this segment. However, it has tried to reposition this brand by increasing the price
range to encourage more customers.
Quality or price positioning:
In the overseas market, especially in Europe where it is competing with Swiss and Japanese watches, it
is positioning itself as ‘value- for- money’: reasonably priced (less than Swiss watches and higher than
Japanese), attractively styled and of good quality. In India Market Sonata is a perfect example of Price
positioning, titan came up with this segment when it was facing heavy competition from lower end
segment.
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Growth achieved:-
To a large extent, TIL was successful in enhancing the presence and acceptance of most of its sub-
brands. As an IIM-B professor said, "The varied offerings to diverse segments with a clear cut
positioning strategy have been instrumental in sustaining the market share of the (Titan) brand.
TIL to a great extent attempted to balance the positive aspects/associations of the mother brand with the
option of using sub-brands to appeal to several segments.”
Titan’s strategy to project watches as part of one’s personality, and not just as a functional product, had
also gone down well.
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It also has multi-brand outlets named ‘Time Zone’, service centers and dealer outlets. Globally
Titan has a presence in over thirty countries through its marketing subsidiaries.
Titan has also entered the jewellery business in 1995. Jewellery is sold in India through an exclusive
company controlled retail chain, comprising of owned and franchised outlets. It is also exported to
Singapore and the Middle East.
The company has watch assembly plants at Dehradun (Uttar Pradesh) and Baddi (Himachal
Pradesh) and a plant manufacturing electronic circuit boards in Goa.
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The return on capital employed has seen a significant increase driven mainly by the
enhancement in operational efficiency, including a reduction in capital employed in the jewellery
division, despite the rapid top line growth. Reducing funds were employed in working capital of the
domestic business through new initiatives like supply chain management to bring down inventories
and costs. The company’s continued efforts have resulted in a significant reduction in the capital
employed, despite a considerable growth in the turnover. The savings from these initiatives are
beginning to kick in and it is expected that operating margins will continue to show a healthy growth.
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Financial Results
Rs. in crores
2007-2008 2006-2007
Exceptional items:
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Appropriations:
62.66 40.70
All brands of the Company have performed well and new introductions in
both watches and jewellery, viz., the Octane series in gents watches,
Raga Crystal for ladies and the Jodha-Akbar collection in Tanishq
jewellery have had very good responses, which augur well for the
future.
The Company continued to expand its retail network and now has perhaps
the largest reach in its category, with 234 World of Titan showrooms
and 104 Tanishq boutiques. The retail reach of the mass - market brand
for jewellery - GoldPlus has grown to 21 show rooms. The new Titan Eye+
eyewear business now has fourteen stores.
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The Company achieved an export turnover of Rs. 138 crores during the
year between Watches, Jewellery and Precision Engineered components.
Dividend
Finance
During the year under review, the Company raised a total of Rs. 346.80
crores from borrowings, of which Rs. 331.35 crores were from Commercial
banks and the balance of Rs. 15.45 crores from other sources.
Borrowings of Rs. 336.61 crores were repaid during the year. The
Company incurred Rs. 47.45 crores as capital expenditure in respect of
refurbishment and expansion programmes, outlays on retail outlets,
capital investment in Precision Engineering Division and in IT Hardware
systems.
As on 31st March, 2008, the Company held fixed deposits of Rs. 1.73
crores from the public, shareholders and employees. There were no
overdue deposits other than unclaimed deposits amounting to Rs. 0.41
crore.
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The Company, at the beginning of the financial year had three overseas
subsidiaries viz. Titan International Holdings B.V, Amsterdam
During the year, the Company took a major step towards consolidation by
sale and mergers of the above constituent companies. The equity
interest in two overseas wholly owned subsidiaries of the Company viz.,
TIHBV and TBHNV were sold during the Financial Year 2007-08 (TIHBV on
31st December, 2007 and TBHNV on 28th March, 2008) and as a result the
overseas Associate companies have ceased to be Associate companies.
Titan Watch Company, Hong Kong, which was a subsidiary up to date of
sale of TIHBV i.e. upto 31st December, 2007, became automatically
divested due to the sale as above.
TTPL sold 8.24 million Electronic Circuit Boards in 2007-08 and made a
net profit of Rs. 100.78 lakhs.
Samrat Holdings Ltd and Questar Investments Ltd made a net profit of
Rs. 174.81 lakhs and Rs. 18.07 lakhs respectively in 2007-08. Titan
Holdings Ltd made a loss of Rs. 15.39 lakhs.
Tanishq (India) Ltd and Titan Mechatronics Ltd also made a net profit
of Rs. 366.56 lakhs and Rs. 2.38 lakhs respectively. Titan Properties
Ltd made a small loss of Rs. 1.41 lakhs.
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Titan Time Products Ltd, Goa Tanishq (India) Ltd, Bangalore Titan
Mechatronics Ltd, Hosur Titan Properties Ltd, Hosur
As per Sec. 212{1) of the Companies Act, 1956, the Company is required
to attach to its Accounts the Directors Report, Balance Sheet and
Profit and Loss Account of each of these subsidiaries. As the
consolidated accounts present a complete picture of the financial
results of the Company and its subsidiaries, the Company had applied to
the Central Government seeking exemption from attaching the documents
referred to in Sec 212(1). Approval for the same has been granted.
Accordingly, the Annual Report of the Company does not contain the
individual financial statements of these subsidiaries, but contains the
audited consolidated financial statements of the Company and its
subsidiaries. The Annual Accounts of these subsidiary companies, along
with the related information, is available for inspection at the
Companys registered office and copies shall be provided on request.
The statement pursuant to the approval under Section 212(8) of the
Companies Act, 1956, is annexed together with the Annual Accounts of
the Company.
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The Companys performance during last year (2007-08) was the best ever.
The Company is working towards sustaining this momentum in the current
year also. The watch division is pursuing rapid profitable growth
through sharp positioning and focus through its major brands. Constant
exploration of new consumer segments, introduction of innovative new
products which would fuel consumer demand, and the rapid growth of our
retail network would certainly drive this growth.
Corporate Sustainability:
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M F Farooqui
Bangalore, 20th June 2008 Chairman
(Rs. In crores)
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In Dec 08
The Titan Industries stock has remained fairly resilient to the recent meltdown thanks to the
company’s improving financial performance and strong focus on domestic consumption.
However, at Rs 830.80, trading at 23 times its trailing 12-month earnings, the stock seems expensive in
the current market scenario. Investors can look for substantial dips in the stock to consider an entry.
Given its business potential, expansion strategies and established leadership position, holding on to the
stock may prove beneficial in the long run.
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The company appears to have the potential to sustain a 20 per cent growth given its improving
market share in watches and branded jewellery, presence across price points, and a diversified retail
presence. Performance in the third quarter, expected to be a period of good sales due to the wedding and
holiday seasons, may hold the key to gauging if the company is vulnerable to a consumption slowdown.
Titan Industries reigns supreme in the watches and jewellery segments. The company, which
owns brands Titan, Fastrack, Sonata and Tanishq, has recently diversified into eyewear through Eye+, a
segment which combines high revenue potential with strong margins.
Jewellery
Though offering relatively thin margins, Titan’s jewellery business has been its key growth engine in
recent years. With branded jewellery making up only 5 per cent of the Rs 75,000-crore Indian jewellery
market, the potential for expansion appears huge. Tanishq is one of the few nationally recognised brands
in this space.
The revenue potential of Titan’s jewellery business is showcased by its 56 per cent CAGR (compounded
annual growth rate) over the past three years. That Tanishq derives the bulk of its revenues from
domestic jewellery sales (though it does have an international presence) is an advantage when other
export-oriented companies in this space may face the impact of recessionary trends in the US and
Europe. Titan’s expansion plans include a wider national presence.Jewellery purchasers in semi-urban
and rural India tend to be value conscious; yet this segment lacks an organised, branded player. And, the
company aims to tap this segment with its economy brand GoldPlus, currently available mainly in the
southern states.
In the watches business, Titan holds a 60 per cent share of the branded market with watches at all price
points; the premium Titan and Xylys brands, Fastrack as a youth brand and Sonata as a budget brand.
This enables Titan to capitalise on any trend of consumer down-trading as a result of a more difficult
demand environment. The watches business, too, is set for significant expansion, with the company
targeting 50 new stores by the end of this fiscal taking the count to 300.
The company plans to open 300 new Titan Eye+ retail outlets over three years, of which 20 will be
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This segment has potential to not only scale up Titan’s retail network, but also to mark up its overall
margin profile. The eyewear segment is fragmented, without a nation-wide recognised brand and the
company aims to build on this gap with Eye+.
This division has contributed Rs 40 crore to Titan’s revenues in FY08, up from Rs 25 crore in the
previous year, when the line was launched. Aggressive store openings will allow Eye+ to service a wider
customer base, but there may not be a substantial increase in contribution to revenues in the initial years.
Apart from the above initiatives, Titan plans to further diversify its revenues through tie-ups with
international premium players, Hugo Boss and Tommy Hilfiger, to market their products.
Model
Titan uses the franchisee model for store expansion. This model allows easy scalability, control on rental
costs and relatively lower capex requirements. The company mainly uses standalone stores and does not
have a presence in malls, which may make for a higher cost structure.
Titan is favourably placed to bankroll its expansion plans (expected at upwards of Rs 100 crore till
FY10), given its low debt-equity ratio and healthy cash flows. This may stand it in good stead to keep its
expansion plans on track, at a time when most other retailers are carrying a fairly high debt burden and
finding it difficult to obtain credit.
Financials
Jewellery accounts for the lion’s share of the revenues, increasing from about 54 per cent in FY2006 to
almost 68 per cent in FY2008, at the expense of the watches division. Revenues are expected to sustain a
growth rate of 30 per cent. Eyewear and precision engineering currently contribute a little over 3 per
cent to revenues. Margins have declined on a yearly basis for the past three years, as jewellery operates
on lower margins than watches.
However, margins have improved in Q2FY08 over the first quarter due to control in interest and
depreciation costs. Margins are likely to remain steady as there may not be significant changes in
product portfolio. Returns on investments have also held out above 40 per cent. Leverage has been
brought under control by retiring old debt and taking up fresh loans to a smaller extent. Debt-equity ratio
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Concerns
The company has incurred forex currency losses on account of raw material imports for FY 2008.
Another concern is the volatile nature of gold prices and high procurement costs. Hedging strategies will
go a long way in addressing this fluctuation. Change in gold prices can also be managed by tagging
retail price to gold prices. Additionally, demand for gold is price sensitive, and hikes in gold prices
might drive down demand during off-season. Performance of Titan’s new outlets in the US also remains
to be seen, as consumer sentiments there remain weak.
Titan Industries rose 2.93% to Rs 983.95 at 14:38 IST on company's plan to consider raising Rs 50
crore by issuing debentures to Life Insurance Corporation of India.
The company made the announcement during market hours today, 19 December 2008.
On BSE, 57,627 shares were traded in the counter. The scrip had an average daily volume of 32,015 lakh
shares in the past one quarter.
Titan Industries Ltd, the fifth largest watches brand in the world, expects sub-brands such as Aviator,
Octane, Heritage, Raga Crystals and Titan-WWF to contribute 60% to the total Titan brand this year,
Harish Bhat, chief operating officer, watches, Titan Industries Ltd, told FE.
Bhat said, “Titan sub-brands are being sold through 260 World of Titan showrooms apart from 5,000
retailers and various malls across the country. With the rising demand for sub-brands, we will increase
the distribution reach in Tier II and III cities as well. All the Titan sub-brands are currently being
marketed pan-India owing to the rising demand. Currently, there are no plans of exporting the sub-
brands.”
Bhat said, “With the recent launch of the Titan-WWF collection, which was inspired by India’s
endangered species, we hope the sub-brand alone contributes 15% to our revenue. The ongoing festival
period is taking off well for the watches market. During this festival season, we hope to see a sales
growth of 20% and 30%. This is despite the rising inflationary trends.”
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In September, the Bangalore-headquartered US$760 million company made its very first foray into the
world of plastic watches with a new range called "Super Fiber." A trendy and youthful collection of both
analog and digital watches, the Super Fiber range is part of Titan's mass-market Sonata brand. However,
unlike the rest of the Sonata brand, which has watches priced up to US$30, the entire Super Fiber range
is priced below US$10.
With this new launch, Titan is taking dual aim. On the one hand, it is looking specifically to target mass-
market consumers in the 16 to 25 age group. Perhaps more importantly, it is also looking to make fresh
inroads into the country's huge "unorganized" retail sector -- including corner shops, kiosks, street
vendors and other single-proprietor venues -- which traditionally has been dominated by cheaply made,
value-priced goods.
Although organized retail has taken hold in India -- with large, "modern trade" stores offering a more
sophisticated shopping experience, better selection, competitive prices, and formalized return and
exchange policies -- the unorganized sector isn't going away any time soon. At present, unorganized
outlets represent 97% of Indian retail, and according to a 2008 report by the Indian Council for Research
on International Economic Relations, the sector is expected to grow at an annual rate of 10%, reaching
US$496 billion in 2011. Based on that analysis, Titan's strategy seems timely. But a question remains:
How does it plan to succeed in a market segment where bargain prices and cultural associations often
outweigh brand cachet?
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The sub-$10 category that Titan is now targeting with Super Fiber accounts for around 40% of the
market in terms of volume. With over half of India under 25 years of age, Titan's game plan is to catch
them early on in the value chain and then get them to upgrade to its higher-value products.
A Cricket Connection
Titan is targeting Super Fiber sales to come in mainly from the semi-urban markets -- and in keeping
with its target group, the company has roped in Mahendra Singh Dhoni, the young cricketing icon who
hails from the small town of Ranchi in Eastern India, as its brand ambassador.
Fragmented Categories: Desai points out that a brand attempting to be among the first branded
presences in a fragmented category must first justify why the category needs a brand in the first place.
"There are good reasons why categories don't have brands. It could be the artisan aspect of the category,
like in the case of female ethnic garments, or deep personal relationships like with jewelry, or it could be
the sheer price aspect like in commodities. You need to redefine the market and create a value perception
of a different kind that gives the consumers an overriding reason to shift to a brand."
This is exactly what Titan did when it entered the jewelry market in 1994 with its Tanishq brand.
Tanishq not only brought a wide design expertise and a plush retail environment to a segment which
until then was limited to local family jewelers and small set ups, but by being the first to introduce the
karat meter to measure the exact purity of gold, it brought the element of trust to the forefront. Before
Titan, 'trust' between the consumer and the jeweler was a factor of personal relationships. "The
reassurance of guarantee and purity in such a transparent manner was a great new value addition that
Tanishq brought to this category," says Desai.
Eyeing Other Territories: Meanwhile, Titan is now looking to bring the power of the brand to yet
another unorganized category: Last year it entered into prescription eyewear with Titan Eye+. The
prescription eyewear market in India is estimated to be around 25 to 30 million units per annum with
revenues of US$300 million and growing at around 15% to 20% per annum. As per industry statistics,
only around 25% of the people who need prescription eyewear are actually using them.
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Bhaskar Bhat is, however, emphatic that Titan will not enter any category where the opportunity to
compete is only on price and product quality alone. Says Bhaskar: "We have always chosen to enter
segments where we saw that the consumer was being significantly underserved. In watches, it was lack
of choice; in jewelry, it was under-caratage; and in eyewear, it was lack of information. In each of our
businesses, we have focused on offering sharp differentiators, and the greatest consumer opportunity to
differentiate comes in the unorganized sectors.
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http://www.s2v.com/contact/
Titan ideology
Operations at the Rs 727 crore Titan Industries Ltd is now set for more than just plain watch making.
Following a top management change in which Mr Bhaskar Bhat took over from retiring Mr Xerxes
Desai as managing director and its successful VRS scheme (which saw the exit of close to 600
employees), Titan is now set to be part of the larger Tata vision.
And Mr Bhat is of the firm belief that new initiatives would help it be part of the larger gameplan and
not just to change the way ongoing operations have been handled. Interestingly, technology is expected
to be a key driver for the company and Titan is pulling out all stops to explore how they could build in
38
39
In what is widely being viewed as a move to keep key managerial talent from leaving, the House of Tata
has formulated a centralised human resources strategy that is expected to be put in place over the next 18
months.
The group executive office’s HR mandate is to attract good people, retain the better people and advance
the best people. The GEO proposes to do this by constructing an integrated HR system in which the
central backbone will be the Tata Work Level.
Around this concept, the Tata group will have a performance measurement system, potential assessment
system, career development system and a remuneration policy.
Historically, CEOs were developed by individual companies with the GEO only playing a small role.
But with HR having become a very important part of the change agenda at the Tatas, it is expected that
there will be greater job mobility between companies.
A star performer at Tata Liebert could be moved to Tata Infotech and may ultimately end up as CEO of
Tata Consultancy Services. Greater job mobility is aimed at keeping top performers in the group from
leaving.
Based on a survey done by the GEO on remuneration at group companies, it has been decided that
employee compensation will be driven partly by market trends and partly by the group’s needs. A
remuneration architecture has already been developed and will be implemented by group companies
progressively.
"The Tatas have for long been seen as a good training ground and it is not uncommon to find ex-Tata
managers holding senior positions at other companies. We are now seeking to open up horizons for
employees to grow within the group," said R Gopalakrishnan, executive director, Tata Sons, who is
spearheading the Tata group’s HR initiatives.
A very significant departure from the past is the process of managing the career development of its
employees group-wide, instead of looking at specific companies. A key to this is a consultative process
between group companies and the GEO.
For instance, if a company needs to recruit a resource of a certain level of seniority, they will need to do
40
Winning strategies
There is no one formula for success in driving business excellence in an organisation, but knowing the
route others have taken helps in getting there faster
<>"We are what we repeatedly do. Excellence, then, is not an act, but
a habit." — Aristotle.
The words of an ancient Greek philosopher may seem outmoded in reference to the pursuit of business
excellence, but in this case, it's a perfect fit. Making the quest for excellence a habit is the objective of
every Tata company; they just reach there through different routes and at different times.
41
The words of an ancient Greek philosopher may seem outmoded in reference to the pursuit of
business excellence, but in this case, it's a perfect fit. Making the quest for excellence a habit is the
objective of every Tata company; they just reach there through different routes and at different
times.
Four companies that are already close to the first milestone (600 points) on the Tata Business
Excellence Model scale — Titan Industries, the ferro alloys and minerals division (FA&MD) of
Tata Steel, Tata Wire and Tata Chemicals — make for a good study of how innovative strategies can
help ingrain quality into the fibre of an enterprise.
Titan Industries:
Lord Chesterfield's maxim, that if one takes care of the minutes, the hours will take care of
themselves, is a motto for Titan Industries, India's premier watchmaker. Committing itself to small,
continuous improvements, Titan believes, will ensure big gains.
Titan's business excellence (BE) process is managed as a distinct entity, with a separate team
reporting directly to the company's managing director, to drive initiatives across all divisions. N.
Kailasanathan, vice president, chief information officer and head of business excellence and
knowledge management, wants the quality initiative to become an indivisible part of the company's
day-to-day activities.
"TBEM influences everything. It makes an organisation think about how it goes about its business,
aligns the company's goals — from vision to strategy to the products and services you offer
customers — and ensures that no department works in isolation," Mr Kailasanathan points out.
"What are your key processes and how do you address them? Do you benchmark yourself against
the best in the class?" he asks. "Ultimately," he declares, "everything is visible through your results,
which tell you where you are on the journey to business excellence." N. E. Sridhar, senior manager,
business excellence, says Titan's BE team is careful to ensure that the processes it initiates are
scalable, measurable and replicable. Only if a process fulfils all three criteria is it considered worthy
of implementation.
The biggest benefit of TBEM, Mr Kailasanathan feels, is the opportunity it offers companies to
learn from one another. "We spoke to Tata Motors to
42learn how it deals with some processes. We
1. The Leadership criterion checks how senior leaders create leadership system based on
Group values. With the able leader in form of Mr. Xerxes Desai at the helm of affairs, Titan has become
a dynamic, vibrant and pro-active organization.
2. The Customer and Market Focus checks how the company determines customer groups, key
Customer needs, and complaint-management issues. Titan has always been a customer centric
organisation and always has focused on satisfying the customer demands.
3. The Strategic Planning criterion examines how the company develops strategic objectives,
Action plans, and resource-allocation. Since its inception, Titan has been the shaper of the watch
industry. It has identified the future trends well in advance and taken appropriate steps in the right
direction to emerge as the leader in the industry.
4. The Information and Analysis criteria check whether the organisation has key metrics in place
To measure and analyse performance. Being market-driven, Titan has its information systems in place
and has its hand on the pulse of the watch market.
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6. Process management examines the product design, production and delivery process, and
Supply chain management. Titan has pioneered the style concept in the watch industry and is the
undoubted leader in design.
Unit Profile
a. Applicant’s Business
Titan Industries Ltd was incorporated in 1984 as a joint venture between the Tata group and the Tamil
Nadu Industrial Development Corporation Limited, a Government of Tamil Nadu undertaking. The
Company has its Registered Office in Hosur, an industrial town in Tamil Nadu, and its Corporate Office
in Bangalore, Karnataka. The Company has been engaged in the manufacture and marketing of quartz
analog wristwatches since the year 1987 at their Watch Division. Titan is the premier watch brand in
India with a market share of over 60% in the organized quartz watch market segment. Since 1995, the
company has diversified into jewelry and jewellery watches and bracelets in separate divisions.
The company also exports about 10 % of it watches primarily to the Middle East, Far East and Europe.
In several key countries of the Middle East market, Titan is ranked among the top three brands.
Titan is producing 8.0 million watches per annum and holds over 60% share in the organized Indian
Quartz Analog Wrist - Watch business segment. The company also exports 10% of its watches primarily
to the Middle East, Far East and Europe. The company also exports about 10 % of it watches primarily
to the Middle East, Asia pacific and Europe. In several key countries of the Middle East market, Titan is
ranked among the top three brands.
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Technology: Titan’s 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 manufactures watch movements, watchcases in steel and brass, and bracelets in solid as well
as sheet steel. The manufacturing processes employed include micro-precision operations
(manufacturing of components and sub assemblies) Hot & cold forging, stamping, injection moulding
and tool making. Some of the key facilities for the above include CNC machining centres, Ion plating
equipment for surface finishing, CNC EDM die sinking equipment for tool making to name a few.
The product development cycle is facilitated by state-of-the-art CAD/CAM technology that enables
seamless integration from aesthetic styling and 3D solid modeling to engineering design, tool design,
tool making and prototype making. Our R&D initiatives, which have been recognized by the DSIR,
have earned several accolades for its design efforts. This includes a national award from the DSIR for
the Design and Development of a Slim Movement and more recently awards in recognition of
Excellence in Electronics for two successive years from the Ministry of Information Technology.
Environment: Titan’s products and services have very little or marginal impact on the environment.
Titan adheres to all related legal and statutory requirements. The Company is also extremely conscious
of environmental issues and has been recognized in this regard by the Hosur Industries Association. The
Company’s environment control results are continuously monitored with respect to both TNPCB and
International Finance Corporation (World Bank) norms. The Company has been certified under ISO
14001 EMS standards. The company has won the Golden Peacock Environment Management Award for
the year 2003. The company is one among few TATA companies which has submitted its first Corporate
Sustainability Report (CSR) under GRI guide lines encompassing the triple bottom line approach
( i.e. Economic, Social and Environmental Aspects).
Energy consumption:
Titan have implemented various Energy conservation projects as on going practice, there is steady
decline in the Specific Energy Consumption. Last 10 years specific energy consumption figures are
shown below, which depicts continual reduction in energy consumption over the last several years due to
our sustained efforts to conserve it with the implementation of various energy conservation projects &
measures to increase the efficiency of the equipments.
Thermal Energy M
N.A N.A N.A
Kcl/watch
Energy as % age of
Total cost of % 7.41 6.74 6.22
production
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Energy Policy:
47
During the year 2004-06, the unit implemented 26 energy saving ideas generated through periodic brain
storming sessions. Annual Energy savings of Rs. 80.6 Lakh was achieved with an investment of Rs
213.3 Lakh with a pay back period of approx. 12 months only. It has resulted in percentage reduction of
18.75 % in electrical energy.
kWh/ %REDUCTION
YEAR PRODUCT
WATCH OVER 2004- 05
50
Annual
Sl Title of Energy Saving project Electrical
Invest. Made
No implemented Savings
achieved
Units Rs in
Millio Millio Rs in million
n n
01 Jig boring Dx plant-I flat belt 0.0216 0.099 0.0142
conversion
02 Toolroom expansion A/c plant 0.0093 0.0431 0.0125
flat belt conversion
03 Conversion of 36 numbers Air 0.1389 0.64 0.36
handling units “V” belts in to
Flat belts .
04 Jig boring Dex plant-I flat belt 0.0216 0.099 0.0142
conversion
05 Ion plating Dex plant flat belt 0.0095 0.0429 0.012
conversion
06 Revamping of reciprocating type 1.258 5.845 -No investment
compressor air-cooled condenser since the project
type centralized air conditioning is carried out on
system with energy efficient performance
screw air compressors with contract basis
water-cooled condensers.
07 Replacement of reciprocating 0.273 0.125 0.12
vacuum pump with rotary type
pump at Stepper motor
08 Installation of Star/Delta/star 0.0198 0.0944 0.06
converters for eight Air handling
Units.
09 Optimizing the blower capacity 0.0199 0.0918 0
at case polishing
10 Controlling the room 0.0026 0.0119 0
temperature at ebauche
extension area
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52
Titan Industries Limited is committed to making a net contribution to the environment by minimizing
the impact of its activities, products and services by specific actions to upgrade the environment and
safety. The unit also committed to preserve its safety of its employees.
a) Water Effluent
In our manufacturing facility two streams of water effluent are generated one is domestic and another is
Trade effluent. Domestic effluent includes the stream from sewage and sullage (from canteen
operations) are collected in common collection sump and it is treated by conventional biological process
and 100 % recycled back into landscaping, cylinder warming and A/C Cooling tower. Quality of the
treated effluent used for landscaping will be analyzed and it will be within in the CPCB/TNPCB norms.
Trade Effluent Electro plating is one of the most important processes in a horological industry. Effluent
generated from these processes (90 KLD) are treated at the dedicated effluent treatment plants and
further it is treated through Reverse Osmosis and Mechanical Evaporation System and 100 % recycled
to the process and meeting zero discharge norms. In addition equivalent amount of fresh water intake for
the electro plating processes has come down.
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Titan and the Environment - ISO 14001 but going beyond Compliance
Titan's products and services have very little or marginal impact on the environment. Titan adheres to all
related legal and statutory requirements. The Company is also extremely conscious of environmental
issues and has been recognized in this regard by the Hosur Industries Association. The Company's
environment control results are continuously monitored with respect to both TNPCB and International
Finance Corporation (World Bank) norms. The Company has been certified under ISO 14001 EMS
standards.
Initiatives taken:
· Minimizing the use of cyanides in plating by adopting non-toxic PVD technology.
· Eliminating the use of ozone-depleting substances ahead of the Montreal Protocol deadline.
· Minimizing the use of plastic packaging with eco-friendly materials.
· Adopting Vermi-composting for the conversion of garden / vegetable waste in to useful manure.
· Piloting the study of conversion of industrial waste into useful civil materials.
· Promotion of rainwater harvesting at manufacturing locations.
· Waste water treatment with efficient effluent treatment and use for industrial cleaning and gardening.
· Recycling brass scraps.
· Rainwater harvesting in 3 manufacturing locations.
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Green Power
Your Company is planning to consume 30% of its energy consumption at watch manufacturing facility
through the renewal energy resources. During 2007-08, 1.0 million units of energy has been sourced
from the private wind farms and for 2008-09 targeted generation of energy is 4.0 million units. This will
lead to the energy cost reduction to an extent of Rs. 0.13 crore.
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“Once Titan puts its valuable name on the watch it does not matter to the customer whether we have
manufactured it, or assembled it, or fully outsourced it.”
INTRODUCTION
In late 1999, the top management of Titan Industries Ltd. (Titan), India's leading watch, clock and
jewelry manufacturer, was surprised when several senior executives threatened to resign. The threats
reportedly came after a long period of employee unrest in the organization.
The reason behind the unrest was the company's decision to increase the level of outsourcing in its
manufacturing activities while limiting production facilities for just assembling purposes.
Titan's Vice-Chairman and Managing Director Xerxes Desai (Desai) quickly issued a statement stating
that the above was not true. However, this was in sharp contrast to his earlier statements in the media. In
an interview to a business magazine[1], Desai had remarked, “We will manufacture only if we can do it
faster and cheaper than anyone else in the world.”
Even as the company worked towards explaining its strategies clearly to the employees, analysts could
not help remark that Titan was already sourcing a large part of cases and movements, key watch
components, from within and outside India. Moreover, the company had always been sourcing a variety
of raw materials such as stainless steels, tool steels, engineering plastics, tools, consumables,
components and specialty movements[2] for its watch manufacturing operations through vendors spread
across 20 countries, mainly in Asia and Europe.
The company's management seemed to have realized that global sourcing of certain components made
better business sense. Media reports even quoted watch industry officials claiming that companies like
Titan had ‘no option but to move away from manufacturing and towards trading in the long run.'This
was not a very surprising move as it seemed but natural for the company to look for cost effective
sourcing options at a time when manufacturing seemed rather costly.
Titan's decision was influenced by a host of factors that made the company realize the potential benefits
of outsourcing as a tool for holding on to its position in the Indian watches market. The liberalization of
the Indian economy and the subsequent removal of quantitative restrictions [3] on watch imports in the
late 1990s, forced Titan to focus more on marketing efforts rather than manufacturing to retain its
competitive edge in the future.
ABOUT OUTSOURCING
56
However, more and more organizations began moving towards outsourcing manufacturing for a lot of
reasons. Outsourcing helps a company become flexible enough to terminate an operation if it does not
meet the business goals without being concerned about various human resources, separation, or
litigation issues.
It is not necessary to build a fixed overhead infrastructure and the company can acquire and leverage
customer acquisition expertise easily when it outsources certain activities. As customers increasingly
demand quick delivery, companies have discovered the importance of optimizing the supply chain
activities. Moreover, with the markets changing rapidly, there has been an increase in the investment risk
in new technology, machinery and other equipment.
This has necessitated flexible production systems in manufacturing concerns throughout the world. Most
importantly, organizations have also realized that it is in the best interest of the company to concentrate
its resources on its core competencies only. The benefits of outsourcing can be summarized as follows:
• Frees up capital and cash for other activities that are the company's core competencies, such as R&D or
marketing.
• Provides access to industry leading process development expertise and manufacturing technologies.
Most importantly, it is necessary to use outsourcing proactively through a stronger focus on internal core
business areas, as a way to improve manufacturing performance by generating employee commitment at
all levels (Refer Table II & III for the essentials and perils associated with outsourcing).
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Many leading global companies such as Volvo and HP have been reaping the benefits of outsourcing
manufacturing. The practice has been particularly popular among companies in the automobile and
pharmaceutical industries. Titan was one of the first Indian companies from the consumer electronics
business to have opted for outsourcing its manufacturing activities as a strategic exercise.
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Titan's entry into the clock segment in the mid 1990s failed badly because its clocks could not face the
competition from cheaper imports from China. Moreover, the design of Titan's clocks was also found to
be faulty.
To correct these problems, the company decided to stop manufacturing clocks, instead it decided to
import them from Hong Kong. The only input in this ‘virtual manufacturing 'setup from Titan's side was
in the form of design, branding and distribution. The company converted its clock plant into a plastic
watch-manufacturing unit to make alarm and travel watches.
Outsourcing activities were further strengthened in the next few years due to the problems Titan was
facing with the gray market. The gray market has always accounted for a substantial part of the Indian
watch industry (Refer Table IV).
TABLE IV
THE INDIAN WATCH INDUSTRY IN 2001
Indian watch Organized Unorganized
industry Sector Sector*
16-18 million
Volume 20 million units
units
[9]
Value Rs 10 billion Rs 3-5 billion
Segment-wise
Premium 15%
breakup
N.A.
Mid 40%
45%
Mass
* Estimates.
Source: Business Line, December 6, 2001.
During the early 1990s, when the import duty on watches was reduced to 25% from 50% and import
licenses became easier to obtain, as much as 55% of the demand was met by small players from the
unorganized sector. Since Titan faced stiff competition from these players on the price, it decided to
concentrate on building a strong distribution and support network. This worked well for the company
and soon it became the undisputed market leader in the watches market.
However, the variety and range available in the mid segment increased dramatically after 1999, with the
changes in the EXIM policy. Though the segment itself grew in size, new entrants began to threaten
Titan's market share. The company's management was also aware that outsourcing was the accepted
norm in the global watch industry and many leading global watch brands were not manufactured by the
companies that owned them.
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This loss was due to the high overheads, excise duties and marketing spending in 1999-00, which
increased expenditure by Rs 1.5 billion. Moreover, net profits had come down by 47% to Rs 146.4
million in 1998 from Rs 275.7 million in 1996 (Refer Table V). Company watchers partly attributed this
to the heavy investments in the manufacturing setup.
TABLE V
TITAN - KEY STATISTICS (in Rs million)
94-95 95-96 96-97 97-98 98-99 1999-00 2000-01
Sales Volumes (nos. in lakhs)
Watches 325.8 387.5 394.5 435.3 511.1 585.4 667.6
Jewellery 0.9 2 3.7 12 16.8 30 72.1
Table Clocks - 6.7 36.4 30.5 43 32.9 16.2
Sales Income 2824.9 3507.2 4085.2 4420.6 4820.4 6303.3 6969
Expenditure 2239.3 2761.9 3207.3 3572 3934.8 5506.2 6141.9
Interest 218 342.2 564 529.6 519.2 508.8 478.4
Depreciation 131.1 156.8 165.2 188.2 201.4 204 209.3
Operating Profit 236.5 246.3 148.7 130.8 165 84.3 139.4
Other Income 14.4 29.4 129.3 31.6 24.1 130.1 116.3
Profit Before Taxes 250.9 275.7 278 162.4 189.1 214.4 255.7
Taxes - - 35.8 16 18.7 21.6 20.9
Profit After Taxes 250.9 275.7 242.2 146.4 170.4 192.8 234.8
Equity Div. (%) 30% 33% 33% 25% 26% 26% 26%
Source: www.titanworld.com
Taking into account the above factors, Titan had no other option but to settle for outsourcing. Around the
same time, Titan decided to change its focus to generating more volumes rather than value. This was
because the growth in the premium segment of the watch market, which was Titan's mainstay, had been
below its expectations. The company wanted to build up a base in the lower value segment and extend
its reach. According to company estimates, outsourcing worked out be around 30% cheaper than
manufacturing in-house.
60
However, the biggest factor that swung the decision in favor of outsourcing was the fact that Titan was
not being able to meet the onslaught of the unorganized sector for the first time. Since the company
decided to focus on generating volumes from low-end mass products, it had come in direct competition
with players in the unorganized market. With cheaper Chinese imports flooding the Indian market, Titan
realized that the complete technology of making watches, from hand-plating technology to
manufacturing cases, was easily available at prices much lower than what the Hosur factory could ever
deliver. According to a former company manager, “The extra costs in the system aren't helping in
differentiating the brand. Today, even unique elements of design are being easily copied at a lower cost.”
61
TIL to a great extent attempted to balance the positive aspects/associations of the mother brand with the
option of using sub-brands to appeal to several segments.”
Titan’s strategy to project watches as part of one’s personality, and not just as a functional product, had
also gone down well.
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www.googlesearch.co.in
www.titanindustries.com
www.financialexpress.com
www.tatagroup.com
www.economictimes.com
www.naukrihub.com
Titan Industries
A Happening Company in a
Happening India!
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