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2010

Titan Industries

International
Academy
of Renu R
Management PGPM/0911/039
& 2009-2011
Entrepreneurship
Titan Industries
Nature of the Business

Titan Industries is the world's sixth largest wrist watch manufacturer


and India's leading producer of watches under the brand names
 Titan,
 Fastrack
 Sonata,
 Nebula
 Octane & Xylys .
It is a joint venture between one of India's most respected business
organizations, the Tata Group, and the Tamil Nadu Industrial
Development Corporation (TIDCO).

Its product portfolio includes


 watches
 accessories and
 jewellery, in both contemporary and traditional designs.
It exports watches to about 32 countries around the world with
manufacturing facilities in
 Hosur,
 Dehradun,
 Goa
and manufactures precious jewellery under the Tanishq brand name,
making it India's only national jewellery brand. It is a subsidiary of the
Tata Group.

Turnover
 The company currently has its 281 "World of Titan" stores across 123 cities.
 35 per cent of the group's turnover of Rs 3,500 crore came from its watches
business.
 The company was growing at a rate of 17 per cent every year.
 Titan Industries reported a turnover of Rs 3,847.72 crore.

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Senior Management

Managing Director
Bhaskar Bhat assumed the position of Managing Director of Titan
Industries on 1st April 2002.

He is a B.Tech (Mechanical Engineering) degree holder of IIT - Madras,


and a post graduate diploma holder in Management from IIM -
Ahmedabad.

Chief Financial Officer


Kapadia, currently the Chief Financial Officer of Titan Industries.
He is a B.A. graduate and post graduate diploma holder in Management.
He has 34 years of work experience in various senior portfolios and prior
to his posting to Titan, was with Tata Press, Mumbai.

Chief Manufacturing Officer, Watches


Raghunath - Vice President – Integrated Supply Chain & Manufacturing
- Time Products Division has been involved in the watch industry for
over 28 years.

He joined Titan Industries in June of 1986, and helped set up and


establish the After-Sales Service network both, in India and overseas.

He has been involved in the customer-service function for 17 years and


since 2003 in ISCM. He holds degrees in Science and Engineering
(Electronics & Communication) and is a coveted speaker on SCM in
many forums.

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History

Titan, a Tata group company entered the watch market in 1987. Since
then it has developed into one of the most recognized brands in India.
Back in the early eighties, the Tata Group had identified the watch
category as a potential consumer market for the Tatas to enter. Xerxes
Desai, a Tata veteran and the then MD of Tata Press, was chosen to lead
that venture.

In those days of pre-liberalisation the watch market, like most consumer


markets in India, was way behind the rest of the world. The technology
in vogue was the reliable, but outdated "Mechanical" technology, which
used the unwinding of a mechanical spring to tell time. Not only was the
accuracy of time-keeping not good enough, but the bulky mechanical
movement did not permit the creation of sleek products. The industry
was dominated by the public sector which had brought in watch
manufacturing into India, enjoyed tremendous goodwill in the market,
but had not really invested in evolving itself and its consumers: styling
still remained basic, choice was limited.

The watch shops were narrow, dingy and typically located in the older,
traditional markets of the city. You went there only to buy a watch, never
to browse, never to simply check out. Visual merchandising was very
much at the stage of "decoration" if any, and neither the brands nor the
retailers saw it as important. The companies themselves did not have
much contact with retailers, preferring to sell through wholesalers, doing
well that way. There was hardly any need for consumer contact or
research. It was a sellers' market.

All this affected the consumers. Watches remained a time-keeping


device, so one watch was enough, thank you. Since the quality of the
watch was quite good, it lasted quite a while, and the consumers did not
change it for 10, 15, 20 years.

Today, in early 21st century India, it is taken for granted that a watch is a
fashion accessory. Titan dominates the market, with a 60% share of the
organised sector market (the total market, including the unorganised
sector, is estimated at around 42 million units). Titan's quality record is
impressive, its sales and service network is wide and deep, and its
network of exclusive showrooms, The World of Titan, is one of the most
prestigious and visible retail brands in the country, offering world-class
levels of shopping comfort and customer service.

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Strategy and Initiatives

Vision & Mission


Our Vision:
To be a world-class, innovative and progressive organisation and to build
India‟s most desirable brands.

Our Mission:
To create wealth for all our stakeholders by building highly successful
businesses based on a customer-centric approach, and to contribute to
the community.

Our Values and Standards:

Total customer orientation


- Customers take precedence over all else, always.

Employee appreciation
- We value and respect Titanians and endeavour to fulfill their needs
and aspirations.

Performance culture and teamwork


- At Titan Industries, high performance is but a way of life and is
nurtured by teamwork.

Creativity and Innovation


- Driven by innovation and creativity, we focus on smarter
approaches and newer technologies.

Passion for excellence


- In all our pursuits, we ceaselessly strive for excellence.

Corporate Citizenship
- We ensure that a part of our resources is invested in environment
and community betterment.

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Merger and Acquisition

The success story began in 1984 with a joint venture between the Tata
Group and the Tamil Nadu Industrial Development Corporation.
Presenting Titan quartz watches that sported an international look, Titan
Industries transformed the Indian watch market. After Sonata, a value
brand of functionally styled watches at affordable prices, Titan
Industries reached out to the youth segment with Fastrack, its third
brand, trendy and chic. The company has sold 100 million watches world
over and manufactures 11 million watches every year.

With a license for premium fashion watches of global brands, Titan


Industries repeated its pioneering act and brought international brands
into Indian market. Tommy Hilfiger and Hugo Boss, as well as the Swiss
made watch – Xylys owe their presence in Indian market to Titan
Industries.

Changes it made

Titan is credited with transforming the face of India‟s watch industry. By


offering consumers quality products the blended classy designs with
superior technology, Titan became byword for success stories.
Outstanding service, wide variety of models, and effective marketing has
helped Titan consolidate its early gains, to the point where the company
is a force to be reckoned with beyond Indian shores.

Understanding the Indian consumer‟s psyche has been vital to Titan


reaching its current position of strength. The company today has a model
for every price segment and every market, urban and rural, regional and
international. Within the Titan mother brand are Nebula, which comes
draped in 18-carat gold; the exclusive Insignia; PSI, for those turned on
by technology; and Raga, which has been designed exclusively for
women. Titan‟s focus has always been on India.

Technology that captured the customers

The company‟s biggest coup in the area of technology innovation has


been Titan Edge, the world‟s slimmest watch. Edge is barely 3.35 mm
thick and HG Raghunath, VP, integrated supply chain & manufacturing,
says the product has been a matter of great pride for the company. “We

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worked with titanium, which is the hardest yet lightest metal. This
thickness is something nobody‟s ever done before.”

Titan‟s muse is the increasingly discerning Indian consumer. “Indians


today are interested in pursuing many interests and developing different
sides to their personality, says Suparna Mitra, global marketing head,
Titan. “We look closely at these and identify „deep design stories‟ which
work as catalysts to their life.” So in came Titan Aviator, inspired by
World War II aircraft, the WWF collection inspired by endangered
species and Titan Orion which is inspired by the world of astronomy.
Currently the watch maker is in the process of launching its Eco Drive
collection

In fact, in a recent survey conducted by A&M, Titan emerged as the top


brand in the consumer durable segment.HMT, the undisputed leader of
the wristwatch market before Titan's entry completely neglected the
quartz watch segment. Titan successfully filled this gap. Its wide range of
designs, high profile advertising and distribution network helped it gain
a substantial market share in a short span of time.The Titan brand was
essentially positioned as a premium brand. As a result the lower segment
was left uncovered. After it entered into a joint venture with Timex, it
made inroads into this segment too. Internationally, Timex is seen as a
mid-priced quality watchmaker. Its association with Titan in India led to
wrong segment targeting. Here, the middle and higher income groups
were buying its watches. In 1998, this association came to an end erasing
Titan's presence in the lower segment. Since then, it has launched the
Sonata range of watches that is in direct competition with the Timex
range.

Responsible for all this is the Titan Design Studio and Innovedge, a
technology group created by the company early last year that continually
churns out ideas and innovations for other SBUs and divisions.

Titan could build an innovation engine only because of a supportive


senior management speaking a common language across the
organization, enabling extensive external inputs and having a supportive
HR policy framework . It‟s not often that a company actually rewards
risk-taking and failure. It is not embarrassed to recount the instances
when it tripped up.

Rome however wasn‟t built in a day and it took two decades of contrarian
leadership to hammer in a culture of risk taking. When Titan entered the
watch market in 1986, it chose to collaborate with the French and not

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with Japanese or Swiss, two countries globally known for watch
manufacturing expertise. And instead of gunning for large volumes to
take on the market leader HMT in mechanical watches, Titan decided to
transform the market itself. For the first time in India, the company used
quartz as a technology base for its watches and offered international
designs to carve a contemporary image. Similarly, in its manpower
hiring strategy, Titan‟s threw all caution to the wind. Instead of hiring
technically trained manpower from the ITIs and poaching experienced
hands from rival camps, Titan hired young villagers in and around Hosur
district, who knew nothing about watches.

Strategies adopted for Market penetration

Mechanical technology was the norm –

Quartz had not really taken off in India. Titan would go against that and
build its line based on quartz. Accuracy would become a selling-plank.

Styling was basic –

This was a constraint imposed by the technology as well the outlook of


the manufacturers. Titan decided to make style a table-stake.

Choice was limited

Titan decided to inundate consumers with a wide choice in style,


functions and price. The initial range was 350 models.

Shops were dark, dingy and uninteresting –

There was no importance given to presentation, and therefore no


attempt made at it. Titan brought in the concept of retailing into the
watch market, established a network of fine showrooms which would
later become the world's largest network of exclusive watch stores. These
stores not only helped Titan to gain leadership substantially, but also
irrevocably altered the retail landscape of the watch market through a
demonstration effect on the traditional dealers.

Advertising was expenditure –

Titan saw this as a vital investment. Right from Day 1, Titan invested
significantly in advertising and in that process created a set of
memorable and effective properties over the years.

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Market Development And Segmentation

Titan has built on this principle over the last 15 years, almost year after
year:

In 1989, it was Aqura, the trendy range for the youth, colourful, smart
and affordable plastic watches for the youth: The other side of Titan for
the other side of you.

In 1992, it was Raga, the ethnic range, with striking symbolism from
ethnic India, for the sophisticated India woman who appreciated such
things.

In 1993, it was Insignia, very distinctive and international-looking top-


end watches, for those seeking exclusivity and status.

In 1994, it was psi 2000, rugged, sporty and very masculine watches with
serious sports features (200-m mater resistance, high precision
chronographs) for those with the penchant for adventure.

In 1996, it was Dash, the cute and colourful range for kids.

In 1997, it was Sonata, the affordable, good quality range for the budget-
conscious.

In 1998, it was Fastrack, the cool, trendy, funky range for the young and
young-at-heart.

In 1999, it was Nebula, the sold gold and diamond-studded range of


luxury watches for those affluent people to whom gold is a precious
acquisition.

In 2001, it was Steel, the smart and contemporary collection for the
young 21st century executive.

And in 2008, the brand has collections like the Octane, Diva, WWF and
Zoop - each of them unique and fascinating.

The underpinning of this entire market development and segmentation


is Innovation. Titan has kept innovation core to its strategy, realising
fully that the only way to sustain the fashion accessory perception is by
continuously coming out with collections that make the current ones
somewhat dated, thereby creating a certain discomfort in the consumers'
mind, which leads to another purchase. This impact has shown up in
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every one of the collections spoken of earlier. They were fresh and
distinctive, unlike what consumers had seen before, and thus created
curiosity, walk-ins and sales.

Titan’s R&D

Titan's R & D talent created a wafer-thin quartz movement, a mere


1.15mm thin, over 4 years of development work. The immensely talented
Design team collaborated with the Manufacturing group to create Edge,
a 3.5-mm watch, a gem of elegance, with water-resistance to boot! Edge
was launched in India early 2002 to tremendous market acclaim and
sales success. It is a design and technological marvel, which justly
received the Best Design Award in the Lifestyle Product Category in the
first annual design contest organised by Business World and NID.

Titan also chose to invest heavily into showcasing all this innovation to
the consumer through advertising. From Day 1, the 'catalogue"
advertising of Titan became its trademark as it was used regularly and
effectively to merchandise new models. The catalogue ads also helped
customers to shop off the page and almost decide which model they
wanted to pick. Retailers also became used to seeing customers walking
into shops with newspaper "cuttings", asking for the models shown
there. This approach continues to this day, with mostly the same effect.

Customer facing aspect and Goodwill earned

Organised retailing did not exist in the late eighties. The concept of
exclusive brand stores was almost non-existent. In a pioneering effort
that dramatically altered industry standards, the World of Titan was
born. Located in the newer parts of a city, with a good frontage and
layout, the showroom immediately stood out on the street and attracted
walk-ins. Once inside, you were totally impressed with the presentation.
You walked along the wall, where recessed "mood windows" showcased
specific collections in the appropriate context with the help of visuals,
decorative props and word (the place looked almost like an art gallery).
You could get a better idea about that collection through such a
contextual presentation and could make up your mind which collection
was right for your requirement. Then you would walk along to the selling
area, where the entire range was displayed in style. Smart and helpful
salespeople waited on you there and helped you choose the best piece by
giving you information and suggestions. You walked away overwhelmed.

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This experience now has over 255 branches and has penetrated the width
and breadth of India. Helping the brand increase sales, increase price
premium, sell the more expensive watches, improve image, keep
competition at bay and keep the brand name salient on the high streets
of the country. Refurbished with a contemporary look in 2001, this chain
has become even more integral to the brand's destiny today.

Doing all this in style has earned Titan enormous goodwill and respect.
Titan was voted the Most Admired Brand (across categories) in India by
consumers, in the first such study by Brand Equity done in 2001. Titan
was voted the Most Admired Consumer Durables Marketer by industry
professionals, 8 out of 9 times (the ninth time it was No 2), in A & M's
annual survey done between 1992 and 1999. Titan was voted the Most
Respected Consumer Durables Company in a Business World Survey in
2003. Consumers and professionals alike have resonated equally to
Titan's successful efforts in bringing international standards to India.
And in 2008, it emerges as the 24th Most Admired Brand in the ET Most
Admired Brands survey done annually, it was also the most admired
Consumer Durable brand.

Titan has also done the seemingly impossible reverse thing: taking
Indian quality to international markets. Since starting export operations
in a small scale to the Middle East in the early nineties to exploit the
resident NRI population, Titan has come a long way. Moving into the
European market in the mid-nineties and Asia Pacific in the late
nineties, Titan today sells in the UK, Spain, Portugal, Greece, Singapore,
Dubai, Malaysia, Oman, Philippines and many more countries. The
customers are no longer only NRIs. They are the Thais, the Greeks, the
Arabs, the Filipinos - through a combination of Contemporary Style,
Great Quality and Great Prices, Titan has put together an irresistible
proposition for the people of these countries. With over 100 million
satisfied consumers and a track record of breaking the rules, Team Titan
faces the 21st Century with a mix of passion, excitement and energy.

Time Product Division

The Time Products division is where the Titan story began. Today, this
division has placed Titan Industries among the world‟s largest retail
networks and earned the company the place of fifth largest integrated
watch manufacturer in the world. With over 2350 employees spread
over 3 business units in Bangalore, India, a manufacturing unit at Hosur
and 3 assembly plants located in the north of India, the division
continues to add world-class brands to the company‟s portfolio.

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Outstanding brands - Our customers have been at the core of this
growth and the division offers a slew of products that cater to their
inherent needs. Some of the most notable brands in the division‟s
portfolio are:

Titan Edge - the world's slimmest watch (at 3.45mm) that epitomizes
the philosophy „less is more‟.

Titan Raga - a feminine and opulent accessory for today's affluent


woman

Nebula - watches crafted with solid 18k gold and precious stones

Sonata - India's largest selling watch brand to suite the common man's
wallet

Xylys - a Swiss-made, impeccably designed watch for the connoisseur


and new age achiever

Fastrack – watches created to accessorise the trendy youth of today

The watch division also boasts of collections such as Automatic,


Heritage, Nebula, Orion, Raga, Zoop and series like Aviator, Octane and
WWF.

The brand Titan enjoys a 60% market share in the organised watch
market in India.

Market Structure

Low Penetration Level –

India‟s penetration at 3% vs. China at 6%, US at 30%

Unorganized market opportunity

22mn pcs (of the total 35 mn pcs p.a) valued at Rs.13bn


Consumer preference

Watches as a function of fashion rather than functionality, driving a 10%


volume growth p.a.

Market share –
TIL at 20% in volume terms and 25% in value terms
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 The “Titan” brand commands >50% organized value market share
 “Sonata” is the only brand with double digit market share – 18% in
the mass-economy segment

Titan Value Orientation

Timely performance
TIL‟s ideology of innovation and buyer value has led to Titan becoming
the world‟s sixth largest, integrated watch manufacturer brand and
India‟s largest with an organized market share of >50%
 Wide range: TIL produces over 2,000 designs and
a record 116 new products were launched in the
portfolio in FY06

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 Reach: “World of Titan” with 180 stores located in
106 cities (includes presence in 10 Malls)

A watch for every occasion


 A multi brand strategy with watches in the range of Rs.500 to
Rs.20,000+
 Sonata is India‟s largest selling brand in the economy category with
over 600 models and a price range of Rs.395 – Rs.1,295
 Xylys, a Swiss-made watch was introduced (in 4 cities) to compete
with the likes of Swatch, Giordano, Fossil etc. The brand will be
rolled out in top 8 towns in H1FY07

SWOT Analysis

STRENGTHS
 Largest player with excellent brand presence
 Attractive pricing power for urban and semi urban segment.

WEAKNESS
 Lower emphasis on growing affluent class –now being addressed
through Xylys

OPPORTUNITY
 Low Penetration - 3%
 ITC e-choupal tie-up can lead to further rural market. penetration
with its Rs.500 range

THREATS
 Imports and global brands to saturate mid & premium category
 Unorganized players are now localizing to unleash own brands

Watches – Promising volume growth, but still in


investment phase
 TIME – Continued leadership in the Middle East and African
markets with 2 consecutive years of 17% p.a. volume growth
 TIML - Operations in UK have been stagnating as competing
premium watch brands dominate the market. Review of the
operations is underway
 TAPL – SAARC & ASEAN regions achieved volume growth of 9%

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Company Financials

Income Statement

Balance Sheet as on march31st 2008

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Key ratios

Cash Flow Statement

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The 2010 Vision
Rs.33bn revenue by 2010

Base case estimate of Rs.33bn by FY2010 (~ 22% CAGR) is on the


following underlying assumption
Time Products (~15% CAGR) – 13% CAGR in volumes, driven by
aggressive store roll out plans (from 180 to 300 by 2010). Improvement
in realization to contribute 2% CARG value growth a Rs.7bn opportunity

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