2010

Renu R PGPM/0911/039

2009-2011

Titan Industries

International

Academy

of

Management

&

Entrepreneurship

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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