Was Titan Company better without diversification ? A Case Study.

Scope of case study

This case study would involve the collection of data, information and discuss the following topics :

1. Does a company benefit from being present in multiple businesses?
2. If the firm sticks to its core business, does it do better or worse?
3. Does Titan achieve competitive advantage by present in watches, jewellery and eyewear business?

Table of Contents

• Prologue
• Background of Titan
• Vision and Mission
• Awards and recognition
• Strategic reasons and strengths - the creation of Titan and entry into watch business
• Strategic reasons for diversification - Jewellery
• Competition and competitive advantage
• Conclusion

Titan, a Indian company that sells watches, jewellery, eyewear and precision engineering products. 

Prologue

Titan Industries Ltd, currently known as Titan Company, is a part of the TATA Group of companies. The Tata group has ventures in Steel, Chemicals, Tea, Coffee, Automotive, Electrical appliances and IT.

Background

Incorporated as Titan Watches Ltd in Tamil Nadu state in July 1984, the company started with an objective to manufacture a wide range of analog watches. It sets up a plant at Hosur, Tamil Nadu to manufacture quartz analog electronic watches with collaboration with France Ebauches of France. Among its range of products are Titan, Aqura, Raga, Spectra, Tanishq and Sonata, reaching to all income segments of the market. Titan sold off its Aqura brand to Timex in 1992. As in 2017, Titan has 438 stores in 120 cities across India. It also has joint ventures with the known global brands for marketing in India. What started as an initial offering of 150 models, now handles more than 3000.

It also forayed into the digital watch segment in collaboration with Casio Computer of Japan in 1986 and introduced Cyber, Classique and Fasttrack range of digital watches.

In 1991, Titan undertook to set up at Hosur a jewellery business both for daily-wear and luxury.

Titan Time Products Ltd was formed in 1992, as a fully owned subsidiary, with an aim to offer a wide range of electronics manufacturing services to companies in the Medical, Automotive, Industrial Controls, Instrumentation and Aerospace Industries. In the same year, Titan stepped into the global market with the launch of Titan watches in Mid-East and in later years in Southeast Asia and Africa.

The jewellery division, Tanishq was initially started in 1994 as a range of jewellery and jewellery watches for European and American markets.  It tapped into the Indian market with a showroom in Chennai in 1996 and by 2017 has 200 stores in 115 cities across India. Pioneering the introduction of Karatmeter, it changed how the purity of gold is checked and how Indians shop for gold. Its’ offer of ‘Golden Harvest Scheme’, a monthly installment scheme was a huge hit with mid-income groups. In 2003, Tanishq stepped into Silverware with a range designed by Michael Folly, the designer for Titan. This additional range has a potential market of Rs 5,000 crore and has few organized and branded players.

Titan Company owns manufacturing and assembly operation centres in Hosur in Tamil Nadu, Dehradun, Roorkee, Pantnagar in Uttaranchal and an Electronic Circuit Boards (ECB) plant in Goa, all in India. Producing over 15 million watches per annum and has a customer base of over 135 million globally, 60% of the domestic market share in the organized watch market is with Titan.

Titan entered the eyewear business in 2007 to market world-class lens and in 2008 it tied up with Sankara Nethralaya, a globally known eye hospital and eye care chain in India for training of store staff and optometrists. Titan Eyeplus formally started lens manufacturing unit in 2010. Today it has over 470 exclusive stores operating in over 200 cities, offering a wide range of stylish and contemporary eyewear.

In 2013, Titan entered the fragrances segment with SKINN.

Among the recent addition are bags, wallets and belts under Titan and ethnic wear through Taneira, its youngest brand.

Titan, with a humble beginning in quartz watch now has wide ranged verticals.

Vision and Mission

Vision of Titan is “We create elevating experiences for the people we touch and significantly impact the world we work in”.

While its mission is “We will do this through a pioneering sprit and a caring, value-driven culture that fosters innovation, drives performance and ensures the highest global standards in everything we do.”

Awards and recognition

Jewellery division - Golden Peacock Innovation - 2010 in the Engineering sector.

TITAN has been ranked 10th among 16,000 in The Brand Trust Report, India Study, 2011.

Jewelry Division - 3rd position on the Productivity championship award for Innovative - 2011.

TIL and Brand Tanishq - 3 awards at the Star Retailer and Franchise Awards - 2011.

Titan Industries, Jewellery division was awarded Gold Award in Engineering sector in the Economic Times India Manufacturing Excellence Awards 2011.

3 awards at the ET retail awards - 2012

Best Governed Company 2012 by Asian Centre for Corporate Governance & Sustainability

Strategic reasons and strengths  -- the creation of Titan and entry into watch business

1. Void in market in targeted price segment.
2. Absence of available options to customers, presenting opportunities.
3. Demand from affluent and growing upper middle class for better choices.
4. Easing of the economy in the country allowed TATAs to collaborate and bring in better and cost-effective technologies from Japan.
5. Lowering of Import duty around that time, made it easy to imports essential parts.
6. The possibility of capitalization of the brand TATA.
7. The existing strong distribution system of its other businesses, extendable to Titan.
8.  Strong procurement channels to lower input cost.

Strategic reasons for diversification - Jewellery

1. Titan did a product mix gig with the introduction of Sonata label, to reduce the onslaught of cheap Chinese watches flooding the market. Sonata caused a dent in Titan’s business, hurting its own well established mid-range market. With 60 % of the market share, growth seems to be stagnant.
2. Jewellery was partially a part of business outlook already, with an existing plant in Hosur for European and American markets. It only needed to set-up infrastructure for domestic consumption.
3. First mover advantage to enter an unorganized market of estimated Rs. 50,000 crores.
4. Capitalization of Titan’s brand name.
5. Customer profiles similar to watches.
6. Increasing economic of scope by utilizing Titan's counters,distribution network, HRD and warehousing.
7. The potential for further expansion in wedding segment and high-value diamond jewellery.
8. Tax Benefits.

Competition and competitive advantage

Watch

When Titan entered the watch market in the early 80s, its main competitor was HMT, a public sector company, literally holding a monopoly of watches, dealing primarily in low priced machined analog watches. Other players in the market were few and unorganized. Allwyn, an Andhra Pradesh based, state owned company entered the watch business in 1981 with a technical tie-up with Seiko of Japan. However, Allwyn's journey ended in 1995 with the closure of the company.

With the opening of the economy in the 80s, TATAs entered the market initially to offer a higher alternative for growing middle and upper class. It was the first company to offer quartz watches of international quality. Sleek looks, exciting new collections, a style statement and sense of prosperity induced customers to choose a Titan instead of dull key wind mechanical watch from HMT.

It created a new market for this business and soon became the overall leader. Its competitive advantage was not limited to the new price segment, but also to innovative marketing strategies. Its initiatives and promotions to gift a watch and aggressive advertisement using film and sports celebrities played a big role in its expansion.

Titan from its advantageous position was able to cause the decline of HMT sales and completely push its main competitor out of the market.

The biggest challenge to watch business was from smuggled foreign watches. Titan tied up and started marketing licensed brands as Tommy Hilfier, FCUK, Timberland, Police, Anne Klein and Kenneth Cole. Thereby mitigating partial risk to its own brand.

Jewellery

Jewellery market was unorganized, fragmented, mostly run by the family-owned chain or local goldsmith.

Titan came in with Tanishq brand and penetrated the market with quality assurances and a range of fresh designs. By 2001, Tanishq became the single largest player in the Indian market, though with a market share of only 0.5 per cent.

Differentiation - Tanishq

1. Most important differentiation was quality. There was a huge gap in the reliability of the available gold. Hallmark and Karetmeter, a non-destructive tool to measure the purity of gold were part of the assurance and guarantee. The brand value of TATA and TITAN helped.
2. Newer designs offered by Tanishq.
3. Potential in bullion trade through coins, especially during festivals with certified products.
4. Customer care already experienced by shoppers in TITAN showrooms.

Eyewear

Eyewear business offered similar incentives. The market is still not matured and domestic competitors as GKB Opticals, Lenskart and Vision Express are growing but have not caused any risk to Titan Eyeplus.

Differentiation - Titan Eyeplus

1. Zero-error, remote eye-testing by trained optometrists.
2. Tie-up with Sankara Nethralaya for training of store staff and optometrists.
3. Branded, fashionable, and quality eyewear at affordable prices.

Broadly none of its competitor is anywhere near to the product mix and lines offered by Titan. 

Conclusion

Having studied the various aspects of the company including competitive advantage , we now look into the scope of the case study and draw a conclusion.

Let us now examine few financial parameters to understand whether Titan’s diversification strategy has been successful :

Titan and its watch business only :-

Titan with its diversified portfolio :-

It is apparent from the above graphical representations that Titan's diversified portfolio generated more revenue than its core business.

Further, the enterprise value has increased from Rs. 22,000 crores at March 2013 to 40,000 crores in 2017.

Hence, TITAN has successfully mitigated risk in its core business and benefited hugely from diversification.

References :

• http://www.titancem.com
• https://www.titan.co.in
• https://eyeplus.titan.co.in
• http://www.moneycontrol.com
• https://en.wikipedia.org/wiki/Tanishq
• https://en.wikipedia.org/wiki/Titan_Company
• Logo - https://upload.wikimedia.org/wikipedia/commons/8/83/Titan_Company_Logo.png

Vinay Pandey, 16/11/2017

#titan,#diversification,#tanishq,#tata,#strategy

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