Titan: The Outsourcing Journey
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Case Details:
Case Code : OPER016
Case Length : 11 Pages
Period : 1999 - 2002
Organization : TITAN
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Watch manufacturing
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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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."
- Jacob Kurien, Vice-President (Marketing), Titan, in 1999.
Introduction
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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.
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In an interview to a business magazine1,
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 movements2 for its watch
manufacturing operations through vendors spread across 20 countries, mainly
in Asia and Europe.
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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 restrictions3 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.
Titan: The Outsourcing Journey
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