Ellora Time's Manufacturing Woes

            

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Themes: Production management/ manufacturing
Period : 1991 - 2002
Organization : Ellora Time Pvt. Ltd. (Ellora)
Pub Date : 2002
Countries : India
Industry : Manufacturing

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Case Code : OPER013
Case Length : 10 Pages
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"We will produce our goods in China and export them to India. It's not possible for us to run the industry in India."


- Jaisukh Patel, Export-finance Director, Ellora Time, in January 2001.

Ellora Goes to China

In 2001, Ellora Time Pvt. Ltd. (Ellora), a company based in Gujarat, India, was the world's largest manufacturer of clocks. It also manufactured calculators, telephones, timepieces and educational toys. Ajanta and Orpat were closely held Ellora companies with a combined investment of Rs 2 billion. Ajanta Quartz (Ajanta) ran the clocks business, while Orpat Electronics (Orpat) handled the other businesses. The business was fully financed by the promoters, the Patels, without loans from banks or financial institutions. The companies, situated in a place called Morbi (near Rajkot in Gujarat), exported their products to over 60 countries.

Almost all their products, marketed through a countrywide network of 25,000 dealers and 180 service stations, were leaders in their respective categories. For the year 1999-00, the group recorded a combined turnover of over Rs 2.50 billion. Both Ajanta and Orpat received awards by the Government of India for superior exports performance throughout the 1990s. Ajanta, an ISO 9002 certified company, had even received the 'Best Electronics Industry' award many times.

In early 2001, Ellora shocked the corporate world by announcing its decision to shift its manufacturing activities to China. Commenting on the decision, Ellora sources said that the decision was more out of compulsion than choice. The company claimed that it was unable to cope with imports from China that competed directly with its products. As these goods were much cheaper than Ellora's products, the company was facing serious problems that seemed to threaten its very survival.

Ellora's decision attracted immense media attention because it came at a time when the Indian manufacturing industry was facing severe competition from cheap Chinese imports. Experts feared that the future of Indian manufacturing will be very bleak if more companies began to follow Ellora's example. Since plant location decisions are integral for a manufacturing concern, China's favorable manufacturing environment seemed all set to result in an exodus of manufacturers from India.

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