Titan - The Outsourcing Journey

"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

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. 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. 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.

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1] Businessworld, August 30, 1999.
2] Movement refers to the assembly consisting of the principal elements and mechanisms of watches/clocks.
3] Restrictions on imports that limit the quantity of the good or service traded, usually in the form of 'quotas' or 'voluntary export restraints.'