Ellora Time's Manufacturing Woes

Details

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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Background Note Contd...

Around 20% of Ellora's output was exported. The company won many awards for its continual good exports performance, including 9 ECS awards for Excellence in Exports (Electronics and software sector) in 1991-92, 1992-93 and 1994-95. In 1994, Ellora was honored by the Electronics Department of the Government of India. In 1996-97 and 1997-98, the company received awards for 'Excellence in Export Promotion' from the Electronics and Computer Software Export Promotion Council. In 1997-98, Ellora received a 'Certificate of Merit' from the Ministry of Commerce, Government of India for its export performance during that year.

In its initial years, Ellora imported spare parts, raw material and components from Japan, Taiwan and Korea. However, from 1998, the company began to import these items from China, which were not only good in quality, but were much cheaper as well. Little did Ellora know that these very cheap, good quality Chinese imports would soon prove to be its biggest enemies. Although imports from China had always been trickling in for a long time, Indian markets were flooded with Chinese imports in the late 1990s. This was because in 1999, the Indian government removed restrictions on import of electronic goods.

Thus, clocks, telephones and calculators from China, exactly the same range of products Ellora had built its empire upon, were suddenly available in abundance. The difference was that they were much cheaper compared to Ajanta or Orpat products in the same categories. In spite of the fact that the Patels did not have to pay interest to any lenders, had the most popular brand in the industry and owned a good marketing and distribution network, they realized that they were not in a position to compete with Chinese goods in the Indian market. More importantly, they were afraid of the fact that Chinese goods will sooner or later affect their export markets as well.

To demonstrate the effect of the Chinese influx on its operations, Ellora cited the example of the hardships being faced by its calculator business. Orpat was the only major player in India for calculators. According to company sources, while the demand for calculators went up from 20 million in the mid 1990s to 40 million in early 2000, the company's production had gone down from 6-7 million to 2-2.5 million during the same period. Its market share touched an abysmal low of 5% from 70%. This was because approximately 90% of the calculators used in India were imported. And a majority were either smuggled goods or were imported and assembled in India.

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