Titan - The Outsourcing Journey
 <<Previous
THE FUTURE
Dash proved to be a runaway success for Titan with 50,000 watches being sold
within the first two months of its launch. The Fastrack range grew by almost
100% in terms of volume and it established itself as the largest youth brand
in the country.
The line was extended to the
digital watch market with Fastrack Digital, positioned on the
fashion platform. According to company sources, the success of these
two watches was due to the fact that they were outsourced. By 2001,
with revenues of Rs 7 billion and net profit of Rs 235 million,
Titan emerged as the country's largest watchmaker with a 25%
marketshare of the total domestic market and a 50% share among
nationally recognized brands.
However, in December 2001, while the income from the watch division
increased by 4%, the figure was 10% for the company as a whole. This
was because Tanishq, the jewellery division had posted a 32% growth.
It was clear that the company needed to work towards strengthening
the watch business in order to reap the full benefits of its
marketing and outsourcing efforts. |
|
Moreover, analysts said that Titan will not have things
so easy in the future due to the increasing competition in the watch
industry. Premium international watch brands such as Swatch, Esprit, Tissot,
Longines, Citizen, Rado and Omega entered India in the late 1990s and
catered to the super-premium segment of the market.
However, during 2001-02, some of these brands such as Citizen, Esprit and
Swatch entered the mid-priced segment, posing stiff competition to Titan's
brands in this range (Refer Exhibit I for Titan's product profile in 2002).
The company's marketshare in this segment was 75%, which contributed nearly
65% to the Titan brand's value and one-third of the company's entire watch
business.
With the company planning to focus all its energy to meet competition in the
lower as well as higher ends of the market, the watch industry seemed to be
all set for an interesting battle.
QUESTIONS FOR DISCUSSION:
1. Explain why Titan had to decide in favor of outsourcing its
manufacturing activities despite having a state-of-the-art manufacturing set
up.
2. Explain the concept of outsourcing and the reasons for its growing
popularity in the manufacturing industry. Briefly comment on the pros and
cons associated with outsourcing the manufacturing function.
3. Evaluate the benefits Titan derived as a result of outsourcing the
manufacturing function. Does outsourcing render Titan a low-cost producer?
4. Is outsourcing a viable option for Titan? Does the operational strategy
contribute to competitive advantage? How far is outsourcing likely to help
Titan face competition in the domestic as well as international markets?
EXHIBIT I - TITAN - PRODUCT PROFILE
2010, ICMR (IBS Center for Management Research).All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means - electronic or mechanical, without permission.
To order copies, call +91- 8417- 236667 or write to ICMR,
Survey No. 156/157, Dontanapalli Village, Shankerpalli Mandal,
Ranga Reddy District,
Hyderabad-501504.
Andhra Pradesh, INDIA.
Ph: +91- 8417- 236667,
Fax: +91- 8417- 236668
E-mail: info@icmrindia.org
Website: www.icmrindia.org
|
More Classifications...