The future is becoming increasingly difficult to predict. Change is the name of the game. The economic environment is changing constantly. Markets are getting segmented on the basis of customer preferences. Technological advancements are providing for faster turnaround times. Companies need to become more flexible and willing to cater to the needs of their customers. Does this mean that companies must take a fresh look at strategies?
Every organisation needs a clearly articulated strategy. An organisation works towards achieving clear objectives. A strategy demands good planning, based on rigorous thinking and tough self-assessment. Organisations need to focus on long-term planning in which they define their overarching goals, direction and strategy. They need to identify the end results and work towards accomplishing them.
Abandoning strategy leads to confusion within an organisation. Strategising is an important process in the functioning of an organisation. Once a direction has been set, it is easier to manage an organisation. Whether the strategy is long term or not depends on the company and the industry. In some industries the pace of change is faster than it is in others.
About four years ago, the Indian market was opened to foreign competition. Titan realised then that the Indian watch market would undergo tremendous change as it was moving from a reasonably uncompetitive era to an intensely competitive one. It was important to keep ones options open and to keep the strategy flexible.
When the company said that it chose to become flexible, it meant that it would not make any investments of an irreversible nature. It refrained from making significant investments in watch manufacturing because it was aware that, as the market opened up, there would be an opportunity for outsourcing.
The company addressed multiple segments through brands such as Sonata, Fastrack, Raga, etc. It realised that as the market became competitive, multiple brands would be the best way to address the needs of the market and deal with the competition. Besides, the market was getting segmented. When you have multiple brands and are flexible, you are less vulnerable. In expanding its market base and choosing to be flexible, the company showed its keenness to serve the consumer segment better.
At one time we expected Swatch to be a major competitor, particularly in the youth segment. We invested in a brand called Fastrack. We knew that we could not dominate that market because of Swatch's deep pockets and its global image. But we still wanted to take advantage of our strengths, in terms of distribution assets, retail strengths and our leadership position. We couldn't have used Titan as a brand. In the worst-case scenario, if we were forced to give up this segment, we would still lose only one sub-brand. This solution was driven by our understanding of the consumer.
We entered the market with studded jewellery and westernised designs; our showrooms were upmarket. This made Tanishq elitist. The mainstream customer was not attracted to our stores. Later, we introduced 22-carat gold. One tactic was the use of the karat meter to check the purity of the gold, causing the consumer to doubt the purity of the traditional jewellers' gold.
Our experience indicated that the Indian consumer was not averse to branded goods. One of the benefits a customer derives from branding is the assurance of quality. Branding helps the consumer forge a relationship with the brand and the company. It promises a certain buying experience. A consumer goes to Tanishq because she believes the brand stands for purity and good design. This insight, along with the increasing mobility of Indian consumers, is helping Tanishq mature into a national jeweller.
The best way to evolve strategy is through a clear understanding of the future. A CEO should be able to get the company to see the future clearly. All the key people must have a shared vision of the future. Only then can they implement the strategy. Fifty percent of strategy is good implementation; the rest is good and robust thinking.
Our European operations made a loss of 9 million. Our ambitions far exceeded our ability to execute. We faced a problem with reference to costs of entry. We did not have enough money to invest. We paid dearly for our mistake in underestimating costs. Our strategy was right, but the implementation was not. Strategy is about ones ability to withstand. The Made in India label also proved to be a big barrier.
Initiatives need to be prioritised. We will take some next year, others can take longer. However, we must start today.
Increasingly, strategy consultants are advising companies to become more pragmatic. Pragmatism has also set in perhaps because of the downturn. For example, in Titan our debt equity is 2.7:1. This hinders us from tapping all opportunities because the interest burden is high and our ability to borrow is low. The company faces financial risk. So our current initiatives are those that do not need too much capital.
The company strategy therefore needs: