|
Shobha
Ramswamy
Way back in 1991,
a small neon sign opposite Place de la Concorde, the big square
near the busy Champs Elysees, in Paris heralded Titan’s debut
into the world business of keeping time.
The company is now present
in 30 markets worldwide. It has approximately 2,500 dealers
in the world — ranging from 10 in a small market like Brunei
to 300 outlets in a large one like Spain. Titan Industries
achieved a turnover of Rs 800 crore last fiscal. This year,
it has set a target of Rs 1,000 crore and aims to make it
to Rs 1,500 crore in three years. It is expecting a 20 per
cent growth in top line this fiscal.
Turn back the clock
Titan had been itching to go global way back in the early
’90s, soon after tasting success in the Indian market.
At the time, it had even
toyed with the idea of turning into a contract manufacturer
for a global watch brand. This would mean minimum investment,
cost and manufacturing efficiencies, and substantial profits.
Besides, it would be totally risk-free. Yet, the idea died
a quiet death. "We strongly felt there was no glory in
being a contract manufacturer. You constantly get driven down
in terms of price," explains Bijou Kurien, chief operating
officer, Watches, Titan Industries.
This meant that to take
Titan to the world, the company would have to take the arduous
route of brand building and large investments. "Building
your brand abroad and creating value provides the highest
return on investment in the long run," Mr Kurien adds.
The next step involved
deciding the ideal global launch pad. The Middle East emerged
as the best choice as it had a sizeable non-resident Indian
(NRI) population that was familiar with the brand. With the
availability of Indian newspapers and television channels,
the spill over of domestic advertising was another influential
factor. The first global footprint was placed in the United
Arab Emirates — the largest market in the Middle East.
The Middle East was a
no-entry barrier market in 1991. Every good brand fought fiercely
for shelf space there. The experience gave Titan a taste of
international competition and an insight into international
product design and consumer demand. The company was able to
observe the marketing and branding strategies of its rivals.
This knowledge was invaluable.
"We knew that the entry barriers in India would also
be dismantled eventually. Then all these global brands would
want a slice of the large lucrative Indian market. They were
likely to duplicate the same marketing strategies here. It
helped us prepare for the competition that we could face back
home," says Bhaskar Bhat, managing director, Titan Industries.
Subsequently, the company also replicated the gains abroad
in its domestic markets.
After UAE, Kuwait, Oman,
Saudi Arabia, Egypt and a few key markets in Africa followed.
With the success of the Middle East venture, the company was
eager to advance its geographic presence. The neighbouring
countries of Sri Lanka, Bangladesh, Nepal and Maldives seemed
ideal. The company also moved into the Asia-Pacific markets
of Singapore, Vietnam, Malaysia, Thailand, Fiji and Australia,
which were large economies with India-like market structures.
Currently, the company has also extended its presence to the
Philippines and Indonesia.
In the nick of time
After covering these markets, the company set its sights
on Europe. "If we could crack this market, it would have
been an achievement that would have given us the satisfaction
that we are as good as the rest of the world," says Mr
Kurien.
The Mecca of Swiss watches
was a huge challenge in every sense of the word. The country
of origin is very important in the international watch industry.
And the ‘Made in India’ tag was more of a disadvantage for
Titan.
In those days, there were
also several restrictions on obtaining foreign exchange. So
the company had to craft a complicated export strategy of
three marketing associates based in London, Dubai and Singapore,
and two investment companies to maintain continuity of investments.
In Europe, the direct
sales route was employed in the UK and the distributor-led
route in other markets. With brands jostling for shelf space,
retailers needed good reasons to stock the brand. The need
of the hour was also to create strong consumer demand. So
the company unleashed a massive advertising campaign to create
brand awareness. Titan, then present in 12 European markets,
had to create a specific campaign for each market. The action
achieved the desired effect. But the investments were huge
and the returns meagre. Also, in the time taken to launch,
the initial designs created had to be augmented with a new
collection. So the company went back to the drawing boards
and created a completely new collection for the European market.
The efforts were arduous and time consuming.
After a few years, the
company discovered that the returns failed to meet the expectations.
The cumulative losses of its European operation touched £
9 million. "It was an expensive learning experience for
us. In hindsight, we underestimated the investments required
for the European market and overestimated the returns we could
achieve," reflects Mr Kurien. Echoing the sentiment,
Mr Bhat says, "We did not have the financial wherewithal
to continually invest in the market. But, at the same time,
I would say it was an investment worth making."
The learnings helped shape
a new business model for Europe. The company’s presence was
shrunk to four key European markets, Spain, Portugal, Greece
and UK, in which it had a fairly large presence. All sales
and marketing efforts were focused only on these markets.
This also halved the advertising spend. The company also decided
to shift its warehouse to lower cost locations to reduce the
overhead costs.
Manpower employed in managing European operations — Titan
International Marketing — has also been rationalised. It has
also started monetising some of its European investments.
This whole exercise will be completed in the coming two years.
The company is hoping for cash break-even by next year. Meanwhile,
its operations in other key markets in the Middle East and
Africa and the Asia Pacific regions continue as per plan.
Titan has notched many successes in various markets in these
areas.
"Almost 95 per cent
of our international investments amounting to Rs 150 crore
are in Europe. Comparatively, our exposure in Middle East
and the Asia Pacific region is minimal and both these markets
continue to be extremely profitable. They are now self-sufficient
in terms of their financial capability," says Mr Bhat.
Hence, while Titan plans
to enter Japan, Taiwan and Korea in the Far East, and Brazil,
Argentina and Chile in Latin America, the US will not be considered
because it would require large investments. China is another
market being watched with great interest.
The company aims to make
it to 50 countries in the next three years, from 30 at present.
Watching the future
To gear up to meet the challenges of covering all that
ground, Titan has taken many initiatives. "We have repositioned
our brand in the European market and we are doing the same
in the domestic market as well. We want to be positioned in
between the fashion brands and the functional ones. The quality
will be world-class but the prices will be affordable,"
says Mr Kurien.
According to the company,
Titan watches combine the qualities of conventional watch
brands like Seiko, Citizen, Rado, Tissot or Omega with the
style quotient of brands like Calvin Klein, Esprit, Christian
Dior or Guess at reasonable prices.
In the initial phase of
globalisation, Titan was positioned in the premium segment.
But the going on this route was tough. Now, it is targeting
the younger consumer between 25 and 35 years of age, who is
seeking distinctive fashion designs at affordable prices and
for whom the country of origin is not a major deterrent. The
European and Far East markets have these characteristics.
As far as the range of
product designs go, they are by and large based on the preferences
of local consumers as they vary from market to market. For
instance, the Europeans like their watches to have large dials,
which are white, silver or champagne-coloured.
They like their watches to have a white metal look. They prefer
them to be made of steel with a hint of gold. On the other
hand, Indians like darker dials, leather straps or even a
complete gold look. Hence, Titan has to create a sense of
distinctiveness in the product lines.
"In Europe, we have
400 designs which are exclusive to that market. In the Middle
East, we have 400 designs with a 50 per cent overlap with
the Indian market. In India, we have 1,000 designs, of which
only 10 per cent are sold in the international markets,"
says Mr Bhat.
Titan’s jewellery arm
Tanishq also owes about 7 per cent of its turnover to exports.
However, so far it has been exporting non-branded products.
But it is expected to follow Titan’s footsteps in marketing
the brand abroad. It has already successfully experimented
in the Middle East market on a small scale. Now plans to enlarge
this exposure are on the anvil.
Titan watches and
Tanishq jewellery will soon add their glitter to the collective
fashion consciousness of the world. It is a matter of time
before Titan lives up to its name and strides across geographical
boundaries.
Other articles on the Tata Group
and globalisation:
Uploaded on February 18,
2004
|
