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
Price: Rs. 300;

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What Lies Ahead?

By the end of 2001, Ellora had set up a production base on two acres of land at Ningbo, in Southern China. In addition, it added a separate production line at the Morbi plant. These new capacities were established after the company decided to diversify into the home appliances business. The 200-worker factory in China produced mechanical parts for home appliances. The range of home appliances products includes hair dryers, house heaters, water heaters, water dispensers, electric fans, electric irons, emergency lamps, blenders, toasters, electric kettles, washing machines, air coolers and vacuum cleaners. These products were to be marketed under the Orpat brand name.

According to analysts, Ellora seemed all set to make a success out of the home appliances business. According to Ellora Director A O Patel, "Diversification into calculators, telephones, toys and now home appliances is basically a balancing act to offset the trend of clock production volumes outstripping demand. Our entry into the home appliances product segment aims at increasing demand by making available products of Japanese quality at Chinese prices."

Meanwhile, the 'feared exodus' of Indian manufacturers to China had somehow not taken effect even by mid 2002. This fact however did not negate the fact that India needed to put in place a host of measures to sustain its manufacturing industry. According to Patel, India needed to reform its labor laws, the customs duty structure, increase the accountability of government employees and strengthen its anti-corruption laws. Until these changes were put in place, it would perhaps be difficult to stop manufacturers from relocating their plants.

Questions for Discussion

1. Why do you think Ellora was forced to decide in favor of setting up a factory in China despite the fact that it had been doing rather well both in the domestic and export markets. Do you think the company can maintain its success rate in the future with the new international manufacturing initiative?

2. Evaluate the differences between the manufacturing environments and regulatory frameworks of India and China. What are the reasons behind the huge cost differential between the products of the two countries?

3. What is the likely impact of the 'Chinese threat' on the Indian manufacturing industry? Discuss the options available to the government and the industry.

Exhibits

Exhibit I: Factors Influencing Plant Location
Exhibit II: Comparing Chinese & Indian Manufacturing Environments