Titan - The Outsourcing Journey

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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

Exhibit I: Titan - Product Profile