Titan - The Outsourcing Journey

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Outsourcing at Titan Titan's entry into the clock segment in the mid 1990s failed badly because its clocks could not face the competition from cheaper imports from China. Moreover, the design of Titan's clocks was also found to be faulty. To correct these problems, the company decided to stop manufacturing clocks, instead it decided to import them from Hong Kong. The only input in this 'virtual manufacturing8' setup from Titan's side was in the form of design, branding and distribution. The company converted its clock plant into a plastic watch-manufacturing unit to make alarm and travel watches. Outsourcing activities were further strengthened in the next few years due to the problems Titan was facing with the gray market. The gray market has always accounted for a substantial part of the Indian watch industry (Refer Table IV).

TABLE IV
THE INDIAN WATCH INDUSTRY IN 2001

* Estimates.
Source: Business Line, December 6, 2001.

During the early 1990s, when the import duty on watches was reduced to 25% from 50% and import licenses became easier to obtain, as much as 55% of the demand was met by small players from the unorganized sector. Since Titan faced stiff competition from these players on the price, it decided to concentrate on building a strong distribution and support network. This worked well for the company and soon it became the undisputed market leader in the watches market. However, the variety and range available in the mid segment increased dramatically after 1999, with the changes in the EXIM policy. Though the segment itself grew in size, new entrants began to threaten Titan's market share.

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8] Virtual Manufacturing refers to the use of computer models and simulations of manufacturing processes to aid in the design and production of manufactured products. It is an integrated, synthetic manufacturing environment exercised to enhance all levels of decision and control.
9] In May 2002, financial daily Business Standard's estimates cited the value of the overall Indian watch market at Rs 60 billion.