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HMT : Relaunch strategy by Rohan Chacko

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HMT Watches

HMT : A SnapshotIncorporated in 1953 by GOI as a Machine Tool manufacturing company.

HMT : A SnapshotIncorporated in 1953 by GOI as a Machine Tool manufacturing company.

Over the years diversified into Watches, Tractors, Printing Machinery, Metal Forming Presses, Die Casting & Plastic Processing Machinery, CNC Systems & Bearings. Successful technology absorption in all product groups through collaborations with world renowned manufacturers & further strengthened by continuous in house R&D. Today, HMT comprises six subsidiaries under the ambit of a Holding Company, which also manages the Tractors Business directly

HMT Watches : ProfileThe manufacture of wristwatches started as part of diversification strategy of HMT in the year 1962, under Technical collaboration with CITIZEN Watch Company of Japan. HMT Limited, the first company to start watch manufacturing in India; has incorporated "HMT WATCHES LIMITED" as its fully owned subsidiary on 9th August 1999. It manufactures Mechanical and Quartz Analog watches. HMT WATCHES LIMITED comprises of three manufacturing units at Bangalore, Tumkur and Ranibagh All its manufacturing units have obtained the ISO 9001 certification

MARKET ANALYSIS 27% of Indians own a watch. Total estimated market as of 2008 : volume 35 million units & value Rs. 2500 + Crs Market has been split into: Mass Market ( < Rs400) Low end (Rs 400 Rs 1000) Mid- Upper Market ( Rs 1000 Rs 5000) Premium (> Rs 5000)

COMPETITION ANALYSIS Titan sells around 7 million watches annually Timex sells under 1.2 million watches Other Brands (all put together sell less than 0.5 million watches) The Japanese Citizen, Casio, have been present, while Seiko has not made any significant moves in India. The Swiss Rolex, Omega, Rado, Tissot, Tag, Longiness, Cartier, Ebel and a host of others The fashion brands Esprit, Giordano, Tommy Hilfiger, Calvin Klein, Fossil, Swatchand many more have recently entered the Indian market

COMPETITION ANALYSISPremium (> Rs. 5k) Mass (< Rs. 400) Valued at Rs. 300 Crores Grey market, Chinese, etc.11% 13%

Valued at 370 Crores Swiss brands: Tissot, Omega, Rolex Fashion brands: Fossil, Calvin Klein, Giordano, Esprit

43%

33%

Mid-upper (Rs. 1k - 5k) Low-end (Rs. 400-1000) Valued at 1200 Crores Sonata, Maxima Valued at 938 Crores Titan, Citizen, Timex, Swatch, Espirit

COMPETENCY ANALYSIS

Strong government support.

S T R E N G T H S

Vision of Pt. Jawahar Lal Nehru in 1960s. Collaboration with CITIZEN, Japan for formal training and technological support. Entry barriers were imposed on the foreign brands entering into India through FERA. Supported its expansion in 1976.

Good brand image and market leadership due to high quality, low price and reliability. HMT enjoyed 71 percent of the market share in the sales of mechanical watches and 55.22 percent market share of the total watch production in organized sector (as of year 1991-92). Companys liquidity position has been quite comfortable. Adequate availability of tangible assets such as land and buildings. Record of good industrial relations. In 1991 HMT set up a product development center for watch design.

Contd. Has an established marketing network. S T R E N G T H S

Contd

W E A K N E S S

Its prime product category (mechanical watches) was in the decline stageof PLC. Weak Organizational culture: It suffers from bad work habits, lack of discipline, low commitment of manpower, inadequate motivational strategies, lack of team spirit and low utilization of human and machine capacities. Inadequate cost control system. Over reliance on the production concept of marketing and hence ignoring the marketing concept. Insufficient emphasis on R&D and design engineering.

Contd

Bureaucratic and centralized decision making inhibited HMTs ability to respond quickly with respect to market changes. Virtually ignored to maintain good trade relations with retail outlets vis a vis competition (retail margin was lower than what was provided by the competitor) It restricted product development to quality development only. Aesthetics and packaging of watches have not been duly attended to.

W E A K N E S S

Contd

T H R E A T S

Worldwide decline in the production and demand of mechanical watchesdue to growing acceptance of Quartz watches. Significant competition from Allwyn and Titan. Competitors wooing HMTs top managers. It has to the threat of misuse of its brand name by spurious operators. Competitors successfully exploited the lifestyle segmentation which HMT failed to.

Contd

O P P O R T U N T I E S

The demand for Watches is growing rapidly both in domestic and

international market. Capitalize on attractive segments. In coming years Fashion brands, luxury watches and watches with multiple functions are considered as the product segment with the biggest growth. Leveraging brand equity of HMT to products such as sports gear, personal accessories.

Contd

T H R E A T S

Titan had started marketing its watches in unconventional outlets likeboutiques and jewellery shops. The authorized service agents (ASAs) for foreign smuggled watches in the country are also offering competition to HMT.

MACRO SOCIO ECONOMIC POLICIES

POST Liberalization policies hit HMT the most. Allowed foreign brands to come in. New tax free zones being identified by the govt. to promote development of rural areas.

SEGMENTATION & TARGET GROUP It is estimated that by 2012 half of indias population will be less than 25 years. Segmentation of market on the basis of age group 18 35 years. The main target segment will be the youth.

Response to Market surveyIts considered luxury by just 11% Of the people90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 11% Reason to buy 89% Necessity Luxury

% response to price70% 60% 50% 40% 30% 20% 10% 0% % response to price 21% 15% 1% 0% 63% 500-1000 1001-5000 5001-10000 10001-15000 15000 & above

Over 60% of the people prefer price between 1000 to 5000

% response Price 17% Design Endorsement Durability 21% Brand Income Trend 17% 4% After sales service others

8% 0% 8% 2%

22%

Brand, Design, Price, Durability is the sequence of factors that influence choice

60% 50% 40% 30% 20% 10% 0% % response 23% 14% 3% 6% 54% Ads Electronic Media Friends Others Salesman

Ads and electronic media account to over 50% as source of information

50% 40% 30% 20% 10% 0%

43%

17% 12% 8% 4% Maxima 8% 4% Rado 5%

% response

Titan

Timex

Citizen

Omega

Espirit

HMT

Demand for HMT is as low as 5% in comparison to 43 % for Titan and 17 % for Timex

H T M

MARKETING STRATEGY -PRODUCTPRACTISED

STRATEGY Create competitive advantage by

Few Designs as compared to competitors. HMT has only 40 odd variants of four basic designs compared to competitor line, Titan which has 70 watches in its ranges with better looks & designs

differentiation leadership :

through

technological

There is less emphasis on product research and development HMT has not been able to be a leader in Quartz watches segment & underestimation of this segment Another flaw in its product strategy was scant attention to aesthetics and packaging of its watches.

Gadget range of watches MP3 watch USB watches

New range of table watches and Wall clocks

New range of table and wall clocks

MARKETING STRATEGY PRICEPRACTISED HMT positioned the quartz

STRATEGY In the lower end HMT should seek to achieve cost advantage by exploiting the differences in cost behavior, in line with fast track Zero outsourcing strategy Offer competitive commission prices to whole sellers and retailers.

watches as the space age generation watches & charged high prices for this category which means that only the affluent middle aged consumer could afford it. Offering less commission than competition to retailers. whole sellers.

MARKETING MIX - PLACEPRACTISED STRATERGY CHANGE HMT had to sell through its 13 Reworking on distribution network. branch offices of Machine tool equipment. Limited service agencies. Selective Policy while choosing retailers. Exclusive stores Display in jewelry stores

MARKETING MIX - PROMOTIONPRACTISED Though HMTs advertising was Special focus on sales during festive time like Diwali, Christmas along with discount offer & finance schemes. Go for innovative and stylish ad campaign that reflects the aspirational, Because of centralized decision making even the decisions on the campaigns for specific products were delayed leading to the time lag and responding to market changes. independent and modern dimensions of the watch collection and its target market along with effective press campaign. distinctive and did cater to the lifestyle segment, it failed to communicate the uniqueness of HMTs quartz design vis-vis other HMT watches.

PROPOSED CHANGE

Long Distance trains

Volve Busses

AdvertisingATL TV Commercials, Print media and Billboards BTL Consumer engagement programs Media engagement Web and social media Radio PR Events

Advertising ATL: TV Commercials Sponsorship Prime time TV programs focusing youth eg: MT rodies, Style check, Stunt mania, Channel V Exhausted , Khatron Ke Khiladi, Big boss to name a few Sponsoring major events like IPL, Major Fashion shows, associate sponsorship Print Media: Billboards Display of ads, cut outs at all major traffic locations Magazines, News paper, danglers, Cut outs

Advertising BTL Consumer engageme