HINDUSTAN MACHINE TOOLS Watch Division

1. HINDUSTAN MACHINE TOOLS Watch Division Presented by: Nilamani Das Pranab Pegu Prashant Jain Vineet Shankdher

2. HMT : A Snapshot Incorporated in 1953 by the Government of India 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

3. HMT Watches : Profile • The 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

4. Question 1: Do a SWOT analysis for HMT watch division S T R E N G T H S • Strong government support. • Vision of Pt. Jawahar Lal Nehru in 1960’s. • 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).

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

6. Contd…. S T R E N G T H S • Company’s 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.

7. Contd… • Its prime product category (mechanical watches) was in the decline stage of 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. W E A K N E S S

8. HMT didn’t embrace new quartz technology to a great extent & suffered because of their adherence to mechanical watches. • Bureaucratic and centralized decision making inhibited HMT’s 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. Contd… W E A K N E S S

9. Contd… • Worldwide decline in the production and demand of mechanical watches due to growing acceptance of Quartz watches. • Significant competition from Allwyn and Titan. • Competitors wooing HMT’s 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. T H R E A T S

10. Contd… T H R E A T S • Titan had started marketing its watches in unconventional outlets like boutiques and jewellery shops. • The authorized service agents (ASAs) for foreign smuggled watches in the country are also offering competition to HMT.

11. 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.

12. Question 2: What is wrong with HMT’s watch division’s marketing strategy? What kind of corrections do you suggest? • Product • 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 • 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. M I S T A K E S

13. Question 2: What is wrong with HMT’s watch division’s marketing strategy? What kind of corrections do you suggest? • Price • HMT positioned the quartz 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. In less than a year the company had to reduce the price and followed lifestyle advertising to justify the still higher price of the quartz, however even this backfired as consumers were not convinced of the differentiation between the quartz and other HMT watches. M I S T A K E S

14. Question 2: What is wrong with HMT’s watch division’s marketing strategy? What kind of corrections do you suggest? • Place • Didn’t strategize its established marketing network according to growing competition and new market trend like downtrend of mechanical watches & the growing market for the quartz watches. • Since retailers have enough foreign brands they were simply not interested in HMT’s home grown products as a result it had to sell through its 13 branch offices for Machine tool equipment. • Even when FERA was introduced HMT could take the advantage in a limited way by offering service agencies to about 50 watch key retailers as a way of expanding its selling reach. • In mid 80’s HMT’s selective retailer policy began going against it. M I S T A K E S

15. Question 2: What is wrong with HMT’s watch division’s marketing strategy? What kind of corrections do you suggest? • Place • Some of the authorized retailers started acting as wholesalers without officially being appointed so. Consequently HMT lost control of the final consumer price and ultimately the trade. • In addition, the retailer margins provided by HMT were 2% less than what its most prominent competitor, Titan, was offering to the retailers. M I S T A K E S

16. Question 2: What is wrong with HMT’s watch division’s marketing strategy? What kind of corrections do you suggest? • Promotion • Though HMT’s advertising was distinctive and did cater to the lifestyle segment, it failed to communicate the uniqueness of HMT’s quartz design vis-à-vis other HMT watches. • 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. M I S T A K E S

17. Question 2: What is wrong with HMT’s watch division’s marketing strategy? What kind of corrections do you suggest? C O R R E C T I O N S • Product: • Create competitive advantage by differentiation through technological leadership. • The products should be developed to enhance quality and features matching customers tastes and preferences and there by increasing buyers value. • Mid & Premium segment: In this segment HMT should seek differentiation by providing better designs

18. Question 2: What is wrong with HMT’s watch division’s marketing strategy? What kind of corrections do you suggest? • Conduct market survey: • Involve leading market research organization along with your sales force. • Do it periodic every six month; Involve retail-shops, shopping centers, department stores, dealers, sales force. • Most popular brands, trend of consumers etc. • Competition: • Competition among brands has been also getting stronger, and a lot of effort to keep sales has been required. • Watches without an appeal, watches without clear marketing hardly attract consumers in the market glutted with commodities. • Train agents to set forth clear brand vision and efficient campaign. C O R R E C T I O N S

19. Contd… • Competition: • Shift to quality with new added value.. • Provide consumers with a lot of information select their watch wisely and professionally according to their own taste.. Distribution: • Prepare retailer to meet the changing consumer’s trend. Watches just displayed in showcases cannot sell. It is absolutely necessary to present them together with the background such as original story of the watch, its functionality and benefits of after sales service. C O R R E C T I O N S

20. Contd… • Pricing: • In the lower end HMT should seek to achieve cost advantage by exploiting the differences in cost behaviour. • The pricing strategy can be to undercut main competitor by 10%, using market penetration strategy. Promotion: • 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, independent and modern dimensions of the watch collection and its target market along with effective press campaign. C O R R E C T I I O N S

21. Contd… Strategy: • Under the present difficult situation HMT will have to find out ways to activate the market and try to to create new demands. C O R R E C T I I O N S

22. Question 3:In the present competitive watch market, how do you visualize the future of HMT watch division five years from now?The Indian Watch Market • India is an under penetrated market for watches – 27% of Indian owns a watch. • Total estimated market as of 2005 : volume – 35 million units & value Rs. 2328 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)

23. The watch market in India (by value 2006-07) Premium (> Rs. 5k) Valued at 370 Crores Swiss brands: Tissot, Omega, Rolex Fashion brands: Fossil, Calvin Klein, Giordano, Esprit Mass (< Rs. 400) Valued at Rs. 300 Crores Grey market, Chinese, etc. Mid-upper (Rs. 1k - 5k) Valued at 938 Crores Titan, Citizen, Timex, Swatch, Espirit Low-end (Rs. 400-1000) Valued at 1200 Crores Sonata, HMT, Maxima

24. The Competition in India • 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, Swatch………and many more have recently entered the Indian market

25. 2. More global and local players • Significant increase in competition in all segments • Luxury end : Swiss brands • Mid to upper end : Global fashion/ Japanese brands • Low end : Local/regional IMFQs, Chinese imports • Shift in structure of demand • Emergence of distinct consumer segments • Volume growth driven by the low end • Value growth driven by luxury segment • Sharply defined consumer segments around distinct buying factors • More awareness of brands and global trends among affluent urban consumers Dramatic transformation of the Indian watch market • 4. Emergence of new channels • New retail outlets emerging (Dept. stores/malls) • Existing outlets (MBOs) getting smarter looking • Unorganized retail at low-end SEVERAL FORCES ARE TRANSFORMING THE INDIAN WATCH INDUSTRY

26. Contd… • Poor Watch Penetration In India Is Likely To Drive Further Growth In Volumes. Increasing penetration will drive growth of low end and mass market segments. • With removal of Quantitative Restriction a lot of International brand watches entering into the Indian market and in five year time they will only grow their market share. It will be even more difficult for HMT to match competition unless until HMT changes its strategy which should match global competition.

27. Contd… • To make it visible in the market we think the HMT watches can be targeted in the villages of India more aggressively where the brand awareness of HMT is more visible. • With increasing level of income and purchasing power people are more concerned about the looks and beautiful designs with jewel studded watches rather than going for simple watches as of HMT’s.

28. Suggestions • Faster production of new models of watches for catering to the changing needs of the customer. • Adoption of innovative and aggressive marketing policies. • Strengthening infrastructure for R&D. • Reduce man power by adopting new technologies and processes. • Institutional sales and sales through canteen stores department (CSD) and e - commerce. • Enhancing customer services. • To seek collaboration with reputed international watch manufacturer to make

29. THANK YOU