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growth/ expansion The electro-mechanical business The unitary cooling business o The Big Bang Strategies New Products Brand Building Channel and Service o Outcome of Strategies used o References INTRODUCTION Voltas is one of the world's premier engineering solutions providers and project specialists. Founded in India in 1954 as a JV between M/s Volkart brothers & TATA Sons Ltd., Voltas Limited offers engineering solutions for a wide spectrum of industries. Voltas is into Electro-Mechanical Projects & Services Electrical, Mechanical & Refrigeration Solutions Electrical & Mechanical Solutions (international) Water Management & Treatment Engineering Products & Services Textile Machinery Mining & Construction Equipment Materials Handling Equipment Unitary Cooling Products Air Conditioners Commercial Refrigeration Water Coolers & Dispensers
THE REFORMATION/ RENOVATION One core management team started to analyze the viability of each business Air conditioning and Engineering were two profit making businesses Idle assets were either leased or were sold In 2004 Refrigerator manufacturing units were sold to Electrolux Voltas grouped its remaining business into 4 segments To reduce cost Voltas started to reduce its work force and encouraged new talent or ideas
STRATEGY AT VOLTAS
A) GENERIC STRATEGY: Generic strategy includes Product diversification and focus of the company PRODUCT DIVERSIFICATION Product Range is from contemporary to hi-tech Diversifying products so that each and every segment is covered FOCUS OF THE COMPANY Provide contemporary and best-in-class products meeting customer needs and value expectations
Build customer loyalty by strengthening after-market operations through service. Ensure cost reduction in all aspects of operations to achieve total cost leadership in the market. Achieve market leadership through people by attracting, developing and retaining excellence in personnel. Energize the organization through teamwork to ensure that various functional areas work together to deliver results in a quick and effective manner. Explore new avenues for revenue generation leveraging established manufacturing and distribution strengths. Spending a good amount of its revenue on R&D. B) ALTERNATIVE STRATEGY: BIG BANG STRATEGY Introduction of new product. Brand building. Establishment of a widespread service network.
c)
MARKETING STRATEGY
Marketing is not Euclidean geometry a fixed system of concept. Rather marketing is one of the dynamic fields with in the management arena. The market faces continually a new challenge every day and companies must respond to it positively. Therefore it is not surprising that new market idea keep surfacing to meet new market place challenges. The market process is applicable to more than goods and services. Anything related to market including ideas, events, policies, prices and personalities comes under market strategy. However it is important to emphasize opportunity in the market through market strategy. Following strategies adopted by the organization. Niche Marketing: Voltas has kept their marketing objectives for niche segments. The specific marketing effect helps them staying focused with their product and customer demand Multi Prolonged Strategy: Voltas marketing strategy is a long term approach. They have not changed their stand since the inception of the brand and continue to promote the same value proposition of economic energy consumption to their customer segments. This has helped them in creating a brand sentiment within masses and the featured product are helping them in getting into cutting edge competition. Corporate selling at discount price to Employees: Voltas has adopted an amazing marketing technique of offering their AC product at reduced price to the employees of TCS. This promoted the brand within in house. On the basis of marketing strategy an organization runs in the market. It is several types of which makes helpful to increase sales and turnover of the organization.
SWOT ANALYSIS
STRENGHTS Design and manufacture of industrial equipment. Management and execution of air conditioning. Public works projects. Sourcing, installation and servicing of technology-based systems. Voltas represents a number of global technology leaders, serving diverse industrial sectors and applications. WEAKNESS Not targeting the mass market OPPORTUNITIES The Indian Mass Market. The high end value driven proposition helps increase the Market Share. VOLTAS is well known for its product differentiation THREATS Indian Mass Market may be captured by a rival company, LG, Videocon, Samsung etc. Due to increased price of inputs and continuing price erosion there is downtrend in the consumer durables market.
Question-2: What could be the reason for the company initially missing the bus in the retail AC market? Compare Voltass experience with the experience of other leading companies in the Indian consumer durable market, which suffered greatly when the market was opened to competition? What factors (internal and external) helped Voltas win back market share in the AC market, when several of its contemporaries wilted under competition? In 1993, the excise duty on ACs was reduced from 110% to 60% which made the unorganized sector lose its price advantage, thus helping organized players to make further inroads. Several MNCs entered the retail AC market in the period. Increasing prosperity levels among Indians on other, the retail AC market started showing healthy growth. However, amid its restructuring efforts. Voltas failed to capitalize on these changes. By 2001, Voltas was reduced to being a marginal player in the retail AC market with a mere 6.8% market share and the 7th position in a market with 17 players. Till 1990s, before the market was opened to competition, Voltas had dominated the Indian AC market with a market share close to 40%. The unorganized sector accounted for another 50% of the market. This clearly shows Voltas experience cant be compared with other leading companies as their combined market share was only 10%. And due this only Voltas also suffered maximum when market got into recession. Vision and fortitude were the essential ingredients in the Voltas revival, but it was leadership that defined and drove the comeback Mr. Khurody began the restructuring task by forming a core management team comprising Mr. Soni, then head of finance, human resources chief K. S. Oberoi, and Bir Singh, head of business excellence. The roadmap was charted and areas of restructuring identified before work began on all fronts. The change mantra was straightforward: chop, revive and grow. The objective was a leaner and more agile company which would parlay its prime strengths in air conditioning and engineering. With these criteria, Voltas' assorted businesses were scrutinized pitilessly with two key criteriaFirst, was the business sufficiently attractive, especially in the global scenario? This included evaluation on market size, likely growth and competitive pressures. Second, did the company have the required capabilities to compete successfully? This included a dispassionate assessment of Voltas vis--vis the competition on critical success factors in the business. Scrutiny on both these counts provided the leadership team with a common measurement tool for assessing the company's diverse business portfolio. Businesses not passing the test the white elephants, the bleeders, the unsustainable elements and non-core activities were dropped with no regrets. Voltas reorganized its remaining portfolio into four clusters: international operations (primarily electro-mechanical projects in the overseas market); air conditioning and refrigeration (primarily HVAC projects in India); unitary products (room air conditioners, water coolers and commercial refrigeration products); and engineering products and services. Chief operating officers were appointed and handed over a mandate to manage the business with financial and
operational freedom. Implicit was the redefinition of the company as a provider of engineering solutions, with manufacturing as an important support activity. These were the businesses which had yielded the most sustainable growth for many years. The model of relying entirely on inhouse manufacturing was replaced with an outsourcing-assembling-branding model of business. This delivered a twin advantage: Voltas cut down its cost and, at the same time, climbed up the market-share ladder with technologically superior products. Between 1998 and 2003, Voltas's rightsizing drive brought down its staff numbers from 10,269 to 3,935. The VRS exercise accounted for 2,681 of these. The VRS cost Voltas Rs 135 crore, but resulted in annual savings in staff cost of Rs 60 crore. Taking the revival agenda forward, contemporary corporate human resources policies were introduced. The focus shifted to training and development, highperforming employees were rewarded, and salaries were linked to performance. For financially shaky Voltas, managing cash flow for the revamp was another priority1. Shedding non-profitable businesses and selling idle real estate and investments coughed up Rs 410 crore. 2. This was used to repay debts of Rs 260 crore and also pay for the VRS initiative. 3. The company's annual interest payments have been brought down from a high of Rs 48 crore in 1998 to Rs 2 crore in 2004. The Voltas of today bears the stamp not just of a reassessment of business priorities, but of a progressive and innovative outlook worthy of a global player. With all restructuring measures in place and firmly consolidated Ranking 1 2 3 4 5 6 7 8 9 10 Source: CRISIL MARKET SHARE LG 28% Others 23% Samsung 21% Voltas 19% Hitachi 10% Source: CEAMA, GEPL Capital Research (2011) Brands LG Hitachi Samsung Voltas Godrej Panasonic Whirlpool Blue Star Mitsubishi Electric Onida