Hmt

HINDUSTAN MACHINE TOOLS HINDUSTAN MACHINE TOOLS Watch DivisionWatch Division

Presented by:

Nilamani DasPranab PeguPrashant Jain

Vineet Shankdher

HMT : HMT : A SnapshotA 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

HMT Watches : HMT Watches : ProfileProfile

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

Question 1Question 1: Do a : Do a SWOT analysisSWOT analysis for HMT watch for HMT watch divisiondivision

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).

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Has an established marketing network. S

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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.

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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.

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Contd…Contd… 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.

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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.

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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.

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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.

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Question 2:Question 2: What is wrong with HMT’s watch What is wrong with HMT’s watch division’s marketing strategy? What kind of corrections division’s marketing strategy? What kind of corrections do you suggest?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.

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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.

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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.

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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.

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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.

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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

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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.

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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.

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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.

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Strategy: Under the present difficult situation HMT will have to

find out ways to activate the market and try to to create

new demands.

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Question 3:Question 3: In the present competitive watch market, how do you In the present competitive watch market, how do you visualize the future of HMT watch division five years from now?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 CrsMarket has been split into:

Mass Market ( < Rs400)

Low end (Rs 400 –Rs 1000)

Mid- Upper Market ( Rs 1000 – Rs 5000)

Premium (> Rs 5000)

The watch market in India (by value 2006-The watch market in India (by value 2006-07)07)

13%

33%43%

11%

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)


Sonata, HMT, Maxima

Premium (> Rs. 5k)


Swiss brands: Tissot, Omega, Rolex

Fashion brands: Fossil, Calvin Klein,

Giordano, Esprit

The Competition in IndiaThe 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

SEVERAL FORCES ARE TRANSFORMING THE INDIAN WATCH SEVERAL FORCES ARE TRANSFORMING THE INDIAN WATCH INDUSTRYINDUSTRY

Dramatic transformation of the Indian watch market

3. Emergence of distinct consumer segments

– Sharply defined consumer segments around distinct buying factors

– More awareness of brands and global trends among affluent urban consumers

– 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

2. More global and local players

4. Emergence of new channels

– New retail outlets emerging (Dept. stores/malls)

– Existing outlets (MBOs) getting smarter looking

– Unorganized retail at low-end

1. Shift in structure of demand

– Volume growth driven by the low end

– Value growth driven by luxury segment

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.

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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.

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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

SuggestionsSuggestions

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