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BRANDS Cometh The Hour, Cometh The Strategy Titan Industries wants customers to buy any watch they like-as long as it is from its Time Zone shops. It's
time for change, again, at Titan Industries. The company that
revolutionised the watch market with its designs is now doing it again
with a retailing strategy that dares to cannibalise its own success.
Instead of using its exclusive stores to sell only its own label, Titan is
quietly transforming them into a multi-brand chain, selling even its
rivals' products.
Rivals,
that is, in the manufacturing context. Titan has created a 115-strong
network of watch-stores named Time Zone, with the aim of capturing value
at the retailing end of the value chain. Thus, these stores sell not only
the Titan brand, but also HMT, Bentex, D'signer, Raymond Weil, Citizen,
Timex, Casio, and Espirit. Suicidal?
No, smart. For,
Titan's research shows that there are actually 3 genres of watch-buyers.
Crucially, only 40 per cent have already determined which brand to buy.
The rest are the 25 per cent that is undecided, and the 35 per cent
looking for the best deal. Obviously, this huge 60 per cent will shop only
at a multi-brand store. That's the requirement that Time Zone tries to
meet. Says Manoj Chakravarti, 50, General Manager (Retailing), Titan:
''These outlets address the needs of the brand-undecided customer, who
wants the assurance of a good product, a good brand, and a good shop.'' What
Titan is trying to leverage is its cachet of quality and reliable
after-sales service, transferring them from the product to the retailing
experience. Elaborates Vikram Satyanath, 38, Senior Vice-President,
Enterprise Nexus, which handles the advertising for the chain: ''The
positioning is based on trust. So, we aptly call it the chain of trusted
watch-shops where a customer can be guaranteed original brands.''
Hopefully, the clock is still ticking for Titan's competitors. -Ranju
Sarkar BROADCASTING Direct-beaming
to the diaspora is what India's vern sat chans are doing. The
technological basis: satellite channels (a.k.a. sat chans) have a
footprint (area of coverage) that typically covers a region, and not just
a country. Thus, a sat chan targeted primarily at Indian audiences would
normally have a footprint that covers the greater Indian subcontinent, and
parts of South, South-east, and West Asia. The
economic basis: developed countries do not have free-to-air channels. But
in India, both customers and cable-operators prefer free-to-air channels.
So, any channel that manages to build a substantial viewership in
countries other than India stands to benefit from this. Leading
the pack of Indian channels going global is South Indian powerhouse Sun,
which boasts a bouquet of 4 channels: Sun (Tamil), Gemini (Telugu), Udaya
(Kannada), and Surya (Malayalam). In Singapore, Sun claims 100 per cent
penetration; in Sri Lanka, it is beamed by local stations as a terrestrial
channel; and in 1999, the company launched a US edition, Sun World. Explains
a bullish Kalanithi Maran, 35, CEO, Sun: ''We knew there was a potential
market for us in countries with a large number of Indians.'' Sri Lanka,
where close to 30 per cent of the people speak Tamil, is one such market.
So is Singapore, with its large number of ethnic Tamilians. And, with the
exodus of software professionals-most of who hail from the south of the
Vindhyas-to the US, so is that country. Similarly,
Zee reaches 1,70,000 homes in Europe, 52,000 in Africa, and 55,000 in the
US. And Sony Entertainment Television (SET) reaches 18,000 homes in the
US, and 38,000 homes in the UK. The figures may seem insignificant, but
the bulk of the revenues from such operations heads south to the
bottomline. For, the programming comprises soaps, game-shows, and
motion-pictures which are already paid for by the Indian operations. The
only incremental costs that the sat chans have to incur, then, is the cost
of the delivery. Nor do these channels have to depend on advertising for
their revenues; the subscription takes care of that. Both
set and Zee attract ads aimed at audiences in West Asia. Agrees Rajesh
Pant, 48, coo, set: '' Our decision to make set an international signal
was based on our research of both viewers and advertisers.'' Even niche
channels have been quick to jump onto the bandwagon. Thus, Malayalam sat
chan Asianet, which launched a late-night global version of itself,
Asianet Global, to reach audiences in Europe and Australia in August,
1999, is now considering turning it into a separate channel. With
human capital certain to be among India's largest export for at least the
next few years, the country's satellite channels could soon find that
while the volumes lie in the domestic market, the value resides in
clusters of viewers outside the country. Perhaps we should call it the DTB-Direct
To Bottomline -revolution. -Nita
Jatar Kulkarni MARKETING We
know what you did on New Year's eve. Popcorn and the boob-toob it was for
you. The evidence? INTAM figures for the night of December 31, 1999. Thus,
Star Movies, which ran back-to-back television screenings of the Titanic,
registered a viewership of 34.1 in Mumbai, 53.3 in towns with populations
of between 5 and 10 lakh in
Tamil Nadu, and 26.8 nationally. In the overall tally, though, Hindi won
out. Zee, with an average viewership of 38.6, Sony with
37.4, and dd-1 with 29.3 were the only channels to score over Star
Movies. How does this mean people
were not out partying? One, these figures
are no different from that of normal viewing days-except for one channel,
Star Movies. And two, Star Movies managed to register a higher viewership
than it normally does. But don't let the fact that you stayed home bring
you down. Star Movies took out full-page ads in the papers to commemorate
its ratings; your girlfriend certainly wouldn't have for her party. POSITIONING Not
price. Not exchange-offers. And certainly not warranties. Today's
favourite differentiator in the Rs 6,000-crore television market is New
Age technology. So,
there's Samsung with a platform built on its DigiTall status, BPL with its
new-definition-of-vision punchline, LG with its Digitalez LG campaign, and
Videocon with its Technology Next promotion. This signals the end of
price- and promotion-based competition. Explains Ajay Kapila, 36,
Vice-President (Sales), LG: ''Brands banking on a short-term proposition
no longer exist.'' We agree. For,
the market for a technology-based product goes through alternating
commodity and brand phases. Initially, marketers can build differentiators
around technology. But once the market defines its standards, and
product-penetration increases, customers start shopping around for the
best deal till the next differentiator emerges. This is where the
television market finds itself today. And the differentiator-of-the-hour
is so-called digital technology. Explains Ravi Sharma, 39, Deputy General
Manager, Sales (CTV), Videocon: ''We are positioning ourselves as the
cutting-edge technology brand.'' The only problem: so is every other
consumer electronics company. This
can be attributed to 2 factors. One, in the absence of a technology
leader, the firm with the slickest ad makes a greater impact. Two, an
emphasis on high-end products creates an aspirational vortex at all market
levels. Says Rajeev Karwal, 37, Senior Vice-President (Consumer
Electronics), Philips: ''Our strategy is to advertise the best; the rest
will sell along with it.'' Does
this mean the television market will never witness a price-war again? Not
quite. As ad-intensity increases and consumer fatigue sets in, the weaker
brands will play the price card. And others will be forced to follow suit.
In the long run, neither price- nor product-features, but lifestyle could
hold the key to building a sustainable brand. The picture never seems to
get clear, does it? -Sanjiv
Rana SEGMENTATION It's
no pipe-dream. Instead of going head-to-head with the well-entrenched
State-owned companies in the LPG market, Elf Gas-the fully-owned
subsidiary of Elf Antargaz of France-has cleverly shifted to the
industrial segment of the Rs
10,000-crore market. In the process, it is also showing the way for new
entrants to compete in sectors that are dominated by subsidy-aided
monopolies; don't forget, the subsidies they enjoy allow public sector
LPG-providers like Hindustan Petroleum (HP) to sell their products 50 per
cent cheaper than their private sector rivals. Elf's
choice is a smart one because companies operating in the segment it has
chosen do not get the subsidies that they do for selling domestic gas.
Sure, in its geographical target area, South India, industrial customers
consume only 28 per cent of the 12 lakh tonnes of LPG sold. Although that
leaves a huge 8.64 lakh tonnes of sales beyond its reach-not even the
quality of service can persuade customers to have their LPG bills doubled,
as a result of which private players have only captured 20 per cent of
this segment-the 3.36 lakh-tonne market is still nothing to sneeze at. The
numbers look all the more significant in the light of the fact that Elf
Gas will sell a mere 1,500 tonnes in the first 8 months of its operations
ending March, 2000. Says
Bernard Leclerc, 44, CEO, Elf Gas: ''In the commercial LPG market, we have
a level playing-field with the government companies.'' Actually, it has
more than a level field. Public sector enterprises still control 80 per
cent of the commercial market. However, their style of functioning
provides an opportunity for savvy b2b marketers to steal a march over
them. For, unlike its State-owned competitors, Elf Gas is investing in
growing its delivery infrastructure: for instance, it has set up a Rs
45-crore storage and filling plant near Mangalore Port, which has a
capacity for storing 3,000 tonnes and piping 85,000 tonnes a year, which
is scaleable to 9,000 tonnes and 2.5 lakh tonnes, respectively. Elf
is also setting up storage- and pipeline-facilities at customers' sites at
its own cost. Already, 6 companies have signed up with Elf. At this rate,
even if the government takes its time removing the subsidy on LPG sold by
State-owned enterprises, Elf Gas' strategy in India needn't go up in
smoke-or flames. -Dilip
Maitra MANAGEMENT Costs
are his target. Michiharu Sakurai, 62, a professor of accounts at Senshu
University, Tokyo, the father of target-costing, a radical approach to
costing that is based on what the markets are ready to pay for a product,
was in Chennai on January 28 and 29, 2000, for the CII's annual jamboree
on cost-management: the Cost Congress. One of the two luminaries who spoke
on the Congress' theme of 'Total Cost Management For Global Competitive
Advantage'-the other was the Amos Tuck School's Vijay 'Strategic Cost
Management' Govindarajan-Sakurai spoke to BT on the nuances of target
costing. Excerpts: ON
WHETHER INDIAN COMPANIES ARE READY FOR TARGET-COSTING. I'm not sure.
Target-costing is best applied in companies with high overheads. Compared
to those in Japan, the overheads in India are very low. As a rule,
target-costing is most effective in an assembly-oriented standardised
production functions. The automobile sector is, thus, one of the best
industries in which target-costing can be applied. ON
HOW TARGET-COSTING WORKS. The purpose of target-costing is to create
upstream cost-reduction. It is an integrated process for strategic
cost-management at the planning and design stages with the co-operation of
the engineering, marketing, product-development, and accounting
departments. Thus, it is more of a strategic tool than a tactical one.
Target-costing implies an emphasis on cost-reduction and not cost-control.
It is market-driven: the cost is determined by the market. But this
doesn't always mean that the selling-price of the product is determined by
the cost. That's a function of the company's strategy. ON
WHERE TARGET-COSTING SHOULD FIGURE IN THE ORGANISATIONAL FRAMEWORK.
The typical organisation will graduate from target-costing, through
Activity-Based Costing (ABC), to Strategic Cost Management. Only this will
establish a link between the market (-driven cost) and the company's
strategic decisions related to cost. Cost-management has 3 components:
Kaizen, or the process of achieving continuous incremental improvement in
costs; target-costing; and cost-maintenance. The challenge is to integrate
the 3. ON
THE RELATIONSHIP BETWEEN TARGET-COSTING AND ABC. There is no black or
white solution to target costing, unlike ABC. For ABC to be fully
effective, a company needs to have adopted target-costing. But the reverse
isn't always true. Target-costing, after all, is something companies adopt
at the planning and control stage. Thus, it's logical that all other costs
(of products or activities) flow from it. Companies will actually discover
that they can use the traditional costing system, standard costing, in the
manufacturing) phase. It is only in the planning stage that target costing
is imperative. ON
WHY TEAM-WORK IS AN INTEGRAL PART OF TARGET-COSTING. The only reason a
company like General Motors could not implement target-costing was that
all its functional departments were working independently. There was no
lateral organisational connectivity. There was in Toyota and that made it
easy. Integrating functions is critical to implementing target-costing.
But many Japanese firms face the same problem that gm did. The only
pre-requisite to target-costing is the organisational culture. ON
HOW LONG IT TAKES TO IMPLEMENT TARGET-COSTING. In 1999, a 7-member
team of experts introduced this approach in an Italian firm in just 4
hours. But it could take longer in India. Maybe 2 to 3 years to implement,
and 5 years for the payback. That's because it requires an organisational
transformation. ON
THE SAFEGUARDS. Target-costing is market-led, wherein the cost of a
product is determined by the market. But markets today are changing
rapidly; and industries are becoming more technology intensive. Thus, it
becomes important to use target-costing as an extension of the larger
organisational objective-and not as a mere costing tool.
-M.
Bharati
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