TITAN INDUSTRIES
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Executive Summary: Titan Industries is the world's fifth largest wrist watch manufacturer and India's leading producer of
watches under the Titan, Fastrack, Sonata, Nebula, RAGA, Regalia, Octane & Xylys brand names. It is a joint joint ventur venturee betwee between n the the Tata Tata Group, Group, and the Tamil Tamil Nadu Nadu Indus Industri trial al Develo Developme pment nt Corpo Corporat ration ion (TIDCO). Its product portfolio includes watches, accessories and jewellery, in both contemporary and tradition traditional al designs. designs. It exports exports watches watches to about 32 countries countries around the world with manufactur manufacturing ing facilities in Hosur, Dehradun, Goa and manufactures precious jewellery under the Tanishq brand name, making it India’s only national jewellery brand. It is a subsidiary of the Tata Group. Titan Watch division was started in 1987. At launch it was the third watch company in India after HMT and Allwyn. As of 2010, Titan watches account for a 60% share of the total Indian market and are also sold in about 40 countries through marketing subsidiaries subsidiaries based in London, Aden, Dubai and Singapore. Titan watches are sold in India through retail chains controlled by Titan Industries. How Pestle analysis can help the industries?
When making decisions, a business needs to take account of internal and external factors: •
Internal factors are ones that are within its control. Examples include how many staff the business employs, the number of machines it uses and how much money owners choose to invest in the business.
•
Extern Ext ernal al fac factor torss are tho those se tha thatt are out outsid sidee of its control control.. The These se may be dir direct ect or ind indire irect ct influences. Direct influences include suppliers, customers and competitors. Indirect influences include legislation, the economy or technology.
These external influences are summarized by the mnemonic PEST. This stands for Political, Economic, Sociall and Techno Socia Technologi logical cal inf influ luenc ences. es. PES PEST T ass assess esses es a mar market ket,, in inclu cludin ding g com compet petito itors, rs, fro from m the
standpoint of a particular proposition proposition or a business. PEST becomes more useful and relevant the larger and more complex the business or proposition. For very small local businesses a PEST analysis can still throw up one or two very significant issues issues that might otherwise be missed. The four quadrants in PEST vary in significance depending on the type of business (e.g. social factors are more obviously relevant to consumer businesses or a B2B business close to the consumer-end of the supply chain).
MICRO (TASK/OPERATING ENVIRONMENT)
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INTERNAL RISK FACTORS:
The results of operation vary from period to period and may not be indicative of their growth in the future. Their business is highly dependent upon the constantly changing needs, desires and aspirations of
their customers and any failure on their part to meet their requirements may be critical to their business operations. Their revenues are difficult to predict and are likely to fluctuate due to a number of factors. These factors include: •
changes in their pricing policies or those of the competitors;
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their ability to successfully anticipate and offer products that their customers demand;
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The ability to successfully launch new products on a timely basis to reduce their cost structure, including fixed costs, to streamline their operations and to reduce product costs;
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the timing of their competitors’ new products or product enhancements or any delays can affect the company
Their operating expenses are budgeted based on their estimates of revenues. A high percentage of their expenses are fixed, particularly expenses related to their personnel and facilities, which are fixed in advance for specific periods. Their operating results may vary significantly from period to period, due to the seasonal nature of the businesses in which they operate. Their inability to accurately estimate, assume, predict or forecast future trends may adversely affect the company brand image, financial performance and customer satisfaction targets. According to the company
“It may be difficult for us to predict market trends and the tastes of our customers. Further, we cannot guarantee the retention or expansion of our customer base”.
An important element of their business involves predicting the trends in fashion and the choices of the customer. Their customer’s choices are also dependent on their geographical location, cultures and customs. They constantly strive to meet the expectations of their customers. They also have to incur additional costs and expenses to study the market, develop suitable products and effectively market the same. Their competitors who are engaged in similar businesses and target the same audience may be able to service the needs of such customers better than them. Any inability to gauge market trends,
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competition and other factors could have a serious impact on their brand image, market share and financial performance. Further, they may be unable to determine the correct time to launch their products in the market and any time or cost overruns in such launch could adversely affect their results of operations.
According to the company various internal factors are affecting the Titan industries they are
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They are highly dependent on their watch business for their profitability
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Competition is increasing in the markets in which they operate: Significant
increase in competition in the markets in which they sell their products may erode their market share and force them to reduce their prices, which could adversely affect their business and results of operation
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•
An inability to manage their growth could impact their profitability
The high price of gold and other precious metals may affect their stock price and sales of jewellery.
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There are restrictions on the import of gold into India: Currently, under the laws
of India, there are certain restrictions on the import of gold, including restrictions on import of gold from overseas banks and single borrower restrictions. They cannot assure the customers that these restrictions will be removed or liberalized.
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Changes over time in the taxation rates on their products and the raw materials, will continue to affect their profits
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The Indian jewellery industry is predominantly unorganized and there is no compulsory quality certification mechanism within the sector: The jewellery
business in India is unorganized and they are highly dependent on agents and sellers for their supply of diamonds and other precious stones. They rely on certain trained professionals to grade and sort the diamonds that they procure for their business. Any interruptions or disruptions of such supply, will severely affect their watches and jewellery, business especially in those offerings where they rely extensively on diamonds.
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“We may not be able to hire and retain qualified design personnel; large portion of our designs are outsourced”: Their ability to create designs and
manufacture products, which meet the customer’s expectations, depends largely on their ability to attract, train, motivate and retain qualified and experienced design professionals, particularly jewellery and watch designers. Their designers in engineering design, particularly those who use specialized software are also important for their business. Competition for such special skills in the watch, jewellery and precision engineering industries is intense.
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MACRO (GENERAL/ REMOTE) ENVIRONMENT External factors:
External factors are those that are outside of the organization control. These may be direct or indirect influences. Direct influences include suppliers, customers and competitors. Indirect influences include legislation, the economy or technology. The external environment includes economic, Social & cultural, Demographic, Political, Technology and legal factors. Political Factors: Force majeure events, acts of violence, terrorist attacks and or war involving India, or
any country could adversely affect the financial markets and result in a loss of client confidence and adversely affect their business. For e.g. The blasts during the Diwali season in Delhi on October 29, 2005, the tsunami, which affected several parts of South East Asia, including India and Sri Lanka on December 26, 2004, the terrorist attacks, such as the ones that occurred in New York and Washington, D.C., on September 11, 2001, New Delhi on December 13, 2001 and Bangalore on December 28, 2005, and other acts of violence or war (including civil unrest, military activity and hostilities among neighboring countries, such as between India and Pakistan), may adversely affect worldwide financial markets, and could lead to economic recession. This may reduce the purchasing power of their targeted segment.
Legal Factors: They are liable to pay taxes under various Indian laws and are availing of certain tax
benefits which is offered to it in its area of location. Their profitability will be affected if the tax benefits
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granted are reduced or withdrawn. There are a variety of taxes and other levies imposed by the Government of India and/or the states in which the factory or the assembly units are located. These may include corporate tax, indirect taxes (which include customs duties, excise duty, central and state sales tax and other levies), income tax, value added tax, entry tax imposed by various municipalities throughout India, turnover tax, service tax and any other tax as may be imposed by the concerned government of the concerned state or India from time to time. In addition to the above, each state in India has different local taxes and levies including sales tax, octroi, which require a more comprehensive and enhanced tax planning and structuring for our Company. Any changes in these local taxes and levies may impact their profitability. “Trade related policies of the countries from which we currently import, are critical to our profits”. In the event that there is a change in the tariff and non-tariff
barriers of a country from which the company import raw materials and/or exports the products to, then such a change may have an impact on their profitability.
Economic factors: Exchange rate fluctuations may affect their financial condition and results of
operations. They report their financial results in Rupees, but a portion of their expenses such as imports of gold is denominated in, or linked to US Dollars. The exchange rate between the Rupee and the US Dollar has changed substantially in recent years and may fluctuate substantially in future. They cannot assure that they will be able to effectively mitigate the adverse impact of currency fluctuations on their results of operations.
Technological factors: The titan Industries are very much ahead in the game of technology then the other
competitors. Recently In July 2011 Titan launched the HTSE (High Tech Self Energized) collection of watches which run on light. According to Titan these watches can be charged with as low as 200 lux of light which makes them chargeable with light even from a candle. In its press release the company said that "HTSE draws its design inspiration from the most complex self-energizing bodies built by mankind — space stations, satellites and spaceships. But their business processes are IT enabled; any failure in their IT systems or loss of connectivity or any loss of data arising from such failure can impact them adversely.
Social and Cultural factors: The titan industries operate in 40 countries and due to their expanding
international operations they are subject to certain risks inherent to establishing and conducting operations
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in international markets. The cultural and language factors associated with managing and coordinating their global operations. The culture and attitude of all the stakeholders will ultimately determine the future of a company and whether they will be profitable or not.
Demographic Factors: Titan also aims to tap into youth segment so as to create a loyal customer base
for future. It believes youth segment has high potential and needs to be lured via innovative designs and price points. But this aim may fail in other foreign countries where the population of youth is not much like India. The analysis of external factors is very important because it help the manager to identity those factors which he wants to narrow it down to a particular part of the business.
Conclusion: The Internal and external analysis of the business environment helps the industries to decide which strategies and tactics were best for achieving the objectives of the company. By using the PESTEL framework we can analyze the many different factors in a firm's macro environment. In some cases particular issues may fit in several categories. For example, the creation of the Monetary Policy Committee by the Labour government in 1997 as a body that was independent of government but had the ability to set interest rates was a political decision but has economic consequences; meanwhile government economic policy can influence investment in technology via taxes and tax credits. If a factor can appear in several categories managers simply make a decision of where they think it best belongs. However, it is important not to just list PESTEL factors because this does not in itself tell managers very much. What managers need to do is to think about which factors are most likely to change and which ones will have the greatest impact on them i.e. each firm must identify the key factors in their own environment
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