Re-launch of HMT Watches

Indian Watch Industry

27% of Indians own a watch. Total estimated market as of 2010 : volume 35 million units & value Rs. 2500 crores Market has been split into: Mass Market ( < Rs400) Low end (Rs 400 Rs 1000) Mid- Upper Market ( Rs 1000 Rs 5000) Premium (> Rs 5000)

Competition

The Watch Market in India

Premium (> Rs 5k)
Valued at Rs 370 crores Swiss brands: Tissot, Omega, Rolex Fashion brands: Fossil, Calvin Klein, Valued at Rs 300 crores Grey market, Chinese, etc.

Mass (< Rs 400)

11%

13%

Giordano, Esprit

43%
Low-end (Rs 400-1000)
Valued at Rs 1200 crores

33%
Mid-upper (Rs 1k-5k)
Valued at Rs 938 crores

Sonata, HMT, Maxima

Titan, Citizen, Timex,

Swatch, Espirit
4

Volumes Growth, Driven by Low End

~35-40 mn 2700 crs

CAGR, %
8-10

BRANDS

Volume of watches sold

~25 mn

0.22 4.5-5.2

375 crs 850 crs

25-35 4-7

Tissot, Omega, Rolex Titan, Citizen, Timex, Swatch, Espirit

~21 mn

Luxury Mid-upper

0.015 3.9 9.5 7.5

0.05 3.7 12.0 9.3

2001-02

17.5-20

Low-end
Mass

1200 crs
13.5-16 300 crs
2006-07 Value Rs crs

8-11

Sonata, HMT, Maxima Grey mkt, Chinese, etc.

8-11

1997-98

Source: IRS 95,99,01, NCAER 95,00; internal data; press clippings; interviews; market visits; annual reports

Watch Market Map

Formal/Classic
Raymond Weil Tissot Titan
1000 2000

Omega, Rado, Longines

Sonata, HMT, Maxima

500

Nebula

Citizen
4000 5000

XYLYS
10000

Price
20,000 +

Timex

Fastrack

Espirit, Swatch Fossil Giordano, DKNY, Carrera Tommy Hilfiger, Accent

Tag Heuer, Hugo Boss, C Dior

Fashion/Sporty

About HMT..
Incorporated in 1953 by the GOI as a Machine Tool manufacturing company

Watches

Machine Tools

Tractors

HMT
Printing Machinery
Bearings
Projects & Consultancy

HMT WATCHES : Profile

Watch manufacturing started as a part of the diversification strategy of HMT in 1962. irst to start Watch manufacturing in India. F Incorporated on 9th Aug 1999 Manufacturing units at Bangalore, Tumkur and Ranibagh. echnical collaboration : CITIZEN T

Reasons for the downfall

Primary Product category : Mechanical Watches Reliance on Production Concept Insufficient emphasis on R&D Not exploring lifestyle segment Weak dealership No new advertisement drive in recent years Lack of new and trendy designs

SWOT Analysis

Strengths
Strong Government support Good brand image Comfortable liquidity position Record of good Industrial Relations Established marketing network Product Development Center for watch design

Weaknesses
Prime product category Decline stage Weak organizational culture Over-reliance on the production concept Insufficient emphasis on R&D No quick response to competition Aesthetics & packaging not duly attended to

Opportunities
Demand for watches is growing rapidly Capitalize on attractive segments Introduce watches with multiple functions Leverage its brand equity

Threats
Worldwide decline in the production & demand of mechanical watches ASAs for foreign smuggled watches offering competition Competitors successfully exploited the lifestyle segment Unconventional strategies by competitors

Porters 5 Force Model

PEST Analysis

Before we re-launch.

The Emerging Trends

19

Demographic pattern

Rising % of young population

Increase in income levels

Changing spending pattern

Effect
Increased size of urban population

Urban India

Enablers

More number of working women

Increase in spending power

Rising aspiration levels

Outcome

Consumption of lifestyle items

Organized retail market at USD 21.5 billion by 2010 (CAGR 31%)

Urban Households
Affluent
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Upper Middle
46% 40% 43% 38%

Middle

Lower
48%

Income Group in %

26% 18% 11% 3% 6% 14% 9%

2001-02

2005-06E
Year

2009-10E

Increasing exposure of middle class creates new opportunities

The Flow of Money

Upto USD 2000 2000 to 4400 4000 to 11000
48 40 38 43

Above 11000

50 45 40 35 30 25 20 15 10 5 0

47

Income Group in %

26 18 9 4 6

14 11

2001-02

2005-06E
Year

2009-10E

By 2009-10 lower income group falls; higher income doubles

Watch is considered as luxury by just 11% of the people

Over 60% of the people prefer price between 1000 to 5000

Brand, Design, Price, Durability is the sequence of factors that influence choice

Watch Industry in India: Where is it heading?

26

Forces Transforming Indian Watch Industry

Brands Titan and Sonata
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

Exploring new brand for luxury segment Licensing: Tommy Hilfiger watches
3. Emergence of distinct consumer segments

1. Shift in structure of demand

Volume growth driven by the low end Value growth driven by luxury segment

Dramatic Transformation of the Indian watch market

Sharply defined consumer segments around distinct buying factors More awareness of brands and global trends among affluent urban consumers

Dominant retail presence: World of Titan Showrooms, TimeZones

4. Emergence of new channels

New retail outlets emerging (Dept. stores/malls) Existing outlets (MBOs) getting smarter looking Unorganised retail at low-end

Sub-branding strategy: Raga, Fastrack, Nebula

Objectives for the Re-launch

Marketing Objective

Financial Objective

Marketing Mix

Product
Then.. Few Designs Less emphasis on R&D Poor packaging Now.. Create competitive advantage by differentiation Product Mix: Gadget range MP3 watches USB watches Table watches Wall clocks

Price

Then.. Positioned itself as the space age generation watches Highly priced Less commission

Now. Cost advantage by exploiting differences in cost behaviour Competitive commission prices

Prices for wrist watches

Segment Youth Ladies Price (in Rupees) 699 3,999 1,499 14,999

Sports
Kids Timepass Accessories

999 4,999
249 - 999 399 3,499 249 - 699

Place

Then. Had to sell through 13 branch offices of machine tool equipments Limited service outlets Selective policy while choosing retailers

Now. Rework on distribution network Exclusive stores Gift stores Jewellery Stores

Promotion
Then. Failed to communicate its uniqueness of Quartz watches Centralized decisionmaking led to delay in response to market changes

Now. Special focus during festive season Innovative & stylish campaign Press conferences Youth Brand Ambassador

Promotion
Television & Radio Print media isplays in shopping malls D Web & social media Hoardings & Billboards Sponsorships

Logo

Beyond Time

Brand Ambassadors

Hoarding (Sample)
I believe in

Other Strategies
Tie-ups with Ddamas, Archies

Customization

Segmentation

Targeting
Positioning

Segmentation
Segmentation of market on the basis of age groups between 18 35 years n the basis of purchasing power O n the basis of their profession O

Targeting
Youth Kids Sports

Positioning
As a High Quality product Affordable prices As a youth accessory

Budget (Expenses)
Expenses
Market Research Salary of Technical Team Tie-up with Archies Tie-up with D'damas PR Activities Ambassadors Equipments Promotional Activities Other Expenses

Amount (in Rupees)

20,00,00,000 5,00,00,000 50,00,000 50,00,000 14,00,00,000 10,00,00,000 15,00,00,000 25,00,00,000 10,00,00,000

Total

100,00,00,000

Budget (Income)
Income
Sale (Youth) Sale (Kids) Sale (Sportwear)

Amount (in Rupees)

45,00,00,000 20,00,00,000 30,00,00,000

Sale (Others)
Export

15,00,00,000
25,00,00,000

Total

135,00,00,000

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.