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 venture between the Tata Group, and the Tamil Nadu Industrial Development Corporation

(TIDCO). Its product portfolio includes watches, accessories and jewellery, in both contemporary and

traditional designs. It exports watches to about 32 countries around the world with manufacturing

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 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.

External factors are those that are outside of its control. These may be direct or indirect

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,

Social and Technological influences. PEST assesses a market, including competitors, from the

standpoint of a particular 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 that might otherwise be missed. The four quadrants in PEST

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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)

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;

their ability to successfully anticipate and offer products that their customers demand;

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;

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”.

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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,

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

They are highly dependent on their watch business for their profitability

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

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.

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

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.

“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

granted are reduced or withdrawn. There are a variety of taxes and other levies imposed by the

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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.

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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

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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