STRATEGIC ANALYSIS OF VOLTAS LIMITED

(A TATA ENTERPRISE)

MINI PROJECT DONE AS PART OF THE STRATEGIC MANAGEMENT

SUBMITTED TO: BRIG (DR) RAJ KUMAR PROGRAMME DIRECTOR-SMS/SENIOR PROFESSOR SMS, JNTUK.

SUBMITTED BY: Harsha.M 11021E0120

TABLE OF CONTENTS
S.NO 1 2 3 4 5 6 7 8 PARTICULARS Industry overview Company profile Vision and mission PEST analysis SWOT analysis Porters 5 forces analysis Strategies at voltas References PG.NO 3 5 6 6 7 7 9 10

1. INDUSTRY OVERVIEW
Air Conditioner Industry Thanks to the fabled Indian middle-class, the air-conditioner market is hooting up. An In ordinate hot summer has convinced the people the comfort of an air-conditioner and a large number appears to have decided to take one home this year. Indeed, in the last few the years, the demand for air-conditioners from the household sector has been growing rapidly. Still, the demand growth is particularly noticeable, and was also the most significant change in the industry during this period. According to some industry estimates, growth in volume terms has been 45-50 per cent this fiscal. But official statistics underestimate this and even report a decline in production. Nevertheless, by all accounts, including a study by the Confederation of Indian Industry (CII), there has been a noticeable jump in the demand for air-conditioners from the household segment. After several years of relatively modest growth, which was totally at variance with the latent potential of the product, the sharp growth in demand the summer past was very welcome for air-conditioner companies in many respects. One, it relatively reduced their dependence on the corporate sector which is still the major demand driver. Corporate traditionally accounted for about 60 per cent of the total demand for air conditioners. But the burgeoning demand from the household segment could level the ratio in the near future.

One of the significant factors influencing the fortunes of the industry is the taxation structure. The industry has come a long way from the time when the excise duty structure favoured only the unorganized sector. The steady fall in the excise rate in the 1990s helped the organized sector cope with the competition from the unorganized sector on more favourable terms. Still, the unorganized sector continues to meet a sizeable proportion of the demand for non-ducted products. There was a significant change in the excise duty structure in 2000. The rate was raised from 30 per cent to 32 per cent and this was expected to adversely impact the industry.
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However, the shift to a maximum retail price based system for the levy of excise appears to have helped the manufacturers. In the MRP-based system, an abatement of around 40 per cent was provided. This ensured that the impact of the increase in excise was minimal if not positive. Another major fiscal change is the removal of quantitative restrictions on imports. Imports are, however, not all that competitive considering the Customs duty structure. An import duty of 44 per cent along with a countervailing duty, which is equivalent to the excise duty, is a large enough protection for the domestic companies. Growth of AC market The demand for non-ducted products grew steadily in the latter half of the 1990s. The Demand for mini-splits has grown at a higher rate compared to window ACs because of the lower base. The demand switch from mid-sized ducted products, such as packaged ACs or ducted splits, to mini-splits is also one of the reasons for the larger growth rates in the latter segment. Another major reason for the growth in demand was the increased attention this product category has attracted in the recent past. Prices of air-conditioners dropped sharply in the past few years because of competition. Most established players upgraded their manufacturing facilities, while fresh capacities were created by companies such as Matsushita (National brand). The marketing and advertisement spend by companies has also been on the rise. With such investments flowing into building both the product and the brand, the expansion of the market was inevitable. As seen with other consumer durables, in the initial years of increased intensity of competition, both existing and new players invest more cash. This leads to a drop in prices, fuelling demand and the result is a much larger market. And the non-ducted segment has attracted a lot of players in the last few years. The latent long term demand potential from Indian households has led to a number of multinational companies making a beeline to set up base in the country. Major Competitors Voltas Air conditioners faces fierce competition with the following brands of air conditioners i. LG ii. Samsung iii. Videocon iv. Hitachi v. Carrier vi. Whirlpool

2. COMPANY PROFILE
Voltas is India's largest supplier of engineering products and services for the textile machinery sector and is a major manufacturer of forklift trucks. It provides solutions in turnkey pumping projects for water, effluent and sewage treatment, and water pollution control. The company has ISO 9001-2000 certification and has executed projects in the Middle East, Southeast Asia, Central Asia, Africa and Europe. The Company was incorporated on 6th September 1954 at Mumbai. The Company was promoted in 1954 by M/s. Volkart Brothers and Tatas Voltas is a part of the Tata Group. The managing director is Mr. Sanjay Johri. Its shares are traded on the Bombay Stock Exchange under symbol 500575 with a turnover of 4300 Crore ($920,200,000 USD) in 2008-09. Voltas provided the air-conditioning for the world's biggest ocean liner, the RMS Queen Mary 2 and also the world's tallest building, the Burj Khalifa.[3]

Areas of business:
The company mainly operates in the following areas:

Heating, ventilation and air-conditioning (HVAC) solutions: Includes the entire range of mechanical, electrical and plumbing services for a diverse range of applications, spanning office complexes, airports, malls, mercantile ships, atomic energy plants, IT parks, hospitals, etc. Cooling appliances: Design, manufacture and marketing of a range of air conditioners and water coolers for household and institutional use. Engineering products and services: Design, sourcing, installation, training, maintenance, etc of engineering products and services in the fields of textile machinery, machine tools, mining and construction equipment and materials handling equipment. Chemicals: Import and distribution of an array of industrial, specialty and pharmaceutical chemicals, industrial plastics and bulk drugs. The company also exports gelatine, ultramarine blue and agrochemicals.

JOINT VENTURES, SUBSIDIARIES, ASSOCIATES: Voltas's subsidiaries include Metrovol FZE, VIL Overseas Enterprises BV, Voice Antilles NV, Weathermaker, Jebel Ali (Dubai), Simto Investment Company and Auto Aircon (India). The Company's strengths lie principally in management and execution of electro-mechanical projects, including air conditioning and refrigeration the design and manufacture of industrial equipment, cooling appliances and materials handling equipment sourcing, installation and servicing of diverse technology-based systems serving Indian industry through representation of global technology leaders

3. VISION AND MISSION STATEMENTS

VISION: The Voltas story demonstrates that an ambitious goal and vision can drive both internal transformation and business growth. Thirteen years ago, Voltas was on the verge of shutting down that is when voltas fornulated a brand new vision plan named "MEGAVOL". Megavol a business plan that aimed to achieve Rs100,000 million turnover with 10 per cent profitability by 2010-11. Our plan involved pursuing both organic and inorganic growth, says managing director Ashok Soni, the man who took over the wheel in 2001 and has steered the organisation to its present course. The Megavol plan has brought about several dramatic changes in Voltas, and these have mainly been the reason for both Voltass growth spurt and its relative insulation from the recession. MISSION: Voltas is determined to strengthen our position in exiting geographical locations and focus to rapidly expand our business into selected new overseas markets in the field of Electrical and Mechanical and related projects by offering high quality, cost effective project management and engineering services to meet the requirements of our valuable customer. Their mission also includes: Minimizing wasteful energy consumption in their branded products Forming representations and alliances with global technology leaders who also follow a Green path Offering and encouraging the use of technologies that purify the air, lower energy costs, and purify polluted water and industrial/urban effluents. Following the most stringent practices of eco-friendliness, sustainability and safety in their manufacturing operations.

4. PEST ANALYSIS Political

-The green trend is taking off in a big way in the asia pacific.

social

Backed by the environmental Protection agency (epa), The US government and 190 countries -Global warming continues to remain a major world-wide, january1 marked the beginning factor propelling market demand, especially of the phase out of hydrochloroflurocarbons. in the residential segment.

Economic
Growing affluent middle class population, robust economic growth coupled with the booming retail sector will ensure that the expectation of a 25-30 percent growth in 2011 is a reality for this segment.

Technical
The us department of energys national renewable energy laboratory has invented a new air conditioning process with the potential of using 50 percent to 90 percent less energy than todays top-of-the-line units.
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5. SWOT ANALYSIS

6. PORTERS FIVE FORCES ANALYSIS Threat of new entrants (LOW)

Capital Requirements The initial investment that goes into setting a plant is considerably high as there needs to be sufficient investment in providing quality components and also in R&D to meet the changing technology. Thus there is a low threat of entry into this sector. Economies of Scale Manufacturers in HVAC industry need to build economies of scale due to high fixed costs and meet the demands. Due to this there is a low threat of entry into this sector. Customized Products In the central and packaged AC system level of customization is high and it is not possible for new player to do that customization. Due to customization, the threat of new entrants is low. Switching costs

It is not easy to switch to the new players in the field due to high initial investment & also a number of collaborations & contracts exist among the players of the world who are into the same line of business. There is thus a high switching cost and thus a low threat to entry. Distribution Channels The existing players have strong distribution channels and thus difficult to match proving to be a high barrier of entry.

Bargaining power of suppliers(HIGH)

Supplier Concentration There is comparatively higher number of suppliers. So the bargaining power of suppliers is low. Importance of volume to suppliers The industry is dependent on volume sales and hence facilitates bulk buying. This reduces the bargaining power of the suppliers. Presence of substitute inputs In the current scenario there is little substitution that is possible to the raw materials that go into the manufacturing of air conditioning products. This increases the bargaining power of suppliers.

Bargaining power of buyers(HIGH)

Quality vsPerformance There are large numbers of players in the market. So quality and performance is the most important factor while selecting the product. It gives high bargaining power to buyers. Backward Integration Backward integration to make the air conditioners means a high investment and also expertise in the manufacturing would be required. Bargaining power would be less since the probability that the companies would integrate backward would be less.

Firm Rivalry(HIGH)
Size of Industry The industry is not concentrated & there are large number of Indian companies and MNCs, hence there is a high degree of rivalry. Industry Growth rate As long as the entire economy is in a growth face and real estate sector is in boom there will be a huge growth in the industry Fixed Cost The manufacturers of air conditioners and refrigeration products have high fixed costs as there is heavy investment in plant and the development of new technologies thus decreasing the degree of rivalry amongst them. Product Differentiation Product differentiation is very less hence high degree of rivalry. Brand Identity / Client loyalty This plays a very important role in the market of HVAC industry. Generally it is seen once a client go for some brand he stick to the same brand in the future also.

THREAT OF SUBSTITUTES(LOW)

7. STRATEGY AT VOLTAS
A) GENERIC STRATEGY: Generic strategy includes Product diversification and focus of the company PRODUCT DIVERSIFICATION Product Range is from contemporary to hi-tech Diversifying products so that each and every segment is covered FOCUS OF THE COMPANY Provide contemporary and best-in-class products meeting customer needs and value expectations Build customer loyalty by strengthening after-market operations through service. Ensure cost reduction in all aspects of operations to achieve total cost leadership in the market. Achieve market leadership through people by attracting, developing and retaining excellence in personnel. Energize the organization through teamwork to ensure that various functional areas work together to deliver results in a quick and effective manner. Explore new avenues for revenue generation leveraging established manufacturing and distribution strengths. Spending a good amount of its revenue on R&D. B) ALTERNATIVE STRATEGY: BIG BANG STRATEGY Introduction of new product. Brand building. Establishment of a widespread service network.

c)

MARKETING STRATEGY

Marketing is not Euclidean geometry a fixed system of concept. Rather marketing is one of the dynamic fields with in the management arena. The market faces continually a new challenge every day and companies must respond to it positively. Therefore it is not surprising that new market idea keep surfacing to meet new market place challenges. The market process is applicable to more than goods and services. Anything related to market including ideas, events, policies, prices and personalities comes under market strategy. However it is important to emphasize opportunity in the market through market strategy. Following strategies adopted by the organization. _ Niche Marketing: Voltas has kept their marketing objectives for niche segments. The specific marketing effect helps them staying focused with their product and customer demand _ Multi Prolonged Strategy: Voltas marketing strategy is a long term approach. They have not changed their stand since the inception of the brand and continue to promote the same value proposition of economic energy consumption to their customer segments. This has helped them in creating a brand sentiment within masses and the featured product are helping them in getting into cutting edge competition _ corporate selling at discount price to Employees: Voltas has adopted an amazing marketing technique of offering their AC product at reduced price to the employees of TCS. This promoted the brand within in house. On the basis of marketing strategy an organization runs in the market. It is several types of which makes helpful to increase sales and turnover of the organization.
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8. REFERENCES
http://www.voltasac.com/news-6.aspx http://www.thaindian.com/newsportal/business/voltas-targets-premium-airconditionersegment_10029375.html http://www.theequitydesk.com/forum/forum_posts.asp?TID=1742 http://www.tata.co.in/company/media/index.aspx?sectid=PwJV/FG+lC4= http://www.voltasac.com/air-conditioners.aspx http://www.tata.com/company/releases/inside.aspx?artid=QZ8OleWXXdE=

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