TTK PRESTIGE LTD. T I N G I T TS W W H I S OP H E T OP ST L S AY T O T
…
1
INDEX SL. No
DETAILS
1)
EXECUTIVE SUMMARY
2)
SITUATIONAL ANALYSIS a)
PAGE No
GRAND STRATEGIES
b) GENERIC c)
PORTFOLIO
d) PORTER’S 5 FORCES MODEL e)
PESTLE
3
7 10 14 22 27
f) CAP
28
g) SWOT
30
h) VALUE CHAIN ANALYSIS
33
i) SOLUTION/STATEGIES ALTERNATIVES
37
3)
CONCLUSION
39
4)
REFRENCES
39
2
EXECUTIVE SUMMARY TTK PRESTIGE LTD. A TTK Group Chennai based company, TTK prestige is one of the leading players in the domestic kitchen appliances industry. Its product portfolio portfoli o spans from domestic cooking vessels to electrical appliances and has recently forayed into modular kitchen designing. TTK‟s TTK‟s products include pressure cookers, nonstick cookware, electrical appliances & gas stoves all of which command high brand recall and a price premium over competitors.
The company‟s topline has grown at 150%+ CAGR over the last 5 years. Profitabilityalso improved and grew by 30%+ over the same time period. The strategy for maintaining growth and improving profitability has been product innovation, brand building and financial financial prudence
The company has over the years evolved from being a mere pressure cooker product brand to a full-fledged kitchen appliances brand. Its wide product portfolio and wide spread retail initiative will help company grow faster than the industry, while branded industry itself will grow at 5-6%.
The pressure cooker industry, which has a penetration of mere 30-35% in India, has a lot of scope of growth with increased availability of LPG & piped natural gas in the next few years. While the non-stick cookware segment will grow on the back of 3
replacement demand, urbanization and growing health consciousness in cooking styles. We believe the macro demographic trends in India will drive the growth of the kitchen appliance industry per se. The company‟s vision for new business opportunities such as modular kitchens and its product innovation provides good business visibility for the company.
Mainstay Pressure Cooker Segment Growing at a Stable Rate
Pressure Cookers is TTK‟s TTK‟s single largest segment which contributes around 54% to the topline currently. TTK‟s TTK‟s pressure cookers are different from other cookers on account of its outer lid-closing feature. This feature provides the user with some additional cooking capacity vis-à-vis inner lid cookers
The Indian pressure cooker market size is approx. 9 million pieces p.a., which is equally divided between organized and unorganized sector. TTK enjoys 30%+ market share in the pressure cooker market of which it is the market leader in the outer lid market segment with 65% market share and 5% of its recently entered into and a highly competitive inner lid market.
The branded cookers market has been growing at 5-6% over the last 4-5 years while TTK has witnessed volumes growth at 13-15%. We expect this segment to continue to clock similar volumes growth over the next 2-3 years.
Apart from that, TTK has introduced a niche product through the launch of pressure handi a few years back.
4
TTK‟s TTK‟s strategy in this segment has been to innovate and give the user a better product experience. TTK has introduced both aluminum and stainless steel cookers, the latter of which has given boost to the overall average realization.
TTK‟s TTK‟s product innovation, superior quality and product technology has always enabled it to command a superior price realization over its peers. Prestige cookers are targeted towards middle class and the upper middle class and enjoy a 3-5% price premium over other branded branded manufacturers.
De-Risking Business by focusing on the Non-Stick Cookware Range
In a bid to de-risk its business from single product dependence TTK forayed into the cookware segment. Over the years TTK has emerged as the market leader in the nonstick segment. It was only recently in FY07 when the company was flushed with demand and hence operated at 200%+ capacity utilization. TTK increased it‟s capacity from 500,000 units to 1,800,000 units in FY08. TTK competes primarily with local and regional players such as Premier in this segment.
Growing urbanization, health consciousness in cooking styles of customers and the segments unique ability for bulky sales (majority consumers do not buy a single pan but a set of non-stick items) will help TTK to grow at a healthy rate. The life cycle for the non-stick cookware is 2-3 years hence giving rise to a large replacement market. Hence we expect the cookware segment to grow at a CAGR of 15-17% for the next 2-3 years.
Investing in setting up In-house Kitchenware (Electrical Appliances) Factory in Uttarakhand
Electric kitchenware is the company‟s third business segment and has been growing much more aggressively than the other segment. This segment includes all types of electric kitchen appliances such as mixer, toaster, chimneys, etc. The company‟s strategy is mainly to offer complete range of kitchen appliances while encashing on its existing retail network setup & existing brand which symbolizes quality, reliability, and safety for all kitchen kitchen products for a housewife housewife The finished products of this segment are primarily outsourced at present. The growing demand for TTK‟s TTK ‟s electric kitchen appliances has enabled this segment to grow much faster. On the back volume growth the company plans to set up its own unit in Uttarakhand at a cost of INR 11 crs. This will enable TTK to control outsourcing cost, monitor quality and at the same time aggressively penetrate this segment. It is important to note that the contribution of this segment to topline has gone up in the last one-year from 13% to 17%. We expect its contribution to go up to 20% once the new plant is commissioned by at the end of this fiscal. 5
Evaluation and Outlook
The company has over the years evolved from being a mere pressure cooker brand to a full-fledged kitchen appliances brand. Its wide product portfolio and wide spread retail initiative will help company to grow faster than the industry
The pressure cooker industry, which has a penetration of mere 36% in India, has a lot of scope of growth. While the non-stick cookware segment will grow on the back of rising urbanization & growing health conscious trends. We believe the macro demographic trends in India will definitely drive the growth of the kitchen appliance industry
TTK is one of the leading players in the Indian kitchen appliances industry.
The company has seen topline growth of more than 20% over the last 5 years with profitability also improving. The company‟s increased profitability are set to improve its cashflows as the company is almost debt-free
Company expect topline & bottomline to grow in the range of 15-17%+ for the next 2-3 years. Margins are set to improve on the back of product mix, insourcing of electrical appliances and lower interest cost. At the current CMP (Current Market Price) of INR 295.65/- the stock trades at 9.1x and 8.1x its FY10E & FY11E EPS of INR 32.5 and INR 36.5.
Company Profile
Corporate Office 11th Floor Brigade Towers, 35 Brigade Road, Bangalore - 560 025, Karnataka.
Website: Website: www.ttkprestige.com www.ttkprestige.com Chariman: Chariman: T T Jagannathan Business Group: Group: TTK 6
SITUATIONAL ANALYSIS
GRAND STRATEGIES GROW TH
Why
no
one
will
give
their
Prestige
cooker awa y….
Prestige like other brands like Bata, Godrej and Tata are part of growing up in modern India. If you think of pressure cooker, Prestige is one name that will come to mind. That the brand has managed to sustain loyalty over the many years is because as T T Jagannathan, chairman of TTK group, says “W e’ve always kept in touch with our consumers and have constantly been innovating.” During this current financial year for instance, it has launched a variety of products, one being Prestige Deluxe cooker that has a pressure indicator, which the chairman says is a result of customer research which indicated that cooks wanted to know when the cooker could be opened. Recently, the group forayed into modular kitchens and launched its trendy Prestige Smart Kitchen across major cities. There are 100 such stores planned.
Prestige started the chain of exclusive franchise stores with the following objectives: To create a retail ambience for kitchenware and showcase the vast range the brand has to offer. This was not happening in the multibrand traditional kitchenware outlet that was cramped and far below expectations of the fast-changing customer. TTK also wanted to have a one-on-one contact with the end consumers to understand their needs better and to rekindle interest in an otherwise low-involvement category. The long-term vision is to be the country‟s number one small appliance kitchenware company, so they had to move on from being just a pressure cooker company to a cookware company. There is very little differentiation in the category - beyond inner lid and outer lid and stainless steel and aluminium - and, despite some innovations, like the Prestige Smart range of cookers launched last year, the urban market is almost saturated, with some numbers only in the addon, replacement and gift segments. The rural market, while largely unpenetrated, remains the preserve of unbranded products, which account for roughly 40 per cent of the value share of the total market; besides, most villagers still use firewood. Kalro, Senior Vice-President (Marketing) says. "When more and more people have LPG in rural areas, the first thing they will do, hopefully, is buy a pressure cooker." Penetration of pressure cookers in the domestic urban market is very high and the future 7
growths have to come from rural households. There are rural households who have disposable incomes but the impulse to buy pressure cookers or other kitchenware has not been generated due to inadequate distribution reach. The company opened two Prestige Smart Kitchen outlets in rural areas in Karnataka during the year under report and both the outlets have been drawing good foot falls and are delivering good sales volume. TTK Group has drawn up a strategy for rural retail foray to deliver all the products of the group relevant to the rural customer. If this strategy works out well the Company will be a major supplier to these stores. This will be in addition to TTKs stand alone rural smart kitchen outlets. The company is continuously improving the internal control system in all the areas of operation including the effective monitoring of Prestige Smart Kitchens established across the length and breadth of the country. TTKs proposed new ERP implementation will further improve the internal controls.
TTK Prestige is the first kitchenware company in India to receive the ISO 9001 certification and the PED / CE certification by TUV, Germany. TTK Prestige Ltd is listed on both BSE & NSE. The company presently has manufacturing set-ups in Hosur, Coimbatore and Bangalore and 19 sales branches located across the country to cater to t he needs of specific markets Over the last few years, modern retail formats like large format stores, malls, super markets and hypermarkets have started attracting huge foot falls especially in the urban areas. Some of these outfits belong to one or more national chains. They cater to a variety of customer segments at several price points. While this modern format currently covers hardly 3% of the 8
retail business this share is likely to become significant in the coming years especially in the urban areas. The company is in the process of ensuring its presence significantly in these modern format stores.
The Company recognizes the immense value of its traditional dealer network. Owing to a dynamic trade policy which affords satisfactory return on investment to the dealer, the contribution through traditional dealer network is also growing. The dealer network which has been largely supporting the traditional product categories consisting of pressure cookers and cookware is now stocking a larger range of TTKs products and the dealers are keen to increase the shelf space of its products. TTK witnessed a decline in the export sale during the current year especially in the US market. However the sales in the non US markets are encouraging. There is a moderate growth opportunity for pressure cookers in the non US markets. As pressure cooker is not a significant part of kitchen appliance market in USA, the company is looking at opportunities for tapping the high end cookware market in USA. If this opportunity can be exploited then it affords an opportunity to increase the distribution for pressure cookers also in this market. As the domestic economy is growing rapidly, TTK will be committing larger resources to the domestic market and hence export opportunities will be considered only step by step to optimize the overall earnings of the company.
FINANCES AND INTEREST RATE STRUCTURING S TRUCTURING During the year there was no chang e in the equity capital. The company was able to finance its grow th through internal accruals without increasing debt capital. It may be noted that ove r the last three years prior to the year und er report, TTK redu ced its debt burden by ove r Rs.20 crores. There was a f urther redu ction in the interest burden as compared to the previous ye ar by about Rs.86 lak hs. The interest cost as a percen tage to sales has droppe d f rom 8.4 % tw o ye ars back to 2. 4% du ri ng the yea r und er report
INVESTMENTS The company further recapitalized its wholly owned subsidiary Manttra Inc by investing Rs.4.41crores. During the first quarter of 2005-06 the investments made in TTK Services Private Ltd was also encashed, encashed, which brought in cash of Rs.1.30 crores. With this TTK has dealt with all its unrelated investments. 9
EXPANSION AND CAPITAL EXPENDITURE The company has during the start of the current financial year i.e. April 2008 commenced commercial production of pressure cookers in the new facility created at Myleripalayam Village near Coimbatore. The capacity has been established by adding new machinery as well as transferring machinery that has been rendered surplus in the Bangalore facility. As mentioned in the earlier director‟s reports, pursuant to right-sizing the Bangalore Unit is being used a stand by unit as part of supply chain optimization measures. This standby use will be phased out during the next twelve months.
TTK is also in the process of establishing establishing a new manufacturing manufacturing undertaking near Roorkee Roorkee in the State of Utharanchal. This unit will manufacture all types of pressure cookers and cookware. Facility for assembly of other domestic kitchen appliances will also be incorporated in this unit. As the demand for company‟s company‟s products exist in northern India a manufacturing facility in the North affords logistical advantages and incidental cost savings. Further, a unit established in the notified areas in the State of Utharanchal is also entitled to excise duty exemption and income tax concession for a period of 10 years. This unit is expected to commence commercial production during the course of the financial year 20092010
All the above initiatives together with normal capital expenditure will result in a capital expenditure spend of over Rs.20 crores spread over the financial years 2009-10 and 2010-11. The Public Deposits aggregated to Rs.310 lakhs as on 31st March 2008. There were no unclaimed deposits which remained unpaid as on that date. As stated earlier, the manufacturing activity in the Bangalore Unit will be phased out during the course of next 12 months and the land therein admeasuring around 2.85 lakh square feet 10
will become available for development. The Board has a massive opportunity to take appropriate decisions in dealing with this property in the best interests of the shareholders to ensure considerable revenue windfall.
DEVELOPMENTS IN HUMAN RESOURCES The direct employment strength stood at 724 as compared to 708 in the previous year. Improved training and development programmes are in place to achieve improved productivity in all departments. Industrial relations were cordial throughout the year. Your company maintained its morale of human resource at the highest level, which enabled the growth possible. The long term settlement with the union in the Hosur manufacturing complex expires during the financial year 2008-09. The directors must work toward concluding a settlement with more thrust on employee productivity.
THREATS In the domestic market the threat continues to be from the mushrooming unorganized players and regional brands. These have two impacts namely commoditization of product categories and unrealistically low pricing. Though there is high mortality of these players they tend to impair the rapid growth of quality conscious branded players by putting their legitimate margins under pressure. As has been the policy, the company continues to invest in innovation, feature and value addition, customer education and br and promotion to stay above these unorganized players. The company operates in a single segment-Kitchen Appliances. The products include Pressure Cookers, Non-stick Cookware, Kitchen Electrical Appliances and Gas Stoves, although the company‟s revenue is still dominated by Pressure cooker sales. The company needs to be less dependant on one product by aggressively promoting & consolidating rest of its kitchenware products in the segment.
2007-08
Pressure Cookers
2006-07
Domestic
Export
Total
Domestic
Export
Total
12249
1481
13730
9717
2463
12180
11
Non-stick Cookware
3542
Kitchen Electric Appliances
32
3574
2424
43
2467
2163
2163
1136
--
1136
Gas Stoves
2254
2254
1766
--
1766
Others
1375
87
1462
1336
52
1388
Total
21583
1600
23183
16379
2558
18937
12
In the export market, the influx of cheaper supplies from China continues to put pressure on margins as well as expansion of sales. Alternatives to combat these very problems are as follows: Option :
1.
Launch
large-scale
promotions
to
make
consumers
aware
of
advantages
of branded kitchenware appliances. 2. Employ cost-cutting methods to further lower prices especially during recessionary pressure. 3. Investing more heavily in Research and Development so as to make more innovative products to compete better.
PORTFOLIO ANALYSIS FOR TTK PRESTIGE: One of the most popular aids to developing corporate strategy in a multibusiness corporation is the portfolio analysis. Portfolio analysis is the wide set of tools to analyze elements of a firm's product mix to determine the optimum allocation of its resources. Two most common measures used in a portfolio analysis are market growth rate and relative market share.In portfolio analysis top management views its product lines and business units as a series of investments from which it expects a profitable return. The product lines/business units form a portfolio of investments that top management must constantly juggle to ensure the best return on the corporation's invested money. Two of the most popular approaches are the BCG growth share matrix and the GE business screen.
The BCG MATRIX is a chart that had been created by Bruce Henderson for the Boston Consulting Group in 1968 to help corporations with analyzing their business units or product lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis. Each of the corporation's product lines or business units is plotted on the matrix according to the 1> growth rate of the industry and 2> its relative market share. Placing products in the BCG matrix results in 4 categories in a portfolio of a company:
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1. Stars (=high growth, high market share) - use large amounts of cash and are leaders in the business so they should also generate large amounts of cash. - frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept. 2. Cash Cows (=low growth, high market share) - profits and cash generation should be high , and because of the low growth, investments needed should be low. Keep profits high - Foundation of a company 3. Dogs (=low growth, low market share) - avoid and minimize the number of dogs in a company. - beware of expensive expensive „turn around plans‟. plans ‟. - deliver cash, otherwise liquidate 4. Question Marks (= high growth, low market share) s hare) - have the worst cash characteristics of all, because high demands and low returns due to low market share - If nothing is done to change the market share, question marks will simply absorb great amounts of cash and later, as the growth stops, a dog. - Either invests heavily or sells off or invest nothing and generate whatever cash it can. Increase market share or deliver cash
MARKETS: The markets of prestige products can be mainly divided on the basis of some common characteristics into urban markets and rural markets. Although the urban markets are mostly saturated with wit h low growth rates in the pressure cooker segment the rural market is experiencing a rapid rapid double double digit digit growth rate with the penetration penetration into rural households being the hope for this segment. TTK prestige forayed into the rural markets in FY 06 in the modular kitchen segment in rural Karnataka and is drawing heavy footfalls in the retail outlets. The modular kitchen and the electrical appliances markets are experiencing a high growth rate in the urban markets. The non stick cookware segment is one in which prestige has a strong position and although the urban market is saturated the rural market is growing at a high rate. 14
Thus in the BCG matrix the products of TTK Prestige can be divided into stars, question marks, cash cows and dogs according to the markets in which they are in i.e. according to the urban and rural markets.
URBAN MARKETS: STARS: NONE QUESTION MARKS: Electrical appliances, modular kitchens CASH COWS: pressure cookers, non-stick cookware DOGS: Gas stoves
RURAL MARKETS: STARS: Pressure cookers, electrical appliances, modular kitchens, non stick cookware, gas stoves QUESTION MARKS: none CASH COWS: none DOGS: none
15
BCG MATRIX FOR TTK PRESTIGE: URBAN MARKETS
MARKET SHAR E
HIGH
RELATI AT IVE
LOW
HIGH
MARKET
STARS Electrical
appliance s
ppliances sss QU ESTION MARKS
Modular kitchens
GROWTH
LOW
CASH
C Pr essure
cook ookers
CASH COWS
Non stick cook ookwar
G as stove s DOGS
16
BCG MATRIX FOR TTK PRESTIGE: RURAL MARKETS
HIGH
MARKET SHARE
RELAT IVE
LOW
HIGH
MARKET
GROWTH
Pr essure
cook ookers
Modular kitchen
QU ESTION MARKS
Non stick
G as
stoves
cook ookwa STARS
LOW
CASH COWS DOGS
GE MATRIX FOR TTK PRESTIGE: In consulting engagements with General Electric in the 1970's, McKinsey & Company developed a nine-cell portfolio matrix as a tool for screening GE's large portfolio of strategic business units (SBU). This business screen screen became known as the GE/McKinsey Matrix. The GE / McKinsey matrix is similar to the BCG growth-share matrix in that it maps strategic business units on a grid of the industry and the SBU's position in the industry. The GE matrix however, attempts to improve upon the BCG matrix in the following two ways:
The GE matrix generalizes the axes as "Industry Attractiveness" and "Business Unit Strength" whereas the BCG matrix uses the market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit. The GE matrix has nine cells vs. four cells in the BCG matrix.
Industry attractiveness and business unit strength are calculated by first identifying criteria for each, determining the value of each parameter in the criteria, and multiplying that value by a weighting factor. The result is a quantitative measure of industry attractiveness and the business unit's relative performance in that industry
COMPETETIVE STRENGTH MARKET ATTRACTIVENESS
HIGH
MEDIUM
HIGH PRESSURE COOKERS
MEDIUM NON STICK COOKWARE
LOW
MODULAR KITCHENS
ELECTRICAL APPLIANCES
GAS STOVES
LOW
Criteria for market attractiveness:
Size of market
Market rate of growth
Nature of competition and its diversity
Profit levels
Ability to differentiate
Impact of technology, the law and energy effeciency
Criteria for competitive strength:
Market share.
Management profile.
R & D.
Quality of products and services.
Branding and promotions success.
Place (or distribution).
Brand loyalty
Efficiency.
Cost reduction. 19
A.D.LITTLE MATRIX FOR TTK PRESTIGE: The Arthur D Little (ADL) Strategic Condition Matrix offers a different perspective on strategy formulation. ADL has two main dimensions - competitive position and industry maturity . Competitive position is driven by the sectors or segments in which a Strategic Business Unit (SBU) operates. The product or service which it markets, and the accesses it has to a range of geographically dispersed markets that are what makes up an organization's competitive position i.e. product and place. Industry maturity is very similar to the Product Life Cycle (PLC) and could almost be renamed an 'industry life cycle.' Of course not only industries could be considered here but also segments.
It is a combination of the two aforementioned dimensions that helps us to use ADL for marketing decision-making. Now let's consider options in more detail. Competitive position has five main categories:
Dominant - This is a particularly extraordinary position. Often this is associate with some form of monopoly position or customer lock. Strong - Here companies have a lot of freedom since position in an industry is comparatively powerful Favourable - Companies with a favourable position tend to have competitive strengths in segments of a fragmented market place. No single global player controls all segments. Here product strengths and geographical advantages come into play. Tenable - Here companies may face erosion by stronger competitors that have a favourable, strong or competitive position. It is difficult for them to compete since they do not have a sustainable competitive advantage. Weak - As the term suggests companies in this undesirable space are in an unenviable position. Of course there are opportunities to change and improve, and therefore to take an organization to a more favourable, strong or even dominant position.
From here the strategic position of an organisation can be established. Managers then need to decide upon the best strategic direction for the business. For example they might use a Gap Analysis. According to ADL, there are six generic categories of strategy that could be employed by individual SBU's: Market strategies. Product strategies. Management and systems strategies. Technology strategies. Retrenchment strategies. Operations strategies. 20
STAGES OF INDUSTRY GROWTH
COMPANY S COMPETITIV E POSITION ’
EMBRYONIC
G ROWTH
DOMINANT
MATURITY
AGEING
PRESSU RE
COOKER
NO N STICK
STRONG
COOKWARE
FAVOU FAVOU RABL
ELECTR ICAL APPLIANC ES
E
GAS
STOVES KITCHE N ACCESO RIES
TENAB LE
MODU LAR
KITCHE N
WEAK
21
Porter s5forcesmodel:’
Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a business unit to re-assess the marketplace given the overall change in industry information. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models, have been able to make a return in excess of the industry average. Porter's five forces include three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.
22
The threat of substitute products or services The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives:
Buyer propensity to substitute
Relative price performance of substitute
Buyer switching costs
Perceived level of product differentiation
Number of substitute products available in the market
Ease of substitution. Information-based products are more prone to substitution, as online product can easily replace material product.
Substandard product
Quality depreciation
The threat of the entry of new competitors Profitable markets that yield high returns will draw firms. This results in many new entrants, which eventually will decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition).
The existence of barriers to entry (patents, rights, etc.)The most attractive segment is one which entry barriers are high and exit barriers are low. Few new firms can enter and nonperforming firms can exit easily.
Economies of product differences
Brand equity
Switching costs or sunk costs
Capital requirements
Access to distribution
Customer loyalty to established brands
Absolute cost advantages
Learning curve advantages
Expected retaliation by incumbents
Government policies
Industry profitability; the more profitable the industry the more attractive it will be to new competitors Internet era; today competitors need only a website to enter a market
23
The intensity of competitive rivalry For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.
Sustainable competitive advantage through innovation. Competition between online and offline companies; click-and-mortar -v- brick-andmortar Level of advertising expense. Powerful competitive strategy used by a company which can intensify competitive pressures on their rivals.
How will competition react to certain behavior by another firm? Competitive rivalry is likely to be based on dimensions such as price, quality, and innovation. Technological advances protect companies from competition. This applies to products and services. Companies that are successful with introducing new technology are able to charge higher prices and achieve higher profits, until competitors imitate them. Examples of recent technology advantage in have been mp3 players and mobile telephones. Vertical integration is a strategy to reduce a business' own cost and thereby intensify pressure on its r ival.
The bargaining power of customers (buyers) The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes.
Buyer concentration to firm concentration ratio
Degree of dependency upon existing channels of distribution
Bargaining leverage, particularly in industries with high fixed costs
Buyer volume
Buyer switching costs relative to firm switching costs
Buyer information availability
Ability to backward integrate
Availability of existing substitute products
Buyer price sensitivity
Differential advantage (uniqueness) of industry products
RFM Analysis
24
The bargaining power of suppliers The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm, when there are few substitutes. Suppliers may refuse to work with the firm, or, e.g., charge excessively high prices for unique resources.
Supplier switching costs relative to firm switching costs
Degree of differentiation of inputs
Impact of inputs on cost or differentiation
Presence of substitute inputs
Supplier concentration to firm concentration ratio
Employee solidarity (e.g. labour unions)
Supplier competition - ability to forward vertically integrate and cut out the buyer
Newentrants Prestige cooker is a brand of the company TTK which is known for its food kitchen utensils. The threat of new competitors is one of the forces of Porter‟s model which in this case is less because of the cost advantage they provide to their customers on various sizes available in the market. It has established superior production operations and processes due to experience, patents and exercise huge control on particular inputs required for production, such as labor, materials, equipment, or management skills. On the other hand new entrants would have to undertake huge capital investment to build out their networks and match the scale advantage of established companies. This is especially true as Prestige Cooker is already in fierce competition with other more established brands like Hawkins, kanchan, Jaipan. Increasing urbanization and fast-changing demographics have led to a growing demand for additional homes, which in turn have increased demand for kitchen appliances. TTK Prestige has evolved from a pressure cooker company to a total kitchen solution provider. It has refurbished its product portfolio by introducing gas stoves, mixer-grinders, domestic kitchen appliances, non-stick cookware, chimneys, hobs, and modular kitchen solutions.
Competitive Rivalry The competitive struggle is fought through price, advertising and promotion spending and direct selling efforts. Prestige Cooker is affecting its rivals by its price and the technology of being balanced cookers all through the world containing aesthetic styles and better technology efficient. TTK controls more than 60% of the pressure cooker market thus actions of other companies affect the market share of it but the growing need for cookers tend to moderate competition by providing scope for growth to the company. Thus fierce competition does exist but at the moment Prestige, with its variety of ranges seems to have advantage of price, distribution, perceived quality and thus, market share. TTK Prestige pioneered the concept of pressure-cooking in India. It has introduced many new concepts in pressure cookers like new shapes, non-stick pressure cookers and pressure indicator, which have now 25
become standards for other manufacturers which makes difficult for other competitors for rivalry.
Bargaining power of buyers When the buyers purchase in large quantities then buyer can use their purchasing power as leverage to bargain for price reductions. The switching costs are low so buyers can play off the supplying companies against each other to force down prices. As mentioned earlier, the retail chains are exercising sufficient power over major brands of cookers. Prestige at present has many outlets; the company has entered the fast growing retail space with its exclusive „Smart Kitchen‟ outlets, which has helped in boosting brand image and demand. TTK Prestige is aggressively expanding the number of exclusive outlets, which is expected to go up from 164 in 92 towns to over 200 outlets by the end FY07. The change in the family structure in India is clearly reflected in the reducing number of persons per household, which has fallen from 5.7 persons in 1971 to 5.3 in 2001. Going forward, we expect the trend towards nuclear families to intensify, with the average number of people in a household set to fall to 5.1 by 2011.India is also fast moving from an agriculture-based to a services-driven economy.
Bargaining power of suppliers Suppliers are weak as the company has the opportunity to force down input prices and higher quality inputs. TTK Prestige is having a huge turnover, nearly half of which comes from its pressure cooker, so it could threaten to enter the suppliers industry and make the inputs as a tactic to lower down the prices of the input. Also, it must be remembered that TTK not only has its manufacturing plants but also the capability of importing with research and development units as, for the urban woman, whether she is a working woman or a housewife, the pressure cooker has become indispensable. The trend of pressure cooker has grown so widely that people from rural are also using the pressure cookers as even the government is stressing upon these people to use pressure cookers so that usage of liquid petroleum gas can be lessened. Its varied variety and its design which are very common and known to many people makes usability very easy which tends the people to purchase, also for its long time sustainable in the market makes them the first priority to purchase.
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Threat of substitutes TTK Prestige cooker provides cookers with different sizes like pressure cooker, pressure kadai, pressure handi etc; therefore the threat of having substitute is reduced as customer can buy according to his own preference within the same brand. Also, for the price conscious customer, who might migrate to cheaper, TTK prestige cooker, has low range or the low cost brand variant. Some brand concern persons who think that prestige cooker pressure is a low class cooker might shift to other brands like Hawkins, kanchan or Jaipan, as these come with some very good western aesthetic designs. The threat is minimal as Prestige has some flamboyant designs where all the utensils and other cookware are matched with to increase the uniqueness.
PESTLE [Political, Economic, Social, Technological, Legal and Environmental Profile] PESTLE analysis factors are Political, Economic, Sociological, Technological, Legal and Environmental. The PESTLE analysis analysis examines each factor factor to assess what their impact or potential impact on the organization. In this way, way, they can prepare strategically for any any changes that need to be made in the organization or simply to have the awareness of the external market to give them a competitive competitive edge over other firms in the industry. industry. Examples of each PESTLE analysis factor are:
Political: what is happening happening politically with regards to tax policies employment employment laws, trade restrictions, tariffs Economic: what is happening within the economy i.e. economic growth/ decline, minimum wage, unemployment (local and national), credit availability, cost of living, etc. Sociological: what are occurring socially i.e. cultural norms and expectations, health consciousness, consciousness, population growth rate, career attitudes. Technological: new technologies technologies are continually being developed. developed. There are also changes to barriers to entry in given markets Legal: changes to legislation. legislation. This may impact impact employment, access to materials, resources, imports/ exports, taxation etc. Environmental: what is happening with respect to ecological and environmental aspects.
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EXTERNAL FACTORS
EXTERNAL FACTORS AFFECTING ORGANISATION
POLITICAL
GOVERMENTS TAX POLICYAND OTHER SUBSIDARIES FOR USAGE OF PRESSURE COOKERS
ECONOMIC
INFLATION, RECESSION/ DOWNTURN, COST OF INPUTS
SOCIAL
URBAN INDIA TRENDS TO EAT OUTSIDE
TECHNOLOGICAL
ISO CERTFIED AND WITH US HELP TECHKNOWLEDGE K NOW HOW CAN BE TRANSFERED
LEGAL
MANTRAA- VARIANT OF COOKER WHICH IS EX PORTED TO US, AND LESS LAYOFF AT THE TIME OF RECESSION
ENVIRONMENTAL
STRINGENT
SPECEFICATIONS
FOR
MAINTENANCE
OF
PRODUCT
QUALITY, AND OTHER METALLURGICAL MEASURES
Competitive Advantage Profile [CAP] of TTK Prestige Pressure Cooker brand in India
TTK Prestige pioneered the concept of pressure-cooking in India. It has introduced many new concepts in pressure cookers like new shapes, non-stick pressure cookers and pressure indicator, which have now become standards for other manufacturers. Over the years, it has launched many unique and innovative products. TTK which was only into cookware now has around 33% of its revenues coming from kitchen appliances. Company recognizes the immense value of its traditional dealer network. Owing to a dynamic trade policy which affords satisfactory return on investment to the dealer, the contribution through traditional dealer network is also growing. Penetration of pressure cookers in the domestic urban market is very high and the future growths have to come from rural households. There are rural households who have disposable incomes but the impulse to buy pressure cookers or other kitchenware has not been generated due to inadequate distribution reach.
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The company is also into the modular kitchen segment, which is the single largest brand. The company‟s current installed capacity in pressure cookers is 40 lakh units. But as it is running only at 50 per cent of its capacity, there is room for scaling up production with demand expected to rise in the coming years. The company will enjoy higher revenues as the market grows in size with no additional capex/interest. Company is continuously improving the internal control system in all the areas of operation including the effective monitoring of Prestige Smart Kitchens established across the length and breadth of the country. Company‟s proposed new ERP implementation will further improve the internal controls.
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SWOT analysis SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves
specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective. A SWOT analysis must first start with defining a desired end state or objective. A SWOT analysis may be incorporated into the strategic planning model. Strengths: attributes of the person or company that is helpful to achieving the objective. Weaknesses: attributes of the person or company that is harmful to achieving the objective. Opportunities: external conditions that is helpful to achieving the objective. Threats: external conditions which could do damage to the objective.
Identification of SWOTs is essential because subsequent steps in the process of planning for achievement of the selected objective may be derived from the SWOTs. First, the decision makers have to determine whether the objective is attainable, given the SWOTs. If the objective is NOT attainable a different objective must be selected and the process repeated.
Matching and converting Another way of utilizing SWOT is matching and converting. Matching is used to find competitive advantages by matching the strengths to opportunities. Converting is to apply conversion strategies to convert weaknesses or threats into strengths or opportunities. An example of conversion strategy is to find new markets. If the threats or weaknesses cannot be converted a company should try to minimize or avoid them.
Internal and external factors The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. These come from within the company's unique value chain. SWOT analysis groups key pieces of information into two main categories: Internal factors – The strengths and weaknesses internal to the organization. External factors – The opportunities and threats presented by the external environment to the organization.
The internal factors may be viewed as strengths or weaknesses depending upon their impact on the organization's objectives. What may represent strengths with respect to one objective 30
may be weaknesses for another objective. The factors may include all of the 4P's as well as personnel, finance, manufacturing capabilities, and so on. The external factors may include macroeconomic matters, technological change, legislation, and socio-cultural changes, as well as changes in the marketplace or competitive position. The results are often presented in the form of a matrix. SWOT analysis is just one method of categorization and has its own weaknesses. For example, it may tend to persuade companies to compile lists rather than think about what is actually important in achieving objectives. It also presents the resulting lists uncritically and without clear prioritization so that, for example, weak opportunities may appear to balance strong threats.
SWOTANALYSISOF SWOTANALYSISOFPRESTIGE PRESTIGE S (Strength): 1. The product is treated as a matter of prestige which gave good brand image 2. .Pioneers in this industry, 3. Prestige has the largest range of pressure cookers in the country, 4. with years of trust, reliability and safety as our hallmarks, 5. Price of these cookers ranges in all income group people. 6. Customers review 31
W (weakness): 1. 2. 3. 4.
Unable to reach huge sales volume. Lacking in high diversified segmentation. . Hawkins provide neck to neck competition in terms of market market share. No innovative marketing strategy been adopted so as grab the market.
O (Opportunities): (Opportunities): 1. Currently the season which is going begin is marriage season so new families form they can target those customers in bulk pack. 2. They are declining the direct promotion to attain good market. 3. Capture the range of market namely low-medium l ow-medium users. 4. They have mudra communications as their marketing agent which is a good opportunity to explore. 5. Safety techniques like Gasket Release Sys tem” and the “Gasket Offset Device” Device” add points in safe use for beginners
T (Threats): 1. Competitors future cookers are being planned to manufacture with Anodized aluminum. 2. Wide range of availability of competitors products. 3. The expected moving of high income group towards the black berry of Hawkins is nearly threat. 4. Launching of anodized anodized cookers in front challenge challenge before all pressure cookware. cookware. 5. Unbranded cookers in market are swallowing 50 percent of market share.
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VALUECHAIN VALUECHAINANALYSIS ANALYSIS The value chain is a systematic approach to examining the development of competitive advantage. It was created by M. E. Porter in his book, Competitive Advantage (1980). The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organization.
PrimaryActivities. PrimaryActivities. Inbound Logistics. Here goods are received from a company's suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organisation.
Operations. This is where goods are manufactured or assembled. Individual operations could include room service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a new car's engine.
Outbound Logistics. The goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer.
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Marketing and sales In true customer orientated fashion, at this stage the organization prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix.
Service. This includes all areas of service such as installation, after-sales service, complaints handling, training and so on.
INBOUND LOGISICS
MARKETING AND SALES The dealers and distributors played a very important role in success of prestige. The dealers and distributors are dealing with the prestige products alone. Prestige strongly believes in trade partners and is committed to strengthen them and prepare them for the challenges ahead. With the current trend of organized retail growing, prestige believes as the leader in the segment. They educate and instigate change in the trade partners and help them get to next level. Prestige smart kitchens kitchens have been one of the most innovative marketing moves moves by prestige. PSK was conceptualized to do three things. To improve the visibility in terms of display the entire range of products, to improve the distribution of our new products and to offer the customer right ambience to shop and educate and communicate the right things about prestige. 34
After three years of successful operation and over 100 stores PSK today offers that edge over the competition, which cannot be replicated. Besides the three benefits, that PSK offered, contributes 12% of the revenue. It has prepared to take the challenges of organized retail. PSK has instigated the nearby traders to keep the entire range of products. The same traders were not ready to stock and sell the entire range. This has actually resulted in prestige increasing its market share for its entire range in that area dramatically. They have plans to expand the stores across the country. The concentration would be on the tier 11 cities in south India and tier 1 in non south markets. By the end of this fiscal fi scal they shall be 400 in numbers with 80000sq.ft of retail space.
Outbound Logistics. The goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer.
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SERVICE
The Pressure Cooker Centre has been supplying and servicing pressure cookers since 1968 when we started started in a little shop in West Perth, Western Australia. With a devotion to a quality service to our customers, our business has expanded to the point of supplying pressure cookers now, on a daily basis, to all corners of Australia, New Zealand, various countries throughout SE Asia (including Thailand, Philippines, Malaysia, Indonesia) and beyond and spare parts to all corners of the world. The "little store", now in Subiaco, WA, still provides the personal friendly service that helped us grow to a truly National dimension. We specialize in Pressure Cookers and their Spare Parts and have sourced quality products from around the world (several brands are exclusive to the Pressure Cooker Centre) so that we can offer you a complete choice of quality pressure cookers for all budgets. We also carry a select range of quality kitchenware and kitchen accessories so that we can offer you world renowned top-of-the-range cookware and kitchenware. You will find a large range of SILAMPOS saucepans, saucepans, stockpots, frypans, steamer sets and double double boilers. This top-of-the range cookware with Thermoplan base (guaranteed for 25 years) is made of the finest 18/10 stainless steel and is imported directly from Portugal. The Silampos cookware range is of excellent quality, design and finish and is offered to our customers at the lowest retail prices. We also offer exclusive to Pressure Cooker Centre, the top quality SILIT cookware from Germany with its unique SILARGAN ceramic non-stick and scratch-proof coating, and ZWILLING HENCKELS knives also from Germany and much more. Goto Kitchenware.
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STRATEGIC ALTERNATIVES/ SOLUTIONS The main issues for Prestige pressure cookers are regarding the threat from other kitchen ware products, ensuring growth in kitchenware market, differentiating its products further so as to fend off competition. Alternatives to combat these very problems are as follows: Option
1. Launch large-scale promotions to make consumers aware of advantages of variant pressure cookers released by prestige
2. Employ cost-cutting methods to further lower prices while discontinuing unsustainable products 3. Investing more heavily in Research and Development so as to make more innovative products to compete better 4. With the improved research and development EXPORTING to USA according to their standards may prove to be advantageous advantageous
Recommended Strategy
In spite of all the aforementioned strategies would help Prestige compete, grow and sell better, the best option for now would be to employ cost-cutting methods to decrease prices further. This would not only ward ward off the significant competition from other players like Hawkins, Jaipan and Kanchan but would also help in wooing the 80% of the consumers of India who rely on pressure cookers. It is our understanding that the vast rural sectors subscribe most to the cookers as they are seen to be cheaper and efficient than normal cooking methodology. By employing cost-cutting methods this price difference and the associated perception can be bridged to increase Prestige market share. It is also imperative for the brand to discontinue the products in its portfolio that are not doing well. Pouring money into promotion of products that aren‟t selling in the market is unwise Increase in sales sales and market share while further cutting down costs, is also likely to increase TTK Prestige Pressure cooker profit margins which at the moment is a luxury that none of the competing others players enjoy. Similarly with more revenue, the rest of the strategies and alternatives can be easily implemented post evaluation to find the best practices to make TTK Prestige growth
in
India
both,
sustainable
and
profitable. 37
Conclusion By studying products of TTK Prestige India specifically its cooker brand, we have been able to analyze the brand, the value it has created, the products, the variants, the problems faced specifically by the brand and those faced by the industry as a whole in recent times. We have been able to evaluate to an extent the strategies that are conspicuous to us while noting whether implementing these strategies have helped Prestige or not. In light of our study, we have been able to formulate certain solutions to the issues identified by us, while recommending the most suitable on for a variety of reasons. All in all, it is certain that Prestige brand of pressure cookers, backed by the parent company TTK Ltd. is here to stay and its market share is only bound to soar with the definite shift towards packaged cookers by the rural and urban population given to the growing density.
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REFRENCES
TTK_Prestige-Techno_Research_Report. Pdf
TTK Prestige report.pdf
www.prestigecookware/State-of-art-Microwave-ovenswww.prestige cookware/State-of-art-Microwave-ovenslaunched-by-TTK-Prestige.html
www.a-review-of-the-royal-prestige-hy-cite-corp-incomeopportunity-579302.com
www.annual-report-ttk-prestige-2008-2009.html
http://www.prestigesmartkitchen.com/
http://www.mouthshut.com/productreviews/Prestige_Pressure_Cooker-925003557.html
http://corporategifts.easy2source.com/ttkprestige/productpr ofile2.htm
http://www.thehindubusinessline.com/iw/2009/10/19/stories/2 009101950210400.htm
http://pressure-cookers.blogspot.com/2009/05/prestigepressure-cooker-cheap-solution.html
www.hawkinscookers.com/downloads/pc_catalog.pdf
http://www.reviewstream.com/reviews/?p=25542
http://www.americanchronicle.com/articles/view/105565
http://www.reviewcentre.com/products2171.html
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