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Voltas turnaround strategy management case
- 1. VOLTAS LTD: FROM TURNAROUND TO BIG BANG Guide: Dr. Ameet Sao Presented By: ANKIT SARKAR: A13558922032 AYUSH PARASAR: A13558922023
- 2. COMPANY BACKGROUND Established on September 6, 1954, by Volkart Brothers and Tata Sons Ltd., Voltas Limited was formed to oversee M/s. Volkart Brothers' Engineering & Import Division operations in India. From 1963 onwards, Voltas commenced manufacturing various equipment including air-conditioning, refrigeration, mining, electrical, and agricultural machinery in Mumbai. Later, it shifted its compressor and chiller production to Thane. By 1985, Voltas bolstered its manufacturing capacity with the inauguration of a compressor and refrigerator facility in Warora, Nagpur. The company's shift from import-based operations to local manufacturing underscores its commitment to advancing and innovating within India's engineering landscape. Pradeep Bakshi (MD & CEO) N N Tata (Non- Ex Dir.) Vinayak Deshpande (Non-Ex Dir.) D. Sarangi (Independent Dir.) B N Vakali (Independent Dir.) Anjali Bansal (Independent Dir.)
- 3. CFO Product & Business Design Head Product & Engg. VP Finance Finance HR Head Learning & Dev. Marketing Head Trade Marketing Sales Head Sales Operations Head Customer Service Health & Safety Head Training & Dev Strategic Organizational Structure Brand Overview India’s leading air conditioning company. One of Tata Group's top ten companies and a leader in commercial refrigeration. Divided into three business clusters. Unitary Cooling Products, Engineering Products, and Electro-Mechanical Projects and Services. Three manufacturing units: (1) Thane, Maharashtra; (2) Dadra, Dadra and Nagar Haveli; and (3) Pantnagar, Uttarakhand In fiscal year 2021, consolidated total income was Rs. 9668 Crore Mission :To be a leading provider of innovative and sustainable cooling, engineering, and consumer electronics solutions, delivering value to customers, stakeholders, and society. Vision: To continuously enhance our capabilities, expand our market presence, and drive technological advancements to become the preferred choice for customers seeking reliable and energy-efficient products and services worldwide. COMPANY OVERVIEW
- 4. BUSINESS PORTFOLIO & EXPANSION Air Conditioning Equipment Heating & Ventilation Engineering Air conditioning condensers and condensing units : Domestic & Industrial Humidity controls, air- conditioning types Coolers, milk and water: electric Textile Machinery, Mining & Construction Equipment Electromecha nical Project & Services Industry leadership secured through innovation and market presence. Proactive strategy adapts to changing customer needs. Product diversification includes water coolers, refrigeration, and consumer appliances. Globally, it enters Middle East, Africa, and Southeast Asia, leveraging urbanization and infrastructure growth. Voltas expands domestically, targeting Tier-II and Tier-III Indian cities. Involved in various MEP projects, Manufacturing & Trading Executed projects in GCC countries Established presence in UAE, OMAN, KSA etc. Established their own duct fabrication & pre- fabricated module in the middle east region Global Expansion
- 5. MANAGEMENT & FINANCIAL OVERVIEW Past Earning & Growth Analysis Financial Position Analysis Shareholding Pattern
- 6. DOWNTURN OF VOLTAS Voltas faced challenges with its diverse business portfolio, experiencing losses and unsustainable cost structures. The company reported its first-ever loss in 1996-97, leading to a missed dividend payment for the first time in 43 years. Share prices plummeted from a peak of Rs 225 to Rs 21, reflecting Voltas' decline in performance. External Factors Intense Competition form Global players: Entry of global giants like Carrier, LG, Samsung, National, Electrolux, and Whirlpool between 1993 and 1997 intensified competition, causing Voltas to lose its leadership position in the market, resulting in a significant erosion of its market share. Demand Shortfall: A 9% decrease in demand in 1996- 97 further exacerbated Voltas' challenges, leading to reduced sales and revenue. Financial Obligations: Low returns from business operations caused Voltas' debt to double from 1.65 billion in 1994-95 to 3.3 billion in 1996-97, increasing financial strain and impacting the company's ability to invest and innovate. Internal Factors Overinvestment: Significant investments made by Voltas between 1994 and 1997 stretched the company's financial capabilities, potentially resulting in overextension and diminished financial adaptability. Diversification Strategy: During this period, Voltas ventured into unrelated sectors, potentially redirecting attention and resources from its core strengths, which could have compromised operational efficiency and effectiveness. Loss making accusation: The acquisition of the loss-making Hyderabad ALLWYN LTD. added further financial burden and operational challenges to Voltas' portfolio. Workforce Issues: A significant portion of Voltas' workforce, especially with a high unionization rate of 80%, contributed to operational challenges and potentially hindered the company's ability to implement necessary changes and improvements. Outdated Organizational Culture: Significant investments made by Voltas between 1994 and 1997 stretched the company's financial capabilities, potentially resulting in overextension and diminished financial adaptability.
- 7. RESTRUCTURING STRATEGY The ‘BIG BANG’ Strategy The "Big Bang" strategy implemented by Voltas entailed a thorough restructuring of its business model in response to challenges encountered by its Unitary Products Business Group (UPBG). Market-Centric Shift: Through an extensive market analysis, Voltas decided to pivot its focus from engineering-centric operations to a marketing-oriented approach, aligning with the dynamics of the Indian AC market. Streamlined Operations: UPBG revamped its business model to prioritize profitability by adopting an asset-light, people-light structure. This involved outsourcing manufacturing and optimizing operations to reduce costs and improve efficiency. Robust Supply Chain: Manufacturing of air conditioner indoor panels was outsourced to Chinese suppliers, leveraging their capabilities and partnerships with local OEMs to bolster production for the domestic market and minimize environmental impact. Strategic Collaboration: Partnerships with companies like Fedders International facilitated access to R&D resources and technological know- how, resulting in the development of competitive product offerings such as the Vertis brand. Global Procurement: Voltas capitalized on a global sourcing agreement to procure components at competitive prices, positioning itself as the most cost-effective manufacturer in India and enhancing its competitive edge. Manufacturing Optimization: Relocating the manufacturing base from Thane to Dadra, a sales tax-exempt zone, enabled Voltas to pass on cost savings to consumers, thereby stimulating sales growth. Distribution Channel Improvement: Distribution channels underwent significant restructuring to eliminate underperforming dealers and enhance operational efficiency.
- 8. BUSINESS STRATEGY Generic Strategy Product Diversification Contemporary products, strong after-sales, cost leadership, talent, teamwork, innovation, revenue diversification, R&D investment. Alternative Strategy Introduction of new product Brand Building Wider service network Marketing Strategy Niche Marketing Consistent Value Proposition Corporate selling & Employee discount
- 9. SWOT ANALYSIS Weakness • Too keen on targeting the economy consumer segment only • Unable to target the Green conscious customers • Highly dependent on its parent company. • After sales services. • Not well equipped. Strengths • Design and manufacture of industrial equipment. • Management and execution of Air Conditioning • Voltas represents a number of global technology leaders. serving diverse industrial sectors and applications. • Public works project • Sourcing, installation and • servicing of technology-based systems Opportunity • The high-end value driven proposition helps increase the market share. • Voltas is well known for its product differentiation • Promote eco friendliness through their energy efficient products. • Changing dynamics of consumer behavior. • Infrastructure facilities. • Energy conservation building code. • Reduction in excise duty. Threats • Due to increased price of inputs and continued price erosion there is downtrend in the consumer durables market. • Inflation effect. • Key international players. • Currency fluctuations. • Domestic companies.
- 10. MARKETING MIX & PEST ANALYSIS
- 11. Thankyou
Editor's Notes
- Expansion strategy: Voltas has significantly expanded its domestic and international presence, showcasing a dedication to broadening its market reach and diversifying its product offerings. - **Domestic Outreach**: Voltas has prioritized expansion into Tier-II and Tier-III cities within India, acknowledging the escalating demand for cooling and engineering solutions in these regions. Through the enlargement of its sales and service centers, Voltas seeks to enhance customer support, fortify its market presence, and seize a larger market share. - **Global Expansion**: Venturing into burgeoning markets like the Middle East, Africa, and Southeast Asia, Voltas capitalizes on opportunities propelled by rapid urbanization, burgeoning infrastructure development, and growing disposable incomes. By entering these markets, Voltas aims to meet the surging demand for its products and services while cementing its reputation as a trusted global brand. - **Product Diversification**: Voltas has diversified its product portfolio to accommodate a broader spectrum of customer requirements. In addition to its core air conditioning offerings, Voltas now encompasses a range of engineering solutions, including water coolers, refrigeration products, and consumer appliances such as refrigerators and washing machines. This strategic diversification enables Voltas to tap into new markets and revenue streams, leveraging its established expertise and infrastructure. - **Proactive Growth Strategy**: Voltas' expansion and product diversification strategies underscore its proactive approach to growth, demonstrating a commitment to adapting to the evolving needs of customers both locally and internationally. - **Industry Leadership**: These concerted efforts position Voltas as a formidable player in the cooling, engineering, and consumer electronics sectors, solidifying its status as a leader in innovation and market penetration.
- 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.