,

,J

STRATEGY FORMULATION FOR GROWTH AT SAMTEL COLOUR LlMITED*

INTRODUCTION
A small fire lit in 1974. giving birth to the Samtel Group. Over the years. it has grown from a small. single unit to become the largest Indian integrated manufacturer of a wide range of dispay devices like Colour and B&W TV picture tubes. tubes for avionics, medical and industrial applications. glass parts for picture tubes. components for tubes like deflection yokes arid engineering services. The Group has nine world-class factories and a familY of over 4,500 motivated people. Today the group's turnover is approximatelY US $ 340 million per annum. In a Quest for excellence in all its fields of activio/. the group has partnered with world leaders like Corning Incorporated. USA, Samsung Corning, Korea and Mitsubishi Electric. lapan. Long before globalization became a corporate buzzword in India, the group was successfullY exporting its products to distant shores. Over the years. the group built strong alliances with its global partners. customers and suppliers and having done so. become known for the Q!.Ialio/ of its products and services in the international arena. Keeping the future challenges in perspective. the group has undertaken many initiatives to build its knowledge infrastructure-setting up its own tube development group with many competent engineers and a dedicated pilot line to develop products and processes for the futUl'e; setting up "Samtel Centre for Display Technology" (SCOT) at the Indian Institute of Ted nology, Kanpur. for developing Organic Light Emitting Diodes (OLEOs) and other generic technologies. to name some.

* VX Murali Mohan This case was prepared by Prof. V.R. Murali Mohan of the Institute for Integrated Learning in Management (IILM), New
Delhi. Special thanks are due to Mr. Rajesh Kakkar. Vice President (Strategic Planning & Business Development) and Mr. ~;andeep Tandan. Consultant (Corporate Communications) both from SAMTEL, Corporate Office. New Delhi, for their encouragement and support provided in furnishing all the details reQuired for preparation of this case study.

168 a THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

SAMTEL Group's headoffice is located at Delhi. The Group's manufacturing locations are as follows: . Parwanoo Ghaziabad Samtel Colour ltd. (Deflection Yokes). Samtel Colour ltd. (CRTs) Samtel Colour ltd. (Color Electron Guns) Teletube Electronics ltd. Bhiwadi Kota Germany, Ulm Samtel Electron Devices GmbH Samtel India ltd. Samcor Glass ltd (CRT Glass)

The SAMTEL Group companies are as below: TELETUBE: First Indian Private CRT (Cathode Ray Tube) company. It was established in 1974. It manufactures B&W TV picture tubes and a variery of CRTs for professional application. SAMTEL India: It is the largest Indian B&W CRT company. SAMTEL GlASS: Started as a joint venture with Corning Incorporated, USA with a cap~ciry of 5.5 million sets of parts per annum. Has a market share of 50% in the Indian Market. SAMTEL ELECTRON DEVICES GmbH: Manufacturer of high end CRTs for Avionics, Medical and Industrial applications. Has a market share of 70% for Medical Tubes in the international market. SAMTEL COLOUR: It was incorporated in 1986 with initial technology from Mitsubishi Electric, Japan. It has a capaciry to manufacture approximate~ 10.2 million tubes per annum at its facilities at Ghaziabad and Kota. The company has the widest range of color picture tubes in the country, viz., 14", 20", 21" and 29" tubes. It is the on~ manufacturer of 21" and 29" pure Flat tubes in India. Besides, it also manufactures the critical components of a picture tube (whose Qualirydetermines the life and performance of the tube), name~, electron guns, deflection yokes and glass parts for colour picture tubes. The company holds the NO.1 position among the picture tube manufacturers in the country with a 38% market share. Its domestic and international client list includes leading and large TV manufacturers including multi-nationals. Samtel is the largest exporter of colour picture tubes in India and has safery approvals from the USA, Canada, Germany and Britain for its products. The company has a flexible world class manufacturing set-up and is high on Qualiry Consciousness (Six Sigma journey underway). Vertical Integration in the group ensures regular supp~ of glass, electron guns, and deflection yokes. The company has a workforce strength of around 1.800, has a gross sales turnover of around Rs. 1,100 crores and employs a fixed asset valued around Rs. 690 crores.

STRATEGY FORMUlA nON FOR GROWTH AT SAMTEL COLOUR LIMITED

169

VISION
The company's vision "is to build a responsible mega corporation - an institution with Business Excellence impacting Nation-Building and caring for the Environment and Sociery. Our culture will be value-driven, self-searching and exploring to develop a mind of our own".

MISSION
The company's mission statement reads as follows: "Our Mission is to be global!y the best value provider of video display and other chosen products through leveraging technology and competencies. We shall achieve it by creating a culture of self-striving with focus on total employee involvement towar ds customer satisfaction. Our approach shall be value based as a responsible member of the sociery. contributing to its growth and development."

VALUES
The company's values are as listed below: EmplClyees are prime movers and they drive resources for effective use. Indivduals have capaciry to excel and the synergetic effect of such individual efforts ultimate!y leads to excellence. Desire to excel depends primari!y on individual initiatives and the environment should facilitate such initiatives. Autonomy to employees leads to motivation to use their creative abilities to improve their own as wdl as organisational efficiency. Qualiry. Productiviry. Efficiency. and Innovation are keys to excellence and efforts should be made: by all to continuous!y improve this through involvement of people. In essence the core values are:
0 0 0 0 0 0

Trust Transparency Respect Caring Risk Taking Autonomy

170 a THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

BELIEFS
The company's beliefs are as under: Each individual has unlimited potential and wants to contribute to the organization's goals and its effectiveness and is able to make genuine contributions. It is the leadership's responsibiliry to create a work environment wherein individual feels encouraged realizing hislher potential.

ORGANISATION

CULTURE

The company's organisation culture revolves around Transparenry. Trust. and Respect.

QUALITY

POLICY

SAMTEL always recognized the primary of people as the main driving force in the organis~tion. This belief led to the dawn of a new movement. which had its core: People striving from within- 'THE SAMTEL QUALITY MOVEMENT.' This movement is based on the fact that self-motivated employees work towards continu<pus!y improving customer satisfaction. business results. and societal impacts. The Group's Qualiry Journey commenced around the ear!y eighties and has progressive!>!got stronger over the years. The company has introduced. over the years. Qualiry measuressudh as Suggestion Scheme. Q!Jaliry Circles. House Keeping. SPC. TPM. ISO 9000. Six Sigma. etd.. to name some.

SAMTEL QUALITY MOVEMENT

(SQM)

The Objective of SQM launched in 1987 is to create an environment where people strive from within to achieve Customer Satisfaction (external and internal) and Business Excellence with Social Relevance. The key focus areas are: o o o o o Customer Orientation Vendor Development Process Capabiliry modified to Process Stabiliry-6 Communication Safery. Health and Environment (SHE) s (Six Sigma)

SQM INITIATIVES Customer Orientation

Customer is the reason for existence of our business. Through customer orientation we can align our internal processes to deliver sustainable business advantage and customer delight.

STRATEGY FORMUlATION FOR GROWTH AT SAMTEL COLOUR LIMITED

J:I \7\

~ Vendor Development
Focus on total value chain - from vendor to customer. It integrates vendors with the same shared vision to create reQuired competeng' to bring delight to consumers.

Safe1:y.Health and Environment (SHE)

SHE'~,mission is to complY with all statutory provisions in letter and spirit and to provide safe and healthy work environment to our people and assets with a focus on conservation of natural resources and prevention of pollution.

Communication
The purpose is to create understanding of the Vision, Mission. and Values. Norms along with Challenges. Strategies. and Action Plans to all stakeholders, so as to generate positive energy amorg them.

Planning
Towards this. emphasis has been laid in the company on: o o o 3-year strategies Annual Business Plan MonthlY Action, Planning and Review

Process Stabili9'
The company has given a great emphasis on 'Process Stabili~'. The company's philosophy is: o o The ultimate state is that all our critical processes operate at Six Sigma levels. Six Sigma integrates the initiatives of customer orientation. process stabili~, and vendor development.

SWOT Ana!ysis
The highlights of the company's SWOT analYsis are as under:

Strengths
o o NearlY all CTV (Colour Television) producers are customers. Has been regularlY introducing new products into the market since 1988 (21" Full SQuare Tube, 21" FFST.14" CPT. 20" Samtel Designed. 21" True Flat. 29" True Flat & Conventional). Has maintained a domestic market share of around 40%.

172 a THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

Has a strong backward integration through the group companies which virtual!>, supp!>' all the reQuired major items for CRT (Cathode Ray Tube), viz., glass, deflector, and electron gun. Have strengths in engineering/process design and development. As a result the company has been able to (a) increase productivi!}' by 19%on an annual basis, (b) reduce process wastages, (c) improve material utilization, (d) bring in energy savings and (e) develop products with compact design.

Weaknesses
o Has not commenced work on developing LCD (liQuid is becoming popular in developed countries.

Crystal Diode) technology which

In the years to come, when CRT technology loses its position in the TV market,. the company would be faced with substantial investment in plant and machinery which may be difficult to put to alternate use. As on date essential!>, a single product range (excluding avionics and medical CRTs) company, Le., CRT manufacturing and selling, primari!>' catering to CTV market. Hence it is exposed to greater market risks in the longer run on account of the advent of LeOs in the sleeker models of CTVs. Manufacturing facilities primari!>' in India.

Opportunities
o Demand for CRT-TVs in BRIC (Brazil. Russia, India and China) markets is growing and expected to account for 55% of the global market share by 2007. Between 1995and 2008 (based on projections) the Indian CPT industry size and growth is estimated at CAGR of 16.12%.From a demand of 2 million CPTs in 1995,the projected demand for 2008 is 15 million CPTs. Larger and medium flat CTVs Le., 21" TF and above are estimated to grow faster and gain market share in India on account of the falling prices of CTVs. They are expected to garner a market share of around 60% by 2007. In the BRIC markets the demand for CRT-TVs is growing. From a demand of 55 million CRT-TVs in 2002, it is expected to touch around 80 million CRT-TVs by 2007, Le., around 45% increase in demand from 2002 to 2007.

Threats
o The primary de-growth in Europe and US for CRT-TVs. From around 70 million CRTTVS in 2002 the projected demand in 2007 is around 55 million CRT-TVs. Price erosion in CTVs not on!>' global!>, but in India as well. For instance a 14" TVs priced at Rs. 7000/- in 2002 is expected to be priced around Rs. 3700/- by 2007; a

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STRATEGY FORMULATION FOR GROWTH AT SAMTEL COLOUR LIMITED

173

29" TVs priced around Rs. 32.000/- in 2002 are expected to drop to Rs. 10.800/2007. o

by

The demand for LCD based TVs is steadilY growing. especiallY in the developed countries. The threat to CRT technology from LCD technology in the world TV market is not expected to be very significant till 2008, when the projected demand for CRT-TVs is around 160 million, whereas for LCD-TVs it is around 40 million.

The unit prices of LCDs have been dropping. i.e.. from around US$ 900/piece to US$ 600/piece (projected in 2007) and expected to further go down. Whereas the prices of CRTs are expected to stagnate around US$ 200/piece till 2007.

The global demand for CPT is expected to be stagnating around 160 million units per annum in the coming years.

o o

Fall in import duties (current!y 15%)are making imports cheaper. Trend in rupee appreciation is making exports dearer.

ORGANISATION STRUCTURE
The focus here is on the Organisation Structure with respect to Strategy Formulation. There is no separate department for this and it is a process that involves almost all the relevant functions/ departments. The organisation structure in the company is somewhat flat. The hierarchy in the m,magerial cadre is as follows: CMD

VPIDept. Head (Mktg, Mfg, HRD. Fin, Technology. <1'\. R&D, Business Development. Electron Gun Division. Deflection Yoke Division. Proj & Engg)

GM
DGM

MGR

Dy. MGR
Below the managerial cadre are supervisory and workmen cadres.

:1

:' I

1 I

I I
I

' '

I : '

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THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

Strategy Formulation Process

Given the Vision. Mission. Values. Beliefs. Qualiry Policy. Organisation Culture. etc.. of ~he
compa~. the company believes in full involvement of the operational staff as well in t!he process of strategy formulation. The company follows 'bottom-up and top-down' process to formulate the strategies as it (a) is meaningful as it is owned by the people. and (b) facilitates involvement of the people ful!)' in the implementation process. Almost all the departments are

involved in the process. The departments are general!)' headed by Vice-Presidents and usual!)' upto Depury Managers/Managers participate in the process.
The broad steps o

involved in the Strategy Formulation process are as below:

Economic Survey. Situational Ana!)'sis. and Competitive Ana!)'sis reports are prepared by the joint efforts of the various departments - Marketing. Purchase. Finance. Manufacturing. etc. These reports are finalized by December of the year. Forecasting the Business Scenario by the combined efforts of all Department Heads/ respective teams by January. Based on the above. preparation of the Business Strategies (Strategy Formulation) for the next 3 years is in focus by February. This is again carried out by Department Heads/their teams. Presentation of the Business Strategies by the Department Heads to the top managemer:lt (Chairman and Board of Directors) in February and obtaining their feedback! recommendations. Incorporation of the Top Management's feedback/recommendations into the Business Strategies and approval of the same by the top management by the end of February. The Vice-President (Strategic Planning & Business Development) coordinates the Strategy Formulation process. SubseQuent!)'. the approved strategy/ies communicated to all managerial levels. Below the managerial cadre the impact of the strategies. as specific to their respective functions are communicated. Preparation of the Annual Budget & Business Plan for the year by Department Heads/ Teams and their approval by CMD/Board of Directors in March-April.

TOWS MATRIX FOR SAMTEL COLOUR LTO

TOWS Matrix has been used for generating strategies for addressing the CRT-TVs market (on!)') in India and global!)' in the next 3years (2005-08) as it is felt by the company. based on market survty/market intelligence. that the threat from LCDs replacing CRTs TVs in India and global!)' in the coming years Le.. upto 2008 is not going to be significant. as CRTs are considerab!)' cheaper as compared to LCDs present!)' and expected to be so even till 2008. Annexure I furnishes strategies developed based on TOWS matrix. The outcomes of TOWS

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STRATEGY FORMULATION FOR GROWTH AT SAMTEl COlOUR LIMITED

a 175

matrix in terms of strategies to be adopted upto 2008 are as below:

SO Strategies
o o Address both local and global markets; Establish new production lines.

WO Strategies
o Focus on large/medium size contemporary CPTs.

ST Strategies
o o o Increased productiviry in each line; Reduce material costs for

every CPT produced;

Low capital expenditure for new expansion.

WT Strategies
o ACQuire established weak companies outside India for competing MNCs.

STRATEGY FORMUlATION FOR SAMTEL COLOR LTD (2005-2008)

Anntxure II gives the main aspects of the Strategy Formulation exercise for the company. Wherever details were of a confidential nature. they were not furnished by the company. Basical!y. the Strategy Formulation exercise highlights the major steps/actions to be taken against each of the strategies identified using the TOWS matrix for achieving the desired results identified unde' the head 'TargetJDate'. It is to be noted that since the TV industry is very dynamic in nature. it was informed by the company's concerned officials that there are times when strategies. which were identified based on the then anticipated trends in the market. had to be modified or abandoned total!y and a new set of strategy/ies introduced. Thus. strategies developed (the previous year) are reviewed in normal practice every year and necessary changes/incorporations carrifd out as reQuired.

CONCLUSION
From the Vision. Values. Beliefs. Qualiry PoIi g'. Organisation Culture. etc.. of the company it is clear that the key driving force behind the company's activities are (a) Business Ethics. (b) Opell Culture. and (c) People striving from within. The whole Business Formulation Process is ba~;edon 'bottom-up and top-down' process. In this process. all the relevant functional and operational staff provides their inputs to the Strategy Formulation based on Economic Survey. Situat ional Ana!ysis. and Competitive Ana!ysis reports etc.. through their involvement in teams headed by their respective Department Heads. After the presentation of the strategies outlined for the coming three years (which again gets reviewed in the normal process in the next year

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THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

while preparing the strategies for the then coming three years) to the CMD and Board of Directors and based on their views/comments/recommendations the final set of strategies (Strategy Formulation) are prepared. The coordination of the whole process is carried out by Vice-President (Strategic Planning & Business Development). As the whole process has.the involvement of all the concerned people at various levels, it (Strategy Formulation) gets owned by the people of the company. Thus, the whole process of Strategy Formulation is in line with the company's philosophy which is very well summarized through one of their statements which reads "At SAMTEL people come first, business follows. This is how we write our future destiny."

Issues and QlJestions

I. 2. How do you classify the strategy followed

by the company?

Classify the rype of forecasting techniQue used by the company. Is it sufficient? What other forecasting techniQUescan be suggested for consideration? Describe the 'Strategic Decision Making' adopted by Samtel Colour Limited. AnalYze the 'Strategic Posture' used by Samtel Colour ltd. to manage the "reasonablY turbulent TV market environment."

3. 4.

STRATEGY FORMULATION

FOR GROWTH

AT SAMTEL COLOUR

LIMITED

C 177

ANNEXURE-I TOWS Matrix for Samtel Colour ltd (Addressing the CRT -TVs market in India/Global!y for the period 200S-2008)
Internal Factors Strengths (5) 5 I. Near\}' all leading CTV producers are customers, with a domestic share around 40%. 52. Has been regular\}' introducing new products since 1988. 53. Strength in Engineering process, design. and development. External Factors Opportunities BRIC countries (xpected (0) 36% SO Strategies WO Strategies (CPTs) in the market WI. Weaknesses (W) Essential\}' a single product range catering to CTVs market and therefore exposed to g~eater market risks in the longer run. W2. Manufacturing primari\}' in India. facilities

01 . CRT - TVs demand growing in (market)-from

Address both local and global markets. Establish new production lines.

Focus on large/medium contemporary CPTs.

size

~hare of global market it is to reach SS% of global market share by 2007. 02. Global sales of CPTs projected at 1.7 million CPTs/annum. Threats ,Ind in Indian market. --2. Fall in import duties (current\}'

ST Strategies

WT Strategies in each

~-I. Price erosion in CTVs global\}'

Increased productivity line.

ACQuire established weak companies outside India for competing MNCs .

S%) making imports cheaper.

--3. Continuous ,Ippreciation dearer. rupee making exports

Reduce material costs for every CPT produced. Low capital expenditure new expansion. for

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178 THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

ANNEXURE~II
Strategy Formulation for Sam tel Colour Ltd (2005-2008)
Strategies contemporary based on TOWS Matrix size CPTs Major Steps Target/Date Focus on Large/Medium

Better Higher

Technology Margins Local status

In-House

R&D to develop

both

IS" flat and 29" true flat CPTs using AK Steel beFore 2008. Margins to increase From 10% to; 12% by 2008. Both in 15" flat and 29" true flat CPTs by 2008.

First Mover/Only

Vendor

Address markets

both

Local and Global

Volume price

Potential demand base and

Capacity million

increase

From 6.2

Intra-Market hedge

tubes to 10.2 million is already decisions abroad .

tubes which accomplished. Internal 25 OEMs Increase

Large Customer

Pricing OEMs

in India already . From 10

to 15 by 2008. Increased Productivity in each line

Higher Global

Production Benchmarking

Efficiencies

Increase

production

efficiency production by

From 97% to 98% by 2008. Reach to Samsung's efficiency 2008. 20% increase in productivity/ annum/line till 2008 with nil or marginal investment are there. both per line. For instance, level of 98.5%

Increased

Productivity

Reduce material CPT produced

costs For every

Value

Engineering

Several develop

Lower Wastages Experts driving modified processes and technologies

15 "flat and 29"

true flat CPTs using AK Steel beFore 2008.

Establish new production lines

There

are several

targets.

One ppm to be

of them is to reduce From 4000 by 2008. In-house achieved

defectives

ppm to 2000 plans developed primarily

using in-

house expertise.

Space to introduce products Maintaining local market Targeting higher

new

In-house Increase Increase 2008.

plans drawn the market exports

up.

share From

share in growing exports

38% to 40% by 2008. From 2 million tubes by tubes to 3 million

Low Capital Expansion

Expenditure

For New

. .

Optimum

(APEX lines to

Should Internal down.

be below plans with

Rs. 100

Ability to assemble specifications

Crores/line specifications

by 2008. and targets laid

Source existing lines that can be adapted to reQuirement

Fall back plans have been internally developed. blue print developed.

Company

aCQuisitions

outside

India

Identify

established outside

weak India

Internal

companies Note: Plans/targets of confidential

nature were not disclosed by the company and hence no major details mentioned against them

in the above table.