5. Different points where Voltas changed/introduced strategies.

Why they did

so? What was the result?
https://www.rediff.com/money/2006/apr/05spec2.htm (2006)

https://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/Voltas%20Ltd%20Fr
om%20Turnaround%20Big%20Bang.htm

1992-2000: Voltas’ fall and 2000-2006 renewal

Voltas’s position today is much more aggressive than it used to be at the beginning.

After being an unchallenged leader in the Indian AC market between its inception in 1954 and 2002,
Voltas has been looked upon as a “white elephant” in a market where multinationals brands such as
Samsung, Carrier and LG had become new players. After almost a decade of fall, Voltas’ renewal
started at the beginning of 21st century till regaining its leader position in the market, where Voltas
stands today.

Fall from top

Between 1954 and 1992, Voltas had close to 40 percent of the Indian AC market share.
No multinational firms in the market and very few national players were primarily to be found in the
market, namely: Voltas, Blue Star, Fedders Llyod and Arco. The AC market was driven by sales in the
institutional market (government and corporations) - the residential or retail AC market was tiny. The
industry was quite small and unstructured and providing products and services to more than half the
market.
Anticipating high growth in the retail refrigerator market, Voltas invested heavily in the business
between 1994 and 1997. However, in 1996-97, the market narrowed by around 9% which resulted in
dramatic losses.

Moreover, Voltas had diversified into several unrelated businesses like pesticides, furniture, granites,
etc., in the same period. By the mid 1990s, Voltas had hard time managing them and some of them
became a drag on the balance sheet.

But when Voltas started to suffer from the American AC Giant Carrier’s fierce competition with a new
range of new generation ACs , it quickly lost its leader position in the Indian market. Between 1993
and 1997, as competition intensified with Korean, Japanese and other global players entering the
Indian market such as LG, Samsung, National, Electrolux, Whirlpool, Voltas’ market share narrowed
further to a low 7 percent. From being ranked No.1 player in the Indian AC market in 1992, Voltas
was down to a No. 6 by 2001.
The arrival of new global players entering the Indian market changed the rules of the game. At that
time, competitors took advantage of the customers’ desires of technology superiority that Voltas was
not fulfilling. Contrary to Voltas, competitors took the retail AC sector seriously and opened up this
market by providing better quality and a large choice of products and services. Standards raised and
so did the expectations. While in the good old days, Voltas had earned profits keeping its margins
high, the competitors’ arrival prevented Voltas keeping on putting high prices.
They had unleashed a price war - slashed prices and cut margins. As a result, generating volumes
became critical to remain in the race.
Voltas was not prepared for these new dynamics changing the market and was not able to do at least
as good as the competitors.

The Restructuring

Under the pressure of Tata leadership, Voltas had to revise its strategy: either to regain its position
among the top three players in the Indian market or exit the AC business.

Based on the recommendations of the Tata Strategic Management Group – Tata management
consultancy - Voltas began an internal redevelopment. Voltas formulated the 'Big Bang' strategy
aimed at becoming the market leader in the retail AC segment by 2004.
To cope with the situation, the team dedicated to the project conducted an analysis of the Indian AC
market, its trends and competition. They came up with a strategy: concentrate the company on what
yield the most, and make Voltas evolve from an engineering to a marketing company.
The restructuring process began with the analysis of each business of the company to determine
whether it was viable with a SWOT approach - evaluating the business on market size, growth
potential, strength of the competition, success factors and core competences of the company.
Businesses which were considered as irrelevant were identified as to be sold.

This kind of transformation would imply transforming every aspects of the company: product, brand,
distribution, systems, service and cost management. Main goals were to increase sales revenue and
lower manufacturing costs through economies of scale.
First, Voltas revised its offering. They realized that the customers’ perception of their air conditioners
was really negative. Overall, people agreed to say that Voltas’ products looked old-fashioned and
were outdated, bulky and not convenient to use. Competitors were offering products with superior
technology for a cheaper price and were able to address the low-end market. Voltas suffered from
having not doing any competition benchmark and missed to see the shift in ACs from premium to
affordable and luxury to comfort.
Therefore, the challenge was not only to be able to develop a product range that matched
competition, but to do it in a cost-effective way. They decided to sign a 50:50 joint-venture with
Fedders International, a leading player in the US room market with a worldwide presence. Fedders
International brought its technology and design know-how. They came up with a new design for the
Vertis brand launch that matched competition. Voltas also benefitted from Fedders’ agreements with
its worldwide component suppliers and thus had been able to lower costs by negotiating with them.
The joint-venture had progressively renewed its entire product range from 20001 to 2004 and
launched over 74 new products.

In addition to improve its offerings, Voltas had to reach out to new markets and customers.

In March 2006, Voltas announced to invest about Rs. 200 million in brand development and another
Rs. 60 million in expanding its distribution network in the retail AC market for the year 2006-2007.

In early 2006, Voltas expected growth in ACs demand because of rising incomes and the availability
of cheap consumer credit. Voltas' unitary cooling business division aimed to reach Rs. 10 billion in
sales by 2008. Moreover, as the penetration of ACs was still low, this suggested huge growth
potential.

Voltas' strategy of concentrating on businesses where it had proven strengths helped it to improve
profitability and register high growth levels. By 2006, the company was second in the retail AC
market and its electromechanical division was the fastest growing and the highest revenue earning
division in the company.

The first step was to identify poor-performing dealers. Some 300 of its 650 dealers - close to half –
were identified. They were given strict deadlines to improve their performance. 200 dealers
managed to meet the new, higher standards Voltas demanded, but about 100 were fired. 200 new
dealers were then added to the workforce.

Brand change

The restructuring involved a complete brand change. Say Manglokar of AT Kearney, "A long relation
with the consumers can have its pros and cons. In Voltas's case the cons were more. It lacked the
freshness that the MNCs provided." Voltas agreed on that statement. "The brand recall was poor and
we had a fuddy-duddy image. The task at hand was to transform Dilip Kumar into Shah Rukh Khan."

Between 2001 and 2004, Voltas invested more than Rs 50 crore (Rs 500 million) in branding
initiatives. Voltas started by switching advertising agencies - from O&M to Euro RSG, which came up
with a new positioning platform: "Acs with IQ." The ads defined features of Voltas's new product
range such as uniform cooling, energy-saving, timers and air filters, with high performance and value-
addition through technological innovation and focused on technology and the “smartness” of the
products.

Promotions focused on customer service and low costs of ownership. In 2004, Voltas changed its
marketing strategy enhancing what is aspirational about the product. Celebrities like Shah Rukh Khan
and Shoaib Akhtar were also involved in to strengthen the brand.

Then, since the focus has become on capturing a larger share of the mass market, Voltas's new
campaign and has been shot in a distinctly non-urban environment. The tagline, too, has changed -
Voltas is now "India ka AC".