Marketing Management and Strategic Issues Group 4: Voltas Case Study

VOLTAS CASE STUDY

Group Members Roll Numbers

1. Amol Kulkarni 5

2. Aveek Ghosh 15

3. Durga Madhaba Padhy 21

4. Obliraj Chithuraju 39

5. Saikat Dutta 47

6. Aditya Sandala 48

7. Vamsee Krishna Reddy 62

Marketing Management and Strategic Issues Group 4: Voltas Case Study

This case discusses about Voltas’ journey from a “Wonder what has happened’’ Company to
“Make things happen” Company. We analyzed this case from the point of factors such as Macro-
Environments and Micro-Environments, SWOT Analysis, Product Mix Strategy and Marketing
Strategy.

1. Marketing Environment:

The marketing environment includes the actors and forces outside marketing that affect marketing
management’s ability to build and maintain successful relationships with customers

Macro Environment Factors

• Demographic: Rapid growth in urban population. Middle class & upper middle class grew
from 34% to 70% in 40 years, which brought changes in consumer spending behavior.

• Economic: Due to liberalization, privatization and globalization, Indian room AC market

grew at 26 %. Boom in the software industry increased resulted in nuclear families which
was a stark departure from the traditional Indian joint family model. This resulted in
households with dual income and single child, increasing the disposable incomes and an
improved standard of living, this coupled with the new availability at lower interest rates
increased the demand for ACs among the middle-class households. The excise duty
reduction to the Indian manufacturers gave the domestic brands a huge advantage.

• Technological: After the Indian Government liberalized the economy in 1992, many big
global AC (especially Korean and American) manufacturers took advantage of the
lucrative Indian markets and brought in ACs with better technological capabilities, features
and aesthetics at a much more competitive price point.

• Political: The Ministry of Power, Government of India mandated star rating label on ACs,
creating an environment for more energy efficient ACs.

• Cultural: Changing family systems leading to nuclear families, which lead independent
lifestyles and had high-income capabilities coupled with a demand for better standard of
living leading to an increase in the demands for ACs.

Micro Environment Factors

• Company: Leading brand of Tata Group in the air-conditioning industry in India with
40% market share for five decades (1954-1992). Voltas imported products and acted as
an indenting agent. Produced very basic and functional window ACs

• Suppliers: Multinational competitors sourced cheaper air conditioners from suppliers

worldwide and gained pricing advantage over Voltas.

• Marketing Intermediaries: Voltas sold products and services through their dealers and
franchisees but with emerging trends in retail industry emerged ‘multi-brand showrooms’
Marketing Management and Strategic Issues Group 4: Voltas Case Study

which became popular by providing brand choices to the consumers. Voltas lost the
important ‘mind-share’ of the customers by failing to find a shelf space in the ‘multi-
brand showrooms’.

• Publics: In comparison to the cost effective multi-variant products of competitor brands,

the perceived value of the Voltas ACs, using old technology, was reduced to old-
fashioned, outdated, bulky boxes.

• Competition: Initially on three competitors Blue Star, Fedders Lloyd and Arco. Also
unorganized AC competition formed a fierce competition with over 50% market share.

• Customers: Current customers included Businesses and Government offices and high net
worth individuals. Also, the total consumer base was divided into five economic classes:
Deprived, Aspires, Seekers, Strivers, and Global Indians

2. SWOT Analysis (Pre-Turnaround)

After facing fierce competition from international players and losing market share, the company’s
management decided to turn around the company’s growth. We have carried out SWOT analysis
Pre-Turnaround.

Opportunity Threat
1. Growing Middle Class 1. Unorganized AC market
Marketing Management and Strategic Issues Group 4: Voltas Case Study

2. Improving demographic 2. Substitutes such as Khus curtains and air

factors coolers

Strength
1. Market share 40 %
2. Distribution channel
Weakness
1. Less affordability
2. No selling through retail channel
3. Did not capitalize on growing economy
4. No product differentiation
5. High mark-up
6. Low Economies of scale

3. Organization and Marketing Strategies

The liberalization of the economy by the Indian Government in 1992 opened up the country to
international players who with the help of their technological superiority and advertising prowess
quickly captured a large chunk of the Indian AC Market Share. Voltage which was once the
industry leader quickly become 7th rank among the 17th AC market players in India.

Based on the suggestions of the Tata Strategic Management Group, Voltas initiated an internal
regeneration drive and a detailed study was undertaken. The result of the study was that –
transform Voltas from an engineering to a marketing company.

In order to effect this transformation, Voltas planned a Big Bang Strategy and adopted below
strategies to regain the market share:

1. Enter into a Manufacturing only Joint Venture with American company Fedders, to
address the technologies shortcomings by gaining access to Fedders’ R&D Centers and
understanding the design know-how and technologies.

2. To improve the quality sourcing of raw materials they leveraged Feeders’ Global
Sourcing Agreement which gave them access to the suppliers and contractors of Fedders.
The key value proposition out of this effect was to develop a key differentiator for the
Voltas product which was to manufacture an energy efficient product.

3. They partnered with multi brand showrooms to increase customer outreach.

4. Signed MOU’s with the retailers, with the objective to improve productivity & quality of
services.

5. They designed a segment-oriented product strategy to improve market penetration.

Launched a sub one-ton window AC under the brand name of Vertis and expanded the
segment with Vertis Deluxe and Vertis Gold.

6. They had a strategic rebranding of Voltas image to make it an India Centric brand and
give their product the positioning of an intelligent, technologically advanced machine.
Marketing Management and Strategic Issues Group 4: Voltas Case Study

4. Marketing Mix

Below listed a summary of their Marketing Mix before and after the Strategy Implementation.

Pre-Turnaround Post-Turnaround

Product Old fashioned, Technologically superior, Aesthetically pleasing and

outdated and bulky Quiet. Product features include low power
dabhas. consumption, dust filter and dehumidification.

Price Costly Cost effective

Place Retail distribution Multi brand showrooms & Retail distribution

Promotion None Advertisement

5. SWOT Analysis (Post-Turnaround)

We have carried out SWOT analysis Pre-Turnaround to study the new Company position post
implementation of the Big Bang Strategy.

Opportunity Threat
1. Unprecedented growth in AC industry. 1. Price war with foreign MNC’s.
2. AC no longer a luxury product. 2. Saturated markets.
3. AC’s for ATM’s.
4. Environmentally friendly

Strength Weakness
1. Sub 1-ton AC’s. 1. Lagging in adopting disruptive
2. Implementation of ERP system. technology
3. Understanding of Indian customers
mindset.
4. Technical tie-up with Fedders.
5. Economics of scale.
6. Low power consumption AC’s.
7. Higher Margin to retailers.
8. Marketing to invoke patriotic
sentiments.
9. Improved cost structure.
10. Segment oriented product strategy.
Marketing Management and Strategic Issues Group 4: Voltas Case Study

6. Conclusion

Voltas as a company was very comfortable in its initial position as a market leader and did not
keep itself updated technologically with the changing times, changing customer demands and
evolving economic landscape. This complacency resulted in Voltas severely losing its strong
market positioning to new foreign entrants who revolutionized the Indian AC market. A Strategic
evaluation of the company in all facets helped Voltas take appropriate transformation steps and
better reposition it’s offering that eventually helped it regain the top position in the Indian air-
conditioning market.