y Incorporated in 1953 by the Government of India as a Machine Tool manufacturing company.

y Over the years diversified into Watches, Tractors, Printing Machinery, Metal Forming Presses, Die Casting & Plastic Processing Machinery, CNC Systems & Bearings. y Successful technology absorption in all product groups through collaborations with world renowned manu- facturers & further strengthened by continuous inhouse R&D. y Today, HMT comprises five subsidiaries under the ambit of a Holding Company, which also manages the Tractors Business directly.

Our Corporate Objectives & Goals

y y y y y To encourage the modernisation of Indian Industry through the supply of engineering goods and services of world class excellence To maintain technological leadership through continuous efforts to update product technology and manufacturing methods To globalise our operations by developing a mix of international markets and businesses To ensure a satisfactory return on capital employed, to meet the growth needs and the aspirations of our stakeholders To present an active, pleasant and productive working environment

HMT Limited, with a diverse range of products, over 18 manufacturing units and a countrywide well established marketing network restructured its various businesses into different subsidiaries under the ambit of a holding company. The constituent subsidiaries of HMT Limited are as below while the holding company retains the Tractors Business Group. Sl.No. Name of Subsidiary 1 2 3 4 5 6 HMT Machine Tools Limited HMT Watches Limited HMT Chinar Watches Limited HMT International Limited HMT Bearings Limited Praga Tools Limited % Holding 100 100 100 100 97.25 51.00

The Holding Company with its Corporate Head Quarters at Bangalore forms the hub for the activities of the different subsidiaries. The Holding Company while ensuring good corporate governance also pursues strategies such as y y y y y Creation of strategic alliances, Development of brand equity, Provision of strategic planning inputs, Interface with regulatory agencies, Creation and maintenance of data warehouse with suitable corporate informational data for the use of all subsidiaries.

The profile of the Tractors Business Group is as follows.

HMTs TRACTORS BUSINESS HMTs Tractor business commenced its operations in 1971 in technical collaboration with M/s MOTOKOV, Czechoslovakia Republic. Initially, HMT started the operation with the manufacture of 25 HP Tractor at the manufacturing plant established in Pinjore, Haryana State. Over the years, it has developed Tractors ranging from 25 HP to 75 HP. The company achieved market leadership in tractors by enlarging its range to cover most of the applications for the farming community. Currently the company has three tractor manufacturing units in India located at Pinjore in Haryana, Mohali in Punjab and Hyderabad in Andhra Pradesh. It has a well equipped R&D Center duly recognized by the Department of Scientific and Industrial Research , the Government of India. The Tractor Business Group of HMT has been a proud recipient of a number of National Level - Productivity Awards. It has also been certified for ISO-9001 by KEMA, Netherlands. It has an installed capacity of 18,000 Tractors for manufacturing and assembly operations. It has an in-house marketing organization comprising 17 Area Offices, 11 Stockyards and over 300 Dealers spread across the country. HMT Tractors Group is ably supported by over 40 Ancillary Units. It has qualified and experienced workforce. HMT has produced and marketed over 3,60,000 Tractors since inception in India and abroad.

HMT Fast Forward

It was in the early post independence era that, HMT began in a small way to meet a big commitment; 'To manufacture mother machines to build modern industrial India'. HMT was conceived by the Government of India in 1949, and was incorporated in 1953, with the objective of producing a limited range of machine tools, required for building an industrial edifice for the country. THE 1960's: With the success achieved in the initial years in absorbing the technology and in attaining production competence far ahead of the original plans, the Company launched a bold plan of diversification and expansion which resulted in the duplication of the Bangalore Unit and the setting up of new units at Pinjore, Kalamassery and Hyderabad. In 1967, recession struck the Indian Engineering Industry and the consumption of machine tools dipped drastically. The traumatic years of recession did indeed serve to bring to the fore two latent strengths of HMT, namely, the urge to survive and the confidence to innovate. With these strengths at full play, the Company emerged from the recession: With the world's widest range of machine tools and associated services under a single corporate entity. With action plans firmly launched for diversification into Tractors, Presses and Press Brakes, Printing Machines, Die Casting and Plastic Injection Moulding Machines, Horological Machinery, etc., which were considered to have economic cycles that are different from those of machine tools. With a Watch Factory already established in 1961-62, additional capacities for watch production were contemplated to provide a greater cushion against cyclical fluctuations in capital goods markets and also to meet the burgeoning demand for watches. With export markets of enormous potential under active development.

THE 1970's: The 70s witnessed the fructification of all the diversification plans as envisaged. HMT setup HMT International Limited as a subsidiary company to channel HMT's products and technical services abroad.

Two more units for manufacture of Watches, one at Srinagar and one at Tumkur HMT took over Machine Tool Corporation at Ajmer as its sixth machine tool unit.

THE 1980's: In the 80s, HMT as a part of vertical integration efforts, launched units to manufacture Watches at Ranibagh Watch Cases at Bangalore Stepper Motors at Tumkur CNC Systems at Bangalore Ball screws for use on CNC machines at Bangalore etc.,. Also HMT took over Indo-Nippon Precision Bearings Ltd, a state owned unit as a subsidiary, which was renamed HMT-Bearings Ltd. HMT took over Praga Tools Ltd as another subsidiary. THE 1990's: The Company restructured itself into five Business Groups viz., Machine Tools, Watches, Tractors, Industrial Machinery and Engineering Components as part of Business Reorganisation. The New Millennium HMT is now restructured with addition of three more subsidiaries to those already existing. HMT now comprises of six subsidiaries under the ambit of the Holding Company which also manages the Tractors business directly. HMT Machine Tools Limited, Bangalore HMT Watches Limited, Bangalore HMT Chinar Watches Limited, Jammu HMT Bearings Limited, Hyderabad Praga Tools Limited, Hyderabad HMT (International) Limited, Bangalore The strategic plans of the HMT group is coordinated by the holding company at Bangalore. To navigate through the challenges of the new millennium, HMT seeks strategic alliances from global leaders to synergise its own strengths with symbiotic inputs from the partners. For us, the whole world of opportunities is ahead to emerge as a global engineering conglomerate.

FINANCIAL INFORMATION 5 Years Financial Summary

(HMT Watches Limited)
(Rupees Millions) OPERATING STATISTICS 20082009 20072008 20062007 20052006 20042005

Sales Other Income

*

135.2 35.9 -30.6

151.4 61.0 13.6

368.8 347.5 -20.6

218.4 766.3 37.8

235.4 27.2 -91.7

Acc./Dec. due to WIP,Stock

Materials Employee Costs Other Costs Depreciation Earnings before interest & Tax Net Fixed Assets Working Capital Capital Employed Borrowings Working Capital Turnover Ratio Current Ratio Number of Employees

35.7 533.9 198.7 12.3 -640.1 121.3 -1487.0 -1362.7 9878.0 -ve 0.3 2050

54.5 536.5 201.6 15.0 -581.6 133.7 -1233.7 -1100.0 8506.4 -ve 0.39 2126

124.6 489.0 1203.1 19.5 -1140.5 122.0 -856.3 -734.3 7425.3 -ve 0.53 2145

90.5 579.3 364.4 22.8 -34.5 141.2 -931.7 -790.5 6365.4 -ve 0.58 2162

64.3 427.1 387.3 25.2 -732.0 164.6 -813.0 -648.4 5929.8 -ve 0.51 2180

*Includes Extra Ordinary Items.

FINANCIAL INFORMATION 5 Years Balance Sheet

(HMT Watches Limited)
(Rupees Millions)

.SOURCES OF FUNDS

As at 31.03.2009 31.03.2008 31.03.2007 31.03.2006 31.03.2005

Share Holders Funds - Capital Resources & Surplus Loan Funds

64.9 9878 9942.9

64.9 8506.4 8571.3

64.9 7425.3 7490.2

54.9 6365.4 6420.3

54.9 3.0 5929.8 5987.7

APPLICATION OF FUNDS Net Block Capital Work-inProgress Machinery in transit Investments Current assets Less: Current liabilities Net Current Assets (Working Capital) Misc. Expenditure Profit and Loss Account

123.6 0.7 0.1 644.8 2131.8 -1487.0 11305.5 9942.9

132.6 0.0 1.1 0.1 776.9 2010.6 -1233.7 6.3 9664.9 8571.3

120.7 0.2 1.1 0.1 979.7 1836.0 -856.3 29.0 8195.4 7490.2

140.2 0.2 0.8 0.1 926.9 1858.6 -931.7 973.4 6237.3 6420.3

162.4 0.2 2.0 0.1 837.6 1650.6 -813.0 1158.7 5477.3 5987.7

FINANCIAL INFORMATION Profit & Loss Account for the Year Ended 31st March 2008
(HMT Watches Limited)
(Rupees Millions)

EARNINGS

As at Year Ended Year Ended Year Ended Year Ended Year Ended 31.03.2009 31.03.2008 31.03.2007 31.03.2006 31.03.2005

Sales Transfer to Plant Other Income* Accretion / Decretion to WIP, Fin. Stock, Scrap

135.2 35.9

151.4 62.0

368.8 347.5

218.4 766.3

235.4 27.2

-30.6

13.7

-20.6

37.8

-90.7

140.5
Less : OUTGOINGS

227.1

695.7

1022.5

171.9

Materials Personnel Depreciation Other Expenses VRS Compensation written off Less: Jobs done for Internal Use Prior period adjustments

35.7 533.9 12.3 190.8 6.3 1.6 780.6

54.4 536.5 15.0 170.6 22.7 9.4 808.6 -581.5

124.6 489.0 19.5 251.1 944.0 8.0 1836.2 -1140.5

90.5 579.3 22.8 151.0 185.3 28.1 1057.0 -34.5

64.3 427.1 25.2 200.8 185.3 1.2 903.9 -732.0

Profit / (Loss) Before Interest & Tax

-640.1

* Including extra ordinary items

HMT WATCHES LIMITED

Citizens' Charter

HMT Limited, the first company to start watch manufacturing in India has incorporated "HMT WATCHES LIMITED" as its fully owned subsidiary on 9th August 1999. It manufactures Mechanical and Quartz Analog watches The manufacture of wristwatches started as part of diversification strategy of HMT in the year 1962, under Technical collaboration with CITIZEN Watch Company of Japan with a manufacturing unit at Bangalore. HMT WATCHES LIMITED comprises of three manufacturing units at Bangalore, Tumkur and Ranibagh while its marketing headquarters is based in Bangalore. The product range of HMT WATCHES LIMITED include more than 1500 models to choose from catering to all segments of the market, from Economy to Premium and Young to the Old. HMT brand enjoys a very high brand equity in the India Market. The brand has consecutively been adjudged as one of the best Indian brands in surveys by leading agencies in the country. HMT brand continues to be the main stream brand among major watch dealers in the domestic market. The Quality and Reliability of HMT watches has been the main selling feature and attraction of the consumer.

After going through a case study of Titan company (which discussed the data upto 1994-95), I tried to find out what happened to HMT after that. I expected that HMT must have been trying hard to get its lost market share back from Titan. But, the real story was something else. I am posting my findings as below: Study of performance of HMT during recent 5-7 years and analysis of what it did wrong and what it could have done better --------------------------------------------------Though HMT finally responded to the competition put by Titan, there were many other factors to the companys failure to gain the overall market share. As the case discusses the data upto 199495 only, we need to analyze the data after this period, to get information about the changes in the market. We will concentrate on the statistics of the market and performance of the organization in this period to understand why HMT failed to capitalize on positive moves later. Following analysis shows the problems that HMT faced and what it could have done better. 1. HMT had the overall market share of 26% during 1997-98 and it dropped to 14% during 200102. Out of this, HMT still had 70% market share of Mechanical watches during 1997-98, which increased to 94% during 2001-02. Company performed poor in Quartz market, it had market share of 8% for five year during 1998-2002. This shows how the sale of mechanical watches dropped drastically. The value curve for Mechanical watches kept falling and there was no driving force from HMT to oppose this. Mechanical Vs Quartz: HMT observed the demand for mechanical watches go down, largely because it focused more on competition from Quartz, instead of their own strength i.e. Mechanical watches. In the world market, still Mechanical watches hold a good position. A recent study shows that the Swiss watch industry exports of mechanical watches accounts for two-third of their total export value. While the Swiss watch industry did not accepted Quartz technology, they were able to make a point with mechanical watches in the watch industry. Exhibit-1 shows the growth of Swiss mechanical watch export in recent years. Conclusion-1: HMT could have emphasized on Mechanical watches only and could have provided a greater competition to Titan by selling over the strength of Mechanical watches. Some of them could have been as follows: a. Quartz watches are as reliable as mechanical, but the battery is a slip. You can not predict the life of the battery. b. The parts to replace are easily available for mechanical watches, but for age-old quartz watches, the battery would have been obsolete. c. Mechanical watches last longer (provided serviced on time), while quartz watches have lesser life because of the limited life-span of the electronic circuitry. Mechanical watches have good resale value. So, HMT could have made it a point that, if you want quality, class, precision and historical value, go for Mechanical watches. 2. HMT remained into losses for last 5 years. Exibit-2 shows the sales revenue of the company for last few years. Though it launched many watches to gain the market share into the quartz market, it could not capitalize on the success of these watches due to many reasons. Some of

these reasons are as follows: Advertisement: Exhibit-2 shows the 5 year data for expenses made towards advertisement by HMT. In year 2006, the expenditure was around Rs. 0.1 Cr. as against Rs. 4.5 Cr. in 2001. This puts a big question mark on the awareness level of the customers about HMT watches caused by lack of advertisement. This analysis becomes more critical, when compared with expenditure made by its competitor Titan. Exhibit-3 shows that Titan tripled its expenditure from Rs. 40 Cr. in 2001 to Rs. 133 Cr. in 2007. While titan engaged major celebrities like Amir Khan, Kapil Dev etc. for its advertisement, HMT advertisements went almost missing from print & electronic media. Conclusion 2: HMT could have made more advertisements to let its customer know about what they are producing. Underestimating the power of advertisement was one of the key factors for HMT to loose its market share. Also, HMT could have done some research on various new ways of advertisement. Retailer Stores: HMT hardly looked into their stores or took any big steps towards renovation of their stores. While Titan kept investing into renovation of its stores, similar efforts were missing from HMT. Conclusion-3: HMT could have spent more on consolidating and renovating the retail stores. Given the large distribution network the company had, it could have done it in phases. Exclusive HMT stores were hardly seen and this was also one of the major reasons for further decrease in sales. 3. Some of the decisions made by HMT were unreasonable given the production ability of the company itself. To meet requirements of the quartz market, company outsourced the production of various visual parts (dial, cases etc.) [Outsourced from Tennmax India Ltd.]. It got large these parts in large volume from this organization, while its own production capacity of dials and cases remained underutilized at 34% and 47% respectively. Conclusion-4: This clearly shows that there was large scope for optimization of the production facility. HMT could have used its existing production capabilities to meet the market requirements. As it was lagging behind in the production initially, producing of its own could have resulted in efficient production. This would have reduced the operating expenses also. It does not make sense to underutilize own production capabilities and go for outsourcing of the same parts. 4. HMT started outsourcing the watch manufacturing to other firms. Suspensions of services from these firms lead the problem of stopping them to use the HMT logo in their production. HMT also started to employ vendors with quite less experience and less technical expertise. Outsourcing led spurious watches in the market. HMT failed to act immediately and took 15 months to take follow-up action in July 2002. Conclusion-5: HMT needed to be more mature towards decision made for outsourcing of various parts, outsourcing of the watches manufacturing and they way they selected the vendors.

It could have handled the suspension of services more authentically to stop the spurious HMT watches in the market. 5. During recent years, HMT suffered from the high operating expenses and higher debts. It did a cut-off of staff in 2003 and sold some land it had in Bangalore to get near-term financial stability. Conclusion-6: Given the financial conditions of the company, it could have restructured its complete organization (HMT watch Ltd.). As the company was in losses for many years, company should revisit the vision of the company and evaluate itself in current market environment. 6. During 2000-01, around 15 million watches were sold at the lowest end of the market and of this only about seven million were branded. Bijou Kurien, vice-president, sales and marketing, Titan said: We found out that customers in this segment badly wanted a brand with which they could be associated with. Conclusion-7: There was a big opportunity in the lower segment in 2001-2002. HMT could have utilized this opportunity by putting more effort on advertisement and distribution of watches for this segment. 7. When Titan planned to play the volume game, it launched SONATA (1998) in the range of Rs. 300-1000. This was a major success for Titan in terms of sales. But, it was only after few years; Titan realized that, by entering into the lower segment, it has actually paid a price of its brand image in the luxury segment. It then decided to separate SONATA from Titan in 2002, as Mr Bijou Kurien, vice-president, sales and marketing said: Its a double-edged sword and we have constantly debated whether we should separate the two or not. NOTE: Please relate this to why Titan came-up with Timex for lower end and not with its own brand. This is what happened when they finally launched Titan brand in lower segment. Titan pushed SONATA into rural market also. The decisions made by Titan, shows the aggressiveness of the company towards the market and its changing dynamics. Titan was quite pro-active in their strategy. HMT, on the other hand, was reactive most of the times. It never had an innovative approach towards the market. Conclusion-8: When you are competing against an aggressive competitor, you have to be innovative. HMT needed to take the feedback from the market and make their strategy based on the data collected, and should not make moves just to counter the moves made by Titan. Following are few more things that HMT could have done:

1. Spin off a subsidiary for Quartz segment. While HMTs mechanical watches could have target the quality, class and elegance customers. Quartz subsidiary could have targeted the lower end market. 2. Innovation was the most important missing factor from HMTs culture and strategy all through years. It could have innovated various ways of advertisement (celebrities, discounts, sponsoring events etc.), marketing (renovating stores, making distribution channel more efficient etc.), getting customer feedback, adopt the changing market conditions etc. Attracting the young generation through media was completely missing. 3. HMT could have invested into R&D or hired some good designers to design new models of the watches. With customer looking for new varieties of watches after 2000, this could have boosted their market share. 4. HMT could have promoted different watches for different moods (e.g. formal, casual etc.). This would have resulted into sales of more than one watch to the same customer. 5. HMT could have collaborated with some of the good retailers of different brands (with big distribution network and good retails showrooms) to display and sell some newly launched models. An example can be television show rooms, which is present in almost all the cities.HMT could have been collaborated with some jeweler to launch the jewel watches. End Note: The study of GUCCI case provides the details of how the company turned around after it went to the extent of getting sold. This case also provides a lot of insight about various ways the production can be made efficient and marketing can be boosted. HMT badly needs marketing efforts to make its sales revenue go up and to get its old brand image back. At the same time, lots of efforts are required to make the production process more efficient. Interesting info: During 2002-2003 Titan wanted to buy 50% stake of HMT and restructure the Organization.

EXHIBIT 1 Mechanical watches export from Swiss Industry

CHF: Confederazione Helvetica (Swiss) Franc, currency Ref: http://www.fhs.ch/statistics/watchmaking_2006.pdf.

References: http://www.tata.com/titan http://www.hmtindia.com/ http://www.blonnet.com/ http://www.fhs.ch/ Posted by Ashu at 11:35 AM Labels: Business Strategy