Case-Study on Voltas AC

TEAM NO 5 IIT KHARAGPUR

Abstract  For most of it’s history, Wokas was the leading brand of Indian AC market, which was characterized by the dominance of only two players in the organized market. The somewhat dramatic arrival of all leading global brands changed the demographics of the industry. The survival of the brand Wokas is under threat from all quarters. Newer offerings have flooded the market and Wokas’ credibility and superiority is questioned. The motivation to buy Wokas is presently low and not being helped by the fact that its offered features don’t match up to competition. Dealers are underselling the brand and service centres are apathetic to customer complaints. The increased affordability of AC’s necessitates targeting more customer segments due to the emergence of the middle class. A failed advertising campaign in the recent past has worsened the situation. The recent attempts at improving the situation, like introducing AMC’s etc., have not resulted in a revival of the brand. Thus, the problem is identified as one of brand repositioning, where we are trying to modify the company’s strategy to focus on the brand’s competitiveness. Prior to repositioning the brand, a comprehensive situational analysis has been carried out detailing strengths, weaknesses, opportunities and threats (SWOT). The exercise of repositioning the brand is carried out in two phases. The actions to be implemented in each phase are reasoned out based on the priority of the goals they help to fulfil and the effectiveness in attaining those goals given the constraints. We are aiming to infuse the brand with a new spirit through innovative technologies and customer care initiatives. Our proposed two phase action plan covers various aspects of the ‐

company’s operations including production levels, advertising focus, R&D priorities and customer service strategies.

Detailed Report 

Key Issues: Brand repositioning, perfectly competitive market, globalisation, technology development, new market segments.

Situation Analysis: In the transition from a purely national industry to global industry, the erstwhile leader in AC market ‘Wokas’ finds itself in the midst of a situation where in the survival of it’s brand is at stake. ‐

Extrinsic and intrinsic factors governing the current situation are: Strengths •

•

•

•

Good knowledge of Indian consumer and the AC market Expertise in local and international industrial markets Technically competent as all other brands Backed by the most respected business group of India

Weaknesses •

•

• •

•

Opportunities • • •

Unprecedented growth in AC industry Excise duty exemptions in certain areas Future demand for CFC free ACs

• • •

Negative brand image in the eyes of  customers specially resellers Developed technologies not in sync with market demand Abysmal levels of customer service Manufacturing units affected by unfavourable government legislations Incompetent PR department and media’s cold shoulder Threats Increasingly competitive market Price war Cheap Chinese imports

Analysis of brand Wokas according to McKinsey Brand Diamond (Copeland):

•

Nostalgia

•

Respect

•

Patriotic fervour

•

Faith

•

Low cost

•

Prestigious overseas projects

•

World class technology

•

Industrial expertise

Problems, plausible solutions, their critical evaluation and our recommendations: In the following tables, we have stated various possible solutions and based on their critical evaluation we have assigned them priority in which they are to be undertaken.

Pre Sales Pitch Problems Many retailers, being dissatisfied customers, discourage prospective buyers. Sales inquiries neglected

Plausible Solutions

Critical Evaluation

Priority

Central database of all customers and priority servicing for retailers

Affects immediate sales and brand image positively

First

Routing of all inquiries through a nationwide toll free number service by call centre

Effective but will consume time and money

N/A

Setting up of priority dealers who stock all variants

Consumer will have access to entire product line but needs widespread advertisements

First

Profit margins of dealers should be proportional to targets achieved

Increased sales will offset apparent reduction of  company profits

First

After sales services Problems Dismal record of  authorized service centres

Lacklustre response of authorized centres to AMC

Plausible Solutions Periodic surveys on quality of service followed by appropriate rewards and punishments

Critical Evaluation Not effective when damage has been done

Priority

N/A

Setup a central database to track all maintenance performed at the service centres (Rao, 2000).

Senior management must follow up data collected to ensure quality service within a reasonable timeframe

First

Advertising campaign promising redressal within specified time failing which service provided free of  charge–equip service centres Sell AC’s at different prices based on length of  warranty specified

Convert major weakness to strength

First

A portion of price difference can be used to finance risk transfer agreements leading to guaranteed profits a part of which can be transferred to authorized centres thereby increasing popularity of AMC’s among them

First

Increased warranty will increase sales immediately.

Periodic service as per schedule of  AMC’s not adhered to

Central coordination of  periodic services through the central database

Central database unit can coordinate this

First

Focus Sectors Problems Presence of vastly divergent consumer segments(household, industrial) requiring specialized products and marketing strategies

Plausible Solutions

Critical Evaluation

Priority

Choosing industrial focus areas based on the market growth in the segment (exhibit A)

Previously unexplored market segments might require huge marketing and R&D costs

Second

Focusing on household markets where Wokas is relatively better off 

Might exclude high return segments

First

New technologies Problems Does not possess many in demand technologies Unprepared for possible demand for CFC compliance

Plausible Solutions Increase spending on R&D to develop new product lines

License the technology

Critical Evaluation Cheap but impeccable standard of R&D available in India Very costly

Priority First

N/A

‐

Enter into JV’s

Increase R&D thrust for developing this technology

No local companies and poor brand image may hamper this

N/A

Will provide customised solutions leading to reduced production costs and better technologies

Second

Customer Finance Schemes Problems Lack of attractive customer finance schemes

Plausible Solutions Implement zero percent interest scheme ‐

Implement floating financial schemes where interest rate is dependent on loan duration. Longer duration will attract higher interests but lower EMI with the provision of a zero interest payback period

Critical Evaluation Short loan period and higher EMI as well as high default rate

Will appeal to both urban and semi urban consumers and reduce default rate

Priority

N/A

First

‐

Government Legislations Problems Competitors have manufacturing facilities at duty free locations while Wokas does not ‐

Plausible Solutions Set up manufacturing units in the duty free areas ‐

Critical Evaluation Setup costs rise with time, but rise in demand will offset this

Priority First

Globalization Problems Lack of major presence in the lucrative international markets

Plausible Solutions Start with a Global strategy (Ghosal, 1989) and migrate to Trans national ‐

Start with International strategy and migrate to Trans national ‐

Joint ventures with local players

Critical Evaluation Low cost engineering in India, implies Wokas should focus on Global Strategy for industrial market as cooling solutions are specialised and lack generic geographical similarity.

International strategy is preferable for household segments; higher initial investment, longer gestation period and no foothold in the segment makes it unattractive

In the household segment, it will open up new markets and give access to new technologies, but diminished returns makes it unattractive

Priority First

Second

N/A

Reco

mende

course of  actio :

Brand Repositionin Based on t e critical evaluation of the above parameters w have come up with a plan of action to r position th Wokas brand. We hav depicted the current a d aspired b and position below:

• rand imag oldest player, outdated technology, low d pendabilit • ery low br nd visibilit • echnically ompetent, cheapest product ‐

Cur ent

?

Int rim

• rand imag contemporary , tec savvy, hig credibilit , Indianness • ery high brand visibili y globally • I novative, resence a ross consumer segment ‐

Aspired

Accordi g to a McKinsey study, securing the customer’s “permission” before repositioning a y brand is necessary; here, “permission” amounts to a reasonable and logical extension f the brand’s current image in the customer’s eyes. Since our aspired image is so f ar removed from the current image,

e are forced to choose an “interim positioning” strategy.

Accordi g to Keller t al., we ha e to clearly define thre aspects with respect to any brand osition: a frame of referenc , differentiating points nd points o parity. In our case, the frame of ref erence is a user friendly co ling solutio for Indian ummers. E ch phase of  our propos d two phase action ‐

‐

plan ac ieves a distinct set of di ferentiating points and points of pa ity. Our proposed interi

position i :

•

Brand imag –oldest player evolvin with time, ignificantly raised depe dability

•

Improved b and visibilit in national media

•

Improved technology d liverables, high growth in SOHO

ACTION PLAN PHASE 1: 1) Top brass of marketing takes dealer network into confidence by informing them about new company policies, implied expectations and incentives (as given in table) 2) Impart refresher training to service centre personnel 3) Set up a new customer care initiative which promises redressal of customer grievances within a specific time frame, failing which all charges will be waived. ‐

4) Hire and train a call centre to handle customer grievances by enabling coordination with the relevant service centre and maintaining a central database 5) R&D develops technical specifications and production methods for new SOHO product line; also increases production process capability to provide industrial cooling solutions 6) Maintain minimal production level while upgrading production facility to produce new line. 7) Offer discounts and various promotions to clear present stock from retail inventory. 8) Develop advertising campaign highlighting the support of the parent brand in the new customer care initiatives (TV ads) and other discounts and promotions (print media). Major thrust should be on the credibility of the personality featuring in the campaign. 9) Start industrial advertising (trade fairs, magazines, yellow pages, journals etc) required to enter earmarked commercial sectors. 10) Buy land and set up a manufacturing facility in tax exempt zones. 11) Set up priority dealers in urban areas. 12) Start production of new products at minimal levels.

PHASE 2: 1) Advertise the new product line, highlighting the innovations in both technology (adaptive cooling, debugging console, power budgeting etc.) and customer care, in a way which appeals to the contemporary Indian. A possible tagline is: “The intelligent AC which cares”. 2) Production capacity for the new range is increased to meet demands. 3) The new range has models priced for budget, mid range and premium users, a fact reflected ‐

in the advertisements. 4) Implement the aforementioned floating financing scheme 5) Set targets for profitability and customer satisfaction in SOHO 6) Set targets for market share in earmarked local and global commercial sectors 7) R&D priorities shift to developing specific commercial solutions and CFC compliances ‐

8) Implement global strategy for entry into international commercial sectors 9) Ensure continued compliance with the high service standards

Exhibits:

(A)Market growth rate 30 25 20 15 10 5 0

(B) Simulation of floating financial scheme.

(C) Simulation of Extended Warranty scheme involving hedging.

(D)Price Advantage of Wokas 8000 7000 6000 5000 4000 Window AC 3000

High Wall Split

2000 1000 0

Bibliography Copeland, J. T. Successful Brand repositioning: Aspirational vs Achievable Strategies. McKinsey Marketing Solutions. Ghosal, C. B. (1989). Managing across Borders: the transnational solution. Harvard: Harvard Business School Press. Kevin Keller, B. S. (2002). Three Questions You Need to ask about your brand. Harvard Business School. Rao, S. S. (2000). Enterprise resource planning: business needs and technologies. MCB UP Ltd.