This is the tale of a company that felt so secure in its dominant
position in the room AC market that it completely failed to anticipate the changing
challenges in a liberalising market environment. Plus, it made very expensive mistakes, so
that by the time it realised it must focus, it had lost major ground.
The US-based Carrier entered the Indian market in 1987-88,
to challenge Voltas' dominance in room air-conditioners. It did not lose any time in
beating back Voltas, garnering as it did about 32 per cent of the windows AC market. But
Voltas probably did not get a very shocking jolt, since the two did manage to share enough
of the market till 1997. Till the Korean chaebols, other MNCs and joint ventures came in
to change the rules of the game.
Between 1995 and 1998, Voltas went through rough times.
After a bad investment decision in the acquisition of Hyderabad Allwyn, the company went
in for a major restructuring effort, including several divestments, a VRS, and hiving off
of its huge white goods business to Electrolux. The foods division was closed down too and
the company decided to concentrate on what it felt were its core competencies --
air-conditioners and engineering goods. In 1998, it launched as many as 44 models of room
Its troubles, however, were far from over. The company had lost significant market share
to Carrier and it continued to be burdened with excess manpower that drained kept it from
achieving much needed profits.
Voltas is now trying to undo its past misfortunes by
concentrating on activities that it believes will give its products the much-required
boost. It has committed itself to an investment of Rs 70 crore in research and
development, in order to improve product features and diversify its range of room ACs to
satisfy perceived customer needs in different segments. It
has introduced 44 new models in the last one year,
including window, floor, ceiling and wall mounted ACs with highly efficient rotary
compressors and microprocessor controls. The company has adapted technology from Toshiba
and tropicalised its products for optimum performance in Indian conditions -- in terms of
climate and power supply.
Its advertising refers to the size of the company, its
long past as an air-conditioning major and the emphasis is on its wide product portfolio.
Its ad strapline says: "You name it, we cool it." The company has also initiated
certain customer focussed programs that it feels will improve its image in the market.
These programs focus on improving product delivery schedules,setting in place customer
contact points and efficient after sales service.
But the competitive
scenario has changed and other players are offering a lot for consumers
to choose from. From the consumer's point of view, Voltas,
as a brand name, will probably have to show clear indications
of shrugging off the baggage of its protected-economy
past and of carrying its inherent strength in its core
areas of expertise forward, to reflect modern, cutting-edge