Business Strategy In The Changing World – Weston Electronics
Posted in Operations & IT Articles, Total Reads: 2330
, Published on 02 August 2012
Economic reforms directly affect the business and industry. Companies have to respond to the changed business environment resulting from the policies. The Economic reforms introduced in India in 1991 had drastically altered the economics of the then market environment. A liberalized policy regime leads to competition, reduction in cost, up-gradation of technology, improvement in quality and customer convenience.
Abolition of government restrictions on production capacity also contributes to increased choices for the customer.Prices are deregulated and investment takes place in the areas of demand. Industry operates and expands in response to market forces. All these changes can be attributed largely to the buyer, the sovereign of the market. Liberalization acutely affected most of the Indian companies which until then were functioning in a closed economy. They had to adapt themselves to the highly competitive landscape. In this article we examine the resurgence of a consumer electronics brand Weston Electronics. It is one of the lesser talked about ripostes but no less intriguing.
Weston Electronics - Background
Weston is a domestic brand that was synonymous with black-and-white TV during the 1980s. It was during this period when television was introduced to India and Weston took the market by storm. Under its promoter Sundar Vachani, Weston was the market leader. But post liberalization things changed for the worse. Weston Electronics which held about 18% of the television market had been virtually thrown out of the market due to cut throat competition and technological backwardness. The company's export business, too, crashed with the collapse of the USSR. It disappeared from market with the same speed as that of its ascent.It was only in 1993, when Sunil Vachani, son of Sundar Vachani took over that the brand got a new lease of life.
Despite the gloomy scenario, Vachani junior surprisingly ventured into televisions. His objective was to partner with the MNCs rather than confront them. The strategy he adopted to work with the MNCs was to be the lowest cost manufacturer.As financial institutions were skeptical of the venture Sunil took a loan of Rs. 4 million from his father and set up a small unit in Noida. Thus began the journey of Dixon Technologies with the goal of becoming the cost leader in the OEM space.
In order to keep the manufacturing costs low Dixon strategically chose the location of its units. It set up its factories in Parwanu, Jammu, Dehradun and Mohali thereby gaining excise and tax benefits. VAT-exempt locations contributed in saving about 8 per cent on cost, while excise-free zones turned in a benefit of about 5 per cent.
Economies of Scale & Related Diversification
By 2007 the company has increased its production capacity from 100,000 television sets a year to 1.2 million sets. It then had over-10 per cent share of the 13-million units CTV market.Dixon also got into manufacturing of DVD players which were private labels for Onida, Phillips, Bajaj and TCL brands. The common infrastructure for different product categories helped generate volumes. The scale of operation reinforced its aim of becoming a low cost leader.
Dixon sourced most of its equipment from closed factories. It purchased used machinery at a fraction of the original price. This reduced both the investment and subsequent interest payments.
Dixon Technologies did not compromise on quality to achieve low cost leadership rather it believed that “low cost comes with great quality”.
Dixon stressed on increased productivity by plugging potential sources of waste. It employed separate groups to address rework, idle time, inefficient energy consumption, higher scrap generation, etc. They believed in doing things right the first time.
Dixon pursued incremental innovation similar to kaizen to improve productivity. For instance, the company took corrective actions when it identified that production during the first hour of the morning shift was 20 to 30 per cent lower than the average. It ensured that the buses carrying the workers reached on time, the line machines were full and switched on.
"My Machine" concept
This is an offshoot of Deming’s principles of QMS wherein workers are given complete ownership of the machines and are empowered to take decisions during production.
There was a palpable improvement in productivity. For example, within a few months one assembly line was making 300 Printed Circuit Boards (PCBs) in an hour instead of 250. A strict scrap generation and rejections process ensured that the company's rejection rate was also down considerably:0.02 per cent in 2007 from 3 per cent three years ago, which is a best in class figure.
Quality Management & Partnering along Supply Chain
Dixon implemented international quality measures like Six Sigma and also collaborated with its customers like LG and Phillips to share their technological know-how and best practices with its workers.
Back “in the black”
The clear strategy and its clinical execution bore results for Dixon Technologies. Revenues started increasing and in the FY 2006-2007 the company grew by 30% to Rs. 500 crore. In November 2006 it won a contract from the TN Government to manufacture 900,000,14 inch TV sets upsetting LG, Sanyo and other Chinese manufacturers. In 2007 the Company won the best quality vendor award from LG Electronics India. Dixon became one of the largest OEM to big names like LG Electronics, Philips India and TCL.
The company is also reportedly the second largest exporter of CTVs (in the OEM category) in the country.Dixon Technologies is capitalizing on its competitive advantage of a strong client base and the growing consumer durables segment. It is scaling up the value chain by sourcing complete material and designing.
Amidst all these the Company re-launched Weston Electronics in the year 2004 in Punjab and U.P.Priced at Rs. 5,990 for a flat CTV, Weston is being positioned on the 'value-for money' plank. The company has employed a lean management team and has a 'cash and carry' policy for its distributors. The company has also introduced DVDs under its Weston brand in A&B category towns in July 2005. After gaining 9% share of that market it embarked on a national launch of the television.It then focused on expanding its product range, consolidating its base in semi-urban and rural areas, tapping urban areas, setting up new production facilities and strengthening its distribution network.
Currently Weston manufactures CTVs, LCDs, LEDs, DVD players and washing machines. The company provides "True Value" to its customers by making technologically advanced, safe and high quality products available at affordable prices, backed up by a comprehensive after sales network. Its core proposition is “Value for money” and promises affordability, reliability, state of the art technology and great styling. Weston caters to India though a wide network of more than 200 distributors and 3000 + retailers.
The tale of Dixon Technologies India Pvt Ltd is quite enthralling. The amount of see-sawing the company's brand Weston has witnessed – from a market leader to a virtual non-entity followed by its revival – is a case worth discussing in the hallowed portals of management. It vindicates the need for new strategies, high technologies, determined efforts, enthusiasm, organization and leadership. New approaches, systems structures and new leadership must emerge to compete with the multinationals. We must learn from the past, bury its failures and start working with new endeavor, approaches and leadership.
This article has been authored by Niladri Majumdar from IMT Ghaziabad.