19 – The PC Rebel

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CEO
& MD: RAJ KUMAR SARAF

The story of Zenith has always been interesting and the unwavering spirit of the
company has brought forth many an example of one-upmanship in the Indian IT industry. Be
it the pioneering moves in networking at the start of the decade or the branding of its
own PC range, the company has always stood up to the market in unique ways, sometimes
defying existing market models.

If the prevailing model is to distribute MNC brands and
earn in services, Zenith chooses to go exactly the other way. CEO & MD Raj Saraf terms
this as Zenith’s transformation from a solutions and distribution company to a
products company. He likens it to a Compaq, Dell, or the PC division of IBM. Lofty indeed,
Saraf is busy working on achieving the top slot in the branded PC market in the country.
And it has already
zenith2.jpg (9495 bytes)become the third-largest PC vendor in the country.

Nearly 87 percent of the revenues came in from system
sales, amounting to Rs 157 crore. Of that, about Rs 131 crore came in from Zenith’s
own brand, a neat 72 percent. That speaks for the success of the Zenith brand. IBM and HP
brought in the rest.

Smart timing explains Zenith’s marketing success.
First, launching the right product at the

S T R A T
E G Y
  • To use effective sourcing options to build a family of
    PCs for various market segments at MNC quality levels and lesser prices.

T A C T I C S

  • Get into a market once it starts developing.
  • Give product options–current and future. Catch both
    the waves–receding and oncoming.
  • Be prepared with product plans in advance…launch at
    speed.
  • To attain newer (lower) price points so that the
    advantage of gray market is nullified while maintaining the quality levels of a national
    brand.

O B J E C T I V E S

  • To attain # 1 position in the PC market, or at least
    maintain the current position.
  • Introduce products round the year as and when the gaps
    emerge.
  • To gain crucial marketshare in the ever-growing FTU
    segment as well as the emerging SME segment.

P E R F O R M A N C E H I G H L I G H T S

  • Grew at 24 percent to touch Rs 180 crore.
  • 72 percent revenue came in from its own brand.
  • Launched the lowest-ever multimedia home PC at Rs 33,000

PRODUCTS AND SERVICES:
Systems, Peripherals, Networking, Packaged Software
* START-UP YEAR: 1981 * EMPLOYEES: 628 * DEALER OUTLETS: 288 * QUALITY CERTIFICATION: ISO 9002 * ADDRESS: Zenith House, 29, MIDC
Central Road, Andheri(E), Mumbai 400093
* TEL: 8377300, 8366030 * FAX: 8377297

right time. The trick is to launch a product which
is configured just right for the market, neither under nor over. For instance, before the
Zenith Home PC launch in April, Intel had insisted that only the PII machine should be
launched. Instead, Zenith launched both Pentium and PII to catch the tide both ways.
Second, the company clearly understands the usage and market segments and adjusts the
timing according to that. In the next three months, Zenith will be launching a machine for
the Internet segment.

Zenith does enjoy an advantage in trailing the MNC
vendors because they take up the market development activity. Zenith never had to create
market segments for itself. In fact, the company’s smartness lies in identifying gaps
and filling them up with its own product—which is made ready just in time.

In the race for the top slot in the PC segment, Zenith
competes with the mightiest forces in the global PC industry. Because of Zenith’s
scale of operations, it gets very favorable sourcing options for components. Just-in-time
sourcing and production have an impact on inventory levels and manufacturing cost.
Compared to any MNC, Zenith has lower administrative costs and overheads.

To increase market reach, Zenith has expanded its
channel strength to 310 dealers and resellers across the country. Networking and
datacommunications being an integral part of PC these days, Zenith is tying up with 3Com
for its range of products. Retailing of PCs is still a year away. It may be recalled that
Zenith was the first company to venture into retail distribution three years back. But
since the retail market didn’t pick up as per the expectations of the company, it
aborted the idea.

Saraf has one, pointed goal for the current year—to
maintain its position in the PC market, if not climb up to the # 1 position. Even to
maintain its current stature, Zenith will have to contend with an IBM on the rebound, a
Wipro relaunched, and an Acer without a prefix. The key to Zenith’s volume game will
be the ease with which Saraf is able to source out components and the amount of pressure
he is able to apply on his margins. The most obvious route that this tactic could take is
by sacrificing margins for volumes and eat into marketshares of competitors.

zenith3.jpg (21546 bytes)Zenith has generally been hailed as the industry’s barometer. It is this
uncanny knack for spotting the winner in a technology maze that has given Zenith’s
customers the confidence in the company. However, in order to push the advantage further,
Saraf will probably have to scale his portfolio one notch higher. While till now, he has
been homing in on the First Time User (FTU) market, it may just be the time to expand
laterally into the corporate market. That the corporate market is price-insensitive is a
myth that has already been blown. Saraf can use the tremendous gains that he has made in
the last year by offering a value proposition to the corporate users, especially in the
Small and Medium Enterprise (SME) category which, in the current tough and illiquid
market, may find a bargain in Zenith.

Another issue that Zenith will need to contend with, if
the volumes have to be ramped up, is one of reach. While Zenith is and has been
traditionally strong in the metros in the country, volumes will have to come from a
combination of metros and mini-metros. Here Zenith’s distribution channels are,
simply put, inadequate. The current year will be a good one for Zenith to consolidate its
channel strategy, get a coherent marketing action in place, which will factor in
countrywide channels. And, as the economy begins its upward motion, Zenith will be in a
better position to move volumes.

It is to be seen how Zenith, and its savvy boss, put
pressure on the MNC companies, both through marketing as well as other means. For
instance, Saraf is the head of a MAIT panel for recommending as to how PSUs should be
brought round to jettisoning the ‘only MNC PC’ buying pattern. Saraf is
extremely bulish about the outcome. And it will be a measure of Zenith’s success if
the company is able to capitalize on the changed stance of the PSUs—if and when that
happen.

In more ways than one, this will be a year of reckoning
for Zenith.

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