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Straddling Both Worlds All things change, and we change with
them A look at the Indian corporate landscape through the glasses of hindsight will have you concluding that most the country's captains of industry haven't heard of this adage (but then who reads Latin these days?). A few, however, did change, along with the environment. Reliance is the first name that comes to mind-once the licence raj died, the Ambanis realised that just facing off with competitors like Bombay Dyeing wasn't enough. They had to think global. In contrast, Kumar Mangalam Birla one not-so-fine day found himself at the helm of a huge global empire. Since then, he's done plenty to bring some method into the madness of his domestic empire, reducing its dependence on the increasingly cyclical commodities businesses, and foraying into sunrise sectors like insurance, and information technology. Reliance Industries
Almost 10 years before economic reforms were ushered in, the Ambanis were already integrating (backward). From a textiles producer, Reliance started making polyester filament yarn (PFY) there's been no looking back since. Today, the company has put up massive global-scale capacities of PFY, polyester stable fibre, polyethylene, ethylene, polymers, chemicals, fibres and fibre intermediates. It's these huge capacities that give Reliance economies of scale, and make it competitive in an era of falling import tariffs. Over the years, Reliance also proved to the world that core competence isn't about sticking to the knitting, but about developing the skills required to put up new projects and getting the right people to do so-whether the business is petrochemicals, or petroleum, or it and telecom infrastructure, or insurance really doesn't matter. A.V. Birla Group
If the Ambanis were frantically upping capacities, Birla had the not-so-happy task of dismantling a disparate set of businesses that made sense in the licence raj but not post-reforms. And to his credit, he hasn't done badly for himself. He showed his peers how one has to be ruthless and unattached when it comes to rationalising, by shutting down the rather esoteric sea water magnesia business. And that's only the beginning, as Birla has decided that he doesn't want to be in areas where he can't assume leadership status. On the other hand, in sectors that he does fancy his chances, the 33-year-old chairman is pulling out all the stops on the acquisition front. So in cement, he's picked up Dharani Cement and Digvijay Cement. In readymade apparels, he pocketed the brands of Madura Garments. And last fortnight, he convinced analysts that the A.V. Birla group is keen on the it sector-keen enough to pick up Group Bull's stake in psi Data Systems. Birla's also made sure that he doesn't miss out on the financial services sector by tying up with Sun Life of Canada for insurance and mutual funds. -Brian Carvalho The Empire Strikes Back In the mid-1990s, Rahul Bajaj, perhaps the most vocal representative of the Bombay Club, declaimed loud and clear that invading global giants will wipe out Indian companies because of the lack of a level playing field. But the plea for protection fell on deaf ears, and India Inc. was faced with only two choices-change or perish.
Some took up the challenge more seriously than others, each responding differently. Ironically, Bajaj was one of them. When the consumers' preference changed from scooters to motorcycles, Bajaj Auto reconfigured itself to sell more bikes and less of scooters. It not only launched an array of new bike models at all price points, but also made its production facilities flexible enough to produce bikes, scooters, and scooterettes from the same assembly line in a plant. Bajaj may have reacted a bit late in the day, but Tata Steel didn't lose any time. In the early nineties itself, when two-third of its production was in long products like rails and roads, the company realised that with the entry of automobile and white goods manufacturers, the demand for steel will largely shift towards flat rolled products. There was also the threat of cheaper imports from the south-east Asian countries. With a huge capital expenditure of Rs 7,000 crore, Tata Steel added two million tonnes of capacities and modernised all facilities. Flats now account for two-thirds of its sales and its products are preferred against imports. At the first sign of Lafarge entering India, cement companies like acc, Grasim, Gujarat Ambuja, and Indian Cements quickly modernised and acquired companies to consolidate their positions. Other companies have restructured themselves, sticking to core businesses. Siemens India, the local affiliate of Siemens AG, hived off its automotive system and telecom businesses and Larsen & Toubro, the cement and capital goods giant, is spinning off the cement division to attract a strategic investor. All these have not only freed resources and management time but also brought much needed cash and focus into the priority businesses. Says R. Besold, Head of automation and drivers business in Siemens: ''We and companies like us had no choice but to restructure to remain competitive.'' Companies also worked at reducing costs and improving productivity. Tata Steel cut raw material consumption by a massive 25 per cent and improved steel production per employee three and a half times over a decade. And faced with the near zero import duty on capital goods, L&T slashed production costs by setting up a high-tech component facility and by sourcing low-tech components globally. Change is even happening in sectors like pharmaceuticals that still face controls. Gearing up for the product-patent regime that will dawn in 2005, some pharma companies like Dr Reddy's Laboratories, Ranbaxy, Torrent, Wockhardt, Sun Pharma, Cipla, and Nicholas Piramal are creating new drug molecules, investing in R&D, forging marketing alliances and acquiring companies to consolidate their positions. Of course, all this became easier to do after 1991. The reforms have opened up more avenues of raising resources. Dr Reddy's has used this window of opportunity to its advantage increasing its R&D spend from around 3 per cent of turnover in the early 1990s to 7 per cent now. Clearly, India Inc. is learning how to cope with competition, albeit slowly. ''Till now,'' says at Kearney Director Patu Keswani, ''the pain of change was more than the pain of not changing.'' With competition intensifying, the reverse will be true. Companies, he says, are realising this. Those who are yet to wake up to this may find it too late. -Additional
reporting by Abir Pal, E. K. Sharma, |
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