"Tarla should focus on business opportunities that are in sync with the long-term visions of his group" Prakash Nedungadi, CEO and President, Madura Garments (AV Birla Group)

Mr Tarla has got a gameplan that is clearly dynamic and focused on his group's future. That is why, to cut a long story short, while he may hear out his friend K.K.'s suggestion, he shouldn't necessarily listen.

The case study raises some fundamental issues of corporate strategy and the role of the leader in a conglomerate. It is written in the context of the recent fads of business analysis. That is, a couple of years ago, things like brands and dotcoms were the darlings of the business analyst, while 'old economy' businesses were portrayed as the aged has-beens of the past. Now, two years later, the shoe is on the other foot. That is, the Old Economy has been rebranded the Real Economy, and is again looked at with favour, whereas the business of brands and new technology, are treated with scepticism.

The fact is that true business leaders do not see things that way. They do not change course every time the direction of wind in business changes. Instead, they steer the direction of their group firmly towards the long-term goal. This does not mean that their strategies are buried in the past, or that they are impervious to changes in the business environment.

In fact, their strategies are far-reaching into the future. Moreover, they maintain a certain sense of fluidity, so as to be able to respond appropriately to changes among consumers, and in technologies.

Hence, Tarla's views and decisions will not be based on the fads of the new economy versus old or real economy, or brands versus commodities. He would focus on business opportunities that are in harmony with his group values and in sync with the long-term vision of the group.

So let's analyse these two aspects-long-term vision and group values.

What is the long-term vision of the group?

In simple terms, with a solid base and strong cash generation, the vision would be among other things to have sustained predictable growth in shareholder value.

This implies: (i) Grabbing growth opportunities both in existing and new areas.

(ii) In each opportunity, focusing on competitive advantage (and being No 1 or No 2)

(iii) Building a balanced portfolio, in terms of sectors and business cycles, risk profiles, consumer and technology groups and so on.

These three steps are key to building sustained predictable growth in shareholder value.

What about group values?

These are based on certain philosophies of the group which fundamentally exclude certain sectors/product categories and crystallise the group's sense of what it is good at doing competitively.

In the case of Tarla Group, efficiency of operation, creativity in execution, and a basic demand for excellence from people, are all clearly exemplified-those are applicable across a variety of sectors or categories or products.

Hence, it makes perfect sense for Tarla to get into brands provided they fit into the above thinking, as it appears in the case of Shatranj Garments.

The turnover of tomorrow's breadwinners is often less than the profit of today's breadwinners-only a successful leader can see this and manage both together, and thus, in a manner of speaking, 'walk on two legs'.

Finally, every leader has a dream that goes beyond the clinical examination of corporate health systems and may even go beyond business vision!

Following that dream requires guts because only tomorrow will tell what was right or wrong. However, rejecting that dream would be the biggest failure for a leader, since creating something new that has real significant long-lasting value is his key role.

"Tarla should think of branding his group distinctively without draining its resources" Arvind Singhal, Chairman, KSA Technopak India

Right idea, but flawed advice. That sums up what Mr Tarla's friend, K.K., has to offer him, as outlined in the Case of Brand Envy.

First, a word on the broad trends in business. In a world of increasing competition, consumers (and customers) are continuously getting more and more choice in almost every product category and service. This is leading to a gradual but unmistakable commoditisation of a wide range of brands and products across industries.

Therefore, in the years to come, retention of profit margins will become a bigger challenge for all businesses: whether in commodities or in FMCGs or even in lifestyle products. In this context, branding, if conceived intelligently and consistently supported by appropriate efforts, can help preserve (and in many cases, even increase) margins.

While the Tarla Group has done well to imbibe, preserve and further consolidate the core values (focus on economies of scale, mastery of production processes, cost efficiencies) that have-in the first place-vaulted the group to the position of being one of the top two business houses in India, it would indeed be threatened in the years to come if it remains a 'no-name' efficient producer of a wide range of mass-marketed commodity products. To that extent, the broad idea, of seeking value in brand strength, appears to be right.

However, should it, therefore, take the route suggested by K.K.? Should it, to recap his advice, sell a few industrial product manufacturing assets ('smokestacks', as mentioned) and go out shopping for brands in their place (presumably for FMCG/soft goods such as food & grocery, apparel and so on) so that the turnover from consumer goods increases to 25 per cent from the current 10 per cent?

That would be hasty, to say the very least. K.K.'s recommended approach is not the only one, and in fact, could even end up creating an unnecessary drain on the time resources (financial resources seem to be in abundance) of Mr Tarla and his senior management team.

There are examples galore where businesses that are removed from the end-consumer have been able to 'brand' themselves very distinctly, and generate a strong financial return for their shareholders, year after year. Dow Chemicals, Cargill Foods and even the new economy Intel do not sell their products directly to the end-consumer.

In Intel's case, the 'Intel Inside' campaign is one of finest examples of creating brand awareness and brand premium for a product that otherwise no consumer ever gets to see or even think about!

Mr Tarla can undertake a similar effort for at least a few of his 'commodity' products that end up either directly or indirectly with the end-consumer (say, aluminium and cement). This way, the group gains the benefits sought without any of the time and other resource-consuming problems that K.K.'s radical ideas might lead to.

Also, there's no point getting carried away by the glitzy world of consumer product branding. Let's not forget that branding, in today's context, is much broader than that. It is about giving superior value and sustaining the delivery of superior value. Value itself can be a function of a number of variables, including product innovation, product quality, customer service, speed of business to respond to changed market conditions or changed customer needs, and now even ethics and good corporate governance. These variables apply to all kinds of products and services, and are not limited to just the traditional consumer products that we tend to associate with branding.

Mr Tarla should therefore invest some of his valuable time reflecting on what can add value for his current customers. If he can succeed in doing so, Tarla Group can collectively stand out as a 'brand', synonymous with 'superior value', and thereby meet or exceed the expectations of its customers as well as shareholders.