Innovate, restructure, and

reorganize: challenges before

India Inc

BY:
MUKESH KUMAR SINGH
RAKESH DALAL

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 ARMY INSTITUTE OF MANAGEMENT
KOLKATA

Since independence India Inc has come a long way. There have been a lot
of reforms along the way, for betterment of the industrial sector and the
nation. Especially since the reforms of 1991, the industrial development of
the country got the momentum. It continued to grow by leaps and bounds
till the world was hit by recession in 2008. Although the impact in India
was not as severe as the rest of the world, there were important lessons in
it for India Inc.

One of the most important of these is innovation. Although, Indian

companies have created breakthrough innovations in the past, for example
ITC’s e-choupal, Mumbai’s dabbawallas’ supply chain revolution and Tata
motors Rs. 1 lakh car, more needs to be done. Indian companies must
overcome two important management obstacles in order to promote large-
scale breakthrough innovations. First, the internal performance
measurement systems need to be changed, like hold managers
accountable for learning rather than for results. Secondly, there exist thick
walls between functions and business units. For a healthy innovative
environment, there has to be a seamless collaboration across products,
functions and business units. India’s true competency is her talent base.
With the right mindset, Indian corporations can unleash this huge force.

The next challenge lies in the management of services differently from

factories. The service-centric organisations need to restructure and invert
the pyramid of the organisation. In traditional organisations, the CEO is at
the top, followed by the vice-presidents, then the senior managers and so-
on. In services, business depends on the frontline employee. Therefore, the
people in touch with the customers should form the topline and the rest of
the organisation should work towards supporting them.

There is also a change required in the marketing-distribution aspect. As

the balance of power shifts from the manufacturer to the retailer, a change
in the attitude towards the retailer has become imperative. The retailer
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should be treated as a customer and not as a problem. Today, the
traditional methods of market segmentation may prove futile as the
market will be segmented on the basis of retailer patronage. The
marketing need to be more pull-oriented, in terms of branding, advertising,
sales-promotion.

Also the advent of organised retail needs to be given attention. FMCG

companies will be forced to rethink core strategies. Now their buyers will
be players who may be more powerful than the companies themselves.
Also, new means of advertising will emerge, in the form of cell phones etc.
companies will need to upgrade their abilities to meet the requirements of
the new media.

The service providers will need to differentiate between the customer

behaviour for services and products. In case of products, each purchase is
a separate transaction and customer loyalties can waver. On the other
hand with services, if a customer is satisfied the first time, he usually does
not change the service provider. Marketers will need to pay attention to
the first interaction itself.

In the B2B world, the biggest challenge will be to give value in the face of
tremendous price pressure. Firms will have to sell solutions instead of
simply selling products. Selling solutions is about making the customer’s
life easier by taking on a greater part of the process. By cross-selling
products and services as an integrated process, manufacturers can expand
the value-added market. A good service provider works with his customer
to understand their problems and then provides customised solutions.

Also the coming battle is for the 86% of world’s population who are
citizens of countries with per capita GNP of under $10,000. Finding the
right products and the right strategies to appeal to this emerging
consuming class is the challenge. Companies will have to come up with
products and services that leapfrog over the lack of basic amenities like
water, electricity and hygiene, among others. To their advantage, Indian
companies are already coming up with products that would suet such

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markets. The advantage Indian companies have is that none of these
problems is new and surprises them. They are used to dealing with them
and dealing with diverse cultures.

Then there is the much known but rarely practiced issue of quality. Indian
companies need to make sure that quality becomes everybody’s business.
The current trend is that the senior management in most companies tend
to believe that quality is the responsibility of the people in the quality
department.
Although, there are several ISO – 9000 certified companies and companies
that are practising six sigma, but in reality, it is just a small group in these
companies that are actually conversant with the quality issue. Three steps
can help make employees quality conscious. First, emphasise the need to
listen to customers. Customers include not only the final consumers but
also their colleagues and co-workers. Then comes enrichment and
continuous improvement. Organizations should strive for continually
improving the quality of their products and services. The third step is
optimisation – do it right the first time. Companies should take time to
develop products and processes but they should be perfect in the first go
itself.

Insufficient infrastructure has been a handicap for India Inc for a long time.
Roads, ports and rail are the most important means of transportation. Poor
quality and insufficient means of transportation infrastructure is the issue
that requires urgent attention. Good quality infrastructure would ensure
significantly reduced travel time, less pollution, more labour hours, etc.
The government has already taken many measures. But these have to be
strengthened further. The most important aspect is to have balanced
development across the country. There is an immediate need to
standardise the roads in the country. Government must ensure that
projects are viable and attract private and foreign investment. Also, the
current policy measures need to be addressed, which include availability of
funds at cheaper interest rates, liberal fiscal and tax incentives. The
government should continue to invest and deliver sustained transport
investment, along with the private sector.

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The shipping industry is one of the oldest industries in the world.
Development of this industry in India has not kept pace with that of the
nation, which has resulted in a gap between the quality and quantity
demanded and that supplied. Although budget 2009 was silent on the
shipping sector, the government has encouraged the sector through
building ports, ushering in privatisation and announcing substantial
investments to the tune of Rs.55,000 crore in various projects. The
government has also launched the National Maritime Development
Programme with an investment of more than Rs.1 lakh crore to improve
the traffic-handling capacity of all major ports. New ports through public-
private partnerships like port Pipavav are also coming up fast. What will
truly make ports efficient is the evacuation of cargo on land and, therefore,
the infrastructure support on land. A port requires an efficient network of
roads and railways in order to be successful.
Ports, roads and railways have a symbiotic relationship. Without the last
two, the first cannot survive. Also in order to take the pressure off the road
and rail transport the government should take active measures to promote
coastal shipping. Coastal shipping also has the advantage of being
environment-friendly.

Another major hurdle facing India Inc is power. Business and industry look
for adequate, reliable and quality power at affordable cost. Today India’s
power demand is about 1,07,000 MW, while the availability is 94,000 MW.
That leaves a shortage of 12%. The demand is expected to rise further to
153000 MW by the end of the 11th plan. To meet this surge, the
government has envisioned a capacity addition target of over 78,000 MW
for the 11th plan of which 16000 MW has already been commissioned. We
must also encourage competition in domestic equipment manufacturing.
BHEL has been able to supply only about 5000 MW equipment a year. It is
inadequate. We must find space for more players. More competition means
lower prices, better delivery and quality. Coal will continue to be our
mainstay for fuel owing to domestic availability. But coal alone will not be
sufficient and viable in the long run. Therefore research for new and
cleaner technologies and fuels must be undertaken simultaneously. Plus
there has been entry of big private sector firms in the sector which gives
hope that the future is promising.

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India Inc has been haunted by red-tapism and bureaucracy since
independence. Moreover even after more than two decades of economic
liberalisation, India still does not have a ‘single-window’ clearance for
businesses. Currently, no less than 11-13 approvals, eight from the centre
alone, are required to start a business. Because of the multiplicity of
approving authorities and absence of single-point ownership, often one
has to traverse a labyrinth of documents and government corridors to get
approvals. As a result, India now has sectoral variances: although there far
more opportunities in production, manufacturing and construction,
investors find agriculture and the services sector easier to work with.
Bureaucracy in India has simply not kept pace with the changes in
technology, business practices and globalisation.

Corruption has become the trademark of India. It adds one more layer to
doing business in India. Business organisations have to pay bribes at every
level in almost all government offices, which adds to their costs and hence
the price of their products.

To counter corruption a handful of public sector companies – including

ONGC, SAIL, NTPC, BHEL are signing integrity pacts with their vendors.
This document is signed in consultation with the central vigilance
commission (CVC). Despite government initiatives corruption has not come
down. The main reason for this is the cumbersome legal process that
provides a cushion to the corrupt. One of the solutions can be to have a
strict time limit of about six months within which any court should produce
verdict in a corruption case. Also, the number of appeals in a case should
also be limited to one. Another solution can be technology, for example,
online railway bookings. Technology can help minimise corruption in the
country. Government should take steps to automate as many government
services as possible. Incentives should be given to encourage the citizens
to not indulge in bribing the government officials and hence reinforcing
corruption in the society.

Stringent Labour laws have been a cause of unease for a long time.
Human resources are currently India’s greatest asset, and form the

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foundation of our rapid growth process. India’s labour laws must be geared
towards unleashing the potential of its huge latent talent and providing
each worker dignity of work, sufficient and rising income, and social
security. According to the National Sample Survey Organisation (NSSO),
total employment in both the organised and the unorganised sectors is
397 Mn, of which about 7% is in the organised sector. For the remaining
workers, there were no social security or welfare legislations until the
unorganised workers social security act of 2008. At present around 45
labour lows are applicable to the organised sector at the national level and
200 at the state level. The major concern of industrial enterprises
regarding labour laws relates to inflexibility in retrenchment of workers and
closure of enterprises with 100 workers or more under the industrial
disputes act 1947. There are several consequences of such restrictive
labour regulations in India. Primarily, they could be a key reason that
organised sector employment has stagnated or declined over the years.
Secondly, the model of economic growth in India may have altered due to
labour legislation. While most economies shifted from agricultural
dominance to mass manufacturing and then to service sector, India has
attained a sectoral GDP break-up in which the services sector is
predominant. Third, India has missed out on the mass manufacturing
boom experienced by other developing countries such as Korea and china.
Fourth, FDI is discouraged by the stringent labour laws. So simplification of
labour laws is vital, as is streamlining of inspections and compliance.

The direct tax policies of the government have been an issue for a long
time. A stable, fair and equitable direct tax system is a fundamental
requirement of India Inc. The government has now introduced the new
direct tax code to bring about a structural change in our tax system. India
Inc still has its wishlist; foremost in which is consistency in tax policies.
Frequent changes in tax laws impact the business plans of several
companies. As Indian businesses become more global, there arises a
definite need for the tax system to get more integrated with global tax
systems. The govt has taken several steps in this direction, such as the
introduction of transfer pricing regulations. However, much needs to be
done. A system that is stable, fair and equitable, has moderate rates,

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focuses on better compliance, stimulates growth and channellises
investments into priority sectors is what should be put in place.

Yet another hindrance facing India Inc is the deficiency of industry-ready

workforce. The Unemployable graduate labour force is partly motivated by
the employers’ concern of keeping the wage cost low so that they remain
nationally competitive. In the short term, local and global sourcing attends
to the problem of particular firms. Long-term solutions come through
investments in institutions that map demand and supply of diverse skills
and skill-sets in a region, assess gaps and overlaps in skill development,
and provide directions to various private and public agencies that are
engaged in techno-vocational educational and training activities.

Despite growing investment in education, impressive increase in degree-

granting colleges and increase in annual student intakes, the results have
not been satisfactory owing to severe shortage of quality teaching staff. It
tis high time that the industry comes forward to create institutions that
train teachers. While the recently passed right to education bill is expected
to improve the quality of skill sets in students, but focus should more on
improving the quality of the teachers which will be more helpful in the long
run.

Another important challenge facing India Inc is excessive political

interference in virtually every aspect of their working domain. The latest
example of this being the pull out of Tatas from Singur. This caused heavy
losses to the company as well as the development of the area and the
state. If such incidents continue to happen, firms will be reluctant to
expand their operations fearing wastage of time, capital and resources.
This will inturn result in concentration of industries in particular regions
and also raise income inequality in the nation. Such events not only have
economic costs but social costs as well. The government must take steps
to ensure that such events do not recur.

In the end it can be safely concluded that India Inc has got what it takes to
be the best, but with the ever changing dynamics of the business world,

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India inc needs to innovate, restructure, and reorganize with the times to
compete more effectively and prove their mettle at the global level.

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REFERENCES

• Wikipedia.com
• Businessworld
• Google.com

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