Blueprint for long term sustainability in the current Globalized Economic Environment

Today, all industries across the economy are facing toughest time ever. Decreasing margins, ever-demanding customers and global competition is hallmark of the current scenario. The situation is undoubtedly difficult but not beyond recovery. In this context, it would be advantageous to have a historic view as to how the Indian business scenario has changed over the years and how have we landed in the current scenario.

 Our country India has had a golden history. During the pre-British period, the country was known as the golden bird. It was one of the biggest trading centers of the world and had a major share in the world trade. Traders and businessmen from the world over came to India for enhancing their wealth. However, unfortunately, this golden bird was plundered by the predators time and again. Britishers were the last to have come to India in this row. They came to India through the East India Company and took advantage of the fragmented polity prevalent at that time by adopting the policy of “divide and rule”. Britishers indulged in massive exploitation as much as it finally resulted in awakening of the nation and throwing of them from the country.

 Outlook at the time of independence

15th August 1947, the country got its hard earned independence. But unfortunately at a massive price in the form of division of the country between two independent nations. At that stage two people at the helms were the father of the nation Mahatma Gandhi and Pundit Jawaharlal Nehru. As far as business was concerned, the two had different ideologies. While, Pundit Nehru dreamt of a modern and industrialized India, Bapu had a vision which was more conventional that of self-reliant India with emphasis on the cottage / tiny / small scale industry. Anyway, at the time of the independence, the economy of the country was in shambles and then there was this agony of partition. There was hardly any industry in the right shape worth its name. The only thing which was positive was a “positive outlook” (in today’s parlance the “feel good factor”) with a desire to grow and march forward towards the growth and development of the nation.

 Socialism without accountability is disastrous

We adopted socialistic pattern of society. While the intentions were highly laudable the effects proved to be catastrophic for the economy of the nation. Little emphasis was laid on the development of infrastructure and the word profit was looked upon with contempt. The Government which could have focused on governance of the nation for growth and stability also got into running of the business. Accordingly, umpteen number of public sector undertakings (PSUs) proliferated, which later turned out to be the centers of inefficiency. These PSUs continued making losses year after year proving to be a big burden on the exchequer of the nation resulting in a huge debt burden on the nation, internal as well as external. PSUs made losses and these losses were made up by the Govt. with no accountability on the part of the PSUs whatsoever. Thus the inefficiency received direct encouragement from the Govt, perhaps unwittingly.

 Pitfalls of Controlled Economy

Thus with the socialistic pattern of society, the economy was controlled through the so-called License and Permit Raj. If an individual or economy of a nation has to prosper and grow it needs three things namely, (1) optimum utilization of its resources (2) technology & capital and (3) continuous value addition by each and everyone. Unfortunately, post independence and pre-nineties all theses characters were found to be far too inadequate as far as the Indian economy was concerned.

 It was purely a Sellers’ market. Everything which was made could be sold. And it could be sold because; the demand far exceeded the supply. And every thing which ran smoothly was nationalized in the garb of public interest. The example of nationalization of Air India one can hardly forget in this context. In fact, the controlled economic structure ensured that not many industries were set up or if set up then not expanded. As a result of such structure, gains were of course there but the same restricted to a limited few. Who these few were is anybody’s guess.

 Close to International Bankruptcy

What was the end result? What else could it be? Came the year 1991, and the country was on the verge of international bankruptcy. The foreign reserves were just adequate for taking care of import requirements of eleven days. The country which used to be a donor to the world had to hold a begging bawl. Not many would forget that four hundred metric tonnes of gold had to be pledged by the country in favour of IMF so as to tide over the payment crisis. And as any lender would do, the IMF / World Bank imposed many conditions which of course inter alia included that the country would need to adopt reforms so as to ensure that the economy was set to move on the right path. It was around the same time that the discussions and deliberations commenced in the forties with Maastricht treaty culminated in the establishment of the World Trade organization (WTO) of which India has been a founding member.

 Internet Revolution

In the Indian context, the quantitative restrictions have been removed from almost all the items. Today you want to import an item from anywhere in the world, you can simply do so. You do not have to go through the hassles of obtaining the import license or any such permission or approval. Custom duties have been lowered and will be lowered further progressively so as to match the world standards. Subsidies are being withdrawn. First it was the sales tax incentives, now it may be the turn of the export incentives. It is going to go on like this now. There is a free flow of foreign direct investment. Today you can see more multinationals in the country like never before.

 In this changed environment, challenges are there for all to face. WTO and the Internet have produced a truly paradigm shift in the business and profession. Today as a manufacturer, my competition is not with the other manufacturers in the same city or state or even the country. Today, as a manufacturer I face competition from each and every part of the world. It means, not only I need to know my own cost, but I also need to know the cost at which the same goods are being produced elsewhere in the world. And I need to make sure that I am not only quality competitive but also price competitive and delivery competitive.

 This is equally applicable to a management professional be it a Cost Accountant, Chartered Accountant, Company Secretary or a Lawyer.

 If we do not do what is stated above, we stand the same risk which Ambassador and Fiat brands of cars had in India. Where are these models and companies producing them today? A black & white TV brand called “Weston” for which there used to be a big demand and it was available on premium. Where is it today?

 Challenges before the Indian Economy

Now the question is “what is the mantra to survive and grow in today’s global scenario”. And before we discuss the answer, lets look at the challenges that we face. An indicative summary of the same is produced below:

 Dismantling of the international borders and the world becoming a big village

1. Global melt down
2. Unprecedented Financial Credit Crisis
3. Customer focus with overpowering Buyers’ market
4. Quality consciousness of the highest order and price competitiveness like never before.
5. Global competition for the manufacturing sector as well as the service sector including management and legal services.
6. Mass scale entry of multinationals
7. De-industrialisation

 Strategies to face the  global environment

So what are the options that we have to survive and grow in such a scenario or it is end of the road. I for one would feel that in short term, the situation may be full of threats and difficult times, the long term is safe particularly for those who are prepared to change and break the mindset. We are heading towards a perfect market scenario which would ensure that in the ultimate analysis everyone who adds value is a winner. Those who are efficient and effective would gain in any case and those who are not would be forced to pull up their socks and upgrade themselves to the changed standards.

 At the macro level, there is bound to be shake up across the board and one would see lot more consolidation in the form of merger and amalgamation. Size is going to matter. “Bigger the better” is going to be the buzzword. Size would decide your negotiation power. Economies of scale will gain prominence. One would need to join hands with the competition in whatever form to enhance its negotiation power while dealing with the vendors and customers and so also to ensure optimum utilization of its resources.

 And of course at the micro level, Cost Reduction Strategies, Innovative ideas and implementation thereof by the business firms and the professional firms is going to be critical for growth, sustenance and better profitability. Customer is going to be the king and the Customer’s delight is going to be the new age mantra for growth, sustenance and profitability. 

 Basically, it is sustained level of competency in one’s chosen field that is going to be the survival and growth mantra for anyone and everyone. And if it is not achieved for whatever reason, sooner than later, we will find ourselves having been overrun by someone.

 Thus one has to be in synch with the requirements of the customer and so also with the ground realities of the economy. One can go on talking of level playing field, but the only way in which one can get it is by creating one by himself. All kinds of protections, reservations and subsidies are going to be the things of the past. And this is going to happen sooner than later. So if I was to design a strategy for survival and growth in the global scenario, I would most certainly include the following in armoury: 

1. Remember, the Vision and Mission statements are not permanent documents. Revisit them once in a while.
2. Work for attaining highest level of productivity in every aspect of the business.
3. Remain constantly aware of the “Risks” and be prepared for it.
4. Attain Price competitiveness of the highest order
5. Create Culture of Cost consciousness in the whole organisation.
6. Work with Customer centric attitude at all levels.
7. Absolute optimization of resources
8. Be driven by an urge to “create wealth” and not “amass wealth”.
9. Continuously feeling pulse of the economy and creating strategies for responding to changes.
10. Ability to respond fast, speed of activity
11. Change in attitude at all levels
12. Accountability at all levels
13. Deliver flawless service, job and products with no compromise on quality whatsoever.
14. San the “chalta hai attitude” for good and forever.
15. Find out the role of your product / service in the final product of your customer.
16. Ensure and maintain high energy levels across the organisation
17. Remember, Innovation is a journey and not a destination.
18. Forget the hierarchical systems. One who adds value is important.
19. Continuous introspection, evaluation and monitoring.
20. Compliment rather than compete even with your competitors.
21. Build expertise and become an authority in your chosen field.
22. Keep pace with technological advancement and adopt the same
23. Value Human Resource. Don’t throw them away simply because you can. Find our ways and means to retain them. Because, ultimately whatever an organisation achieves it is through the Human Resource only.
24. Finally, don’t ignore and pay only lip service to “Transparency and Good Corporate Governance”. Ensure sincere and serious implementation of them in the organisation.

 Today all the players in the industry and professions big, small or medium are in the same situation. While, the vendors insist on prompt payments and continuous price increase, the customers demand longest possible credit and the product choice with no bounds. Gone are the days of annual automatic price increase from the customers. Now you earn profit from the cost which you cut at your end. And the situation is going to be more serious with the passage of time. The world standards are going to be the benchmarks and not the national best which may not really be the best.

 And therefore, constant adherence with the above-said survival kit will provide the necessary respite and succor to the ones who wish to make and leave their mark on the portal of the industry or profession. This is going to be our survival and sustenance kit in Globalized Economy.