IIPM,THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

   IIPM Editorial - Reprinted by permission from B&E and 4Ps


‘B’eyond ‘P’erceptible ‘L’ogic!
Nambiar’s misplaced trust in his son-in-law was just the icing...

“Here lies BPL... They never thought bad of anybody, not even competitors...,” could not have been even close to what T. P. G. Nambiar might have been thinking when he laid the foundations of the British Physical Laboratories (BPL) Group in 1963 to manufacture electronic measurement and testing. Though, for this Malayali entrepreneur, the beginning was not a cake walk as the era was marked by the License Raj, in 1982, the company diversified to manufacture colour televisions, video cassette recorders and subsequently started manufacturing refrigerators, alkaline batteries, and other electrical components, thus becoming a household name in the Indian consumer durable industry.

This all was done by Nambiar even before anybody could sense similar business opportunities, bringing out his true entrepreneurial abilities and giving BPL a head-start. The 90s certainly heralded a significant change in the dynamics of Indian businesses, but for Nambiar, this era had a completely different significance. On one hand, while the group, which was already a household name in India’s consumer durable sector (with its joint ventures with the likes of Sanyo), saw the emergence of killing competition in the form of global companies like Samsung, LG, Sony; on the other hand, in the year 1991, Nambiar married off his daughter Anju to Rajeev Chandrasekhar, and soon made him the Executive Director of BPL Mobile, and even transferring considerable shareholding, steps that would go down in the history books as one of the biggest strategic blunders ever committed.

Originally, Nambiar was the majority holder in BPL Mobile Communications, with a stake of 61.43%, while the rest was held by Chandrasekhar. But in 2002, amidst a host of allegations, murky strategic manouevers, Rajeev somehow managed to become the majority shareholder. In July 2005, Rajeev sold his entire stake in BPL Communication to Essar for Rs.15 billion, leaving behind a dumbstruck Nambiar, who only got a meager (if you can call it that) Rs.1.25 billion for his stake of 13%. Ironically, the man who started the first telecom empire in India can only blame himself (and perhaps his misplaced emotional trust) for the imbroglio. While the Nambiar’s were fighting the court room battles for their telecom business, their core business of consumer electronics was confronting the battle of strong competition from all possible directions.

So, whether you blame it on cost-warrior Akai, aggressive marketers like Samsung and LG or the technocrat Sony, every competitor played its part in uprooting the dominance of BPL. Consequently, the Nambiars simply reacted to the strategies of the competitors and fire fought, rather than developing their own strategies. Worse, the group started taking out money from this business in order to invest in other businesses like telecom. Today, BPL, or what remains of it, is being looked after by Ajit Nambiar. After the mayhem caused by the Rajeev Chandrashekhar episode, resurrecting the group would not only be difficult, but quite near to impossible. With an open playing ground, can BPL come out tops ever? We’re not time, and we’re not telling either...

The Meteor Showers

They certainly did not know what hit them, when the Indian government was compelled by a foreign exchange crisis in the beginning of 1991. It was time to give up the colonial hangover and embrace a new era, where there could be just one route to survival – be the best! This era witnessed a host of first generation entrepreneurs exploring business opportunities. These ultra competitive companies focussed on single sectors, and hence played the core-competence card; a spin taken up even by some ancestral business groups.

Business houses such as Godrej Group decided to spin-off areas that were not core to their businesses, while Dabur Group has been increasing its footing in the fast moving consumer goods (FMCG) segment. The $500 million Lalbhai Group invested on new age technologies to sustain its presence in the textile industry. On the other end, as an anti-thesis to the core agenda, Reliance (then headed by Dhirubhai as a single group) showed that it wasn’t a focus on core, but rather efficient project management, whether in petrochemicals, textiles, chemicals, education, telecommunications or the most recent foray into retailing, which defined how successful one could be.

Other big time sectors that emerged included the automotive sector that witnessed almost a hundred launches in a short span of 10 years. Brands like DaimlerChrysler, BMW, Audi and Ford are all present in the country. Home-grown manufacturers like Tata Motors and Mahindra took to the market and evolved as well. Auto-ancillary industries like Kalyani and Sundaram Fastners became multi-million dollar companies in their own right. The post liberalisation survivors, actually became leaders!

Tata: A timeless Jewel
If world-class needed an indian synonym...

In the era of post-license Raj, when many business conglomerates were forced to bid adieu to the corporate sector, the legendary Tata group withstood it all. The man behind the scenes was Ratan Tata, who took over from J. R. D. Tata in 1991. First on the target was the culture of the organisation that was institutionalised in the organization since its birth. The relation between the management and employees witnessed a see-saw change – it became more of a practical than a munificent one. To safeguard Tata’s interests within these companies, Ratan decided to raise the conglomerate’s stake (through parent holdings) in all the group companies to minimum 26%. With Ratan sitting at the helm of Tata, an era of corporate management came up.

He made sure that his troops meet the performance targets – and in setting targets he followed the erstwhile ‘GE Way’ vision, which was to either be number one, or two. And in that vision, shareholders’ wealth became pristine. From Tata Steel (where the workforce reduced from 80,000 in 1992 to around 35,000 in 2006) becoming the lowest-cost steel producer in the world, to hiving off stakes in many industries, from Tomco to the Ambassador hotel chain, from TCS acquiring Chinese operations, to new found Corus deal, from telecom, to infrastructure, Tata Group leads, and like very few!

Do we need a hero?
The answer is indubitably only one – Yes!

In the times when entrepreneurship was seen as an act of bravery, Brij Mohanlal Munjal – along with his brothers Dayanand, Satyanand and Om Prakash – started supplying components to the local bicycle businesses and become the first generation entrepreneur. Soon, Hero Cycles zoomed ahead of well established brands like Atlas and Hind Cycles. The next milestone came in with the collaboration of Honda Motors with Japan in 1985 to manufacture motorcycles in India. However, 1991 has been a pivotal year for the two-wheeler industry and all this has been credited to Hero Honda.

Trendsetters – the Munjal family has been at the epicenter of the colossal change brought in the Indian two-wheeler industry, so much so that today their company owns a staggering 52% of the Indian two-wheeler market, and is the world’s single largest two-wheeler company by volumes. Today, the erstwhile bicycle company has six different models in its range of nine product diversifications with the Splendor becoming the most popular motorcycle of all times (across the globe) selling more than a smashing 1.3 million units in the year 2002.

A. V. Birla needs no introduction...
...& neither does the mercurial kumaramangalam

On the outset of nineties, the Birla empire was struck by two storms at once – one was the competitive scenario post liberalization and the other was the death of the legendary A.V. Birla at an early age of 52, in 1995. The group now depended on the young shoulders of Kumaramangalam Birla. Many worried whether he could be as dynamic as his father.

However, the way he managed the group’s operations gave a clear message to his critics that he won’t let things pass away easily. Kumaramangalam brought in a new breeze in the organisation. He not only introduced stricter and new-age management concepts, but also restructured and streamlined the operations of the group. He changed the recruitment policy of the company, and instituted a retirement policy, which helped in bringing a much younger, energetic and dynamic workforce to the group companies. He also introduced new age management concepts and laid stress on empowering the group as a whole, rather than resting powers with individual companies.

More importantly, he changed the way business was done within the Birla empire. Under his leadership, the Birla Group has grown five times in size through acquisitions and foray into sectors like telecom, subsequently derisking the business portfolio of the family which was mainly in commodities. Despite taking hits in sectors like cement (because of foreign companies like Lafarge, Holcim taking over Indian companies), today the A. V. Birla Group’s operations extend to new-age businesses like mutual funds, insurance and dozens of others.

Hero Honda’s market capitalization is now a whopping Rs.188 billion. One of the biggest weapons up the family’s sleeves has been their uncompromising capability to innovate and change with market dynamics. Headed by the visionary Brij Mohanlal Munjal, the Hero group has diversified into a number of businesses. In order to reduce dependence on a particular sector, the group is now into ITES (Hero Mindmine), finance, steel rolling and components. Now, in the relatively younger hands of Pawan and Pankaj Munjal, the Munjal family is undoubtedly a part of the business clan that have not only survived the ruthless brunt of intense foreign competition in the post liberalising period, but have beaten them hands down. One of the finest examples in our list of post-1991 survivors – and spectacular leaders – the Hero group, for the want of a better term, has redefined what heroes are really made of!

Only the fittest survive...
The Singhs look beyond Feuds and India!

From intense family feuds to intended embracement of globalisation, the pharma major Ranbaxy can boast of it all. The company was acquired by Bhai Mohan Singh, who gradually inducted his three sons Parvinder, Manjit and Analjit into the business. It was in 1989 that Bhai Mohan Singh decided a three-way split of his assets and initiated a fifteen-year long feud between the brothers and an aged father. Today, Malvinder Singh and Shivinder Singh (son of Parvinder Singh) are steering Ranbaxy ahead into a truly multinational company with a host of global acquisitions. But even Ranbaxy could not guard itself from the liberalisation process. Interestingly, the period turned out to be a blessing in disguise for Ranbaxy.

The company embarked on internationalising its operations. Today, Ranbaxy finds itself amongst the top 10 global generics players, with operations in 49 countries. Succession planning too has been the key domain highlighting the professional attitude within this organisation. The instances of S. D. Brar and later Dr. Brian W. Tempest becoming the CEO of Ranbaxy, are a few examples. Thanks to these roots of succession planning, even with years of family involvement, Ranbaxy remains as one of the most professionally managed Indian company.

 

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