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Challenge Of Change

Indian corporates have to re-invent the rules of the game with imagination and guts

Challenge Of Change
outlookindia.com
-0001-11-30T00:00:00+0553

In an interview with Outlook, the country’s leading management consultant, Dr Mrityunjay Athreya, talks about the new realities that the Indian corporate sector will have to adjust to in 1996.

What do you think will be the dominant trends in Indian management in 1996?
Predictions are generally hard and foolhardy. They are particularly so for 1996. It is not a normal, incremental year. It is an election year. There are major uncertainties. They could lead to several possible scenarios. At least two basic scenarios can be envisaged. One is that the 11th elections to the Indian Parliament return a reasonably stable government, which is likely to last at least three years, if not the full five-year team. The other is that there is an unstable government, which may last for about 12 to 18 months.

What will happen to the Indian corporate scene under each scenario?
In the event of a stable government, the following management trends are likely: high growth investment, greater globalisation, diversification, especially into core and infrastructure, mergers and acquisitions, R&D take-off and social development contributions. In case of perceived instability, I am afraid more of the following trends may operate: downsizing, reengineering, cost cutting and foreign outbound investment.

Which scenario would you personally bet on?
The advantage of being a consultant is said to be that you don’t have to bet. It is the client who does! However, I am, on the whole, an optimist. I expect a stable government. This is one prediction where even the cynics may secretly hope that I am, for once, right.

In that eventuality, what kind of corporate performance do you expect?
In the first half of 1995-96, its performance was good. Due to uncertainties, tighter liquidity, etc, the second half, which is usually better, may not show the same rate of growth. However, the second half is brisker than the first, and the fourth quarter, January-March 1996, will be at a peak. Since liber-alisation, corporate performance has become less dependent on the annual budget of the Government. It now depends more on economic fundamentals. These continue to be good. We have had another reasonable monsoon. Real incomes are rising. Industry’s efforts on the quality issue through a variety of approaches such as ISO 9000, Quality Circles and TQM are beginning to pay off. So, both consumer spending power and the competitive prices should stimulate demand. With the end of election uncertainty in April or June, the stockmarket should revive. Raising equity through rights and new issues will be easier. Investment can pick up.

What about further structural changes?
Structural changes in the economy take longer to work out. Structural changes within particular industries will accelerate in 1996. Two opposite kinds of changes are likely in two different types of existing industry structures. In highly fragmented industries like consumer goods, engineering and financial services there will be a trend towards more concentration through shakeouts, mergers and acquisitions. In the erstwhile state monopoly industries, especially telecom and power, the trend will be towards more pluralism and competition. In telecom alone there will be about 40 new cellular operators and 20 new basic service providers.

How does Indian management have to reorient itself to cope with these trends?
Indian managements are about to undergo a major new test. They need to make themselves fully aware of this, sensitise their immediate team and also communicate to the entire organisation. India will have the first general election after liberalisation. A historic responsibility has been placed on the shoulders of Indian industry. The people will be watching. Are Indian business leaders and managers going to be paralysed by electoral gossip and uncertainties? Indian industry needs to take a long-term view on the fundamentals of India’s potential and go for aggressive growth.

They also need to think and act like "virtual MNCs". India is, just in a way, one of the country markets. Indian companies should push for exports, using country competitive advantages and their core competencies. They should keep in mind the increasing autonomy of the market from party and personal fortunes. They should govern their corporations through sound management models of mission, vision, long-term strategic plan, empowered organisations, innovative culture, flexible systems, action orientation and learning from feedback. They should look at 1996 not in unfavourable, wistful comparison with 1995, but as another stepping stone towards 2000 and the 21st century.

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