Indian Industry: New Strategic Options Author(s): P. Chattopadhyay Source: Economic and Political Weekly, Vol. 36, No.

4, Money, Banking & Finance (Jan. 27 Feb. 2, 2001), pp. 281+283-285 Published by: Economic and Political Weekly Stable URL: http://www.jstor.org/stable/4410221 . Accessed: 24/05/2013 09:39
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'irreligious' teaching imparted in schools outside the madrasasystem, but the overall consensus amongst the community is to educate their girls in the traditionalas well as the modern systems of education. The Karamat Husain Girls' College, housed in a building across the Gomti river, exemplifies this. Founded by Syed Karamat Husain (1854-1917), a judge of the Allahabad High Court, this school was born out of the conviction that women's education was a precondition for the advancement of the country and community. It was a bold and.important venture, and in tune with the reformist spirit generated by Syed Ahmad Khan, the founder of the Aligarh Muslim University. Yet there was stiff opposition to his initiative. One friend told Karamat Husain that god would curse him (colloquially, that god would 'blacken his face'). KaramatHusain retorted that in any case, his face was already black, so it could hardly get much blacker. On another occasion, he pointed out to an opponent: "It is far better that I should be cursed and Muslim women educated, thanthatI should retain my good name, but Muslim women remain in ignorance".Reading these lines in Secluded Scholars: VWomen's Education and Musliml Social Reform in Colonial India by Gail Minault, I was reminded of the resentment generatedby Syed Ahmad Khan to his projectof startingthe Muhammadan Anglo-Oriental College at Aligarh. Today, the spirit of the founders of KaramatHusain Girls' College lives on in the hearts and minds of the teaching staff. Says Noor Khan, lecturer in English: "this institution symbolises our determination to educate girls and equip them to compete in the wider world. We want to convince the parents that the benefits of a girls' college outweigh its dangers. Sometime back, it was hard to persuade them to let their daughters out of the house to go to school. Now, the old attittides are changing. My own mother was withdrawn from this school by my grandmother. She was haunted by the spectre of 'angreziat' (westernisation). Such apprehensions do not exist anymore.More and more Muslim girls aspire to gain access to this school." This is illustrated by the fact that nearly 40 percent of the 3,000 studentsareMuslim girls. They pay a paltry sum of Rs 650 per annum for their education. Some of them turn up wearing the burqa;others do not. Some would say that the symbols of the past and present coexist without any obvious tension.

You do not just see mosques and minarets in Lucknow; you also notice large and small schools in the lanes and by-lanes of the city. Some aregovernment-aided; others are supportedby charitable institutions. In addition, community initiatives, such as the one undertaken by the shia leader Maulana Kalb-i Sadiq, have led to a mushroom growth of educational institutions. Educating girls appearsto be central to their agenda. Sadly, however, Muslim politicians have not done enough to support their activities. Coming out of the KaramatHusain Girls' College, I recalledthewordsof Amina Pope,

a Canadian woman who had converted to Islim and was the first principal of the new Muslim Girls School, that no community can progress if its mothers are illiterate and unable to give adequate guidance to their children. In the words of the 19th century scholar, Mumtaz Ali, "aneducated woman can take care of herself better than an inexperienced, uneducated, mentally confused bundle of veils which has not been allowed to develop self-confidence and cannot take care of herself'. Contrary to my earlier impression, the Muslim women I encountered in Lucknow have long been converted to this idea. it3

Indian

Industry

New StrategicOptions
Indian industry has had to bear the brunt of the government's recent espousal offree market policies. However, 'co-opetition' as a conscious strategy decision could help to smoothen the rough edges of competition by putting forward a variety of options -firms working together on a mutuality of interests; the devising of strategic alliances or even embracing a combination of several moves like combination management and/or marketing that could prove especially beneficialfor the small sector industry.
P CHATTOPADHYAY

he July 1996 issue of the official

organ of the British Institute of Management, London, Managenenit Today, editorially underlined and sounded a warning that in the highly unpredictable business environment, economic patternsbecame increasingly fluky. The challenges of the free marketand keen have made many an competition organisation runfor cover ratherthanstand up to the challenge and face the odds. The marketforces which several of the industry groups and organisations were espousing earlier had now become a bone of contention for them. With regard to Indian industries, in recent years many workers have been rendered surplus. The productional economies have, however, not yet recorded much perceivable real improvement, while the woes of several have multiplied. Taking all this into view there are three questions that come to mind. For whose benefit is all this hullabaloo of

opening up directed? Who, in the long run, will constitute the marketwhere goods are sold and profits are earned? If purchasing power is not spread, how can the economy be sustained? None of these questions has been answered properly. Nor are the answers easy without a total overhaul of the framework of policy and sensitive action. With the onset of liberalisation and deregulation, the sudden exposure has shaken the Indian industries to their fundamentals. A new consciousness and a fresh introspection have dawned in the industrial scene regarding the hazards likely to come up and the ways of dealing with them. 'Survival of the fittest' sounds easier uttered than achieved, particularly because of the gargantuan stakes all around and their varied import. It is in this context that governments and public agencies have been seeking to enforce the rules of competition with the help and effective intervention of the courts of law. To make sure that every player respects the rules of the game is, however,

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turning out to be a lot more difficult than imagined. The spread of the arms of the law is sought to be extended by way of enacting new laws in line with the new aura of openness and gradual slackening of the executive vigil, as also unbridled competition. The ways of the 'fish-world' are being witnessed in an increasing number of instances. In such a situation more often than not, somebody's gain invariably turns into somebody else's loss, in a sort of zero-sum game. When this process continues uninterrupted, competition not only loses its sharp edge, but also results in much unaccounted loss of ventures and other resources. While it is possible to cushion the untoward effects through an effective network of social security measures and renewal funds in the advanced countries, it becomes costly in the laboursurpluseconomies of the developing countries. As a matter of fact, there is little use in averring that competition would chastise the weak by bidding it goodbye and the reign of the fittest would be ushered in as a direct consequence. The history of anti-monopoly legislation in the US and the UK and the numerous cases decided by law courts in those countries could not guarantee perfect competition in the market and on different counts, both laws and the law courts have been only chasing the miscreants without being able to prevent monopolistic practices altogether. The recent Microsoft case illustrates the point. The transformation of the law on monopolies into that of competition appears to be in tune with what the developed countries and international institutions would like us to do. While the Indian economy is being opened up unquestionably, the externaleconomies are also being increasingly closed in some pretext or the other so that it is gradually becoming a one-way traffic. Whether this is good for the country or not is the main question but little has yet been done to assess this issue. The open economy has resulted in pushing up prices all around, unemployment has increased by leaps and bounds, imports into the country have far exceeded exports creating problems of acute balance of paymentscrisis. The downslide of the rupee in relation to the general cuTrenciesof the world has continued unabated. The new and old technologies of the western world that are being introduced on a large scale have created different problems including large-scale retrenchment. So-called proEconomic and Political Weekly

labour laws are gradually giving way to a change of stance. Competition in different lines has been hotting up to an unprecedented degree. Three consequences of the growing competition in Indian markets have been noticeable. One, the entrepreneurial spirit in the country has come to a low ebb; two, mergers and acquisitions have been found more attractivethan starting new industrial units; and three, search for alternative approaches has been intensified especially because SEBI allows hostile takeover. This means that all the pangs of birth of an enterprise and the honest efforts.of an entrepreneurto bring it to a healthy state are set at naught by the takeover tycoons who in fact look at the prospects of such an enterprisein terms of its ability to generate cash, to yield profits and to figure as the flagship unit. The long-term health of the enterprise receives a low priority. Many a time flourishing units of the earlier days have turned sick primarily due to mishandling of the affairs of the enterprise. The number of sick units has gone up as well with a large complement of outstanding bank credit, piling up statutory liabilities and diminution of work opportunities.

Cartels vs Co-opetition
It is in this context that one considers the phenomenon curious that the better the performance of an enterprise, the greater is the chance of its offering itself as a target for predators always on the prowl. This means that managershave to be on the alert against two types of onslaughts, namely, one from the competitors in the marketand the other from the predators, both threatening the very existence of these companies. The search for straws in the wind is but naturalin the circumstances. The ways out of this problem are not many in the given conditions. One method for avoiding the predators may be to acquire controlling interest of 51 plus per cent of shares, but the threat in the market place remains. This would also hit at the very concept of the corporation wherein wide dispersal of shareholding is an integral part. There is also the widely accepted concept of delinking shareholding from control. The second method applicable to ward off the bellicose forces in the market place may be to go for strategic alliances. Competition law and approaches preclude the formationof cartelsor syndicates which were operative in this country in the 1950s but were abandoned under government directives and the anti-monopoly legisla-

tion. Whether a company can adopt either of the alternatives or both would depend on a numberof factors. Rivals in the market place finding competition between themselves generally healthy and to mutual advantage may be a rarity. But it is not impossible. It is here that 'co-opetition' may have some role to play. It is not like cartelor syndicate which incurredthe wrath of the people because of the practices they used to adopt in the bygone days. The respect for a code of conduct and generally complying with the conventions followed by competing companies in the same lines of activities may in fact make the concept of co-opetition more acceptable in general than merely scoffing at market rigging. There are several other management concepts and practices thatcan easily go along with the techniques of pricing products and services. To some of these we revert later in the discussion. Abidance by the law and the regulatory measures is, however, a must, but within the perimeters available, companies may adopt procedures that would save their skin in the market place. There are some which one might ask in this regard: One, is co-opetition market rigging? And, two, is it automatic, that once the alliance is established, things will work out smoothly? Answers to these simple questions are not easy at all, if one were to take into view all the games that are played in the world of business in the cobweb of interactions among the players. Indeed, a free market by definition accommodates many diverse forces of different hues. To make a mark in a truly competitive environment is a highly demanding task; it does not come automatically. It also raises questions as to whether it was right to open up anyway, and whether the representation of the country at the internationalforums was as effective as desirable. On the negotiation table the performance of the country has left a lot to be desired. Not only that, on almost all matters of crucial importance for the country, India has recorded a loss in the battle of words. As a result, competition in the Indian market has been hotting up. To make a mark in the free market, and that also after saving oneself from the cross currentsof pushes and pulls, means walking on the razor's edge all the time. Generating customer dependence on suppliers in an era of fierce consumerism calls for the best of acumen on the part of providers of goods and services. Coopetition makes for the smoothening of the sharp edges that competition brings forth.

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The open economy in some ways does provide a platform where Indian companies in different lines of activities can underline the elements of mutuality of their interests, especially in developing a frontage to the foreign companies for guarding their interests in different ways. Such platforms are different from the industry associations insofar as their relationships are a lot closer and matter of fact, and relate mainly to their commercial operations, not necessarily market rigging. I have, for a long time, argued that the corporate sector in India has been overcrowded by companies that are very small in size of their paid up capital, mostly private limited companies that have chosen to languish on the verge of subsistence. Most of these public limited companies are beset by other disadvantages. First of all, the private limited companies are barred by law to invite subscriptions to share capital from the public. Secondly, their average per unit paid up capital is only Rs 18 lakh. Even the public limited companies have fallen far short for expectations insofar as the per unit paid up capital of such companies is only Rs 31 lakh. The government could have done something in this regard but all this while it has turnedonly deaf ears to the pointers raised to this effect. Prescription of the minimum paid up capital for both these classes of companies could have sorted out this anomaly. It is not that the concept of economic size is unknown to this country. Mention maybe madehereof the governmentpolicy, duringthe Rajiv Gandhi regime, regarding grant of licences on the basis of worked out industrynorms of minimum economic capacity, so that the enterprises could run on viable scales of operations. It is necessary to stress that though the licenceraj has been abandoned, the relevance of the concept still remains and can be given a fair try. I have had occasion to deal with this question earlier at some depth where I suggested that most of the private limited companies and quite a few of the public limited companies should seriously consider friendly mergers so that they start operating on viable economic size. That the prevailing conditions are far from what can be called satisfactory is attested by the facts presentedaboutthe finances of public limited companies published in the Reserve Bankoflndia Bulletin (July 2000), which underscores that some 1,800 and odd public limited companies studied 284

represented more than 30 per cent of the paid up capital of the total paid up capital of the non-financial, non-trading public limited companies. That the distributionof paid up capital is skewed can hardly be gainsaid. The total number of public limited companies operating in the country as at the end of March 1999 was more than 70,000. That this sort of distribution of paid up capital is at the root of misuse of public funds on a large scale can hardly be gainsaid. The thin spread of resources has made a mockery of economics of operations on a countrywide scale. Even in a free market economy, it is possible for government to prescribe such limits; to startwith government can lay down norms for exporting companies, those in the illfrastructure field as also those in some otherspecified industries.Governmentcan also prohibit, by law, the private limited companies fromoperatingin specified lines of activities in view of the inherenthazards and large capital required.Friendly merg-ers can effectively smoothen some of the rough edges that may still remain. Such mergers would have four salutary effects, to the companies and the economy at large. First, the size after merger would be economically more viable, provided of course that some preconditions are observed. With the infusion of fresh capital and updated technology the new unit can face the competition with renewed vigour on the basis of a freshly worked out strategy. Second, such mergers would enhance their credibility not only to the banks and

financial institutions but also to the other companies operating in the same field. Three, such mergers would make the shareholders of both the merging companies more enthusiastic about the future of the merged company. Four, such mergers would make these companies structurally stronger and may provide new attractions for infusion of fresh capital, cushioning the shocks that an open economy deals fiom time to time and more professional management. The turnaround of the Gramophone Company of India, a sick company even till the 1980s, is a case in point. The extent of sickness in Indian industry has already assumed alarming proportions and some effective measures need to be taken on an urgent basis. The large accumulation of non-performing assets from the points of view of commercial banks and financial institutions has been a matter of serious concern. Stern measures for recovery of long outstanding debts may not really be the ultimate solution to the problem, at least not in the cases where default has taken place for reasons beyond the control of the companies. Events such as naturaldisasters, terrorism,insurgency, political turmoil and governnient's constrictive economic policy have had a killing effect on industrialgrowth anddevelopment in many countries, including ourown. Pervading sickness in Indian industry has not a little been due to a cumulative indifference to professional management and the normal propensities to growth; for,

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in the case of a company either it grows or decays, there is nothing in between.

WhatCo-opetitionDoes?

Co-opetition takes care of these propensities by nurturing the normal growth impulses. Apart from this, it is not necessarily mergers that figure as a measure of the last resort. Enhancement of competitive ability may indeed have several routes. Without having to stir the bottom up, it is possible to gearup things via co-opetition underlining strategic alliance in all crucial matters.Mergers, especially friendly mergers, can go hand-in-hand with such strategic alliance for the purpose of combating the competitor's moves. Co-opetition can also go easy with moves such as combination management including combination marketing. Such moves may be more relevant in the SSI sector in which the list of reserved items has been drastically cut sure of the market forces, adherence to andgovernmentdesiresthatthe unitsshould quality standards aendbetter responses to fend'forthemselveswith minimum external customer needs. Co-opctition can provide propping up efforts. Indian government for following the best practices in the field has had a policy of encouraging the for- througTh benchm'arkinu. Such improvemation of a consortia of several SSI units nments may be a continuous effort, followfor purposes of exporting and the units in ino what the Japanese enterprises call the sector are known to have contributed 'kaizen' embracing quality, cost, design substantiallyto the foreign exchange earn- .and performance. It may sound curious ings of the country. Side by side, it has that small units are urged to update and also to be stressed that almost 10 per cent modernise their management practices. A of the total numberof small-scale units are moment's thought would, however, unsick andheavy amountsof bank funds have derline that the limits of investment in remained stuck in them. It has become plant and. machinery for a small-scale unit necessary to do something about this, have recently been raised and government especially in view of the fact that many desires these units to raise their operational other units had been deprived 'of funds levels and efficiency. It is not impossible badly requiredby them. Banks and finan- to achieve: This may also be considerably cial institutionshave been helpless. Unless facilitated by strategic alliance. Spread of the funds keep rolling, the maximum of effective entrepreneurship is the crux of assistance possible cannot be rendered. the matter and co-opetition may be instruCorrectives in this behalf that call for mental in spreading the cult. In a free economy, it is also possible to close examinationareseveral. Firstly, since mass productionis not a virtue of the small visualise the tussle between the suppliers units, they have to concentrate on items and the consumers' Competition envisof productswhich are special, customised. ages excess of supplies over demand so Secondly, greater reliance would be re- that not only do the consumers have a quired with respect to products that add choice regarding the purchase of products high value on counts of personal skills. but also the prices at which they would be Thirdly, even while relying on personal agreeableto buy. Different safeguardshave skills, it is possible to take recourse to been envisaged for protecting their appliances that make efforts less labori- interest such as correct weights, correct ous, cumbersomeandtiresome; contrarily, depiction of the contents on the package, they may increase in productivity, help to maximum retail prices chargeable, period achieve high value addition and enable during which the products should be concarving a niche marketfor the units which sumed, precaution about the ways of dealing with the contents and so on. While may be profitable and self-sustaining. Lastly, accounts-keeping in small units the consumers do stand to gain in a comhas been a major problem though it is petitive market,it would, however, depend almost certainthathad therebeen sensitive on how fair is the competition and how Economic and Political Weekly January 27, 2001

accounting systems in operation many of these units would not have to eat away their fixed and working capital. Much-of the problems arise due to lack of knowledge and expertise in mattersof tracking inflow and outflow of funds and a judicious deployment of resources. Co-opetition is compatible with both the merger concept and the consortium approach, because the units seek to approach the tasks in a more organised manner. In the case of merged units, which are of a bigger size thanearlier, such alliances with other merged units would basically mean dealings between equals. Such-dealings need not be with reference to pricing or marketing alone; they may relate to the entirety of the supply chain as well. Management of the small units under such strategic alliance may be more and more professionaliscd forwithstandingthe pres-

reasonable is the price. While on price and pricing, it is necessary to emphasise that maximisation of value to the customer has been a major objective of suppliers but in this respect, it is not always based on lessening the price as such, but price in relation to the value offered. The concepts and ideas of value management become relevant in this context which enjoin that value is maximised in conditions where either the same functions of the product are performed with declining cost, or functions improve while cost remains constant, or functions improve the costs also rise but less than proportionately. Taking all this into view even so-called consumerism acquires a different connotation from what it is generally ascribed. Consumers occupy the centre stage all right but the emphases become different. Brand equity creates a difference in consumer behaviour.

Conclusion
With a virtual paradigm shift like what has been stated,competing enterprisesseek to create brand loyalty that goes beyond what generally consumerism denotes. The atmosphere of competition among brands is of a different dimension and the levels of sophistication are also higher. Coopetition can effectively cash in on this state by way of strategic alliance among enterprises who may have the same or similar products but different brands or even mutually accommodative variances of brandedproducts. The accommodative approaches are envisioned in the strategies for satisfying total requirements of customers, at times unrelatedto the supplier's core products. Instead of buying such products from the market for supply to the customers, the suppliers would like to team up with others for supply of such items. Such practices are taken to by many an enterprise to retain their customers and to stall their own searching for such products from different sources. Thus, in the strategic efforts to sustain markets over time, suppliers often adopt insourcing coupled with outsourcing and farming out approaches. As mentioned by Tom Peters, excellent companies spend a good deal of time to understandand appreciate the needs of the customer so that his total needs can be 'satisfied', to borrow the expression from H A Simon. If the desires of the customer remain only desires, not effective demand, all efforts come back to square one. Co-opetition furthers such an effort in the right direction. Wli 285

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