The subject has been of much interest and definitely entails a lot of research. However I have arrived at some conclusions based on primary studies through my experience. Initially let us try to understand the environment under which the British firms operated which could help us arrive at a few answers .
Supplier’s Market : Spices, Tea and Jute were shortage commodities.The First and Second World War further led to spurt in demand. The British mercantile firms in India were never under pressure to create customers or brands.
Lack of pressure to create brands : Since the business was essentially driven by volume with decent profit margins there was no reason to create brands and up the profitability further.
Cost Structure and Overheads : The British organizations had abnormal profit margins and were willing to share the same with employees.The economy was mainly supply driven and ability to retain employees in remote locations was a key challenge.Hence there was no restriction in providing liberal perks and allowing the managers to have extreme facilities with no cost focus.
Integrity : Also the managers in India began to accept bribes as a regular practise from suppliers and buyers .A classic example was Lord Clive who multiplied his personal wealth while on the payroll of the East India Company .
Strict Cost Controls on operating parameters : The Scotsmen especially had extreme cost focus while supervising their Indian counterparts. Every day they would ensure end of the day accounting and figure out every cost parameter be it in the jute mill or in a tea garden.
Post Independence once these organizations came into Indian hands the situation became extremely grave for the following shortcomings :
Competitive Markets & Poor Cost Control : As labour costs went up sharply the markets became increasingly competitive.Tea was also grown in Kenya, Sri Lanka and Indonesia and prices came under pressure. As the Indian management endeavored to throttle perks these became serious IR issues and strikes and lockouts closed down the firms. The issue of manager’s perks were never addressed and as the yearly increases continued there was no way to correct it without creating unpleasantness.
Lack of Technical Research : No cutting edge research was initiated by any Indian firm be it in process or product which could be of significant value. Mainly lip service was provided by setting up Jute and Tea Research Institutes.
Lack of focus on brand building : Being mainly of trading background, the new owners focused mainly on opportunistic windfall trading profits and not on product differentiation and brand building which could lead to profitability. In other words no Blue Ocean Strategy was contemplated to turn around these firms.
Lack of Systems and Processes : The Indian owners did not focus enough on discipline and structured systems and processes. The employees recruited weren’t professional as in Western and Southern India and took advantage of the lack of supervision to cut corners.
Each of the aspects are subjects of deeper research and the paper can only be useful if a way forward is devised for turning around these businesses instead of converting the properties into prime Real Estate.
Comments