Prognosis and Actions for the Indian Industry!

"Ask not what your country can do for you, ask what you can do for your country." John F. Kennedy

The recent article in Economic Times* confirmed the looming fears for the Indian Rupee (INR) downslide vis-a-vis the US Dollar. Predictions indicate that Rupee could further devalue to 57 vis-a-vis the USD. The situation is such that some Bankers are not taking a view on INR. Chinese Yuan, Brazilian Real and South African Rand have appreciated against the USD - thanks to current account surpluses and steady economic fundamentals.

Indian Industry watches with dismay as the INR slides and is trying to estimate the fallout of this - erosion of profits due to mounting import bills, loss of competitiveness due to induced price increases

There are several factors that interact with each other to make any economy work. It's a fine balance and any disruption can have far reaching consequences. India's current account deficit is at 4.3% of GDP worse than the acceptable number of 3%. Trade deficit (excess of imports over exports) has reached a record high of 185 billion USD. Although RBI has made several symptomatic efforts to address the issues, it has largely been superficial given the impact of higher dollar pay-out on imports and reduced supply of dollars due to lower demand for India's goods and services. Redemptions of external borrowing by organizations, India's high oil import bill and the Eurozone crisis are all large contributors to the current issue. However, here are some facts - oil contributes only about 32 to 35% of India's total import bill. The rate of growth of imports is higher than the growth of exports. India will not meet its targeted growth of exports.

Can the Indian Industry Contribute in Salvaging the Situation and Strengthening the Future?

It is but true that the Indian Government has been slow on policy making and decisions to capitalize on the robust growth and boom time witnessed during 2005-08. However, the Indian Industry can contribute by following a well thought out agenda that can bridge the trade deficit.

Strategic Initiative 1 - Focus on export oriented organic growth

By April/May every year most companies finalize their strategies. Key question here is what percentage of targeted revenue is from - organically developed new products and services and from new international geographies?

Many companies have global ambitions and are looking to reach out. There are several challenges that are faced in such initiatives - selecting the right country and market, understanding customer needs and competitive scenario, right entry strategy and ability to deliver as promised (better than prevailing standards). What has worked so far may not continue to work and hence a mere grudgingacceptance of dwindling exportsdue to the Eurozone crisis will not help.

Drive for Innovation is the key here. Some techniques to mitigate the above challenges are as follows ?

  • Understanding the organization's core competencies and finding the "customer jobs**" that can be fulfilled through those competencies in identified target markets.
  • Following a structured process for "Country Selection/De-selection" for identification of target market (and country)
  • Determining "customer jobs" in identified markets and then working to build capability to fulfil those customer jobs
  • Establishing strong capabilities in managing a "global supply chain"

The above includes products, services (including export of competencies). A recent interesting example of this was an Indian company "exporting its manufacturing competencies" to turn-around an ailing company in Africa.

Strategic Initiative 2 "Strengthen" Make & Deliver - Capabilities

While most companies have a "Continuous Improvement Program" in place, the key question to ask is "has the program done enough?" If it is has, then why is there increasing movement towards cheaper Chinese imports? Why is the quality of Indian products/services being questioned in international markets? Indian companies may not be happy to rely so heavily on imports as it exposes them to several risks apart from tolerating erratic quality and managing higher inventory (definitely not just-in-time!)..but still "cost as driver" prevails.

The key here is to not get caught in "we have implemented xyz methodology fad" but to truly make "Improvement and Efficiency" as a Cultural Pillar of the organization. Here are some actions to enable movement in this direction "

  • Focusing on quality as ability to meet "customer outcome expectations? " doing away with "chalta-hai" attitude
  • Specific programs designed to build a "frugal mind-set" in employees - do more with less
  • Inculcating the ability to relate to "cost of activity?" currently most employees are not aware of costs of their actions

Strategic Initiative 3 - Conserve Oil and Energy

This should be a key focus. If every organization does their bit, this can add up to a substantial whole. Some actions here can be as follows:

  • Replacing raw material that find their roots in "oil"
  • Reduction in energy consumption
  • Efficiency in utilization of oil and related products

There could be several other actions. The key is relentless focus on the above stated strategic initiatives by the Leadership Team and considering these elements as critical as your routine operations.

Here, literally a dollar saved will be a dollar earned, thereby reinforcing the concept of "every drop makes an ocean". The impact of this effort will mean increased confidence of the Indian Industry on itself thereby reducing dependenceon the imports. Innovation and organic growth shall help spur exports and the whole effort, should over a period of time, work favourably to reduce the trade deficit.

Hence, it's time for positive action by ensuring that the challenges of uncertainties arefaced head-on and that India gets its rightful place in the world economy. Leadership teams will ensure that newsitems such as - Industrial output belies everybody's expectations& logs impressive growth rates? dot the headlines landscape.

BMGI is a global consulting firm that works with companies to improve competitiveness and drive growth. BMGI has worked passionately with the Indian Industry as a true partner in the Nation Building Process.

Contact us to see how BMGI can partner in realising the dream of "India Abound"

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Breakthrough Management Group International (BMGI), a global consulting firm, partners organizations to transform their business performance with a strong focus on delivering results. Today, BMGI is recognized as the world leader in harnessing the power of cutting edge techniques in the area of Innovation, Strategy, Problem Solving and Business Transformation for achieving tangible business results.

Headquartered in the US, BMGI has developed a loyal clientele across the globe. BMGI has partnered with organizations in various stages of their business life cycles and has delivered cumulative benefits of several billion dollars to its clients with an ROI of 5:1 to 20:1. In India, BMGI is located at Mumbai.

BMGI’s clients include amongst others ABB, Bausch & Lomb, DuPont, Johnson & Johnson, Northrop Grumman, Praxair, Schneider Electric, Siemens and TRW. In India, BMGI has assisted amongst others AdorPowertron, Apollo Tyres, Asian Paints, Jabil, Jubilant Life Sciences, Hindustan Unilever, Hyderabad Industries, ITC Group, Kraft Foods (Cadbury), Marico, Oracle, Praxair, Reliance Industries, Standard Chartered Bank, Sudarshan Chemical and Thomson Reuters to name a few.