Business decisions are becoming more and more difficult to interpret. What appears apparent in the beginning is not so in reality and many a time we understand them only by looking beyond the obvious. It seems corporate now a days don’t feel any dilemma in what to keep secret and what to drop in the public domain, and are using the power of information technology and media to reach new avenues of strategies and gimmicks. Some of the recent decisions and announcements make an interesting collage.
Reliance – proposals and disposals
Back in March, Reliance Industries had decided to close down all the 1432 petrol stations it had opened across India. The company had invested some 4000 Crore rupees in setting up these stations and employed 55000 people. Reason was that government had not agreed to pass on the same subsidies to the company as what it had granted to the public sector oil firms. On one side, it made me wonder: how could Reliance be so buoyant at the business planning stage that it believed the government would grant it the same subsidies that PSUs get in order to survive? I tried to calm down my bewilderment by asking myself to wait and watch; may be Ambanis had some hidden Plan-B’s. But any good news in the regard is not coming in. On the other side, we didn’t realise that when Reliance closed its petrol stations, all its sales went to the PSU oil firms, thereby requiring the Govt of India to churn out Rs 4000 Crores extra in the form of additional subsidies! Interesting? So the decision of the Govt not to give the same subsidies to Reliance still resulted in a loss of Rs 4000 crore to the govt! Now it is evident that Reliance was sending a message across by its decision to close down.
Reliance Retail – Sending message @ speed of Fire
The first thing Reliance Retail did after public and political opposition to its setting up organised retail stores in Uttar Pradesh was to send termination letters to its 1200 employees it had hired, and announcement of closing down 20 stores. Did this decision to fire employees and bad press coverage cause it any harm? No! Actually it sent a strong signal that the opposition to organised retail in UP was actually resulting in loss of employment rather than save some! A very fine example of sending the right message with a bad news…
The Nano – and the Grand dreams
We all know about the fate of Tata Nano project in West Bengal. Knowing the state of industries there because of trade unions and labour protection policies, I wondered why Singur was Tata’s first choice. Later on I understood that the strategic port location, presence of huge middle class customer base in the vicinity and the favourable sops offered by the state government were the reasons behind its selection. But what about the long term sustainability? In a communist state where public life stands still at the call of frequent bandhs by any political party, starting a project there, which was so very critical for the company and for the nation was questionable. The same is true about communist ruled Kerala. Harsh Mariwala, Chairman and MD of Marico who visited our campus told how everyone laughed at him when he decided to put up a plant in Kerala. And successfully managing it despite all odds can still be called one of his major achievements. The public announcements made by Ratan Tata, whether at the negotiating stage or to pull out of the state can be understood because the situation was all political. Right communication by the company was very important because the whole world was watching them and their baby Nano. (Though some suspect the Govt of West Bengal of killing the political career of victorious Mamta Banerjee by not trying too hard to calm the situation with some real sops and compensations for the farmers. If we see it this way, then the defeat of the ruling party in the state in retaining the Nano project was actually its victory in insuring their rule for next two or three decades.)
Jet Airways firing and flip-flop
The case of Jet Airways firing 1100 employees and then inducting them back with some touching and emotional statements made by the Chairman and CEO Naresh Goyal calling company the mother and all employees as her children was an interesting one. No emotional speeches were able to douse the bad press it got, and this episode would definitely leave some bad impressions for the company as an employer for a long time to come. But this whole episode can be seen as an attempt by the Indian airlines industry to wake up the government and get some favourable policies and subsidies in order to survive…
State of Indian economy - Pessimism or Propaganda?
Front page of HT on Nov 12 carries a news title, “No more acquisitions, Tata tells his firms”. The news report had quoted Ratan Tata’s email to the top management of Tata Group firms! Should this email have been kept a secret? Not necessarily so. The decision to make it public is understandable. Due to Indian economy in bad shape – partly due to global financial meltdown and more critically due to failure of the Indian economic planners – private firms are the first to get the beating. Their survival is questionable as the raw material costs are going high on one hand, and the competition is merciless on the other. In such a situation, sending panic messages in the markets, raising questions about the sustainability of Indian growth story, making employment an issue in a country with 7.2% unemployment rate, the message is clear – the government has to act and give more breathing space for the private firms. But after a limit, it seems that the general pessimism and the panic that is created in India by the private firms is more in the air than on the ground. India is still not that much affected by the global financial crisis, but companies are making use of this gloomy situation to achieve some difficult goals. Some companies are using the situation to fire employees, cut down salaries, and stopping all perks, even if they are in the business of selling chocolates, which is mostly unaffected.
As we look at it, some decisions and communications by the Indian companies raise questions about their prudence at first, but eventually the real picture comes out as very different… Let us keep the faith on the board of directors who decide the salaries of the CEOs :)
Reliance – proposals and disposals
Back in March, Reliance Industries had decided to close down all the 1432 petrol stations it had opened across India. The company had invested some 4000 Crore rupees in setting up these stations and employed 55000 people. Reason was that government had not agreed to pass on the same subsidies to the company as what it had granted to the public sector oil firms. On one side, it made me wonder: how could Reliance be so buoyant at the business planning stage that it believed the government would grant it the same subsidies that PSUs get in order to survive? I tried to calm down my bewilderment by asking myself to wait and watch; may be Ambanis had some hidden Plan-B’s. But any good news in the regard is not coming in. On the other side, we didn’t realise that when Reliance closed its petrol stations, all its sales went to the PSU oil firms, thereby requiring the Govt of India to churn out Rs 4000 Crores extra in the form of additional subsidies! Interesting? So the decision of the Govt not to give the same subsidies to Reliance still resulted in a loss of Rs 4000 crore to the govt! Now it is evident that Reliance was sending a message across by its decision to close down.
Reliance Retail – Sending message @ speed of Fire
The first thing Reliance Retail did after public and political opposition to its setting up organised retail stores in Uttar Pradesh was to send termination letters to its 1200 employees it had hired, and announcement of closing down 20 stores. Did this decision to fire employees and bad press coverage cause it any harm? No! Actually it sent a strong signal that the opposition to organised retail in UP was actually resulting in loss of employment rather than save some! A very fine example of sending the right message with a bad news…
The Nano – and the Grand dreams
We all know about the fate of Tata Nano project in West Bengal. Knowing the state of industries there because of trade unions and labour protection policies, I wondered why Singur was Tata’s first choice. Later on I understood that the strategic port location, presence of huge middle class customer base in the vicinity and the favourable sops offered by the state government were the reasons behind its selection. But what about the long term sustainability? In a communist state where public life stands still at the call of frequent bandhs by any political party, starting a project there, which was so very critical for the company and for the nation was questionable. The same is true about communist ruled Kerala. Harsh Mariwala, Chairman and MD of Marico who visited our campus told how everyone laughed at him when he decided to put up a plant in Kerala. And successfully managing it despite all odds can still be called one of his major achievements. The public announcements made by Ratan Tata, whether at the negotiating stage or to pull out of the state can be understood because the situation was all political. Right communication by the company was very important because the whole world was watching them and their baby Nano. (Though some suspect the Govt of West Bengal of killing the political career of victorious Mamta Banerjee by not trying too hard to calm the situation with some real sops and compensations for the farmers. If we see it this way, then the defeat of the ruling party in the state in retaining the Nano project was actually its victory in insuring their rule for next two or three decades.)
Jet Airways firing and flip-flop
The case of Jet Airways firing 1100 employees and then inducting them back with some touching and emotional statements made by the Chairman and CEO Naresh Goyal calling company the mother and all employees as her children was an interesting one. No emotional speeches were able to douse the bad press it got, and this episode would definitely leave some bad impressions for the company as an employer for a long time to come. But this whole episode can be seen as an attempt by the Indian airlines industry to wake up the government and get some favourable policies and subsidies in order to survive…
State of Indian economy - Pessimism or Propaganda?
Front page of HT on Nov 12 carries a news title, “No more acquisitions, Tata tells his firms”. The news report had quoted Ratan Tata’s email to the top management of Tata Group firms! Should this email have been kept a secret? Not necessarily so. The decision to make it public is understandable. Due to Indian economy in bad shape – partly due to global financial meltdown and more critically due to failure of the Indian economic planners – private firms are the first to get the beating. Their survival is questionable as the raw material costs are going high on one hand, and the competition is merciless on the other. In such a situation, sending panic messages in the markets, raising questions about the sustainability of Indian growth story, making employment an issue in a country with 7.2% unemployment rate, the message is clear – the government has to act and give more breathing space for the private firms. But after a limit, it seems that the general pessimism and the panic that is created in India by the private firms is more in the air than on the ground. India is still not that much affected by the global financial crisis, but companies are making use of this gloomy situation to achieve some difficult goals. Some companies are using the situation to fire employees, cut down salaries, and stopping all perks, even if they are in the business of selling chocolates, which is mostly unaffected.
As we look at it, some decisions and communications by the Indian companies raise questions about their prudence at first, but eventually the real picture comes out as very different… Let us keep the faith on the board of directors who decide the salaries of the CEOs :)
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