FOR ECOPINION IN ET OF JUNE 18 2001

The fall of “swadeshi” BY S L Rao

Neo-economic patriots like the SJM must pay attention to Indian brands and what their creators are doing to them. Indian companies have faced severe constraints for long. The opening up to competition is claimed to have been too sudden. They are not in a “level playing field”. There are many examples in the last decade that suggest the opposite.

Bajaj scooters enjoyed a stranglehold on the Indian scooter market, with huge production capacities, little competition, customers queuing for years to get their allotted scooters, with no questions about price, nor of quality. The scooter was the new middle-class status symbol and Bajaj was almost the only scooter. But it was only a name, not a brand. The company made huge profits for its shareholders. It amassed large amounts of cash but could find few avenues to invest it. It did not invest in design and R & D., in meeting emission norms or installing signal lights, nor in building the name in customer minds as standing for something unique. Bajaj is still a large and rich company. But it no longer dominates the two-wheeler market. Its profits have taken a beating, like its market shares. But its present state cannot be blamed on anyone but itself. The patriarch and leader of the ‘Bombay Club’ proclaimed only three years ago that his family would provide the natural succession to the company. The future for this company is clouded only due to its management.

Godrej has been one of the oldest and most respected names in India for all of this century. But the company’s behaviour in the decade of liberalization has been that of a trader, not of a company that builds brands and markets. It has the record of having entered into and broken three collaborations or joint ventures--with P & G, Pilsbury and G.E. For a while it surrendered for money, what every new foreign entrant desires, a nation-wide distribution system built by itself, not outstanding, but its own. It bought into the new business of electronic mosquito destroyers, and soon sold a large part of it to a foreign company. Some of these transactions earned Godrej large profits. But in the process, the products and brands that it had earlier built lost market shares. Godrej will find it difficult to get back the earlier standing in the market, a result of its own actions.

Parle is a different story, but also a loss for swadeshi. Parle built very successful products and brands--Gold Spot, Thums Up, Limca, Bisleri, Frooti. Then they began selling them to giant multinationals. In a way they are corporate brand merchants, who design and market great brands and then sell them to others for a profit. This approach was in the last few years emulated by many young men who started dotcom companies, which they expected to sell within a few months for vast profits. The difference is that the Parle founders actually built great brands, and then consciously opted out. Hopefully, they will continue and build more brands, which they can sell later!

There are more examples of companies that allowed themselves to decline than of those that consciously built themselves and sold out. There are fortunately practically none like Godrej, which built brands, joined up with the “videshis”, and having watched their brands being milked, bought back the business (apparently) to rebuild it.

Unfortunately, neither political “think-tanks” nor our governments understand that building a company is not merely about constructing buildings and installing equipment. A company has to develop a special place in the minds of customers, for all of whom the company must stand for the same kinds of things. This is as difficult a task, if not more so, than the actual manufacture of the product or delivery of the service. It can also be easily destroyed. Air India was among the great airlines of the world. It was not big, it did not fly to many destinations, but to fly it was to be enchanted into being a Maharajah for the duration. That image was worth a fortune, and some years ago could have fetched one if it had been sold. But our politicians and bureaucrats ensured that they first destroyed the brand before they tried to sell it.

Our “swadeshi” ideologues must educate Indian business and governments on the need to build brands in the minds of customers, not to sacrifice company long-term interests for short-term trading profits, nor to tarnish a brand image built with great effort in past years. (770)

FOR ECOPINION IN ET OF JUNE 18 2001

S L RAO

2001-06-13