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Corporate India – a brief guide to the best practices
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By Sourajit Aiyer
The current economic slowdown in India is not just an aftereffect of the financial crisis of 2007. A lot is written of how China and
India received only minor bruises from that crisis due to certain structural patterns in which they had opened up their economies in
the last two decades. Conversely, many advanced economies caught a cold when America sneezed.
But the Indian growth chart does not show minor bruises. It shows deeper cuts. The financial crisis had actually coincided with
another severe crisis in India – an utter failure of governance implementation. The combined effects of the two crises are visible,
and the global community is debating whether the India story is over.
But there is always something to learn from adversity. The slowdown shook up the way India Inc. managed its businesses. It made
companies develop better strategies to attract clients, bring in best practices, cut the flab, be adaptable and enhance their business
models from the earlier golden days.
Not everyone succeeded, but many did. It is easy for companies to capture volume during good times, but only the better-managed
ones could capture market share during tough times. In short, the economic slowdown brought forth the better-managed, quality
companies – sorted the wheat from the chaff.
So how did Corporate India navigate the slowdown? Some attributes emerge from the way the better-managed companies
conducted their business in these recent years.
Delivering a specific value
If every firm offers the exact same thing, then there is nothing to remember one specific company by. Creating a value proposition
gives clients a reason. It addresses a specific area for clients, something extra, over and above the normal.
“What is it that we bring to the table that others do not?” is the question the better-run companies have addressed. This created a
branding, and branding created relevance and recall. That is a significant intangible asset the successful firms enjoy. It increased
the chances of clients sticking with that company in the long-run.
It is also believed that such sticky relationships continue even after the crisis is over, and that stickiest relationships typically
contribute to the maximum proportion of sales.
When volumes shrank during the slowdown, the value proposition helped gain market share. Delivering a value proposition holds
true for B2B businesses, but is even more critical in B2C where clients are generally more fragmented and less bound by long-term
sales contracts.
Balancing cost rationalization
Cost-cutting was one way for companies to remain afloat, but it was done with an intention to increase productivity by cutting flab.
Process-mapping of various operations was essential to ensure that the basic resource level was not compromised upon, since that
would negatively impact productivity.
That helped ensure the companies did not give up those resources that would actually help it gain business. Companies also had to
invest into creating growth, since doing things in the earlier status-quo would not take them anywhere.
The better-managed companies invested into areas that helped them gain visibility and top-of-mind recall from clients, reduced
turnaround times for service delivery and enhanced the delivery experience, reduced overheads in operations and hired
experienced talent to guide the company. In short, they created operating efficiencies and a launch-pad to grow as recovery
occurred.

2. Profitability, ahead of profits
During tough times, there is only so much the industry can do to increase the depressed volumes. Capturing market share within
depressed volumes can often take time, and time meant possible bleeding every quarter. Absolute profits can be impacted by lower
business volumes and the proportion of irreplaceable fixed costs.
Also, accumulated losses and continued capital calls hampered the growth plans of some companies, especially where the ability to
raise that capital in-house was limited. This also included over-leveraged companies, many of whom struggled to meet obligations
leading to asset quality concerns in certain banks.
Hence, maintaining profitability was a way to navigate the rough seas and served as a yardstick to ensure results were still within
some acceptable limits. Maintaining profitability was a fine balance and a tough task, but many better-performers companies were
those who delivered consistent profit margins across the cycle.
Adapting to changes in purchasing power
Companies earned sales ahead of others by being adaptable to address the changes in the purchasing power of clients. Tough
economic times impacted the clients’ propensity to spend, since incomes are often stagnant in a climate of inflation.
Clients still want the product or service, but now perceive the price on the higher side. This impacts their willingness to purchase.
Companies reduced the quantity (and packaging) to make the price more affordable to clients, and still win sales in a tough climate.
In the services segment, this strategy would necessitate unbundling of services into smaller components and assigning separate
pricing.
Diversifying into new markets
The financial crisis gripped the USA and Western Europe, traditional export destinations for India. In recent years Indian companies
(in both manufacturing and services segments) needed to send prospect teams and invest into road-shows into new markets.
It meant going where the new money was: China, Middle East, South East Asia and larger Latin American countries in recent years.
They came with their cultural challenges. Companies had to understand the nuances of their way of doing business.
But many Indian companies made significant inroads into these new geographies, with the intention both to gain export markets and
to set up production facilities for global sourcing.
It meant hiring foreign managers and training domestic managers who could then take over those operations. These expansions
have not been restricted in terms of sectors, but have been visible across sectors.
Staying focused
A hallmark of successful players has been to focus on few segments where they could build specialization, rather than going into too
many segments where they did not have competency. It was better to be the master of few skills, rather than a jack of all trades.
Being big might help enjoy economies of scale and spread common costs. But it may not always turn out to be the best strategy,
since size often creates failure to ensure every segment is run in the best manner.
Every company could not always be best in everything, and clients had become increasingly demanding post-2007. They wanted
the best service and would switch their loyalty rather than compromise if service level fell. Companies that focused on few areas and
went into them in depth to ensure the best proposition for clients often ended up successful.
Corporate governance
Corporate governance became crucial, be it when foreign partners were looking to source or invest, or during capital infusion. With
the ability of some banks to lend affected due to asset quality stress and the depressed IPO market, private equity emerged as an
alternate source of growth capital.
But these funds had their strict standards of corporate governance, be it in financial reporting, external directors etc. Corporate
governance came at a cost. But it also brought reputation and dependability of those companies as far as raising capital was
concerned, and capital was needed by many companies to achieve their next level of growth.
These are some of the attributes of the better-managed Indian companies that have emerged from the observations of the current
economic slowdown. For global players looking to source, invest or partner with corporate India, these attributes might help identify
the quality companies.
The author works with a leading capital markets company in India. Views expressed are entirely personal and do not represent
those of any entity.