How Competitive Are Indian Industries?
Liberalization has seed India rushing to import products that are already in its manufacturing range. It has no major or even medium-tech industrial products that can be told abroad competitively–either, in terms of innovativeness or quality. Exports largely consist of raw materials and labor-intensive and even drudgey-intensive products.
The competitiveness of Indian products today is based mainly on low wages. This is a dwindling asset as shown by Japan, South Korea, and Singapore. To be competitive, a country has to be competitive in innovation, technology, technical skills, organizational ability, and inefficiency. Innovation and creativity can be brought in by motivated persons with talent.
To be competitively salable in the world market an industrial product must be:
(a) Innovatively designed. This needs investment in research and translating a good idea into a usable product.
(b) Fully developed, so that the product is reliable, of high quality and fully meets the claims made for its performance,
(c) The product must be well-engineered, so that it can be produced at an acceptable cost, can perform consistently to prescribed standards under defined conditions of usage, and cater for minimum fault liability easy repairability, and higher reliability
(d) Efficiently produced to ensure high quality at the least cost.
In the world market, the price of a good product is typically composed of expenses on design and development (3.0 percent), expenses on engineering and production (30 percent), marketing expenses (30 percent), and profit (10 percent). The Indian picture is very different. Design and Development facilities are only partially established. Copying or buying know-how is found easier. Original engineering is of low standard and many times receives low priority. Production costs are very high. Most Indian producers are hardly conscious of effective marketing techniques. Today, the customer looks for the features behind the product rather than viewing it as a mere product. Customer expectations are a whole package or a system. For example, when a customer buys a television set or a DVD Player, the features he looks for include the number of channels, color contrast, and density, features such as slow-motion, pause and still, picture search, and the number of ptograrrunes that can be recorded per month. He does not bother much about the technology that goes into the TV or DVD Player.
Underlying the operations of every company—working like its spine or cerebral cortex—is a system. How does an automobile manufacturer design a new vehicle made up of thousands of different component parts and manage the daily flow orders and shipment with supplies and assembly parts?
Each business operation is different but all of them share one common trait. All are systems for providing added value to customers—the value delivery system (VDS).
AVDS organizes work and guides action, and a time span connects all the parts of the system. It is a system that develops and delivers products as well as makes decisions. It is a system within an organization that results in orders being placed, goods being manufactured and shipped and stores being stocked. Whether the system consists of a flow of bytes between computers, papers over desks, or parts through a factory, the mandate is the same. A company’s performance is the direct result of how effectively the system is structured and managed. The quality of the system is based on the sustainable competitive advantage of the technologies, products, or services.
While investment in R & D is a must for any company to be globally competitive, the technology innovation has to be timely in meeting emerging needs. As such an innovation culture may take time to take root, an immediate solution available is to go for import of technology. However, having acquired the technology, it will be necessary to keep improving it all the time so that it remains state-of-the-art.
The rapidity with which changes are being introduced by major manufacturers makes it necessary to examine the implication of changes much more before its introduction. Obsolescence takes place in the electronics industry at a higher rate than in other industries. Hence, high technology industries should be alert and watch international trends continuously.
Change is inevitable. Responding to change quickly is a matter of survival. Some of the factors to be watched are: redundant designs, long design cycles, increased work in process, scrapped parts, lack of adherence to standards. No enterprise can survive in today’s competitive environment with a “rework until it’s right ” philosophy. To compete in the global markets, international accreditation such as ISO 9000 is inevitable.
A lot of attention needs to be paid to product design. An average Indian bicycle weighs 20 kg compared to the world average of 14 kg. In Japan and some other countries, it weighs even less than 10 kg. This difference amply describes the gap in technology between India and other countries. All over the world, the trend is towards lighter products brought about by sustained R & D. Also, high engineered versions such as mountain bikes with multiple gears and carbon fiber components are being built through innovative techniques. Thus new -niche markets are created in this segment. These important areas till recently had received negligible attention in India.
Today time is the cutting edge. The ways leading companies to manage time in production, new product development, and sales and distribution, represent the most powerful new sources of competitive advantage. The elapsed time can make a critical difference between success and failure. Give the customers what they want and when they want it, or else the competition will. Costs do not increase when lead time is reduced—they decline. Costs do not increase with greater investment in quality—they decline.
Costs do not go up when product variety is increased and response time is decreased—they go down.
The world over, organizations are aligning new product engineering teams around the ‘pit crew’ model. Cross-functional teams of design, manufacturing sales, and service engineers work closely with everyone else, who at some point in time have a stake in the product. This ensures manufacturing and salespeople having their say all through the design process and building up the manufacturing capability early on, that is concurrent engineering. The goals are simple—speed, quality, and competitive price.
Competition has become international for most industries and the impact on engineering is significant. In many industries, the learning curve in engineering has become an unaffordable luxury. Competitive pressures mandate finding ways to reduce the total time required to introduce new products in the marketplace. Competition along with more complex production and distribution environments requires identifying and reducing unnecessary costs—costs associated with development, manufacturing, distribution, and service.
Too often business goals of reducing costs and improving product quality are established only after problem areas are identified. The problem areas relate to missed product release and production schedules; unwanted and unplanned scrap and rework and difficulties in communicating critical information between engineering and manufacturing.
All these have one thing in common, they affect the ability of a business to earn profit. Engineering management systems provide a valuable resource to help improve these areas and achieve required levels of profitability, production, and quality Many manufacturers have discovered new avenues for implementing, an engineering management system. These are the businesses that are successfully developing methods for using computer integrated manufacturing as an ally in the highly competitive marketplace of the Nineties and beyond to reduce cycle time for development.
The need of the hour for Indian industries is to adopt the engineering management system which helps in achieving product release at the most advantageous time: early determination and control of cost impacts caused by design changes; overall production cost reduction; rapid development of process plans; minimized product development time; a predictable development schedule; increased manufacturability; predictable quality, and one logical repository for all product and process data. The thrust for quality improvement should be a continuous process and it should be company-wise. The company should strive to take one and all in the organization, particularly the working class, towards a quality improvement program and implementing the quality policy and objective of the company.
A systematic approach should be evolved in identifying the areas that require improvement in identifying the responsibility with adequate resources if required, a time-bound action plan, culminating in the formulation of an annual quality improvement plan (AQIP). This system should also cover the agency for monitoring the implementation of projects identified in AQIP. Identification of areas that contribute to cost reduction and control is to be done, with appropriate methods like waste elimination, value engineering, and productivity improvement programs. By eliminating minimizing defects and rejections through systematic analysis, a lot of savings can accrue. Training operators/engineers and motivating them to come out with suggestions for improvement would go a long way.
Value engineering can contribute considerably towards cost reduction/control. The emphasis should be on tangible benefits while identifying projects. Due to substantial costs of tied-up capital, inventory should be reduced to the minimum level needed. A number of companies across the world are adopting the Just-In-Time (JIT) deliveries of parts and components. This can become effective if zero rejection levels are achieved and prompt payments are made.
The after-sales product support services by any company have a major effect on the sustenance of customer confidence. Customers cannot afford to wait for want of spares to put back the machine under the breakdown particularly when there is a huge investment on the equipment. How fast the manufacturer assists the customer in putting back the machine into operation depends on the system adopted for spare parts management which may include various activities such as order processing, spares planning, procurement manufacture of spares, and distribution methods. Without training the operators and maintenance staff properly, the product may not give satisfactory performance. There is a need to pay great attention to this continuously. Sometimes customers may pick up a catalog and order a piece of equipment that may not serve their requirements exactly It is necessary for the supplier company to thoroughly investigate and understand the customer requirement and suggest appropriate equipment, spares, and accessories.
The industry initially expects the Government to create a level playing field, especially in the domestic market. Once the product is established successfully within the country, a market share can be carved out in the global market. When tariff barriers go down as per expectations, imported equipment may be preferred by many customers for obvious reasons. The tariff barriers are to be lowered keeping in mind the interests of Indian industry. The industry should be permitted to import any type of technology. Curbs should be lifted since the latest technology cannot be obtained at reasonable prices. There is a peed to join hands with foreign companies or form strategic or competitive alliances to facilitate exports. Maruti-Suzuki is an excellent example. The Government should promote or encourage similar joint ventures.
There is also a need to choose specific areas for achieving global competitiveness. There must be a national consensus on the thrust areas where global competitiveness is desired and the effort should be nationally coordinated. Japan’s domination in consumer electronics, Germany’s domination in heavy engineering, U.S. domination in an important challenge. New markets are opening up in Africa, East Europe, West Asia, and South America among others. They have to be explored.
With the withdrawal of Government funding and special dispensations such as price and purchase preference, the public sector enterprises face a greater threat. Industries and service organizations depending on PSEs also consequently stand to suffer. Some of the PSEs are beyond redemption and terminally sick. Revival plans of some others are not successful. It is time that employees, unions, and executives realize that the juggernaut of liberalization cannot be stopped. With a high degree of involvement and dedication, they can show extraordinary positive results and face challenges. At the same time, the Government and top managements of OSEs have to resolve certain inherent contradictions and problems. Some of them are:
* Multiplicity and accountability such as statutory audit, Government audit, accountability to Parliament through various bodies like COPU.
* Burden of social obligations.
* Exodus of experienced and talented executives to the private sector and abroad because of better salaries and perquisites.
* Article 12 of the Constitution makes the PSEs an article of the Government.
* Slow decision-making due to complex, procedures and hesitation to take timely decisions.
* Opposition to link productivity to wages.
* Absence of well-defined exit policy
The aviation industry is an example of identified thrust areas for global competitiveness. A small country like” Switzerland with no raw materials is a big exporter of high’ skilled specialist products.
Companies can enter global markets through exports, joint ventures, and strategic alliances, starting from scratch, licensing agreements, by partnerships, and acquisitions of going enterprises.
A recent phenomenon is the development of a range of joint ventures and strategic alliances wherein partners bring a particular skill or resources, usually complementary, and by joining forces both are expected to profit. A large number of alliances have been formed over the past years, particularly in the automobile industry which is a worldwide phenomenon. To survive in the coming global battles for market dominance, companies will be to become increasingly bolder and more creative in their entry strategy choices.
Gone are the days when entry was restricted to exporting, licensing, foreign manufacturing, and joint ventures. New concepts such as global alliances have become common and international firms will have to include acquisitions, venture capital financing, and complex government partnerships as integral elements in every strategy configuration. The numerous new entry alternatives have raised the level _of complexity in international marketing and will remain so for some time:
* Policy on the restructuring of operations and organizations.
* Disinvestment and gradual privatization.
* Increased autonomy and making the organizations highly professional.
* Reduced layers of hierarchy, bringing about a flatter organizational structure and making people accountable.
India has all the attributes and capabilities to become a global player and an Asian Tiger, if not a lion. The strategies for the global competitiveness of Indian industries have to be evolved by the Government, industry, and the people. It has to be a dedicated effort aimed at national building. There is no alternative.
One must remember that in the race for global competitiveness, Indian industry has many contenders—almost each and every other non-developed nation—which will include the developing and under-developed nations as well and India is to be amongst the winners it has to unlearn a lot and Lam a lot.