Business Today

Managing the slowdown

The economic downturn is a reality, though its impact is varied across sectors. India Inc.'s top players are devising strategies to drive growth—in investments and in volumes—in tougher climes.

     Print Edition: October 5, 2008

Economists have correctly predicted nine of the last five recessions! That’s a quip once made by Paul Samuelson, Nobel Laureate and MIT professor. Nobody’s talking of the R word back home—and there’s no need to. But there’s no need for playing the guessing game here, either: call it a moderation of growth, or any cute euphemism you can think of, but there’s little doubt that industrial growth has slowed down in 2008-09. A surprise on the positive side is industrial production in July—7.1 per cent against expectations of 6 per cent—may well resemble the proverbial solitary swallow that doesn’t make a summer. For the first four months of the year, industrial growth has slipped from 9.7 per cent in 2007’s corresponding period to 5.7 per cent.

Investment growth in the first quarter has slipped into single digits (9 per cent) for the first time since the fourth quarter of 2003. Softer demand conditions in sectors ranging from auto to real estate to financial services have resulted in sales and profits of such companies taking a beating, and investors treating their stocks with disdain. But this isn’t a story about how much industry has slowed down by. Rather, it’s about how the bellwethers of some of the sectors closely linked to the economy are devising strategies to drive growth— in investments and in volumes—in tougher climes. They’re doing so in various ways. And innovatively. Auto major Maruti Suzuki is taking so close a look at its cost structure that it is seeking to reduce the weight of components that are fitted into its cars. DLF is perhaps the only real estate company in India to be importing cement from Pakistan. Reason: Prices of that commodity are 4-5 per cent cheaper there.

Tata Power has chosen this time to make a strategic acquisition in nonconventional energy; it has acquired a stake in a geo-thermal energy company Down Under. Engineering and construction giant Larsen & Toubro (L&T) has found a simple way to step up revenues and save costs at the same time—by executing highway projects ahead of schedule. By doing so, L&T gets to collect tolls ahead of schedule; and it also gets a chance to put its engineers on to other projects.

Cost-cutting is clearly the mantra for India Inc. But there’s one cost that consumer-oriented industries can ill-afford to slash. The temptation to cut back on advertising and promotions may be strong, but not necessarily wise. Companies like Samsung clearly see the slowdown as an opportunity to grab market share. Read about how some of India’s most proactive corporations across a crosssection of sectors are managing the slowdown, smartly. There are more than a few tricks to be learnt from them.

To be downturnproof a company should be:

Financial, operational and product flexibility helps companies survive, and even thrive, in a slowdown

Diversified: Diversification across products and geographies is the time-tested downturn antidote

Cost-intelligent: Cut costs in such a way that it doesn’t affect the company’s competitiveness

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