Corporate Evolution Indian Context

Corporate Strategy of IndianOrganizations: The ‘Root- Branch’Framework

Rajnish Karki

Corporate strategy questions relating to the appropriate measures of performance, therate of growth and extent of diversification, and the ways to mobilize resources anddevelop requisite competencies are of current and high importance to Indian organiza-tions. In the coming decade, they need to adopt rigorous and appropriate corporatestrategy approaches as they face a complex, fast changing, and globalizing businessenvironment.

Since the beginning of strategic management discipline, the four major corporatestrategy frameworks that have emerged are — SWOT in the 1960s, Strategic PlanningMatrix in the 1970s, Competitiveness in the 1980s, and Core Competency in the 1990s.Based on an assessment of the frameworks, corporate strategy is considered as a responseto imperatives in the evolutionary and emerging contexts and the perspective of thecoming decade is taken to explore the Indian business situation. The imperatives forcorporate strategy of Indian organizations in the coming decade are:

� From the evolutionary context — Correcting the mindset of dependency on thegovernment; going beyond rationalization of businesses; establishing tight linkagesbetween corporate and business strategies with operations; venturing into new areas;and, building on success against multinational corporations.

� From the emerging context — Large, growing, and internationalizing Indian economy;

globally integrated capital markets; information and communication technologies;tenets of governance; and, management resource and capability.As these imperatives are different and variegated and do not match with any single

period of American business, the existing frameworks are inadequate in terms of patternsresponded and inappropriate in terms of analytical approaches and prescriptions.

A ‘root-branch’ corporate strategy framework addresses the contextual patterns andimperatives of an organization. It conceptualizes corporate strategy of an organizationas a gestalt of three sets of components — ‘root’ as the first level response to thecommonalities in the context shared by all the organizations; a ‘branch’ or types ofstrategic direction depending on its match with requirements and characteristics of atype; and components based on its industry-and company-specific factors. The frame-work can be applied to any geographical or sectoral situation, and root and branchcomponents can be delineated based on the analysis of imperatives in evolutionary andemerging contexts.

For Indian organizations in the coming decade, corporate strategy should be builtaround:

� the root of ‘being honest’ and ‘being world-class’

� one of the three viable branches or types of strategic direction — ‘India focused,’

‘India diversified,’ and ‘global focused.’In conclusion, the three viable and effective corporate strategies for Indian organi-

zations in the coming decade are — “Being honest + Being world-class + India focused,”“Being honest + Being world-class + India diversified,” and “Being honest + Being world-class + Global focused.” To be successful, the agenda of an organization is to achieve andsustain consistency among the various components and with the requirements of ‘root’and chosen ‘branch’ or strategic direction. And the agenda will need to be translated intoand be implemented through a well-calibrated sequence of business and organizationalinitiatives.

KEY WORDS

Corporate Strategy

Indian Organizations

Configurations

Root-Branch Framework

Executive Summary

VIKALPA • VOLUME 29 • NO 3 • JULY - SEPTEMBER 2004 1

presents emerging issues and ideas that callfor action or rethinking by managers,administrators, and policy makers inorganizations

P E R S P E C T I V E S

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Strategic behaviour of corporations is a reflectionof and a response to the prevailing socio-economictrends and patterns. Corporate strategy questions,

which have been central to the strategic managementdiscipline, relate to the appropriate measures of corpo-rate performance, the rate of growth and extent of di-versification, and the ways of mobilizing resources anddeveloping requisite competencies. These questions areof great importance for the Indian organizations as theyprepare to navigate the competitive, fast changing, andglobalizing business environment. They need to adoptrigorous and appropriate corporate strategy approachesto realize their potential in the coming decade.

Since the emergence of strategic management as adiscipline in the early 1960s, the corporate strategy ques-tions have been addressed at two levels — one, throughthe development of frameworks and tools for outliningthe relevant factors and for analysing them in a holisticmanner, and two, through conclusions and generaliza-tions of research on what are the characteristics ofsuccessful strategies of corporations. The discipline withits roots in case-based teaching and in contingency theoryof organizational behaviour has largely depended oninductive and empirical research methodologies and hastried to be practitioner-oriented by focusing on issuesof interest to the top management of corporations.

Strategic management is currently in pre-paradig-matic stage with many propositions and theoreticalconstructs on superior strategic behaviour existing si-multaneously. However, the need to evolve and sustain‘fit’ between requirements of a corporation’s businessenvironment and its organizational competencies hasremained a guiding premise since the beginning. Theconcept of ‘fit’ is multi-faceted and complex in terms ofoperationalization, and, over the years, various corpo-rate strategy frameworks were evolved to elaborate onthe ways to analyse a corporate situation and to definethe characteristics of a superior fit. Among the frame-works, there are differences in perspectives and empha-ses, whether on internal or external factors or on currentversus future scenarios.

Therefore, this paper has two objectives — one, toassess the major corporate strategy frameworks anddraw relevant insights for corporate strategy of Indianorganizations, and two, to incorporate insights andanalysis of Indian business situation for evolving appro-priate strategy approaches in the coming years.

MAJOR CORPORATE STRATEGYFRAMEWORKS: AN ASSESSMENT

Taking a long sweep, four major corporate strategyframeworks have emerged — ‘SWOT’ during the 1960s,‘Strategic Planning Matrix’ in the 1970s, ‘Competitive-ness’ in the 1980s, and ‘Core Competency’ in the 1990s.These frameworks distinguish themselves in terms oftheir high impact on research, learning, and practice ofstrategic management, and each one provided a defini-tive response to the corporate strategy questions. Inter-estingly, they emerged about a decade apace and all ofthem originated in the US.

Each framework was influential during its respec-tive decade and following the suggested corporate res-ponse became the popular way. As these frameworkswere extensively discussed and referred to in the mediaand investment circles, the American corporations oftenfelt compelled to follow the prevailing trend. On theother hand, the latter frameworks did not disprove orsubsume the earlier ones and it was more of supplantingthe influence, somewhat akin to the ‘fashion of thedecade.’ Building on our earlier paper (Karki, 2002), themajor features of the four corporate strategy frameworksare outlined in Box 1. A few conclusions that can bedrawn are as follows:• Dramatic shifts in the analytical emphasis of frame-

works: While SWOT emphasized growth during the1960s, there was a shift to profitability in the 1970sand the 1980s, and further on to market capitaliza-tion during the 1990s. The shifts related closely withthe changes in the business requirements and theexpectations from corporations and the respectiveframeworks provided a tool appropriate to the times.Therefore, no framework can be taken as intrinsi-cally superior and each one can be the most appro-priate for a particular situation, whether at an overallnational business level or at an individual corporatelevel.

• Shift in recommended response from entry into newareas to withdrawal: The corporate strategy res-ponse favoured is opportunity led diversification inthe 1960s and calibrated diversification in the 1970s,and the suggested response swings to other sidewith considered withdrawal in the 1980s and ag-gressive focus in the 1990s. This too relates closelywith the American business context during the yearsleading to a definitive conclusion on the temporal

2 CORPORATE STRATEGY OF INDIAN ORGANIZATIONS

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nature of corporate strategy responses. It is thecontext that makes for right corporate strategyresponses and neither diversification nor focus isappropriate for all the corporations and all the times.

• Influence and popularity result from effective link-ing-up with the prevailing issues: A new frameworkrose to prominence and supplanted the previousone when there was a shift in the nature of corporateaspirations and issues. The strategic planning matrixas well as the competitiveness framework weredecidedly better tools to analyse and design corpo-rate responses in the changed and different oper-ating contexts of American business in the 1970sand the 1980s respectively.

• Issues fall into two sets — consequences of earlierresponses and of new forces and patterns: Thecompetitiveness framework addressed two types ofissues — one, related to excessive diversification ofcorporations in the earlier decades of the 1960s andthe 1970s, and two, related to challenge of Japanesecompetitors especially in automobile and electron-ics industries in the 1980s. This was broadly truefor other frameworks as well. Therefore, the issuesthat corporations need to respond in a period is a

concatenation of those rooted in the evolutionarypast and those in newly emerging forces and con-siderations.It is evident from the analysis that it is inappropriate

to wholly transplant the latest, or for that matter any,corporate strategy framework to another decade evenwithin the same country. The Indian corporate situationis vastly different and an appropriate framework needsto be rooted upon and evolved from the contextualfactors prevailing therein. However, some useful gene-ralizations can be made for the Indian corporate strategyframework — it is desirable to take a perspective ofabout a decade rather than aiming for and suggestinguniversality; one should delineate the issues from theevolutionary context, especially the intended and theunintended consequences of corporate strategy respon-ses earlier; it is useful to outline new forces and patternsin the emerging context which needs to be addressedwhile evolving corporate strategy in the coming years;and, each of the frameworks developed in the Americancontext could have important learnings due to someunderlying similarities in the context or desired respon-ses.

The corporate strategy issues faced by Indian or-

Box 1: Major Corporate Strategy Frameworks over the Years1

1960s 1970s 1980s 1990s

Framework SWOT2 Strategic Planning Matrix Competitiveness Core Competency3

Proponent Kenneth A Andrews Boston Consulting Group Michael E Porter C K Prahlad andGary Hamel

Theme and Match opportunities and Have a balanced portfolio Achieve and sustain Find a few basic activitiesSuggested Response risks in the environment in terms of the growth competitiveness in the the corporation is good at

with the internal capabilities through entry into emerging businesses individually and build the business andand orientation and be in areas and the profitability based on five-force the organization aroundbusinesses that pass through through high market share industry attractiveness harnessing this core(s)the screens of what a and learning curve effects analysis and on competency and also tocompany ‘might do,’ ‘can do,’ following one of the exit from businesses thatand would ‘like to do’ three generic strategies, do not relate to it

i.e., cost, differentiationor focus

Perspective Inside-out and current Inside-out and future Outside-in and current Inside-out and future

Key Contextual • Continuation of post-world • Sobering influence of • Challenge from • Continued success ofPatterns for war boom oil price shocks Japanese companies Japanese companiesAmerican Business • Emergence of new • Emerging evidence on • Disappointing results and their expansion into

industries like chemicals differing profitability levels of earlier merger multiple product-marketsand electronics and linkages with market and acquisitions • Below par profitability

• Opening of opportunities share wave and market capitalizationin overseas markets • Realization that industries • Diverse and of US conglomerates

go through ‘S’ type unwieldy businesslifecycle curve portfolio of

corporations

1There is a vast body of research and publication on each of the frameworks and the representative references are Andrews et al.(1965); Boston Consulting Group (1975); Porter (1980); and Prahlad and Hamel (1990) respectively.2Though Andrews et al. (1965) did not explicitly use SWOT in writings, the framework was generally known and referred to bythis term.3Refer Karki (2003) for a detailed critique of the ‘core competency’ framework and the proposition of Khanna and Palepu (1997).


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ganizations in the coming decade, due to the ways andthe reasons therein of their evolution till now, are de-liberated upon in the next section. Thereafter, the majornew forces that will impact on the strategic choicesduring the coming decade are outlined. An originalcorporate strategy framework for the Indian organiza-tions is developed through juxtaposition of the issuesand forces of evolutionary and emerging contexts in thesection prior to ‘conclusions.’ The primary focus is onthe private sector organizations, predominantly ownedand managed by domestic promoters or investors andinstitutions, as the sector is likely to be the largestcomponent and the principal driver of Indian businessin the coming decade. However, the issues and forcesas well as the corporate strategy framework will bebroadly applicable to the other two sectors of corporateIndia — public sector organizations and the multination-al subsidiaries.

EVOLUTIONARY CONTEXT:ISSUES AND IMPERATIVES

Since independence, the business environment and thecorporate responses in India have been very differentfrom the premises and assumptions of strategic manage-ment literature. The primary reason was the adoptionof a ‘nationally planned self-reliance’ based economicthinking in India. The thinking pervasively and tightlydefined the do’s and don’ts for Indian business organi-zations. It was operationalized through licences andcontrols and was administered through an elaboratemechanism of planning bodies at the top to factoryinspectors at the bottom. After some sporadic and in-dustry-specific loosening-up during the 1980s, the turn-ing point was the economic reforms initiated in 1991.This marked a deliberate shift towards ‘market-orient-ed-globally integrated’ economic thinking and the pro-cess became irreversible and covered considerable groundby the late 1990s.

The evolution of business environment and corpo-rate strategy responses of Indian organizations fall intotwo distinct stages — first, during the ‘planned self-reliance’ oriented economy till the 1980s, and second,during the transition decade of the 1990s and after.Various aspects of these stages, documented in our earlierarticle (Karki, 2001), have left a distinct imprint on thebusiness profile and the mindsets and behaviouralcharacteristics of the Indian organizations. The keycorporate strategy issues and imperatives in the coming

decade, as consequences of the approaches followed bythe Indian organizations in earlier two stages, are:• Correcting the mindset of dependency on govern-

ment: While the discretionary and direct control isnow considerably reduced, Indian corporations oftencarry a hangover from the ‘license control’ era ofhigh dependence on government for directions. Thisorientation is counter-productive as corporate stra-tegy will be primarily dependent on market oppor-tunities and organizational capabilities for most ofthe Indian organizations. It is inappropriate toobecause in a market-oriented economy, it is thecorporations that generally set the relevant agendafor governments. However, the government moveson disinvestment could throw exceedingly goodopportunities to diversify as in the case of entry ofReliance into power and the ability to anticipate andinfluence policies can be a source of significantadvantage in areas where the policy framework isstill evolving, e.g., banking, retail, and infrastruc-ture.

• Going beyond rationalization of businesses: As aconsequence of strategic approaches during the ‘li-cense control’ era, a majority of Indian organiza-tions had unwieldy business portfolios, outdatedtechnologies, and low scale and operating efficien-cies. The rationalization phase undertaken in the1990s is nearing completion in case of most of theorganizations, and the corporate portfolios are nowrelatively balanced, and individual businesses areoperating at currently viable cost levels. Now, theyneed to go further and build long-term sustainabil-ity especially in terms of creating product and processinnovation capabilities and evolving an organiza-tion culture of continuous efficiency improvements.

• Establishing tight linkages between corporate andbusiness strategies with operations: Before the 1990s,the growth and diversification of Indian organiza-tions were almost de-linked from the performanceand efficiencies in existing businesses. The de-link-ing was further manifested during stock marketsurges of early and late 1990s. The orientation ofbusiness success being determined by fundamen-tals that led to superior market valuations, and notthe other way round, is yet to be fully internalized.The aspects that need to be worked upon are —ability to make calibrated investments in techno-logy development and operating infrastructure that


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will pay over a longer horizon; processes to reviewmarket developments and current performance interms of long-term implications; and, organization-al framework to balance dynamics at individualbusiness level with the corporate portfolio currentlyand in the future.

• Venturing into new areas: Since economic reforms,many new industries with high business potentialemerged. The successful players in these industriescame from two stocks — those that came into sig-nificance with the industry themselves and thosethat are diversification initiatives of existing corpo-rations, i.e., Infosys and Wipro in software devel-opment, Bharti and Reliance in telecom, Pantaloonand RPG in retail, etc. Therefore, the fundamentalcorporate strategy question of ‘whether being diver-sified or being focused is better’ cannot be defini-tively answered at a basic level and it should beextended and be instead framed as ‘under whatconditions, one or the other is better.’ This questionis of relevance to even the currently focused Indianorganizations, as they may need to exercise thechoice in the coming decade.

• Building on success against foreign corporations:In the early 1990s, there were widespread fears thatIndian organizations will wilt under the onslaughtof existing and newly entering multinational cor-porations. This has not happened and Indian com-panies generally did not lose market share or re-gained it by the late 1990s in most of the industries.No major domestic company went out of businessand in the highly competitive pharmaceuticalsindustry, the companies acquired multinationalsubsidiaries and increased market share by over 15per cent during the 1990s. On the whole, Indianorganizations have shown the capability to competewith the best of multinational corporations. Strate-gically there could be two ways to build over thesuccess — entering overseas markets themselves orentering new industries in the domestic market thatmay have presence of multinational players cur-rently or in the future.These corporate strategy issues and imperatives are

different and more variegated to any comparable periodin the case of American corporations. The evolutionarycontext will be a major influence with respect to thecorporate strategy choices as well as the efficacy ofprocesses or framework adopted by the Indian organi-

zations in the coming decade.

EMERGING CONTEXT:MAJOR FORCES AND IMPLICATIONS

Five forces that broadly capture the emerging contextof Indian organizations in the coming decade are: large,growing, and internationalizing Indian economy; glo-bally integrated capital markets; information and com-munication technologies; tenets of governance; and man-agement resource and capability. These forces are rel-atively independent and can be analysed for implica-tions separately.Force 1: Large, growing, and internationalizing Indianeconomy: In terms of purchasing power parity, India isthe fourth largest economy in the world. Given the growthrecord of the last two decades, strong macroeconomicfundamentals, favourable social and demographic fac-tors, and diverse but sizeable product-market segmentsmake India along with China the most attractive placeto do business in. Continuing the trend since economicreforms, Indian economy will become highly integratedwith the international economy in terms of both supplyand demand side factors. Domestic market will be oneof the fastest growing in the world and any significantglobal corporation will look to carve a presence here.Therefore, Indian organizations have the business op-portunity to achieve adequate size and scale economiesin the domestic market itself, potential to grow anddiversify at perhaps the highest rates in the world, andto engage with overseas markets at terms and time oftheir choice.Force 2: Globally integrated capital markets: Since thelate 1990s, Indian capital markets have been closelyinfluenced by overseas trends, and with gradual liber-alization of two-way capital flows, the integration willbe completed in the coming decade. Venture capital hascome of age and will become pervasive, promotingentrepreneurship especially among conventionally lessbusiness-oriented social groups. All this leads to capitalceasing to be a constraint for a sound idea and for a well-managed Indian organization. On the other hand, inte-gration has brought in exogenous considerations to Indiancapital markets and has led to greater pressure forperformance and transparency on organizations. In thecoming decade, there will be obliteration of distinctionbetween overseas and domestic capital both in primaryor secondary markets and in terms of availability andcosts and convergence with global trends and patterns


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related to market expectations, volatility, and discipline.Force 3: Information and communication technologies:In essence, a business activity is the exchange of goodsand services for money which is made possible by theexchange of information at various points and stages.The efficiency and efficacy of information exchange isa powerful explanation for creation and for determina-tion of boundaries of organized entities. The develop-ments in information and communication technologies,especially since the coming of internet in the 1990s, haverevolutionalized the scope and costs of capturing,processing, and exchanging information. These devel-opments have the potential to alter the concept of businessand organization in corporations around the world. Withthe proven capabilities of Indian IT companies and fastcreation of relevant infrastructure in the country, theimpact on Indian organizations will be equally strongand almost simultaneous. The impact of IT on opera-tional tasks and efficiencies has been fairly dramatic andthe implication for corporate strategy, already visible,will be equally profound. For Indian organizations, thisforce will lead to opening out of hitherto inconceivablebusiness opportunities, for instance, business processoutsourcing; redefinition of the boundaries of industriesand scope of companies by breaking-up or integratingvalue chains; and making feasible new organizationalconcepts and designs.Force 4: Tenets of governance: In spite of several initi-atives in the last few years, corporate governance is anAchilles’ heel of Indian organizations. There are infir-mities at procedural levels but more germane are theorientation and behavioural level issues. On the onehand, promoters in a large proportion of Indian organi-zations continue to have proprietary attitude towardspublicly owned companies leading to biased businessdecisions and indiscretionary handling of company funds.On the other hand, some promoters thrive on access toprivileged information and company resources to ex-ploit the situation for personal benefits. Inculcatingappropriate corporate governance standards and orien-tations will be a sine qua non for Indian organizationsto realize their potential. In the coming decade, they willneed to clearly outline the roles, rights, and boundariesof various stakeholders; evolve adequate checks andbalances; and realize the unequivocal need and show thewill to enforce high governance standards.Force 5: Management resources and capability: Capitalthat was central to the growth and evolution of Indian

organizations is increasingly being replaced by themanagement capability. It is a complex outcome of theknowledge and orientation of members and the efficacyof organizational framework and culture. Owing toproliferation of career options and socio-cultural chan-ges, there is a shift among potential employees from a‘loyal and life-time company man’ to being a ‘profes-sional executive’ looking to use and develop their know-ledge and skills at the right place and often for a fewyears. Attracting and usefully deploying such personnelwill require organizational approaches to be transpar-ent, demanding, and well integrated. To aid responsive-ness to the customer and market dynamics, the organi-zations will also need to enable decision-making at lowestpossible levels and then to evolve symbiotic linkageswith strategic direction and policies. For Indian organ-izations, this force will lead to shift of power towardsprofessionals; need for greater decentralization andopenness in organizations; adoption of institutionalizedorganizational structures and processes; and need forcalibrated approaches for developing and honing mana-gerial resources.

As in the case of evolutionary context, the forcesshaping the emerging context of Indian organizationsare very different as compared to any period outlinedearlier. The forces are unique to the Indian situation,either by the very presence, e.g., ‘large, growing andinternationalizing economy’ and ‘management resour-ces and capability,’ or by the nature, intensity, and zoneof impact, e.g., ‘globally integrated capital markets,’‘information and communication technology,’ and ‘ten-ets of governance.’ The forces are not only relativelyindependent but also represent powerful imperativesthat need to be suitably incorporated in the corporatestrategy of Indian organizations in the coming decade.

THE ‘ROOT-BRANCH’ FRAMEWORK

As the contextual patterns and imperatives influencingcorporate strategy of Indian organizations in the comingdecade are not only more diverse and variegated but alsodo not match with any particular period of Americanbusiness (Box 1), the existing frameworks are inadequatein terms of patterns responded and inappropriate interms of analytical approaches and prescriptions. There-fore, a new corporate strategy framework rooted in theIndian business situation that adequately and appropri-ately addresses the contextual imperatives is necessary.

A ‘root-branch’ framework, based on the concept of


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configuration,* incorporates the contextual patterns andimperatives for evolving corporate strategy in a businessenvironment. The framework is based on three premises:• effective corporate strategy is a configuration like

‘fit’ between business environment and competen-cies of an organization

• more than one configuration could be equally viableand successful in a business environment over aperiod

• the agenda of an organization is to undertakebusiness and organizational initiatives that createand sustain the fit.It conceptualizes strategic behaviour of organiza-

tions as a response to complex and multi-faceted inter-play of imperatives from the evolutionary and emergingcontexts and that effective configurations or corporatestrategies comprise of few components that interact andreinforce each other in a gestalt like phenomenon.** Thecorporate strategy components fall into three categories:• ‘Root’ components as first level response to the

commonalities in the evolutionary and emergingcontexts and which are pervasive and essentialcomponents of all the organization.

• ‘Branch’ or types of strategic directions as secondlevel response to the contextual imperatives and anorganization adopts the appropriate type depend-ing on its match with requirements and character-istics.

• Components based on an organization’s industry-and company-specific factors.The components of root and the types of viable

branch or strategic directions would tend to becomedifferent as the evolutionary and emerging context oforganizations change significantly though over protract-ed periods of about a decade. To operationalize theframework, an organization will need to start with thefirst-cut choice of a branch or type of strategic directionand the laying out of the suggested base level agendafor the root and branch components for further debateand discussion. This will set in motion an iterative processthat involve asking questions, identifying major indus-try-and company-specific factors, validating assump-tions, developing responses, and finally fitting the detailstogether.

For Indian organizations in the coming decade, thetwo components of root are ‘being honest’ and ‘beingworld-class’ and the three mutually exclusive branch orstrategic directions are ‘India focused,’ ‘India diversi-fied,’ and ‘global focused.’ A possible strategic direction‘global diversified’ is ruled out as no Indian organizationis likely to have more than one business global in scaleand scope in the coming decade. The three strategicdirections along with the components of root are threeviable and effective corporate configurations which theIndian organizations can adopt to successfully navigatethe coming decade. They can evolve their specific cor-porate strategy and agenda by overlaying and integrat-ing the components of root and the chosen strategicdirection with industry-and company-specific factors.Table 1 outlines the linkages between the imperativesin the evolutionary and emerging contexts and the rootand branch components of the corporate strategy ofIndian organizations in the coming decade.

The imperatives from the evolutionary and emerg-ing contexts, while representing fairly independent andseparate influences for corporate strategy, are closelylinked to more than one root or branch component ofthe Indian organizations. Each imperative influencesone or more levels leading to variations in intensity ofimpact on a specific root component and on branch ortype of strategic direction, e.g., tenets of governance willhave multi-dimensional impact on various aspects of‘being honest’ and will have higher impact on ‘Indiadiversified’ strategic direction for reasons of marketcapitalization. Given the impact of an imperative onmore than one component and the impact of manyimperatives at variety of levels on a single component,the configurations are true gestalts. The three viable andeffective corporate strategies for Indian organizations inthe coming decade are — “Being honest + Being world-class + India focused,” “Being honest + Being world-class + India diversified,” and “Being honest + Beingworld-class + Global focused.”

The components of root, though seemingly conven-tional wisdom for corporations, are relevant and dis-criminating for Indian organizations in the coming decade— in terms of the temporal urgency, emphasis andpriority, and the need for sustained and multi-dimen-sional initiatives. For instance, ‘being honest’ relates toreorienting business practices, top management mind-sets, and organization patterns acquired in the license-control and transition decades, which remain influential

*Configuration is an advancement of the concept of ‘fit’ in contingency theoryand is elaborated upon by Mintzberg (1980) and Morgan (1997).

**Refer Siggelkow (2002) for how the configuration components interact andevolve in case of an organization.


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currently, to the market-oriented and globalizing Indianbusiness context. Similarly, ‘being world-class’ relatesto the requirements of successfully countering compe-tition from global players, existing or imminent, in mostof the product-market segments in India and the real-ization of potential in domestic and overseas markets.The two components of root are necessary, while notsufficient, responses to the ten imperatives identified —five each in evolutionary and in emerging contexts —of Indian organizations. And, the Indian organizationneeds to not only take definitive and critical initiativesbut also institutionalize appropriate practices and ori-entation in their being in the coming decade.

The branch or types of strategic directions have twodimensions. One, whether presence is required in singleand tightly related or ‘focused’ business activities or inmultiple and unrelated or ‘diversified’ businesses. Two,whether the targeted market is domestic and whateverengagement with overseas markets happens throughexports and progressive expansion into neighbouringand similar markets or ‘India’ with internationalizationor the targeted market is worldwide or ‘global’ withconcomitantly integrated business, organizational, andfinancial approaches. It will not be possible to simul-taneously follow more than one strategic direction as therequirements and characteristics for a stable configura-tion are different and mutually exclusive. The charac-

teristics determining the choice of branch or type ofstrategic direction for an organization are:• presence of India-based global advantages in busi-

ness• relative gap between resources required and avail-

able for realizing the business potential in a singlebusiness in the domestic market or globally

• characteristics of the existing organizational frame-work, whether suited for managing single or mul-tiple businesses

• orientation and capability of the top management,whether tuned to domestic market or outwardlooking.Table 2 outlines the ‘fit’ between the characteristics

and the type of strategic direction. Organizations willneed to align all the characteristics with chosen directionto be viable and successful, often through a well-definedagenda of initiatives. For instance, an organizationadopting ‘global focused’ strategic direction may needthe top management to develop orientation and capa-bilities to do business internationally and an organiza-tion following ‘India diversified’ direction may need torectify the organizational framework.

An organization can switch from one branch orstrategic direction to another when there is a dramaticchange with respect to one or more reasons and thereis willingness and determination to change the remain-

Table 2: Branch or Type of Strategic Direction and their Characteristics

Characteristics India Focused India Diversified Global Focused

India-based global advantages No No YesResources outweigh single-business potential No Yes NoFramework to manage multiple businesses No Yes NoTop management orientation and capability Domestic Domestic International

Table 1: Intensity* of Linkage between Contextual Imperatives and Corporate Strategy Components

Imperatives The ‘Root’ The ‘Branch’ or Type ofStrategic Direction

Being Being India India GlobalHonest World-class Focused Diversified Focused

Correcting the mindset of dependency on government Medium Medium Medium High LowGoing beyond rationalization of businesses Medium High Medium High LowEstablishing tight linkages between strategies and operations Low High High High HighVenturing into new areas Low Medium Medium High LowBuilding on success against foreign corporations Low Medium High High MediumLarge, growing, and internationalizing Indian economy Medium High High High MediumGlobally integrated capital markets High Medium High High HighInformation and communication technologies Medium Medium Medium Medium HighTenets of governance High Medium Medium High HighManagement resources and capability Medium High High High High

* High — Strong, direct and at multiple levels, Medium — Moderate and at one or two levels, and Low — Weak and indirect.


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ing. And, for the switch to be successful, it will need totransform fully into the new configuration with changein business profile and direction accompanied by con-comitant changes in organizational characteristics. Gi-ven the excruciating nature and the uncertainty and risksof transformational change, the natural tendency wouldbe to continue on the chosen strategic direction. Theswitch will generally happen when there are extraordi-nary changes in the attractiveness of existing and po-tential businesses; dramatic shifts in resource situation;taking charge by a new leader; and top managementhaving significantly different orientation, e.g., Ranbaxyin mid-1990s.

The ‘root-branch’ framework, as applicable to In-dian organizations in the coming decade, is illustratedin Figure 1. Various aspects of the root and the branchalong with an example and ‘what’ and ‘how’ of theagenda are elaborated upon subsequently.

The Root: Being Honest

The root of ‘being honest’ is a truism for the conductof any business transaction or organization but theapproaches demonstrated and internalized during thelicense-control decades, the 1990s, and turn of century‘new economy’ exuberance still need to be worked uponand corrected. Now, with a fairly robust regulatoryframework for market economy in place and under theforcible impact of globally integrated capital markets,IT and internet, governance and management resources,‘being honest’ to all the stakeholders would need to bean essential strategy component and an agenda item ofall Indian organizations in the current decade. Beinghonest to customer means delivering what is being statedand in a timely and sustained manner. Being honest toemployees means giving fair base compensation, re-warding achievements and contribution, and meetinglegitimate career aspirations. Being honest to investorswould involve providing superior returns and sharingmaterial information on performance and plans. Shareprice and market capitalization cannot be a managementobjective but are best seen as an outcome of current andfuture profitability which a company strives for.

‘Being honest’ does not mean in any way handingout sensitive information and blunting of aggressive-ness or not exercising bargaining power with the stake-holders. If anything, this ‘root’ strategy component buildsrobustness in the organization and conviction at thesenior management levels to forcefully and ruthlessly

deal with competition and move towards objectives.‘Being honest’ — from being a necessary condition forsurvival in the current decade — could even be a sourceof competitive advantage for the early movers. As shownby Wipro, Infosys, and some Tata companies, organi-zations that are honest in reality and perception arerewarded with higher market capitalization, greateremployee loyalty and commitment, and better customerpreferences. Transaction costs and uncertainty levels arelower in a higher trust-based ‘honest’ organization.Individual organizations will need to first define what‘being honest’ specifically translates into with respectto the three key constituencies. Secondly, they need todefine the path from the current to the desired level. Theissues are likely to be sensitive — often relating tofunctioning of top management and promoters, complex— disentangling various past actions, and difficult —concerning well entrenched mindsets and behaviouralapproaches. Many companies like Aditya Birla Grouphave shown that it is possible if there is adequate com-mitment and relentless focus at the top.

The Root: Being World-class

This strategy component is a response to the existingand emerging competitive reality and to the businesspotential of a growing and internationalizing Indianeconomy. Over 40 per cent of Fortune 500 companies arealready operating in the country and, given the size andpotential of the Indian economy, many more can beexpected to enter and Indian organizations will need toachieve world-class levels to survive even in the domes-tic market. The experience and self-confidence of facingup to best of global competition and the scale economiesresulting from large domestic market will facilitateforceful entry of Indian companies into internationalmarkets. ‘Being world-class’ has two aspects — cost andresponsiveness. Indian companies would need to matchor be superior to global corporations in terms of bothoperating and capital costs. However, cost levels are amoving goalpost and competitiveness once achievedwill need to be sustained by building suitable monitor-ing systems and efficiency orientation in the organiza-tion. While companies would need to match responsive-ness at operating level to customer complaints, etc., theycould garner some advantages built on responsivenessif they can bring to bear superior knowledge of Indiancustomer needs and market behaviour towards moreappropriate design of product and services and if they


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can effectively play on the rigidities and assumptionsof global players.

A majority, if not most, of the Indian companieshave undertaken benchmarking and business processreengineering initiatives to ascertain where they standand set efficiency expectations. The cost improvementwill need to become institutionalized by being part ofannual planning and monitoring mechanisms and oforganization culture. From not being aware or concernedabout the customer in the license-control era, Indianorganizations have progressed but they need to reachmuch higher levels. The routine areas relating to effec-tive and quicker handling of customer complaints canbe programmed and enabling organizational approach-es be created for translating customer feedback to makerefinements and fresh designs in products and services,e.g., Indica car of Telco and OTC products such as Itch-guard and Krack of Paras Pharmaceuticals.

Branch 1: India Focused

This strategic direction is appropriate for Indian organ-izations that are in high growth industries or have enoughground to cover in terms of market share and entry intoclosely related product-market segments and geograph-ical areas. The opportunity in domestic market is oftendisproportionately higher than their financial and or-ganizational resources and they generally operate in

industries in which India-based companies do not havesignificant advantages or face serious handicaps in theglobal market. However, as they exhaust domestic marketopportunity, they could go for expansion into neigh-bouring and similar developing countries taking advan-tage of scale economies and branding, technology, andorganizational skills. A case in point is Bharti Telecom(Box 2).

The organizations following this branch or strategicdirection will need to balance the growth and profita-bility objectives by fortifying competitive position inexisting segments and generate profits and cash flowsand by expanding into new geographical, product, and

Figure 1: ‘Root-Branch’ Corporate Strategy Framework

Strategy of an Indian Organization

Organization ‘A’ Organization ‘B’ Organization ‘C’

2. India diversified

3. Globalfocused

1. Indiafocused

Branch

Industry-specific factors

Company-specific factors

Root• Being honest• Being world-class

Box 2: Bharti Telecom

India’s private sector leader in telecommunications industry, BhartiTelecom was incorporated in 1985 to manufacture electronic pushbutton phones. Subsequently, Bharti Cellular was formed in 1992to offer cellular services and, in 1998, it became the first privatefixed-line service provider in India. Bharti currently providesmobile services in most of the telecom circles; basic servicesin a few states; and national long distance (NLD) and internationallong distance (ILD) data and voice services. In the 1990s, Bhartienergetically focused on the deregulated telecommunicationssector and formed joint ventures with foreign firms for financesand technology but got out of all of them over the years andthen mobilized finances from international investors like Singtel,Warburg Pincus, New York Life, etc., in late 1990s onwards andfrom IPO in mid-2002. In the coming decade, Bharti will continueto focus on telecom as there is a lot of ground yet to be covered.And from being driven by entrepreneurs, it will move further inits efforts to build an organization and institution.


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customer segments at the fastest possible manner. Theprimary agenda will be to develop understanding ofconsumer and market trends and respond with newproduct, marketing, and selling approaches; build com-petencies to sustain position in existing areas whilebeing able to enter new segments; and, create manage-ment systems and management depth. Organizationstructures will preferably be functional though in somecases where number of product segments is high andeach segment is of sufficient size, limited divisionaliza-tion of sales and production activities will be moreappropriate. Organization ethos and culture will needto be tuned to attracting and nurturing managerial talent.The organizations would need to aim for good govern-ance standards in order to create a culture of excellenceand to meet generally large fund requirements fromdomestic and international sources.

Branch 2: India Diversified

This strategic direction is appropriate for the Indianorganizations that possess and can mobilize financialand managerial resources far more than required for asingle business area. Generally, the current operationsof these companies tend to cover the entire geographyof the country and their businesses either do not enjoyIndia-based advantages or face many handicaps in in-ternational markets. They have strengths in domesticmarket with closely aligned top management orienta-tion. The strategies at corporate level and for each of thebusiness could have different degrees of integration andconsistency and internationalization efforts will gener-ally happen at the individual business level rather thanat the corporate level. Reliance Industries is a goodexample following this strategic direction (Box 3). In thecoming decade, organizations following this strategicdirection will fall into two classes — one, that inheritedunrelated businesses from controlled economy era andhave retained competitive position in multiple business-es afterwards, e.g., Aditya Birla; and two, that generateor leverage resources in excess of what is required forexhausting opportunities and for enhancing competi-tiveness in existing business and diversified into newareas, e.g., Nirma.

Given the size and growth rate of Indian economyand the emergence of new sectors, the ‘India diversified’strategic direction will be viable and robust in the com-ing decade. At the corporate level, organizations couldleverage on the advantages such as greater ability to

avoid crippling effect of downturns in a business andto manage financial risks; better support acquisitionattempts, especially during lower points of industrycycle when valuations of potential targets are attractive;and, be well-positioned to enter newly emerging, dereg-ulated, and privatized areas as they have the resourcesand orientation to manage multiple businesses. Theprimary agenda will be to assess in how many and inwhich businesses they can achieve and sustain world-class levels; create organization design that developstotal ‘focus’ at the individual business level and ‘checkand balance’ mechanisms and ‘new opportunity seekingskills’ at the corporate level; follow high corporategovernance standards for taking care of any conglo-merate type market discount; and, transfer learnings andresources across businesses. Organization structureswould need to be sophisticatedly divisional often withmultiple levels of divisions and overlaid with many legalforms. A corporate centre having specialized functionslike human resources and having initiatives group dealingwith corporate-wide issues and new ventures will benecessary.

Branch 3: Global Focused

This strategic direction is appropriate in the industrysectors where India has certain advantages at the globallevel and for the organizations that have achieved sizeand capability levels that can be deployed in interna-tional markets, i.e., textiles, tea, diamond cutting, infor-mation technology, pharmaceuticals, etc. (Box 4 discuss-

Box 3: Reliance Industries

Reliance became the first ‘Fortune Global 500’ Indian privatesector company in 2002. The company started as a manufacturerof synthetic textiles in 1966 and integrated backward first intoyarn and fibre manufacture and then into input materials likePTA and MEG. All the capacities were of globally efficient scaleand the trend continued with facilities for commodity plastics likePVC, polypropylene, and polyethylene; petrochemical crackercomplex; and, finally, the 27 million tonne oil refinery. Besides,it has a large stake in oil and gas exploration, presence in financialservices, presence and major plans in power, and has madelarge investments in telecom covering all areas of communicationservices across the country. In addition to its ability to influencethe regulatory environment, Reliance developed competenciesin large-scale project management and in funds mobilizationthrough the 1980s and 1990s with founder Dhirubhai Ambanibeing a visionary and the strategist. From an earlier strategyof backward integration till mid-1990s, Reliance started movinginto related and unrelated areas in newly opened sectors andwill continue to diversify in the coming decade by leveragingits standing and resources. It continues to be more of a task-based organization, an anomaly given the size, and will needto evolve into a role-based organization and further on into aninstitution.


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es the case of Ranbaxy, India’s largest pharmaceuticalcompany). The global advantages could be rooted eithersingly or through a combination of natural, cost, andskill factors. Indian organizations may initially basetheir global business on a single advantage but will tendto build second order advantages like technological andmanagerial skills or product and institutional brandsover a period to strengthen and create sustainablepositions in global markets. However, Indian organiza-tions can either be born global, e.g., Infosys, acquire into,e.g., Tata Tea or grow into one, e.g., Ranbaxy and Aptech.The top management of these companies have a globalmindset or an international orientation and are thus ableto outline a global positioning-based vision and objec-tives and are able to accordingly commit and focus theirorganizations.

This branch or type of strategic direction will be-come pervasive among Indian organizations as manymore organizations and industries will develop world-class capabilities and look to exploit business potentialin overseas markets. The primary agenda will be tocontinue to aim higher, maintain focus and set world-class standards, and to develop sustainable technologyor brand-based advantages. The structure is likely to befunctional or geographical divisions, and, in some cases,global product divisions, where they have reached certainsize and managerial depth. The organizations will need

to institute dynamic reward systems and create a cultureof organizational innovation and excellence.

CONCLUSION

The ‘root-branch’ framework can be used as an enablerand a tool for formulating, elaborating, and validatingthe corporate strategy of organizations. In comparisonto other frameworks (Box 1), it balances the current andfuture imperatives and the internal and external aspectsof an organization. At a conceptual level, it can be appliedto any geographical, sectoral or industry contexts throughdelineation of suitable root and branch components. Theframework evolves the concept of organizational con-figuration to the footings and specifics of corporatestrategy and provides the logic and agenda for existenceof more than one viable and effective corporate strategyin a context. In the process, it sheds new light andextends the premises and propositions of strategicmanagement discipline.

The framework fulfils a deeply felt need of strategicmanagement practitioners and researchers in India.Especially since early 1990s, they have been subjectedto a cacophony of prescriptions, based on what is thelatest thinking and what is currently fashionable in thedeveloped countries. Unlike technology, the latest is notdistinctly superior and appropriate in the case of man-agement concepts. As shown in the first section, whilethere are useful insights in corporate strategy evolvedin the American contexts, there are serious contextualand temporal limitations in transplanting them to Indianorganizations. And, in essence, the ‘root-branch’ frame-work builds the theoretical conviction and clarity for adifferent approach in the Indian context.

The approach of evolving corporate strategy byidentifying the patterns and imperatives in the evolu-tionary and emerging context of an organization hasbeen successfully used by the author in about a dozenmedium and large Indian organizations over the last tenyears. This experience, while giving confidence on theefficacy of the approach in real-life corporate strategysituations, is generalized into the overall Indian busi-ness situation and is evolved into an analytical tool withthis framework. The ‘root-branch’ framework will helpfocus on the relevant issues and cut out the conceptuallyinconsequential, thereby enabling Indian organizationsto evolve clear, conviction-laden, and rigorous corporatestrategies in the coming decade.

Box 4: Ranbaxy

Ranbaxy is India’s largest pharmaceutical company and ranksamong world’s top 100 with overseas sales more than 70 percent. It was incorporated in 1961 by Parvinder Singh, a Ph.D.in Pharmacology. Its initial technology orientation was born outof necessity when its long-term distributor agreement for an Italianpharmaceuticals company was cancelled and it was forced tomanufacture its own products and develop process expertise.In 1993, it committed itself to becoming a truly internationalresearch-based pharmaceutical company and started to focuson international markets and on developing new chemical entities.This commitment was manifested in the large investment inresearch infrastructure, recruitment of over 250 scientists, andestablishment of overseas sales network, and a global territory-based organization structure. Ranbaxy had started expandingabroad during the 1980s when price controls in India limitedlocal growth and profit opportunities and the new organizationstructure helped set strategic direction and intent — by givingeach of the three international territories same stature as thedomestic one, even if domestic sales was four times the entireinternational sales in 1993. The vision and approach of the nowdeceased founder continue to guide the company which willcontinue its globalization process in the coming decade. Itproposes to have a presence in all the dozen major globalpharmaceutical markets in the world by 2005, make acquisitionsto facilitate entry, increase percentage sales of dosages to over80 per cent in FY05, and, license or launch self-discovered newdrugs or delivery systems.


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Karki, Rajnish (2002). “Need Strategy Doctrine for IndianBusiness,” Economic Times, 17th July (Edit page),www.stratdesign.net/perspective.html

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stratdesign.net/perspective.htmlKhanna, Tarun and Palepu, Krishna G (1997). “Why Fo-

cused Strategies May Be Wrong for Emerging Mar-kets?” Harvard Business Review, July-August, 41-51.

Mintzberg, Henry (1980). “Deriving Configurations,”Mintzberg on Management, New York: Free Press, Chap-ter 6, 95-115.

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Porter, Michael E (1980). Competitive Strategy: Techniques forAnalysing Industries and Competitors, New York: FreePress.

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Rajnish Karki, BTech (IIT, Kanpur), Fellow (IIM, Ahmedabad), is

the Director and CEO, Stratdesign India Pvt. Ltd., Mumbai — a

research and advisory boutique specializing in strategy and

organization design. He has advised over a dozen medium and

large organizations in the conceptualization, implementation, and

institutionalization of quantum business and organizational

initiatives. He has taught strategic management at IIM, Ahmedabad

and School of Management, IIT, Bombay and policy analysis at

LBS National Academy of Administration, Mussoorie.

e-mail: [email protected]

Everything harmonizes with me, which is harmonious tothee, O Universe. Nothing for me is too early nor toolate, which is in due time for thee. Everything is fruit tome which thy seasons bring, O Nature: from thee areall things, in thee are all things, to thee all things return.

Marcus Aurelius


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