Effective corporate response to liberalisation: the Indian case

Abstract

In most developing societies there has been a decisive shift towards economic liberalization, that is, towards deregulation and globalization of the economy. Liberalisation has two majhor consequences for the corporate world: intensification of competition and increase in growth opportunities. Increasing competition subjects competing corporations to many partially conflicting pressures, such as the need for sharper awareness of market developments and competitive moves of rivals, greater compulsion to cut costs, to respond to special needs of customers, quicker responses to the moves of rivals and the demands of customers, better coordination between various management functions, greater decentralization to meet effectively local contingencies, greater resourcefulness and innovativeness, greater access to diverse expertise, etc. Greater growth opportunities cannot be seized without increased entrepreneurial spirit. These pressures require a complex organizational response which is partly systematic and partly strategic. The systematic response needs to be the greater deployment of uncertainty coping, differentiation, and integration mechanisms. The strategic response requires clearer conceptualization of a short term strategy based on core competencies and a longer term strategy based on learning and adaptive capacity. The deployment of appropriate systemic and strategic mechanisms consequent on liberalization should lead to greater efficiency, better product quality, more innovation, faster growth, and greater profitability. However, in several countries liberalization does not appear to have produced the hoped for results, possibly because of institutional barriers to effective corporate response. In India, however, several indicators suggest that the corporate response to liberalization has, by and large, been quite satisfactory, as judged by corporate growth rates, increased profitability, greater quality consciousness, increased exports, etc. Available evidence suggests that both systematic and strategic responses tend to be in the expected direction. The reasons for the better corporate response to liberalization in India as compared to such countries as Russia are explored. Some management challenges for coping with liberalization, such as institutionalizing effective management styles and policies indicated by recent studies, are described.