R. K. Krishna Kumar has strong views on what it will take for companies, particularly Indian ones, to be competitive in the global market. He should know. The chairman of Tetley, vice chairman of Tata Tea, and managing director of the Taj Group of Hotels,Mr Krishna Kumar has a wealth of experience in dealing with the phenomenon of globalisation.
Mr Krishna Kumar completed his studies at the Presidency College, Chennai, before joining the Tata Administrative Service 38 years back. In this interview with Christabelle Noronha, the Tata Group veteran explains why only efficiency of the highest order can guarantee success in a world without business boundaries, and talks about the coming together of Tetley and Tata Tea.
tata.com: How has globalisation affected the Tata Group?
RK Krishna Kumar: The process of globalisation really began in 1991, a time when India almost went bankrupt. Since then Indian industry and agriculture have had to take definite steps towards integrating themselves with the global economy, which is what globalisation is all about.
When you look at the changes the Tata Group has undergone since then, it is entirely in sync with globalisation. The chairman, Ratan Tatas initiatives in this regard are, I think, in response to the winds of change that have been blowing across the world ever since the Berlin Wall fell. But our group had begun responding to globalisation much earlier, and that was a good thing.
I wont say that we have reached an acceptable level of competence and excellence as yet, but we will get there when we finish the first stage of our implementation process. The Tata Group does, in many ways, share features that are the best in the world. The impact of the process of change that we are going through has been felt all round.
tata.com: Globalisation has made the world of business more volatile, with large companies becoming bankrupt in a hurry. Whats your view about this trend?
RKKK: I agree that the business environment is riskier today; it has become extremely challenging for companies big and small. Even large enterprise have gone belly up in a short period of time due to the impact of changes. Managements must have the maturity to foresee change, and they should be prepared to meet it.
tata.com: Isnt this trend destructive?
RKKK: I wont call it a destructive force; I think it is an evolutionary process. The world economic model is readjusting itself to new market realities, and that means goods and services will be rendered by the most efficient organisations. This is a highly risky environment, and there will be a heavy price to pay for inefficiency. But, on the other hand, the rewards for efficiency are huge. Thats the way the world is going and I welcome it.
tata.com: Which businesses will survive in this new world economic order?
RKKK: The fittest and most efficient, in terms of economic viability and financial strength, will survive. The rest will die, and I think that is only right.
tata.com: What does it take for an Indian company to become a truly global organisation?
RKKK: We must start with changing the mental attitude of the people within an organisation. It is extraordinary how mindsets get frozen in time. The rigidity this breeds leads to a narrowing of vision. I would say it is the approach of the people who run an organisation that holds the key; how adaptive they are to changes that have an impact on them. It is here that the process of an Indian company going global truly begins.
We have been sheltered by a protected economy for many, many years, and we are only now beginning to understand that the protection is no longer there. We need to adapt ourselves to the competitive environment into which the world economy is moving. Everybody, starting with those at the top, needs to alter their way of thinking from what we have had down the years.
tata.com: From an Indian business perspective, what are the positives and negatives of globalisation?
RKKK: The negatives are obvious now. It is going to bring big misery; companies (I cant name them) in many sectors in India will have to shut down and many people will lose their jobs. If you are not among the fittest and most efficient, you will have to shut shop, or migrate to some other activity. If you are not one of the best in the world in your core activity, you are under threat.
Take agriculture. Can you imagine the impact cheap food imports will have on Indian agriculture? Indian tea is a high-cost product. When cheaper tea comes into the market, the countrys high-cost tea producers will lose out. If you look at the whole process, it is about readjusting resources to be efficient in the marketplace.
We are talking about the globalisation of capital; we havent actually touched the globalisation of labour. Thats a very difficult area, and one where, I think, globalisation will ultimately happen. Today there is a free movement of capital. If you have US$ 10 million to invest in the agricultural sector, you will invest it in the most efficient agricultural region in the world. From there your products will go to the rest of the world. Places where cost, inefficiency and tariff levels are high will, obviously, lose out
The positive here is that, provided you are able to adapt, resources can be applied much more efficiently. Lets consider a possibility where you have excess reserves. You dont have to necessarily invest only in India; you can invest in, say, Vietnam or some such place that gives you an advantage.