The basic competitive elements of the past were material, capital and the capability for mass production. Today, information, knowledge and creativity are emerging as the sine qua non of competitive elements. On all the counts, Indian firms are lagging far behind.
Surprisingly, competitiveness has remained one of the most understudied areas of international business in India. There are many factors that are responsible for this state of affairs in the Indian economy.
First, cross-country and firm-level data are not available. Second, as international competitiveness is a distributed area of knowledge, it has not become the main domain of any academic discipline. Third, the resulting lack of intellectual focus on the subject.
In the context of international competitiveness of firms in respect of developing countries in general and India in particular, five elements are identified as the most strategic and they are a) technology, b) human resources, c) organisational structure, d) government and e) role of capital and finance.
In the 1980s, research in regard to competitiveness of a country both at micro and macro levels was confined to different aspects of trade in goods and services.
Thereafter, research was extended to other issues such as ranks and business environment. Today, competitiveness is studied in terms of exchange rates, interest rates, trade balance, government deficits, labour abundance, natural resources, level of subsidies and the degree of protectionism.
The competitiveness of a nation brings competitiveness in industry, which in turns contributes to the nation's competitiveness.
For a firm it is essential to establish an effective and efficient linkage between strategy and manufacturing operations. For a firm's competitiveness in India sound management, leveraging and stretching of resources are essential.
Despite all claims made by India in the technology sector, a huge void exists between the perception and the actual data on the nation's standing in the area vis-a-vis its global counterparts. India's technology ranking stands at 66 with the score being 3.54 on a scale of 1 to 7.
The rankings take into account three variables innovation, technology transfer and access to information and communication technology. In the innovation sub-index, India stood at 61. There is an interesting comparison -- in terms of information India ranks as high as 33. But in terms of hard data India's place is 64th.
Crucial segments for India's manufacturing sector -- textiles, steel and chemicals -- are already over the hump, having crossed the stage of plant closures and seen the emergence of new capacities on a global scale.
These industries are likely to emerge competitive in the near future. The remaining sectors that are yet to reach the stage are taking necessary measures to make themselves globally competitive.
In the Indian economy, the services sector is considered the growth engine of the future and the infrastructure sector, is being provided with necessary investments.
There is a relatively better performance on the power horizon despite some hiccups; roads and telecommunication, besides ports, all of which would help Indian industry to cut costs and attain global competitiveness.
In the Indian economy, one of the areas identified as a problem is the high cost of financial intermediation despite the considerable availability of funds with banks. Indian manufacturing sector has to learn to reduce its debt-equity ratio.
It is true that Indian industry would not be in a position to achieve competitiveness unless and until it gave up the legacy of looking to the government for solutions and its emphasis on "administration" rather than on management and leadership.
The relentless pressure on prices as a result of heightened competition that several sectors of the Indian economy face and the positive results that some Indian firms have achieved in facing the crisis through "lean manufacturing" show that it is high time Indian firms adopted the Toyota Production System.
This system has already been introduced and practised in manufacturing sector of many developing countries especially in South-East Asian economies in the sectors such as steel, textiles and even in some services.
Hence, it is vital for Indian firms to shed the obsession with economies of scale and learn to make the most out of existing capacities and machinery and in this respect the role of lean manufacturing is of strategic importance.
Lean manufacturing, that forms a triad along with total quality maintenance and total productive maintenance, is the only option left for Indian firms to meet two vital ends -- improvement in quality and at the same time cut costs of production and operations.
With the elimination of waste, lean manufacturing techniques would help Indian firms become suppliers or partners of MNCs with their exacting demands instead of either being taken over by MNCs or being driven out of the market by them.
Lean manufacturing would also lead to higher volumes through lower costs and is the only option left for Indian firms to attain competitiveness and to earn profit.
Lean manufacturing means flexibility and small-batch production that makes goods suited to customer needs and meet delivery schedules with the least cost in terms of inventory of raw material and finished goods.
Increasing size of the internal market through lower costs and taking to exports, as a cushion against recession at home would be the right strategy for Indian firms.
Adoption of lean manufacturing by Indian firms will not lead to redundancy because the surplus manpower arising from effective and efficient deployment of resources will be absorbed in meeting the growing demand.
Information technology is not used by Indian firms as a central part of manufacturing planning or production planning and IT techniques or tools are meant just for automation. It is the need of the hour to realise the benefits arising out of cross-functional utilisation of technology in the manufacturing process.
In order to bring the desired level of competitiveness in Indian firms, they have to formulate an effective and efficient strategy. This strategy should be based on the following facts:
- To impart 'change management' as the most strategic element for achieving competitiveness.
- To build high-value customer-specific technology.
- To avoid creation of demand or purchasing power through government schemes.
- To give priority to public investment in education.
- To assign greater role to private sector in the promotion of higher technical education.
- To make complete deregulation in one phase not in different phases.
- To give maximum thrust to efficiency and productivity as these two variables would help in reducing costs.
- To give needed thrust on the integration of agriculture and rural economy with industrial economy, of the small units with large units and of manufacturing with services sector.
- To deregulate the power sector.
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To identify and support competitive business by the government.
To conclude, competitive strength could only be achieved by anticipation strategies, fine-tuning and a desired commitment to stakeholders. Added to this, efficient planning and effective management are required to cope with the challenges on global competitiveness in the present century.
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