Monday, September 10, 2012

Lack of long term strategies

Post the frenzied activity that begins in any sector opened up in the Indian Economy, many entrants, including the larger ones, lose out due to lack of long term strategies and inability to adapt to business dynamics. Ultimately, market forces take them off road, putting paid to all the aspirations that convinced them to enter the sector in the first place

The same has been the case in the insurance sector, where the state-owned Insurer LIC stands tall among its counterparts with close to 73% market share (as of September 2010) and 22 players are fighting for the remaining 27% market share. Clearly the market hasn’t picked up like it was expected (one wonders about the possible scenario when the new banking licences are issued, currently sought by a number of players). There were even forays made by a number of players in the IT and BPO space, but players like L&T & Birla failed to make a mark. For that matter, even steel has proved to be an El Dorado in India. Some Indian steel players may beg to disagree, but ask an Arcelor Mittal or a Posco and brace yourself for ayes galore! Players entering the power sector face innumerable constraints in terms of infrastructure, raw material, labour, et al, ever since they entered the sector to take advantage of the new electricity policy. The list goes on.

The fact is that new entrants come into the sunrise sectors solely on the basis of potential. However, only a few years later, they realise that success in the respective sector may be too elusive due to competition, market readiness, regulatory hurdles, infrastructure constraints, et al. If they have gone too far to start afresh from square one, they are left with no option but to move out. Resources can sustain them to an extent, but industry dynamics can take no time to overwhelm them if they are not prepared. And then there is no sense in putting more good money where the bad disappeared! B&E provides an in depth analysis into four major sectors that are giving every indication of being future El Dorados, even as the players remain engaged in a relentless battle in the hope that they won’t be the chosen ones for capitulation.


Source : IIPM Editorial, 2012.
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