why corporates need to rationalise costs

economies across the world have slowed down, those posting good numbers of gdp growth rate aren’t faring well on equitable distribution of national income. then is the issue of rising number of loan defaulters. so what happened suddenly in the economic landscape that well-established companies, barring a few, are increasingly falling in the trap of squeezed profits?

first globalisation (that in the indian scene resulted in public sector undertakings sharing their market base with more competitive enterprises, causing gradual decline in performances of psu firms) and now easy access to information (all thanks to the internet revolution) that is not allowing companies to reap unfair profits owing to new ventures in related business coming up rapidly through easily gained knowledge of a profitable market.

google is perhaps the best company to work with as per studies, the internet giant has great workplaces, jaw-dropping salary packages for staffers and the perfect work-life balance. but google can afford this, at least for the time being, for no other internet-based company can today challenge its might.

but for others, is replicating google’s workplace and work culture a sure-win position? infosys (an india-based outsourcing firm), for instance, started off with some eye-catching buildings and perks for its staffers; today the company is finding ways to cut costs. others like flipkart too are matching international standards on the back of foreign funds, but will they be able to sustain these costs is a question.

uber recently announced its departure from south-east asia and its only promising market outside us and Europe is india, where again it is struggling to convert revenue into profits.

the ground reality for today’s corporates is that the market is wide open for participants. you just cannot afford doling out great salaries and perks to your staffers that work from expensive and lavish offices. you may be able to sustain this for initial few years, but the rush of entrants in your sector will eat into your profits sooner than later and turn these so-called eye-catching assets into burdens.

same is the story with indian public sector undertakings and banks that have failed to grasp the fact that you cannot offer excessive pay packages to your employees when the private sector peers are working on comparatively lower packages.

the corporate sector on a whole is reeling under the pressures posed by hiring workers that are promised good pays and regular appraisals, margins are regularly thinning and entering negative territory. the hard reality of today is you just can’t afford these. should you not correct course, be ready to fall.

uber, ola fiasco is a lesson for all

the current show of strength by drivers of cab-aggregating companies ola and uber is a reflection of how indian market and market players are unreservedly incomparable to scenarios of the west. it is time that many are debating the impending bubble burst in india’s startup ecosystem; had they been vigilant and diligent from start, such debacles were avertable.

here are five simple lessons for these taxi hailing companies, and these are generic for applicability in wide-ranging scenarios of today.

first, and this is fundamental, assessing india as an aggregate market with stakeholders and consumers toeing the same west line is a fault. replicating stories of growth in west in this asian giant will only culminate into disasters and eroding of public confidence in such businesses.

second, doling out sops and subsidies isn’t what that works in india. had it been so, the government’s persistent bill on fertilizers, food, other subsidies would have eventually come to an end. respect your money.

third, a comprehensive, rational and dedicated study of indian market is what that has to precede any implementation. people’s preferences, capacity and willingness to pay is to be researched, for they are not the same as consumers in developed economies.

four, and another commanding covenant, disruptive tactics won’t work every time, barring a few cases. india already has adequate infrastructure for trade and conduct of other transactions, which is to be factored in and integrated in new business models; circumventing these can rarely work.

five, easy and rush money cases are a flop. you may fill wallets with some gift cash, offer unviable cash backs to customers, incentives to businesses to bring them on board, this will not boil down to sustainability, let alone gaining market share.

the choice is simple, change ways or perish.