Bajaj Electricals roiled by tussle over strategy5 min read . Updated: 13 Dec 2009, 08:58 PM IST
Bajaj Electricals roiled by tussle over strategy
Bajaj Electricals roiled by tussle over strategy
Mumbai: Two executive directors at Bajaj Electricals Ltd (BEL), one of them a member of the Bajaj family, are at odds over the firm’s strategies in areas such as product quality, exports, research and development (R&D), and advertising even as the firm’s chairman and managing director Shekhar Bajaj downplays any differences.
Anant Bajaj, son of Shekhar Bajaj, told Mint in an interview last month that lack of quality products and R&D is preventing exports of lights, fans and air coolers, an opinion that’s refuted by R. Ramakrishnan, who heads BEL’s operations.
The quality of BEL exports is inferior to those sold by international companies in the global market and the firm “fails badly in international accreditation" of products, said Anant Bajaj, who started with the firm in the mid-1990s as a sales trainee when he was 19.
The younger Bajaj, 32, also heads Bajaj International Pvt. Ltd (BIPL), which exports goods that are imported from China and assembled in India, as well as BEL products made by domestic vendors.
BIPL pays 0.75% commission on the value of exports for using the Bajaj brand. The exact details of BIPL’s exports are not known as it’s not required to disclose these because it’s an unlisted entity.
“We do not have South African Bureau of Standards (Sabs) certification and big companies cannot accept our products," Anant Bajaj had said in an interview in the first week of November at the headquarters of the Rs20,000 crore group.
South Africa is a critical market in Bajaj’s scheme of things. Sabs certifies quality and is a must for any product being sold in the country, be it a computer or a bottle of mineral water.
“Our challenge is to make bold moves to move into the next level and we have to have a different strategy on quality control of our products. The problem is that (there) are too many people in comfort zones in the company," said Anant Bajaj, who exports goods to 30 countries and plans to sell in every member country of the United Nations by 2011.
Right now everything that is exported is first imported from China and then assembled in India. According to him, the only way to boost export revenue is through quality upgrade.
“We have a 75-member dedicated team to do research and development at our plants in different locations and this team works on whatever is needed in terms of product innovation, technology upgradation, new model introduction and better performance and quality," Ramakrishnan, 48, said, adding that he “has nothing to do with exports".
In the fiscal year that ended 31 March, BEL invested Rs4.82 crore, or 0.27% of its total revenue, on R&D.
During Ramakrishnan’s tenure—he joined the 70-year-old company in 2000 as president—BEL’s revenue has grown six times, from Rs300 crore to Rs1,800 crore, while operating profit, or earnings before interest payments and income tax, a key indicator of a firm’s health, have risen from Rs1.5 crore to Rs140 crore.
For the domestic market, BEL makes fans, lighting products and home appliances, besides setting up telecom transmission towers, with a significant domestic market share in each of these segments, Ramakrishnan had said in the interview last week.
BEL sources products from vendors through contract manufacturing, a model followed by global consumer durable makers, and the firm focuses on distribution, customer care, innovation and profit management, said Ramakrishnan.
Shekhar Bajaj sought to minimize the divergence of views between the two executives. “We have no issue with our products against our competitors in the Indian market and we are a domestic market-focused company," he said.
At the same time, Shekhar Bajaj added, “It’s true that the quality standards need to further upgrade our products to sell it in the global market because standards and specifications are different."
He also offered a solution to the problem: “We need to develop a dedicated vendor base for exports or change the mindset of our existing vendors. BEL needs to increase R&D and brand building."
Shekhar Bajaj acknowledges the key role Ramakrishnan played in turning around the company.
BEL has a 12-member corporate management committee to decide on business strategy. It comprises Shekhar and Anant Bajaj, Ramakrishnan and six business heads, apart from the heads of finance, information technology and personnel.
Abraham Koshy, a professor of marketing, who teaches at the Indian Institute of Management, Ahmedabad, said BEL needs to focus on three areas to become a formidable player.
“First, they need to realign from no focus to some focus. Second, invest in product innovation through research and development, and, third, (focus) on cost-efficiency," said Koshy, author of The Growth and Transformation of Small Firms in India.
A shift from a “no focus" to “more focus" for global opportunities will rub off in the domestic market, said Koshy, who coaches marketing teams at Tata Steel Ltd, Bharti Airtel Ltd and Mahindra and Mahindra Ltd.
Anant Bajaj has issues with the company’s advertising strategy as well, saying it “does not appeal to the younger generation and our brand advertising is not put up on our website".
BEL uses Disney characters on its fans, but according to Anant Bajaj, the company is yet to take full advantage of this. “We are not in some of the segments like baby care and toddlers," he said.
This is contested by Ramakrishnan. “We won the Bronze Lion’s Campaign award for the exhaust fans ad in the outdoor category at the Cannes Lions International Advertising Festival in June 2009. Our new advertisements cater to the youth as well as women (for appliances used in the kitchen)," he said.
Anant Bajaj said, “My job is, show the direction, but the company has to move. Quality control, research and development, supply chain and brand development—once these issues are addressed, competition does not matter to me."
According to Ramakrishnan, the company has chalked out its strategy, which envisages 10% of fresh sales coming from new products and 10% from new markets.
BEL is also expanding its product range and has entered into a marketing agreement with several global firm such as Delta Controls Inc. of Canada for access control systems and heating ventilators, Securiton AG of Switzerland for fire alarms and security systems, and Trilux GmbH and Co. KG of Germany to make street lights.
Anant Bajaj’s cousins—Rajiv, Sanjiv and Kushagra—manage Bajaj Auto Ltd, Bajaj Finserv Ltd and Bajaj Hindusthan Ltd, respectively.