Arindam Chaudhuri
Give them purchasing power
Macro Economic Strategy for Micro Management Success

When the Japanese economy was at its peak management experts across the world were frantically looking for the management mantras that led to the Japanese miracle. They came out with the concepts of zero defect, quality circle, Kaizen (you name it and they had it) etc. in their bid to explain the Japanese miracle. Management experts across the world, mostly, and sadly, lack the ability of coherent thinking due to the intellectual handicap that they invariably seem to posses because of their lack of understanding of economics. Not their fault though. Their MBA schools never taught them anything beyond managerial economics, which, in real life almost never works. So, with their astonishing lack of  economic understanding they try to analyze events at a very micro level. Thanks to decades of corporate sponsored public relation campaigns for the free market economy, anything other than such a thought has become a taboo as well. Those who understood the Japanese miracle well (for example Akio Morita) knew very well that concepts like zero defect etc. were very much present in the western companies as well. More so, these concepts were easy to adopt. What differentiated the Japanese economy then from the rest of the world were the macro economic strategies they followed. An effective distribution of purchasing power which kept the domestic economy fuelled, a macro strategy encouraging domestic competition (unlike in India) which helped them create world class products, a central coordinating organisation: MITI, coordinating all industrial activities of Japan Inc., and not to forget as Akio Morita put it 'an effective judicial machinery'. That today the Japanese economy is going through a lull is more due to a cultural problem than an economic one and it can never take away the credit that they earned by growing at an amazing rate of 8% for about 15 long years (I for one would not mind India going through the kind of slowdown Japan is going through after achieving a 8% growth rate for such a long period).

The mistake management experts made with Japan is the same they are doing today by not understanding correctly the reasons behind the Chinese miracle (which is of a much bigger magnitude with a sustained 12% plus rate of growth for more than a decade now). China being a closed economy and with hardly any individual Chinese company available for a case study this time nobody is talking about jargons rather they are hitting out blindly against it talking about their unfair practices et all. The reality is far different. And it has important lessons for India  in it.
I love comparing India with Japan and China. Culturally too we have lot in common. We all more or less started off together.. around mid forties. Infact China has parallels with India in terms of size , population etc. too.

What is it that India, infact corporate India, needs to learn as the most important lesson? At a macro level the government and the industry needs to set leadership standards that can be looked up to ; in order to drive a sense of patriotism and commitment to the country. This can only come through humane and caring policies for the upliftment of the masses implemented with equal zeal, honesty and earnestness.

Most importantly they need to realise that the success of our industries or their respective companies doesn't entirely depend upon the kind of business strategies they have nor the latest jargons that they have adopted from their multinational consulting firms nor on their exciting marketing and sales promotional schemes.

Remember: The success of Indian companies in the long run depends upon how vast is the market that the economy has been able to give them, how much is the purchasing power of the people in the country.

The people at the bottom level today need to be given a higher purchasing power along with better health and education facilities which would not only make a huge difference in the quality of human capital in the country but would also satisfy the most important criteria for the growth of the Indian industry i.e. they would become a part of the consuming market. The market will no longer comprise of 50 million people but of 1 billion people, because it is purchasing power and only purchasing power of the market that determines the long run growth of any economy, industry and company. No marketing strategy certainly can achieve the above market expansion. This is pure economics and no miracle. So, not only for the sake of humanity but also for the sake of their own long run interests they should support policies which benefit the weaker section of the society and contribute towards its success. Countries which are developed today had all taken care of this basic thing before their surge forward.
Ever wondered why inspite of being the worlds largest democracy and a liberalised economy, we get less than one tenth of the FDI that China gets inspite of China being amongst the worlds largest dictatorships as well as a totally controlled market? The same America which keeps protesting about the Chinese human rights violation all the time sends the maximum FDI to China! Because the rules of the free market suggests us to go to countries which have purchasing power. Because that is where products will sell. If you need to see success in a liberalised world, then know the basic rules at least!! Recently, the World Bank said that in recorded history, no other country has been able to pull up more number of people from below the poverty line as China has in the last twenty years. The figure they say is 170 million. Add to that my believe that whenever World Bank says anything good about China, I am sure it underplays it!! So, if a country has given purchasing power to ten times more the number of people, it will get ten times more FDI since chances of the MNC products selling more is ten times more in that country (specially when the populations of the two countries in question is more or less the same). The other day I was talking to the MD of Sony Mr. Teruo Ishii and he agreed to the fact that in China they do more than 10 times the business that they do in India. They definetely are no exception, it is the same with all others. In my workshops for the last 5 years, I have been talking about the potential Chinese threat and requesting the corporate sector to wake up and take to the government a delegation lobbying for the right issues. But they preferred to lobby for short run issues and then cry hoarse when the threat blasted on their face recently. The need is to act right and fast instead of crying when faced with a difficult situation. On the highways in countries like Germany they indicate two kilometers in advance that a speed breaker is ahead, on the highways of countries like Argentina the same notice is just before the speed breaker. In India we go over a horrible bump and then some where we read 'what you just bumped over was a speed breaker'.

To achieve the above we require greater corporate participation in influencing the macro level decisions through organisations like FICCI, CII etc. presurrising the Government to eliminate poverty if not for the sake of humanity, then for the sake of their own selfish gains and bringing in a functional judicial system. No amount of management and marketing techniques can enable corporates to have a more than 10 to 15% growth in their market nor any amount of moral lectures can make people ethical. But the market can be expanded by more than 1000% by increasing the purchasing power of the people (then, instead of the middle class being an approximate 50 million would become more than 550 million).
These things I talk about are essentially practices which globally successful countries realised and worked upon. Sadly, these are assumed to be so basic in nature that nobody ever highlights this. So, in a country where the basics are not right we talk of advanced concepts of globalisation and 6 sigma! Because this is what Americans talk about today. What we forget is that they talk about these things today because they have done well to give their people purchasing power.