Bring Break-Even to the Bottom of the Pyramid

Tuesday, August 19, 2008

How much does the global slowdown impact India? What should be the corporate structures and strategies to weather the current storm? Can India overcome the growth blip? Which sector is in need of urgent reform? We put these questions to management guru Prof CK Prahalad, who was in the city for a CII session on ?India@75: The emerging agenda?.

?There are dramatic changes in demand and cost structures and in some cases excess capacity?all of these require a rethink in the break-even volumes,? said Prahalad.

?If you have a low break-even volume, you can weather the storm,? he advised companies. ?Now is the time to optimise the system. Hedging is largely about operational and not financial issues.?

Talking about the impact of the global slowdown on India, he said, ?Since India is now part of the global market, she must come to terms with real economic costs. Prices of oil and raw materials are no longer within our control. Rather than subsidising, one must plan on the basis of real economic costs.?

Asked whether the slowdown in economic growth was a temporary phenomenon, Prahalad said: ?It?s a blip. The good news is that rural markets are growing rapidly. It?s a good time to get operations under control.? He said every sector, from power and financial services to agriculture, was in need of urgent reform.

Earlier, laying bare his vision of India in 2022, Prahalad, the Paul and Ruth McCracken distinguished university professor, Ross School of Business, University of Michigan, argued that India should convert its huge population into an advantage.

?For example, we should create a trained workforce of 500 million in order to become India-inside for the rest of the world, just at Intel has done for our computer systems.?

Calling for a radical rethink on policies and practices, he said if India became ?a little less corrupt?, it would add $20 trillion more to the GDP and ?make many more lead a better life?.

Source: Financial Express (link opens in a new window)