Core Complexities

The success trap of Bharat Synthetics

Business venture not based on environmental scanning and vision but because of governmental policy.

 Operating in a sellers market under a regulated market condition

 Functioning on a cost plus pricing, which permits costs to escalate

 No worthwhile synergy between the products of the company

 Artificial barriers for protection from foreign competition

 Management of the company was complacent and so did not augment capacity even after liberalization of the economy.

. Flop of rights issue to fund expansion plans  None of its products at an industry level is doing very well  Even the initiatives being taken to improve operating performance seem to very incremental as the growth rate and market size of the new applications being developed is suspect.

Revenue for this purpose to come from sale of unproductive assets and negotiated sale of underperforming businesses (nylon cord. 330 crore. Raj Bahadur Singh do? 1.What should Mr. Further. nylon filament yarn. rayon yarn). which is essential to be a branded textile and garment company. this is a safe area. Talk to creditors and restructure the debt of Rs. there is need to invest in state-of-the-art textile manufacturing plant. Scale up operations of PFY (target foreign markets): Via a combination of acquisitions as well as green field projects focused on best-in-class-technology preferably with a foreign tie-up. . Integrate forward into branded textiles and garments : Competency in manufacturing textiles will be improved due to action taken in point 2. 2. 3. Since textiles are a must for humans and the population is exploding in India. Funds for this purpose will come from sale of equity to a foreign joint venture partner (who may bring in technology from abroad). Then develop capabilities in marketing and distribution .

Further. Additional performance bonus should be promised to the new ED cum CEO if he exceeds set targets. 236 crore in the late 90s) as well as develop them in-house and make it one of their most valuable resources. the company has to purchase brands (AV Birla Group purchased the Madura Coats brands for Rs. An experienced and proven professional manager from the textile industry has to be brought in an ED and CEO. 4. . with scope for further renegotiation subsequently solely based on performance. Raj should step out of his executive role and become non executive chairman. Become a contract manufacturer: to use excess capacity (if any) 5. He should be given a clear mandate for an initial period of three years to be extended by another 2 years. Professionalize business: Mr. This can be done later as the economic performance of the company improves and creditors will be willing to lend at attractive interest rates.

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master Your Semester with a Special Offer from Scribd & The New York Times

Cancel anytime.