The government’s Make in India programme, that aims to boost employment generation, would gain from a return to the Asian model, or a version of the traditional fragmented production processes in which individuals played an important role, leading to a revival of employment in the rural sector, says Arindam Banik, Director, IMI Kolkata.
Make in India can be truly successful if we go back to such decentralised production patterns, emphasises the academician who is deeply engaged in researching and writing about development economics, international business, trade in services and corporate governance. He is editor of the Global Business Review , and is on the Advisory Board of Asian Business and Management and The Journal of Public Sector Policy Analysis .
“In the last decade or so Asian business practitioners have been increasingly talking about integrating Asian-style management methods into their operations, drawing inspiration from the Asian Century,” explained Banik. The background of the Asian Century, he explained, is set at a time, about 200-300 years ago, when the South Asian region was a trade and commerce powerhouse, and when the contributions of India and China to total world trade was an impressive 50-60 per cent. The bulk of this trade was in materials such as textiles, tobacco, muslin, jute and other cottage industry products.
“To truly understand the Asian century, we must remember that everyone at the time plied some trade or the other, so there was no unemployment as such, and there was no concept of integrated firms either,” Banik pointed out. Rather, all ventures depended on a collaborative effort across several business entities, each with a specific role to play in the process of manufacturing a single product, he said. As a result of the decentralised efforts of a range of fragmented entities, there was zero unemployment, villages became prosperous, and women were largely involved in gainful employment, as the bulk of such cottage industry activity was pursued at a time when there was a seasonal break from agricultural operations.
Designer firms
In recent times, said Banik, we have seen the emergence of designer, or industrial design, firms, such as Apple Inc, that creates the detailed designs for its products, which are then manufactured by different intermediaries in factories across the world, including in China, Thailand, Malaysia, the Czech Republic, South Korea, Singapore, and the Philippines. Similarly, the wide range of Benetton products is manufactured by intermediaries in various regions.
Even in the publication business, nowadays, he said, the process has become diversified, so that the main job of a publisher such as, say, Springer Verlag, is to assess the manuscripts and select the ones it wants to publish. Thereafter, the process is taken over by firms scattered across the world, with the design, art work and printing completed in cities such as Bengaluru and Copenhagen, while the binding and finishing of the product may be done in cities in China or Mexico. So, several firms across the globe become involved in creating a single product.
The concept of designer firms is, therefore, not new, especially in the background of the Asian century. It is a model that is employment-intensive, even today. Integrated firms are costlier, more capital-intensive. And with the gains from the averaging of costs dwindling, Western corporates have come to realise that integrated firms are more difficult to manage, he said.
India-China partnership
“If we consider the India-China relationship, there are many synergies at play. For instance, many Indian companies have manufacturing units in various parts of China. In the case of Micromax, for instance, the handset is designed by an Indian firm, the components are made and put together in China, and the assembled device is shipped back to be sold in India,” said Banik. Significantly, the brand is also popular in several African countries, to which it is exported.
Such operational tie-ups underline the fact that doing business with China is a reality for India today, regardless of all the talk of our high trade deficit with that country. How smartly we strategise and leverage the opportunities with China is important, as far as the policy-makers are concerned, argued Banik.
“Another area we can tap into is the sunset industries in China's Sichuan region, where several units manufacturing engineering or textile goods have become unviable because of rising costs, with many of them moving their operations to less expensive countries such as Vietnam and Bangladesh. There’s no reason why these sunset firms should not move their operations to India, where the kind of facilities they seek already exist, in terms of labour and infrastructure. Relocating such units here could also have a tremendous influence on the way our sunrise industries operate,” Banik said.
Relevance to management studies
In the last ten to 15 years, an increasing number of Western management schools have integrated into their courses leadership and operational concepts from South and East Asia. Most Asian business organisations are marked by a high level of decentralisation, and even units within a larger manufacturing company function as near-independent businesses.
“Harvard Business School and MIT have two or three elective courses each on Asian business practices. The pedagogy for these courses describes the designer firm concept as having its roots in India, China and other SE Asian countries. It’s time Indian and Chinese academicians also began writing theses and textbooks on this distinct stream of management. There have been some Chinese and Japanese publications in this area but more research needs to be done,” says Banik.
This will be a significant area to focus on as the next century will be that of India and China, and management practices will also be driven by these Asian forces, he said.