Rakish Iron and Steel Company is a significant player in the iron and steel industry. The company has a workforce of 18,000. With a 21 per cent market share at the national level, it occupies the fourth position in the industry. The company set for itself an ambitious target of securing the third position in three years, the second position in seven years, and industry leadership in ten years. The management of Rakish announced a major change in the business strategy of the company that would lead to the transformation of business operations. Incidentally, it prepared a blueprint for the company and chose product differentiation as its primary strategy for the future. It identified a few segments in the market like the low-value steel market where the competition was negligible. It decided to expand its product line with a focus on the consumers of these low-value products.
Pursuing this strategy, the management announced a slew of measures aimed at enhancing the width of the product line by adding a few more varieties to it. It made a huge investment commitment in the infrastructure for producing low-value steel. Within a remarkably short span of time, it introduced new products to cater to the market demand for low-value products. The market responded favourably to its new products and the turnover and profit rose appreciably. However, the competing companies understood the game plan of Rakish quickly and reacted by expanding their product line too. The advantage enjoyed by Rakish turned out to be a short-lived one and the major players once again began to dominate the market.
Once the product differentiation efforts failed, the management of Rakish changed its strategy and adopted a low-cost strategy. This required the organization to be aggressive in sales promotion measures and diligent in cost reduction in fields like marketing, advertising, distribution and services. The cost reduction measures could not help the company for two reasons. One, the cost of marketing did not have a significant influence on the price tag of the product. And two, the cost reduction efforts had a negative fall-out on sales promotion and also on the actual sales performance. Eventually, the company was forced to abandon its low-cost strategy endeavours.
When the company was almost clueless about its future strategies to accomplish the performance goals, Mr Rajesh Sharma joined the board as the HR Director of the company. Learning about the ill-fated strategy initiatives of the company, he made a proposal to develop the workforce of the company as a competitive advantage in the market. The board of directors greeted the proposal with suspicion and contempt. They could not believe that the employees could be developed into a formidable force for the organization through proper HR measures, and that in due course this would lead to cost reduction and quality enhancement. However, having no worthwhile alternative schemes, they set aside their reservations and approved the HR director"s proposal. Simultaneously, the directors allowed a huge budgetary support for drastically improving the training infrastructure and the compensation packages. The HR director"s proposal began to take shape and the management kept its fingers crossed.
Questions for discussion
- What could have been the reason for the failure of the earlier strategies of Rakish?
- How do you foresee the future of Mr Rajesh Sharma"s proposal in the light of the competition faced by the company?
- What would your proposal have been if you had been the HR Director of the company?