Restructuring Reaping Dividends: Shekhar Bajaj

Mumbai: | Updated: Jun 27 2003, 05:30am hrs
Its slowly reaping dividends. Business restructuring at Bajaj Electricals Ltd (BEL)into five strategic business units (SBUs)has given a two-fold result to the company. First, greater transparency and responsibility and second, the ability to have independent strategy for each of the business units. This was elucidated by BEL chairman and managing director Shekhar Bajaj.

Speaking to FE, Mr Bajaj said the restructuring of business into five SBUs, which was implemented in April 1, 2002, has resulted in greater emphasis on profits. The move took shape around two years back, when we started working with Accenture on the restructuring plan. In April 2002, the plan was implemented, he added.

The five SBUs, namely the lighting business unit, luminaires division, appliances, fans and engineering projects division now have a clear mandate to create genuine bottomline as Mr Bajaj put it. The move, he explained, has brought it greater transparency and responsibility within each SBU. The sense of responsibility has now percolated to even the lower rung of heirarchy. The restructuring has helped us to clearly outline the career and authority points at these SBUs, he added. However, Mr Bajaj elaborated that the five SBUs have common shared services like the HR function to have synergy with the overall company objectives.

Going by the profit motive objective, BEL is looking at playing both the volume game and margin game, especially for its products in the appliances and fans division. Thus, it is looking to tap the unorganised market in the fan segment to grow its business. Mr Bajaj said the unorganised fan market in India presents an enormous opportunity of growth for BEL.

Explaining it further, BEL president and CEO R Ramakrishnan said the effort is to move the customers in the unorganised segment up from being price conscious to becoming brand conscious. If a customer in this bracket realises that by just paying Rs 200 more, he can buy a Bajaj fan, we would have achieved our motive of moving the customers up the value chain, Mr Ramakrishnan said.

And to support this strategy, BEL has in place a chain of about 600 distributors, 2,500 authorised dealers, 60,000 retail outlets and over 200 service franchises. This network, according to Mr Bajaj, enables it to have far more depth in the markets, both in the urban areas and the hinterland.

When asked whether an exclusive retail outlet of BEL selling Bajaj appliances would work, Mr Bajaj said consumers look for variety or options when it comes to purchasing appliances like toasters, juicers and mixers. Here just having exclusive outlets will not be a good strategy. People still like to pick and choose and surf for variety when it comes to buying such products. So even if customers buy Bajaj products, they would still like to look at products manufactured by other companies, explained Mr Bajaj.

However, what BEL is doing is identifying retailers who cater to a particular segment of customers with various products. The company is looking to push its premium brands along with the regular economy brands in areas where it feels it can push the customers up the value chain.

The success of the strategy is reflected in the fact that in 2002-2003, the company registered a growth of 53 per cent in volumes and 40 per cent growth in value terms, added Mr Ramakrishnan.