Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do.

There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Thursday, 5 January 1989

DIVERSIFICATION STRATEGY (OUTPUTS)


DIVERSIFICATION STRATEGY : OUTPUTS (GOODS/SERVICES)
Before we get into a detailed examination areas of diversification-opportunities, let us recapitulate our Corporate Mission :
a)  To serve the Indian Nation through manufacture and supply of high quality goods  and services at reasonable cost;     
b) To become the most diversified company of India.
A Diversification strategy for "Goods/Services" must necessarily take into account:
a)  L&T's strengths & weaknesses

b)  GOI's Licensing Policy

But, "taking into account" should not be taken as "binding" or being "limited by".
Any diversification move would obviously generate newer challenges. These challenges, in turn, could also crystallise our "weaknesses". Such crystallisation, however, would emphasise the need to discover ways and means to convert "weaknesses" into "strengths". Some of the options could be as listed in
Annexure III

This list is only a demonstrative one as there could be many more options available to us.
 Various human wants and needs generate the demand for innumerable goods and services, which in turn create the necessary prospects for business. Some of the specific areas that emerge out -of these human wants and needs are identified as follows, under each want category.

A. want Category: ESSENTIAL
A.I Economy sector: Food
A.I.I Sub-sector: Agriculture-based
Products/Services Recommended
* Flavours
* Processed foods
* Bagasse based paper
* Genetic engineering (Tissue culture/ cloning for Hybreed seeds)
* cut flowers/Potted plants (for exports)

A.I. 2 Sub-sector: Animal-based
Products/Services Recommended
* Dry land fisheries
* Milk based products

A.I. 3 Sub-sector: Consultancy
Products/Services Recommended:
* Food testing laboratories

A.2 Economy sector: clothing
A.2.l  Sub-sector: Natural/synthetic Yarns
Products/Services Recommended .
* Textiles/Fabrics
* Apparels/Garments
* Soft furnishing
* Components
* Shoes (Leather shoes, Sports shoes)

A.3 Economy Sector: Shelter
A.3.l  Sub-sector: Building Construction
Products/Services Recommended
* Mass housing/Residential complexes
* Commercial complexes
* Shopping plazas
* Industrial estates

A.3.2 Sub-sector: Building Materials
Products/Services Recommended
* Cement (we are already in)
* Value added cement products
* Glass (Float)
* Ceramic tiles
* Pre-fabricated components
* Gypsum/Cement/MDF boards
* Lighting systems (Lamps)
* Natural stones
* Metal sections (Doors/windows)

A.3.3 Sub-sector: cities/Towns/Land Services
Products/services. Recommended
* Town planning consultancy
* Real estate/Land development projects
* Architectural services
* structural engineering services

A.4 Economy Sector: Sex
A.4.l  Sub-sector: Population
Products/services Recommended:
* Family planning devices

A.5 Economy Sector: Climate
A.5.l  Sub-sector: Heating/cooling/Humidification/ De-humidification
Products/services Recommended:
* Air-conditioning devices
* Refrigeration devices


B. want category: NECESSITIES
B.l Economy Sector: Health
B.l.l Sub-sector: Health Care Products
Products/services Recommended:
* Pharmaceuticals
- Preventive (Vitamin~/tonics)
- Curative (drugs)

B.l.2 Sub-sector: Health Care Services
Products/services Recommended:
* Diagnostic clinics (not hospitals)
* Ambulance services ('Corporate-Image' angle)

B.2 Economy sector: Education
B.2.l Sub-sector: Educational institutions
Observations/Recommendations:
* Products/Services are not recommended because of Govt controls and low returns
B.2.2 Sub-sector: Research Labs (Industrial/ scientific/Management)
Products/Services Recommended
* Research Labs in Biotechnology/ Genetic engineering
Observations/Recommendations:
* Sector recommended due to the "Image creation Effect" (Example: TIFR/TISS, etc.)

B.3 Economy Sector: Transportation
B.3.1 Sub-sector: Air Transport/Rail Transport
Obeservations/Recommendations:
* No scope either in products or services due to pUblic-sector presence.However,sports-fun products such as "PARA-PLANE"could be marketed world-wide.

B.3.2
Sub-sector: Road Transport
Products/Services Recommended:
* Highway/Road construction
* Road construction eqpt.
* Road Transport Corpn. for materials (Similar to USA's Federal Express and United Parcel Services)
* Auto/Industrial Batteries

B.3.3 Sub-sector: Sea/River Transport
Observations/Recommendations:
* No immediate prospects.

B.4 Economy sector: communication
B.4.1 Sub-sector: Telecommunication
observations/Recommendations
This sector can be broadly divided into two: services and products.
Both of these are very closely controlled by the state/Central Govt through public sector units. For the next 25 years, this is going to be one of the fastest growing sector of economy. The public sector is unlikely to cope-up with the demands and gradually more and more areas of goods & services are expected to be thrown open to the pri vate/joint sector.
The entire sector, therefore meri ts a very close,' indepth examination and development of detailed "Entry-strategies" in a big way including backdoor entry through tying-up with state Govt projects.
The following developments will revolutionise the tele-communications:
* Very powerful supercomputers
* Artificial intelligence/Expert systems
* Miniaturisation
* Optical computing
* Large scale use of optical fibre cables
Within the next 10 years, there will be Generation/storage/Retrieval/Manipulation/ Transmission of
- Voice
- Data
- Text
- Image
thru a single instrument.
Having covered the "Senses" of EYES!. EARS within the next 25 years, the 3rd generation revolution will comprise the long distance transmissions of the feelings generated by the senses of:
- TASTE
- SMELL
- TOUCH
Japan, USA and Europe will lead the development of these new technologies which will give birth to a whole gamut of "Sunrise" industries in these coun­tries.
Obviously these industries will have for its basic building blocks, very powerful micro-processors operating at fantastic speeds. These micro-proce­ssors will have a product-life of not more than 2/3 years and will require heavy investments in manufacturing facilities. For this reason, manu­facture of these building-blocks would be beyond the abilities of countries like India.
On the other hand, the "applications" of these technologies will travel to India, much faster than hitherto. This will open-up enormous opportunities to those Indian companies which have built-up a strong "application-base" in communication electronics by the turn of the century.

Very clearly therefore, L&T's strategy should be to build-up such a base through a series of com­plimentary (non-conflicting) steps comprising of:
1 Joint-venture with world-leaders.
2 Technical collaborations with world-leaders.
3 Joint ventures with state Industrial Development Corporations.
4 Joint ventures with existing PSUs such as ECIL, BEL,ITI/GCEL,etc.
5 A central "Technology-Absorption/Transfer-cum­ R&D Laboratory" with a free flow of technicians/     engineers/scientists to the geographically dis­persed manufacturing units. This will include a "communication consultancy service organization"
6 Owning and operating a publishing network of newspapers/magazines/professional journals.
7 owning and operating a computerized Data Network for :
-      Financial World (Equity/Bonds/Debentures,etc.)
-      Products/Services (Yellow-page type)
-      Industrial Production Statistics (for market surveys, etc.)
-      Business Intelligence/Corporate Performance
-      Industrial Licensing Data

c.
-      want Category : DESIRABLE
-      C.1 Economy Sector : Environment
-      Products/Services Recommended:
-      * Pollution monitoring/control/prevention equipments. ( These will cover air/water/ sound pollution) .
-      * Geotextiles/Geofabrics
-      * De-desertification plants/chemicals
-       * Water de-salination plants and soil salinity removing chemicals
-      * Underground water locating devices
-      * Rain making (cloud-seeding) devices
-      * Garbage processing eqpt.
-      * Sewage water recycling eqpt.

C.2 Economy Sector - Entertainment
-      Products/Services Recommended:
-      * High Definition Flat Tube TV
-      Observations/Recommendations:
-      The technology for this is unlikely to be passed-on to India for the next 10 years atleast. The Japanese & the Europeans are working on two differing STANDARDS. Which standard, India will adopt is quite likely going to be a political decision, since the potential Indian Market could be worth billions of rupees.

-      The new system will make existing TV system totally obsolete and force existing TV manufacturers to close-down their existing manufacturing facilities or carry out costly renovations.
-      Our ability to

-      obtain a favorable political decision in time;
-      tie-ing up wi th a world-class HDTV manufacturer of technology in time (name of the game is to be THE FIRST),
-      could give us a virtual monopoly of the Indian entertainment market.

-      D. want Category : LUXURY
-      D.l Economy sector: Comfort
-      Products/Services Recommended:
-      * Domestic Appliances (White Goods)
-       Air conditioners Refrigerators
-      Washing Machines
-      Vacuum Cleaners

-      * Cosmetics

-      * Wines/Beer


-      D.2 Economy sector: Ego/Status Needs

-      D.2.1 Sub-sector: Tourism/Travel
-      Products/Services Recommended
-      * 3-star hotel chain
-      (Synergy with our "Construction Group")
-      * Fast Food franchise chain
-      (Synergy with "Processed Food Groupll)
-      * Tourism/Travel Agency/Luxury coaches
-      * Trade Fair/Conference Centres

-      D.3 Economy Sector: Intellectual/ spiritual needs
-      Products/Services Recommended

-      These are ultimate luxuries in the Indian context with a negligible "market".
-      Of course , these are not water-tight compartments. Very often, a particular sector of economy caters to more than one Human-Wants.
-      For example:
-      "Agriculture" will provide "essential" foods for survival, as also sophisticated cocoa products (chocolates) which may fall under "Luxuries" in the Indian context.
-      Similarly, "Housing-sector" could mean an "Improved slum-type Shelter" to millions who sleep on footpaths to fully air-conditioned luxury apartments for the ultra-rich.
-      A lot of compromise was inevitable in trying to prepare a "simple" list.

-      E. Economy Sector: INDUSTRY
-      There are, however, several products/services which satisfy a number of human-wants indirectly by the reason of being essential "inputs" to that sector of economy which we call:
-      Engineering sector/Industrial sector/Energy Sector

-      Some of these which may be worth examining indepth are:
-      E.l Ferrous/Non-ferrous Metals, especially
-      * Sponge Iron
-      * Steel
-      * Flat Products of Steel (sheets/strips/ flats)
-      * sections of Steel (Tubes/Irregulars)

-      E.2 Non-metallic Materials, especially
-      * Plastics/Polymers
-      * Composites
-      * Plasticisers/Elastomers
-      * Synthetic Rubbers
-      * Speciality Chemicals
-      * Basic Chemicals
-      * Dyes/Dye-intermediates

-      E.3 Energy Raw-materials/Applications, especially
-      * Petrochemicals
-      * Refining
-      * Gas-based Industries/Piped Domestic Gas
-      * Gas-based Power Plants
-      * wind/Solar Energy Products
        
 E.4 Information Industry, especially
-      * Special Process-control Computers
-      * Energy Software
-      * Office automation products

-      E.5 Service Industries, especially
-      * Advertising
-      * Leasing
-      * Engineering/Management Consultancy
-      * Financial Consultancy

with the Corporate Mission and SWOT Analysis in the background, an attempt is now made (Chapters 6 and 7) to define L&T I S Corporate strategy with respect to the primary and secondary resources

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