Rpg Strategy Post 1991

RPG strategy post 1991 :-

Post 1991 RPG group changed its strategy from being a diversified conglomerate to a conglomerate, which wanted to acquire core competence in focused areas. As a result of this strategic shift six core sectors were identified i.e. tires, power generation and transmission, communications, agribusiness, financial services, and retail. These six divisions saw a significant additional investments and joint ventures with a variety of overseas partners helped in refocussing the corporate resources. This strategy was adapted post 1991 due to following reasons:-

• Capital Markets: - With the liberalization of economy in 1991, it became easy to raise funds from the market. As a result, dependence on conglomerates different companies for investment greatly reduced. For Ex CESC raised fund by issuing GDR post 1991(Exhibit 7, Modern India). This allowed the conglomerate to focus on its core sectors without worrying about the funds. Also before 1991, state run institution thought it was less risky to lend to larger groups. But after 1991, conglomerates were no longer dependent on funds from state run institution and as a result affinity to form large groups reduced considerably.
• Labor Markets:- The new labor laws post 1991 encouraged companies to be small thanks to many concessions provided by the government. But as such entry and exit policies ad restructuring still remained the same and as a result labor market wasn’t a important factor for change in guard at RPG.
• Product Market :- With the relaxation of MRTP act it became easy to have a large market share in a particular share which encouraged a focussed strategy rather than diversification strategy. Also with the opening of Electricity transmission and distribution sector for private sector it became all the more important to remain focussed and competitive and expand its market footprint.
• Government Regulation :- With the liberalization of economy and reduction in the number of regulation foreign investors and business houses began to flock India. This resulted in a increased competition which made it all the more necessary for RPG to adopt a focussed strategy and increase its competitiveness in its core business.