Birla, Mahindra bat for conglomerate business model

Kumar Mangalam Birla and Anand Mahindra joined hands to defend the Indian business model of conglomerate structure at a time when globalisation is demanding focus so that decisions can be taken quickly. 

At the "Make in India" summit, Edward L Monser, president of the US-based Emerson Electric Company advocated for focused businesses, “Globalisation has brought multiple layers of decision-making and speed has become a big issue.”

World's best known conglomerate the US based General Electric (GE) is also in the process of bringing focus with selling of financial services business globally. Banmali Agrawala, president and CEO at GE South Asia emphasized the need of being in "related businesses" supporting Monser's argument.

But Indian businesses are largely through business houses including Tata, Aditya Birla, Reliance Industries and Mahindra & Mahindra. They are present across various operations which are not necessarily related. 

For instance Aditya Birla Group is present across cement, telecom, aluminium, retail, financial services, textile and garments. Telecom and financial services are relatively the new areas of business for the Group, which it entered when the government opened these sectors for private sector.

But now Aditya Birla Group’s over 50% of revenue comes from overseas which is largely into the commodity business. And it needs to be globally competitive.

"We have focused companies run by independent boards," said Birla defending the conglomerate structure. "And then we have an activist corporate centre who guides them," said the chairman of the Aditya Birla Group.

Anand Mahindra, chairman of Mahindra & Mahindra Group prefers to call Indian business model as a federal structure than a conglomerate. Mahindra hopes to do well in every aspect of transportation from yacht to jets though his group's mainstay is tractors and SUVs. The company is also present in software, retail, agri products.  

Mahindra cited Warren Buffet to defend multi business models. "Google is a conglomerate with its diversified business operation including health services," he said.

Success of Indian business houses in a globalised world will depend on how fast they react to global change. And that will require spending on research & development which focused business houses are expected to do better.