By Avik Chattopadhyay
On March 31, the former Reserve Bank of India deputy governor and noted economist Viral Acharya had commented that the ‘Big 5’ Indian mega-corporations needed to be broken up into smaller firms to dismantle their near-monopoly on pricing and market reach. They are Reliance, Tata, Aditya Birla, Adani and Bharti Telecom. “Creating national champions, which is considered by many as the industrial policy of ‘new India’, appears to be feeding directly into keeping prices at a high level,” said the professor of economics at New York University Stern School. “The rising concentration of corporate power risks making inflation even more persistent and creating a vulnerability on the external sector front given India’s outsized fiscal and cyclically sensitive current account deficits,” he further commented in his report.
Mega-corporations are not good for any economy or market. Through backward and forward integration, they end up controlling the entire value chain and price mechanism, virtually holding the end consumer at ransom. For example, a mega-corp retail chain will shut down competition by offering the most competitive prices and gaining rapid customer following finally leading to a situation when only that chain remains to serve the market, at a price it then wishes to operate on. This not only destroys local competition but also deters foreign players from exploring the market.
When Standard Oil was broken up into 43 little companies in 1911 by the still fresh US Anti-trust Laws, it had assets worth USD400 million. It was 65-70% of the entire US market. When AT&T was broken up in 1974, it had revenues of USD70 billion. At that size, they could and were dictating governments on policy matters. They were monopolistic enough to manipulate both value chain costs as well as end consumer prices.
On April 18, India celebrated the opening of the first official Apple store. A USD400 billion mega-corporation! In the context of a Standard Oil or an AT&T, isn’t Apple Inc. not large enough to attract attention of the anti-trust regulator? Or is the very context of the market very different from before, being global in scope rather than just in the US which is what took the previous two down? Its nearest competitor, Samsung, is a bit more than just half its size.
Are brand size and trust inversely proportional values of an organisation? Not really, if it is not monopolistic in its inherent behaviour and its size is spread across multiple markets with varying degrees of penetration with none being too large to be of competitive concern.
Apple is one of the world’s most valuable ever brands with some of the most loyal following ever seen or recorded. It has thousands of stories about itself circulating in hundreds of languages and formats. Its founder is one of the most iconic global personalities ever, across business, politics, entertainment, sport and culture. Yet, the brand is not without the chinks in its shiny armour. It has not had a very good record on how it treats its workforce in countries outside of the US, though it tries to slither away citing they are contractual. It has been dodgy about its sourcing of materials and rare earths for its products. It has been known to use tax havens for years which technically speaking is nothing wrong but ethically is a misuse of lax regulations. There have been issues about its environmental impact, though it has made progress over the years to ‘clean’ up its image when it comes to recyclability and repurposing.
Is the end-consumer really bothered about the negatives? When people line up at BKC in Mumbai from the wee hours for the first Apple store to open and then post millions of videos and photos to establish the love and admiration for the brand, you wonder whether looking at two sides of a coin does even matter when it comes to such formidable brands?!
Even if five million iPhones are sold in a year in India, it will still not be 1% of a total market of 700 million smartphones. But size does not matter here as aspiration, admiration and benchmarking does. Size therefore is a contextual and relative measure to use when evaluating a brand. General Motors is large globally and very large in the US but not present in India at all. The same is with other global brands like Ford and Harley-Davidson. So, does it mean that in a market like India, with huge economic inequalities, brands need to play out different strategies of building the brand narrative and managing themselves depending on their product or service relevance? Can there be no universal truths that apply to all brands operating in India? Is there no universal truth about India itself?
Or will history always be written by the victor, whether in battle or by ballot? There is a huge furore about the modifications being made in the NCERT history books. While the anger is welcome and justified, is this showing of just one side of India’s history being done for the first time? Are we sure that what was written in the 1970s and 1980s was the most balanced and unbiased? Are we certain that each constituent of this land’s rich and diverse history was given its due weightage, whether it be the Chola empire or Subramanya Bharati? Are we comfortable with a certain section of our freedom fighters being termed as “extremists” just because their method of action was not in tandem with the method of the majority? In fact, are we sure that we attained independence by using just one method of protest or was it actually a mix of many? There were half-truths then just as there are half-truths now. Just that the victors have changed and so have the overall agendas and resultant narratives. Just like when one CEO gives way to another and the ‘old order’ gives way to the new. New narratives are born and old shoulders are used to fire missives.
However, that did not seem to happen in 2011 when Jobs gave way to Cook. The narrative remained the same. In fact, its application gave birth to new product categories and solutions that helped further reinforce the cause and level of addiction. That makes its fan and follower overlook its chinks and go only for all that shines. Hope NCERT adds a chapter on Apple in our history books soon. The learnings will certainly be deeper!
Avik Chattopadhyay is a senior brand and marketing strategist based in Gurugram. He writes on MxMIndia every other Thursday. His views here are personal.