Guntur, the tobacco capital of India is the stage for the unfolding of a strange phenomenon. It is that of the tobacco ‘boom’ that has now become a ‘bubble’ all set to go ‘bust’.
Fuelled by increasing demand and record prices over the past couple of years, farmers had resorted to upping the production of tobacco in order to make a fast buck. The bull run of the bumper crop is coming to a halt and the farmers are feeling the pinch. They are now saddled with excess stocks, bundled into bales much like the bundles of AAA rated mortgage securities. The high percentage of rejected bales due to inferior quality has made the average tobacco bale price plummet to new lows. The growers association, a federated body consisting of registered farmers from clusters across Andhra Pradesh has now called for the intervention of the Tobacco Board of India, a body functioning under the Ministry of Commerce, striving to provide fair & remunerative prices to tobacco growers. One of the primary functions of the Tobacco Board is to regulate the production of Virginia tobacco to match with the demand and requirements of customers. Though the authorized limit of production per farmer has been fixed at 170 million kg, lax oversight has led to farmers cultivating up to 200 million kg.
As the first quarter of tobacco auctions come to an end, all eyes are on the Tobacco Board. Will it do a Ben Bernanke and bailout the bales?
Saturday, September 4, 2010
Towards Tomorrow
An organization is a miniature society. As a community, it has a distinct culture that affects the way in which people behave.
I’ve always wondered as to why ITC actually lives up to its sobriquet of a Sarkari Company. Does it have something to do with being Indian and the glossed over phrase- ‘respect for elders’. Or does it derive its framework of strict hierarchy from the caste system that defines people’s roles, status and social order?
Operating in a competitive environment makes a company far more receptive to the need for change, to adapt. The FMCG business has traditionally been characterized by intense competition and wafer thin margins. But ITC’s long held monopoly in the Indian Cigarette Industry along with the huge entry barriers has resulted in the preservation of its imperial past. It is said that leaders play a primary role in shaping the values & norms that form culture. The British may have been ousted, but the current crop has merely taken the place of the former masters. Status, power and formality still form the staple diet of the management. The shadow of the Imperial Tobacco Company still looms large over ITC. There is a tremendous focus on legality, legitimacy and bureaucracy with a spelt out role-oriented culture. Power is associated with positions not people. But, it is yet another thing here that people in power think of themselves as ‘dynamic’ and ‘charismatic’ due to the power invested in them. Interesting fallout of this is that ITC has a strange humane twist to it. The master is a benevolent one. Efforts are made to listen to concerns of people down the hierarchy but often what they hear is rose-tinted, politically right and limited to what the boss wants to hear.
Walking into the organization as a fresh recruit, I have experienced how easy it is to get influenced by its culture and prevailing management style, which represents the expected behavioral norm for managers. Outside of work, I struggle to call people by their first names instead of the salutary ‘Sir’. I get angered if a security guard or any subordinate does not greet me with a God like reverence. .
Over the past decade, ITC’s diversification into multiple businesses has exposed it to a highly turbulent and competitive environment. It is no longer the old boys club in tobacco land. New people have helped spawn new subcultures in this century old behemoth. Change is raising its sleepy head, but it feels too slow. An old stalwart remarked “ITC is 100 yrs old. Change will be slow. Otherwise, it would result in a culture-shock”. I readily agreed but pondered over it much longer, much later.
During an interaction with a senior professional, I quizzed him on bureaucracy and things moving at a slow pace at ITC. He looked at me thoughtfully, but his eyes betrayed the fact that this question had come his way numerous times in the past. He said me to “adapt to the realities of the organization”. Alas, the need to adapt isn’t lost on all.
I’ve always wondered as to why ITC actually lives up to its sobriquet of a Sarkari Company. Does it have something to do with being Indian and the glossed over phrase- ‘respect for elders’. Or does it derive its framework of strict hierarchy from the caste system that defines people’s roles, status and social order?
Operating in a competitive environment makes a company far more receptive to the need for change, to adapt. The FMCG business has traditionally been characterized by intense competition and wafer thin margins. But ITC’s long held monopoly in the Indian Cigarette Industry along with the huge entry barriers has resulted in the preservation of its imperial past. It is said that leaders play a primary role in shaping the values & norms that form culture. The British may have been ousted, but the current crop has merely taken the place of the former masters. Status, power and formality still form the staple diet of the management. The shadow of the Imperial Tobacco Company still looms large over ITC. There is a tremendous focus on legality, legitimacy and bureaucracy with a spelt out role-oriented culture. Power is associated with positions not people. But, it is yet another thing here that people in power think of themselves as ‘dynamic’ and ‘charismatic’ due to the power invested in them. Interesting fallout of this is that ITC has a strange humane twist to it. The master is a benevolent one. Efforts are made to listen to concerns of people down the hierarchy but often what they hear is rose-tinted, politically right and limited to what the boss wants to hear.
Walking into the organization as a fresh recruit, I have experienced how easy it is to get influenced by its culture and prevailing management style, which represents the expected behavioral norm for managers. Outside of work, I struggle to call people by their first names instead of the salutary ‘Sir’. I get angered if a security guard or any subordinate does not greet me with a God like reverence. .
Over the past decade, ITC’s diversification into multiple businesses has exposed it to a highly turbulent and competitive environment. It is no longer the old boys club in tobacco land. New people have helped spawn new subcultures in this century old behemoth. Change is raising its sleepy head, but it feels too slow. An old stalwart remarked “ITC is 100 yrs old. Change will be slow. Otherwise, it would result in a culture-shock”. I readily agreed but pondered over it much longer, much later.
During an interaction with a senior professional, I quizzed him on bureaucracy and things moving at a slow pace at ITC. He looked at me thoughtfully, but his eyes betrayed the fact that this question had come his way numerous times in the past. He said me to “adapt to the realities of the organization”. Alas, the need to adapt isn’t lost on all.
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