the world is becoming ultra-competitive, all thanks to greater than ever dissemination of information through electronic means. today, no company (except those with cutting-edge tech like google and microsoft) operating in a specific industry can expect to be the sole beneficiary of demand for a particular product/ service. margins are getting thinner and this is all a good sign, we will tell you why.
for a country like ours, all problems lie in income disparity that has only exacerbated despite of political promises to curb it. with those who earn handsome money and are willing and actually spending large sums on imported goods like electronics and garments, our trade balance has suffered. this ‘handsome money’ that they make can be attributed to the irrationality of their employers.
companies, both private and public, have not prudently considered changing market conditions and are thus unable to rein in rising operating expenses, especially those incurred on salaries.
take airtel for example. post jio’s entry in the telecom sector, not only the competitors had to reduce their prices for services they offer, they also had to cut on operational costs, resulting in laying off of large number of employees and rationalization of salaries of others.
take another case of private vs public sector banks. when one compares annual cost to company of a state bank of india (sbi) employee with that of his counterpart employed with a private sector bank, huge difference in favour of sbi employee comes as a shock. when market was opened for private and foreign banks in the country, the public sector banks didn’t notice the competition coming and failed to cut their operational costs. the irony is they gradually increased perks of their employees.
jio teaches a lesson to all market players. every sector is vulnerable to competitive forces and no enterprise can senselessly spend on pleasing their workforce. gone are the days when near-zero annual salary increments came as a shock only for a few handful companies. today, enterprises may even need to cut down salaries from past years so as to survive the competition. else, there will be no alternative to posting losses in books, defaulting on bank loans and finally going into liquidation.
to correct the market and more importantly correct the distortion in salaries, we need more and more market participants like jio. they would teach their respective sectors how to run businesses with thin margins by rationalizing costs.