| dc.description.abstract | The case study has sought to draw attention to the fact that historical factors have a strong impact on the structure and behaviour of a company. In the case of HMT, some of these factors were the association with the Swiss, the recession that hit Indian industry beginning from 1966, and the fact that HMT was led by people imbued with a sense of mission and purpose.
The case study also draws attention to the pervasive uncertainties that characterize the management of technology. There has been an unfortunate tendency in the economics literature to construe the development of technology in a very simple-minded fashion to be linear and trouble-free. Even when a company has mastered the intricacies of a particular technology, it necessarily runs into fresh problems the moment it diversifies into making a new product. Thus, HMT faced technical problems when it ventured into, say, NC machines, metal forming presses, automatic watches, tractors, or practically any new product that HMT took up.
It may be useful to emphasize at this point that the kind of problems that HMT faced in the process of diversification are not unique to the company. Thus, for instance, Stanley S. Miller refers to similar problems in his study of the diversification process by companies manufacturing metal production components for the automobile industry in the U.S. [1963]. Thus, after a recession in the automobile business, Briggs Manufacturing Company, which welded subassemblies for Chrysler and Packard, found that its open press capacity was left without sufficient orders and was leading to losses. To keep the presses engaged, Briggs diversified into the plumbing business and started making steel sinks and bathtubs. The plumbing business did eventually prove successful but not quite in the manner that the Briggs management had anticipated.
The bathtub project ran into a number of problems almost right from the start. The task of stamping the tub proved more difficult than the bodywork that the company was used to. The large size of the bathtub and its deep 14-inch draw led to numerous problems. Most serious of all were the cracks and splits in many pieces that resulted on account of the deep draw involved. To solve this problem, the dies had to be redesigned and the gears had to be changed. The company was forced to purchase three additional heavy presses for the plumbing line despite the fact that there was excess capacity on the automotive side. Steel of a new composition had to be developed. Several other technical problems were there. There were also problems in developing a suitable distribution system for the new products.
The technology that Briggs employed also led to some advantages in the form of the lightweight and low cost of the steel bathtub, and this was one of the main reasons for its eventual success. Briggs had envisaged the plumbing project as a filler product meant to support the automotive plant. But in the end, the plumbing project became more and more of a distraction and ultimately emerged as the sole business of Briggs, completely displacing the automotive operations of the company. The steel bathtubs and lavatories had to be supplemented by a full line of vitreous china sinks, bowls, tanks, and brass fittings to cater to the market. As Briggs had no experience of the china industry, three outside acquisitions had to be made for this purpose.
Problems of an unforeseen nature, then, crop up when a company ventures into a technology somewhat different from what it has hitherto dealt with. As Miller puts it, much of what we call management judgement is actually experience in a particular business context. Diversification to a new business context necessarily tends to upset that judgement. [1963, p.126].
In a similar fashion, the experience that HMT had acquired through the manufacture of machine tools proved insufficient and even misleading when HMT sought to manufacture metal forming presses. Accustomed to dealing with small-sized machine tools, the large size of metal forming machines took the company by surprise. Many of the facilities that were needed for manufacturing and handling presses were not anticipated.
Another case that Miller presents is of Hupp Corporation, which acquired the Perfection Stove Company, which made gas ovens, kerosene stoves, and other appliances. The Perfection Stove Company was shown a sample of a German heating unit called the Schwanck infrared heater and asked to supply it to heat the airplane hangars at Texas airport. The Schwanck heater was popular in Europe and was widely used to heat cafes, auditoriums, public garages, industrial plants, churches, etc. Impressed by its potential, Perfection Stove Company purchased the U.S. rights and started to introduce the product to the American market.
But it soon found that the heating was considered ineffective by the Americans, who simply demanded a higher temperature than was considered acceptable in Europe [Miller, 1963, p.86-87].
The above case is clearly similar to the problems that HMT faced on account of the fact that the technical specification for automatic watches turned out to be different for India as compared to Japan.
The above examples clearly show that managers operate in a complex environment. Attempts can be made to reduce the amount of uncertainty involved and to induce some orderliness through the use of methods such as formal planning procedures and by trying to anticipate, to the extent possible, the problems that could arise. But that would still leave a large residue of uncertainty about which nothing much can be done. For, as Brian Loasby points out, “Not all of the apparent duplication, waste and confusion is avoidable.” [1976; p.135].
It is, then, quite simply the essence of good management to cope with the problems that arise. The fact that HMT had resilient and flexible management systems enabled it to overcome, at least to some extent, the numerous problems it faced — problems which were inevitable. Without such problems, managers would inhabit a world that is peaceful and would not face any challenges. Any two-bit individual in such a world could become a successful manager. All too often, alas, the complexities of management are not realised by those who judge it from the outside. Economists, in particular, much taken up by the concept of rationality, are apt to ignore the kinds of pulls, pressures and problems that managers of corporations are subject to. But, as the present case study has tried to show, these problems are too real to be wished away. It is then time to give up the assumption, commonly made by economists, of complete rationality, of complete foreknowledge.
This brings me back full circle to the methodological point this thesis has tried to make, namely, that there should be a shift to studies of a historical nature in economics. It’s been said that methodology, like sex, is best demonstrated through actual example. And it is to be hoped that the present case study or example is convincing. | |
