I INVEST IN A DOWNCYCLE- SAJJAN JINDAL’S
UNCONVENTIONAL BUSINESS STRATEGY
This article talks about Sajjan Jindal’s
unconventional business strategy that helped his company’s revenue grow 172% in
last 4 years.
Analysis:
Sajjan Jindal, Chairman, Managing Director of JSW
Steel, a part of the JSW Group of companies having interests in Mining, Energy,
Ports, Infrastructure and Software entered an expansion mode in the middle of
the economic crisis of 2008. Their domestic economy was slowing down, and the
global capacity had also slipped. During such slowdown, he accelerated the
investment cycle by negotiating cheaper contracts. In such a case, contractors
are easy to find because other projects are not happening. And in that mean
while, they are ready when the cycle is up. That is the reason why they invest
in trough.
Also,
Jindal’s JSW had once invested a billion dollars as an acquisition in the US
during an upturn. But they are still struggling today. Hence, Jindal feels that
one should not take decisions in euphoric times.
Further
strategy build up by Jindal was that they were compromising on profitability
for a short period of time but not on growth since Steel is a long-horizon
business and not a quarter on quarter business.
Ethical leadership of Sajjan Jindal:
Values: He is discovering core values such as he is an optimistic in nature by instinct. He is committed. This is also a fundamental characteristic of Jindal i.e. changing the status quo. He undertakes these core values with integrity and identifies himself as an optimist.
Values: He is discovering core values such as he is an optimistic in nature by instinct. He is committed. This is also a fundamental characteristic of Jindal i.e. changing the status quo. He undertakes these core values with integrity and identifies himself as an optimist.
Vision: His
mantra is that his company should be among the top 20% in terms of cost of
production in the world. As long as cost is low and quality is good, he is not
concerned. He is able to figure out a real picture that brings service to
others.
Voice: He is
motivating others by saying “Shed the frills”, “Keep a positive attitude”, “Use
opportunities to cut the flab”, and “Don’t get perturbed”.
Virtue: He
believes in doing what is right for his company and for the common good.
Corporate examples:
McDonald's
continued to grow in the 1970s downturn even though restaurants generally
suffered as people cooked rather than going out to eat.
Similarly, Toyota was opening new American plants
in the 1990s downturn when the Big
Three were closing theirs due to
falling sales for new cars.
A recession can be a blessing for investors, as it is much easier to spot a strong company without the white noise of a strong economy.
A recession can be a blessing for investors, as it is much easier to spot a strong company without the white noise of a strong economy.
