THE CROMPTON
GREAVES' OPERATIONS OVERHAUL
Case Code- OPER003
Publication Date -2002
"When I became CEO of Crompton Greaves in 1985, the company was in bad trim.
The wind had abruptly changed direction, catching the management unawares. It
was my job primarily to set the sails right again and correct the course."
-Kewal K. Nohria, CEO, Crompton Greaves in 1998
THE BLUECHIP'S DOWNFALL
Crompton Greaves Ltd. (CGL), the flagship company of the L. M. Thapar group was
one of India's leading private sector electrical engineering companies. CGL
manufactured a wide range of transformers, switchgears, control equipment,
motors and related products and railway signaling equipment besides consumer
products.
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CGL was incorporated in 1937 as a 100% subsidiary of
the UK based Crompton Parkinson Ltd., (CPL), under the name of Parkinson
Works Ltd. (PWL). In 1948, the L. M. Thapar group company, Greaves Cotton
& Co Ltd. (GCCL), acquired a 26% stake, which was later increased to 50%
in 1956. In 1966, a joint venture company (between GCCL & CPL), Greaves
Cotton & Crompton Parkinson Ltd. was amalgamated with PWL. The company was
renamed as Crompton Greaves Ltd.
Over the years, CGL evolved from being a single location company
manufacturing ceiling fans and AC industrial motors, into a multi
location, multi product company. In the late 1970s, CGL entered into
various technical collaboration agreements with renowned companies from
USA, UK, Europe and Japan. These activities (many undertaken as joint
ventures), were in related products, supplementing the company's main
business. While many of these companies were amalgamated with CGL, some of
them were divested as well during the following years. |
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In 1987, CGL began its diversification moves and entered the
telecommunications and industrial electronics arena. The company also undertook
turnkey engineering projects and began providing information technology
services.During the 1980s, CGL was in dire straits with profitability at all time lows.
Nohria said, "In 1982 and 1983, industry in general and the electrical industry
in particular was gripped by recession, and the scenario changed from a seller's
market to a buyer's market. Falling demand combined with higher production
capacity and employment levels resulted in declining productivity during 1982-84
at Crompton Greaves."
The CGL management realized that it would have to take steps soon enough to put
the company back on track. Nohria believed that operational efficiency was one
of the keys to organizational effectiveness and long run profitability. Besides
working towards an overall restructuring of the company, Nohria decided to focus
on total quality management to improve CGL's performance.
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THE NASHIK UNIT OVERHAUL
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This case study is intended to be used as a basis for class discussion rather
than to illustrate either effective or ineffective handling of a management
situation. This case was compiled from published sources.
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