The Indian Economy Blog

September 9, 2007

Fortune 500 Facts for Indian Businesses

Filed under: Business,Economic History,Miscellaneous — Pragmatic @ 12:41 am

Chris Zook, director of global strategy at consulting firm Bain & Co., highlights certain facts from Bain’s analysis of Fortune 500 companies over last two decades. He contends that only one-in-three from the Fortune 500 companies in 1994 survived intact, i.e., without bankruptcy, without acquisition by or integration into another company, or without fundamental changes in their core strategy. Bain’s analysis contends that -

  1. Only 1 in 10 companies achieve sustainable growth over a 10-year period.
  2. Business life spans have plummeted to an average of 14 years.
  3. CEOs are leaving their jobs twice as often as in previous decades, with today’s average tenure only four years.
  4. The average period an investor holds a share of common stock has decreased from about eight years to eight months.
  5. Market leaders are more quickly losing their lead positions.
  6. Product lifecycles in many industries have shrunk by 70% or more.[link]

Most forces of turbulence leading to these accelerated changes in the world economy are macro-level forces that Indian companies can not avoid or ignore. The pace of change for Indian industry is thus closely related to their overseas counterparts. It is safe to presume that similar observations hold true for the Indian economy; issues that would have lasting impact on the profitability and viability of Indian businesses.

However it seems that most Indian companies, both established and emergent, have ignored the accelerated pace at which they will traverse the path of Zook’s Focus-Expand-Redefine cycle in today’s era. Nevertheless, a belated identification of the correct coordinates on the F-E-R cycle by Indian businesses can be offset by internalising the obvious lessons from Bain’s analysis now. It is high time we put forth rigorous analysis on definitive data about Indian businesses since 1991, to support such contentions about the Indian economy as well.

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