As the Dutch firm Akzo Nobel assimilates its latest acquisition, the famous ‘ICI’ brand will fade into history. Along with HLL and ITC, ICI pioneered the management profession in India for eight decades.
Despite some initial similarity, the divergent destinies of these British subsidiaries exemplify lessons in corporate strategy, which is about the choices made over time.
Thirty years ago during the License Raj, India was an enigma for global companies. In response, ICI India changed CEOs relatively often and moved closer to the parent, leading to an unintended choking of the subsidiary.
HLL had long-serving CEOs, who balanced local and global priorities and persisted in keeping alive the flagging interest of Unilever. ITC management’s actions resulted in spinning the company out of the parent’s control.
Early into the 20th century, the chemical industry was like today’s software industry. It attracted large research expenditure, was the fast-growing industry, and fascinated people with its technology.
Four British companies became very successful: Brunner Mond (now owned by Tata Chemicals), Nobel Explosives, British Dyestuffs, and United Alkali. An irascible Glaswegian, Harry McGowan, amalgamated the four companies into a giant called Imperial Chemical Industries with 33,000 employees in 1926.
The Registrar of Companies objected to the use of ‘Imperial’ in the company’s name. Harry McGowan responded, “The name was chosen after very careful consideration…we are ‘Imperial’ in aspect and in name….this Company will be of enormous value in the economic position of the Empire…” The company developed a technically-oriented culture: Over 70 years, it owned 33,000 patents. One of its research leaders said, “The world can be changed in the laboratory, not in the marketplace.”
Up to the late seventies, the ICI group of companies was the largest multinational company operating in India, bigger than HLL and ITC. A career in ICI India was very prized and the ICI managers enjoyed operational freedom. Their actions were appropriate for the Indian market; they established subsidiaries to manufacture diverse products like synthetic fibres, fertilisers, explosives, and pharmaceuticals; ICI brands like Terene, Alkathene, and Savlon became household names.
In 1959, J M Lal became the first Indian professional manager to be appointed as the CEO of any multinational company in India. Some of today’s successful CEOs are ICI alumni, for example, Ishaat Hussain (Tata Sons), Adi Engineer (Tata Power), Prasad Menon (Tata Chemicals), Ashok Soni (Voltas) and Ranjit Shahani (Novartis).
After the premature death of J M Lal, ICI posted expatriate CEOs, who had relatively short tenures; for them, India was a hop-step in a global career (there were Indian CEOs from 1978-1987). ICI aligned itself to the parent’s priorities and product strategies and began to lose management vitality.
In 1991, when the Hanson Group bought a small, but threatening stake in ICI, a shaken-up management acted rapidly; they de-merged into two companies, ICI and Zeneca. Later, ICI made a highly leveraged acquisition of a speciality chemicals business and sank into a pit of debt, thus affecting ICI India’s degrees of freedom.
By the time the parent could restore its balance sheet, the company was, as The Economist put it, “no longer imperial nor chemical nor even an industry.” Akzo Nobel then made a successful bid for ICI, a bellwether of the London Stock Exchange passed into history.
Imperial Tobacco was the second ‘imperial’ company in India. Even before the Second World War, four factories had been established. Ajit Haksar, a 1948 Harvard MBA, rose to be the first Indian CEO in 1971 like J M Lal did in ICI.
Haksar recalled the atmosphere when he joined, “BAT looked at its investment made in India in 1902 as giving them the right to exploit the Indian company without the willingness to put in fresh capital and continue risk taking.” Haksar adopted an independent path from BAT.
Source: ET
