This issue consists of four papers. The first paper, “Agglomeration of Foreign
Automobile Firms in India: Empirical Evidence”, by Neha Gupta, investigates the
impact of agglomeration as well as state-specific endowments on the development of automotive clusters in India. Agglomeration has a lot of significance, especially in industries such as auto where firms look at opportunities to co-locate near each other. This creates tremendous advantage in terms of economies which may be external to a firm but are internal to a specific region/ area. Empirical studies on agglomeration effects have shown that the industry productivity is enhanced. This study focuses on the automotive and auto-ancillary industry in India with the number of newly created industries between 2002 and 2012 as the dependent variable. Taking the investments made up to 2001 as the independent variable along with nine control variables, the study proves that the location decisions by new foreign automobile and auto-ancillary manufacturing firms in India are influenced by the plant locations of the incumbent Indian automobile and auto-ancillary firms. These findings hold well even when state-specific endowments and automobile industry-specific endowment effects are controlled by using the variables depicting the characteristics of each of the 9 states/ UTs and automobile industry of India. The results are consistent with the empirical findings of many studies on foreign investments in developed countries such as the US, France, and Portugal. The authors concur that the positive externalities emerging out of endowments like pool of suppliers, product market availability, technological spillovers etc. induce new foreign auto and auto-ancillary manufacturing firms to cluster in a particular region.

Indian IT industry is going through a challenging phase in terms of migrating to the next stage of growth. Once a preferred destination due to low costs, India is now forced to chart a different growth trajectory for opportunities in the IT industry. What are the opportunities available and how can they be mapped? The second paper, “Strategic Opportunities for Indian IT Companies: A Study”, by Yagnil Mehta and U S Rao looks at the strategic opportunities for Indian IT companies that are battling global competition across different business geographies and economies. Quoting extensively from the paper “Corporate Spheres of Influence” authored by Richard A D’Aveni, this paper tries to relate the framework proposed by Aveni to the Indian IT industry. According to the framework, the industry can move from one sphere to another as if in a hierarchy and in the process create greater value. For example, the framework suggests moving to Pivotal zones that consist of Social Media, Mobility, Analytics and Cloud Computing (SMAC) opportunities in order to leverage the competence that the Indian IT industry has built over the years.

Capital investment decisions are fraught with time and money risks than ever before. Businesses like oil and gas, for instance, require huge investments of capital and no certain estimation of returns that can be accurately predicted. How do companies plan such investments? The third paper, “Investment Decision Making in the Upstream Oil Industry: An Analysis”, by Surbhi Arora analyzes how companies make decisions in the upstream oil business. The oil business presents a significant business risk for investors in any country. Risks arise from the project (construction, operation, production, reserve), changes in global economic conditions (market, macroeconomic), political circumstances (regulatory, expropriation), legal conditions (contract, jurisdictional), and force majeure (natural disaster, civil unrest, terrorism). The higher the risk associated with an investment, the higher the cost of capital and the higher the return required by investors and lenders. The ability to model risks and plan for contingencies is another critical consideration when executing large-scale capital projects. Description of the different methods of evaluating risk is presented by the author with specific reference to upstream oil business.

Does Structure have a bearing on Strategy? Is there a need to evaluate organization structure whenever there is a business challenge? Literature overwhelmingly supports the contention that structure must be flexible enough to cater to the ever evolving business landscape. The final paper, “Organizational Restructuring and Collaborative Creativity: The Case of Microsoft and Sony”, by Ishneet Dhillon and Sonam Gupta, is a case that describes the linkage between organizational restructuring and collaborative creativity with specific reference to two leading technology companies—Microsoft and Sony. The authors explain the challenges faced by these companies in sustaining their market and technology leadership. To contrast, a comparison is drawn with Google and Apple which operate in similar environments but are able to far outperform their rivals. The efforts made by Sony and Microsoft are then presented. Sony in the year 2013-14 introduced a collaborative divisional structure code named ‘One Sony’. The strategy comprised integrating the R&D, design engineering, and sales and marketing operations of its smartphone business with its tablet and laptop businesses. Microsoft, on the other hand, reverted to a functional structure in July 2013. The reorganization brought together the company across nine functional areas rather than by a products/solutions grouping. The reorganizing introduced a horizontal management structure at Microsoft wherein vice- presidents are responsible for the nine different functions, namely, Engineering, Dynamics, Advanced Strategy and Research Group, Marketing Group, COO, Business Development and Evangelism Group, Finance Group, Legal and Corporate Affairs Group, and HR Group. The benefits of these initiatives are presented in detail.

-- Venu Gopal Rao
Consulting Editor