The failure of BPL was an unfortunate situation which has taught some valuable lessons to the business owners. British Physical Laboratories (BPL) headquartered in Bangalore in 1963, was once the best Indian electronics company, founded by T.P. G. Nambiar. The company started the business by manufacture panel meters for defence forces. But Nambiar was ambitious to create BPL as a household name. Nambiar had prior experiences in the United Kingdom and the United States. And he was optimistic about the business expansion from the health care equipment to consumer electronics. After the Asian Games of 1982, BPL explored in manufacturing other household equipment like colour TV sets, cassette recorders, refrigerators, batteries etc. Within no time, BPL expanded from only medical equipment to soft energy, electronics and telecommunications.
With the relaxation of the industrial licensing and in the 1980s, BPL began a collaboration with Japan’s Sanyo Electric Company with a technology-transfer agreement. After the globalization and liberalization, the domestic market was open for foreign entrants. BPL concretized its position with an annual revenue touching Rs 4,300 crores. From the latter half of the 1990s, the company faced serious competition from South Korean brethren like Samsung and LG. The family feud and the internal organizational turbulence overshadowed the severity of the foreign competition. This resulted in a financial crisis faced by both BPL and Sanyo in 2004. The failure of BPL was a result of changing times and cut-throat competitions.
By early 2000, the market dynamics across the globe witnessed a drastic change, with the establishment of China as “the factory of the world”. In both ends of the value chain, the value creation not only increased but also faced a severe metamorphosis. On one hand, the proprietary technology like that of Intel and Phillips invested heavily on Research and Development (R&D) to come up with technological innovations. On the other hand, value creation takes place when the brand could connect successfully with the consumers. Ajit Nambiar said in an interview that “In the middle sits China, masters, at manufacturing and assembling electronic products at unbeatable prices but with no brand differentiation; China is the brand.”
In 2007, the failure of BPL Sanyo venture resulted in a 70% attrition rate of Sanyo and BPL concentrated in manufacturing medical equipment. The Sure Care brand of BPL Healthcare Business Group concentrated in gaining attention from the consumers by providing superior quality of health equipment like electrocardiography apparatus and patient monitors.
Two major reasons that led to the failure of BPL were the family feud and the focus on the wrong priorities. The competition from the foreign market was getting cut-throat. There was a family rift between the senior Nambiar and his son in law. Since the beginning of this century, the market drastically changed. When BPL should have considered the external threats, it was instead involved in court cases. In 2004, Nambiar dragged his son in law Rajeev Chandrasekhar, who managed to carve out his own business out of BPL Telecom, to assert his ownership.
When the family fortunes declined, there was no unity among the family members. They were engaged in saving their own homes, rather than the business altogether. Jayanth, who worked with TPG for almost three decades and is a board member of BPL Techno Vision said “Obviously, TPG feels sad about what has happened. Who will not if they were in his shoes? The empire which he built through so much hard work has diminished. Whenever I meet him, we don’t discuss family issues. But my own understanding is that they have reconciled if not exactly resolved their differences.”
As per the comment of Ajit Nambiar, “To a great extent, our thinking was ‘inside-out’—products, technology and manufacturing were our priorities. With economic liberalization in the early 1990s, very large global brands like Samsung and LG joined the fray. With very large volume global manufacturing bases, these brands were able to put pressure on Indian brands like BPL. Further, rapid technology change cycles created immense market volatility.”
The PEG (price/earnings to growth) ratio of BPL stocks is shown below to depict the stagnant condition of this once-upon-a-time electronics giant.
From the failure of BPL, the budding entrepreneurs, soloprenuers and the businesses can learn some valuable lessons.
- Family governance is needed in case the family is in business: Several brands like Dabur have their family members in the business. In India, several businesses grow in collaboration with family members. But like Dabur, which has a system of family governance, the business must be for all. Absolute ownership, dictatorship and possessiveness will never bear fruit in the long run.
- Set your priorities: As said by the present CEO of BPL, Ajit Nambiar opines that setting wrong priorities can harm the business growth. At the brink of the technological revolution and the blooming digitization, BPL, instead of getting ready to cope up with the foreign competition, was involved in court cases and family feud. The product varieties, flash sale marketing techniques and innovation of the foreign brands obstructed the business growth of this domestic brand.
- Adapt to the changing dynamics: Just like the weather and a woman’s mood, the market is very unpredictable. BPL was doing good with the Japanese ventures, but with the turning of the new century everything changed drastically and the company failed to adapt to the changing dynamics. The faster the company can adapt to the changing tides, the better will be the business growth.
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