Lean Operation

Course Work 1: Case Study

The Bluechip Company’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.

CGL was incorporated in 1937 as a 100% subsidiary of the UK based company 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 the 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 subsequently divested in the following years. In 1987, CGL began to diversify 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 financial straits with profitability at an all time low. 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...