At an event to mark 190th Chamber Day Celebrations of the Madras Chamber of Commerce & Industry (MCCI), Chief Guest Dr. Jairam Varadharaj, Managing Director of Elgi Equipments Ltd., shared insights from the company’s 30-year journey, highlighting the importance of building a business that is both globally competitive and socially responsible.
He said Indian market represents only a small share of the global air compressor market, accounting for around 5 per cent.
“Indian companies aspiring to remain relevant even within the domestic market must develop products that meet global standards. This requires investment in world-class systems, quality, technology, talent and operational efficiency. Global competitiveness, is not merely about expanding into international markets but about building the capability to compete with leading companies worldwide,” Varadharaj said.
According to him, a truly global company is not defined merely by its size or international presence.
“It must be “country agnostic”—capable of competing effectively in different markets without depending on the advantages of any single country,” Varadharaj said.
Global companies must compete on the strength of their technology, quality, value and pricing rather than relying on low labour costs or being positioned as low-cost manufacturers, he said.
Varadharaj noted that about half of Elgi’s revenue comes from international markets, with major chunk coming from competitive markets such as Europe and the United States.
He admitted that these operations are not yet as profitable as desired.
Building scale and improving profitability in these markets will be a key focus for the coming years, Varadharaj said.
Reflecting on India’s pre-liberalisation business environment, he recalled the tendency of companies to pursue a wide range of businesses without developing sufficient depth in any one area.
Varadharaj stressed on the need to move from a “mile wide and an inch deep” approach to an “inch wide and a mile deep” strategy.
“This involves concentrating on core strengths, building expertise and, where necessary, divesting non-core businesses to achieve greater focus and competitiveness,” he said, citing the Elgi Equipments example.
Varadharaj also challenged the conventional business school perspective that the primary purpose of a company is to maximise shareholder wealth, while arguing that focusing exclusively on shareholder returns can undermine long-term value creation.
He batted for a multi-stakeholder approach in which the well-being of six stakeholders is given equal importance:
- Customers
- Employees
- Suppliers
- Distributors
- Society
- Shareholders
Varadharaj emphasised that a good company must create sustainable value for all these stakeholders rather than prioritising one group at the expense of others.
He pointed out to the significant disparities in compensation between the highest- and lowest-paid employees, citing a ratio of approximately 350:1 in India compared with 90:1 in Japan.
Excessive inequality can weaken organisations and societies, Varadharaj said and advocated for responsible capitalism rather than socialism.
He said a nation’s development cannot be measured by GDP alone; the distribution of prosperity and the well-being of its people are equally important considerations.
Elgi does not seek to build its competitive advantage on low wages or cheap labour.
“Instead, the company aims to improve productivity and efficiency so that Indian shop-floor employees can earn compensation comparable to their counterparts in developed economies,” Varadharaj said.
He cited an example of increasing annual compensation for shop-floor employees from approximately Rs 12 lakh to Rs 35 lakh, illustrating the company’s aspiration to create a high-value, high-productivity manufacturing environment.
The underlying principle is that competitiveness should be driven by efficiency, technology and productivity rather than by keeping labour costs low, Varadharaj noted.
He explained that the company follows an approach of treating employees as trustworthy unless there is evidence to the contrary, citing examples including eliminating the requirement for formal leave applications, simplifying travel expense submission procedures and reducing unnecessary administrative controls.
Varadharaj said that trust must be accompanied by accountability.
Any deliberate breach of trust, he stated, would result in immediate dismissal.
Varadharaj highlighted the introduction of a five-day workweek for all employees, including shop-floor workers.
To maintain production levels while providing employees with additional time away from work, the company invested in machine capacity and operational efficiency.
This approach, he explained, reflects the principle that employee well-being should be considered consistently across all levels of the organisation.
Varadharaj also described the challenges of balancing three interconnected priorities:
- Purpose: Remaining committed to the organisation’s values and broader responsibilities.
- Profit: Ensuring financial viability and long-term business growth.
- Risk: Managing uncertainty while pursuing ambitious objectives.
He referred to this as a “tension triangle,” explaining that balancing these competing priorities can be demanding but ultimately rewarding.
The Elgi Chief stressed that sustainable business success requires organisations to pursue profitability without compromising their purpose or their responsibilities towards stakeholders.
He also reflected on the challenges businesses face in India’s political and administrative environment.
Varadharaj said many businesses succeed despite systemic constraints, highlighting the difficulty of pursuing long-term strategic goals in an environment where political and administrative priorities can be influenced by five-year electoral cycles.
He stressed the importance of long-term thinking and a stable, predictable environment for business growth.
Varadharaj urged businesses and individuals to focus on the opportunities within their control rather than waiting for government action.
He emphasised that India offers significant opportunities for growth and innovation, and that businesses must take initiative, develop their capabilities and act decisively, even when the broader environment presents challenges.
His message was one of individual and organisational responsibility: progress requires people to take ownership of their goals and pursue solutions proactively.
Varadharaj shared a Sufi tale to illustrate the importance of seeking solutions where the problem actually exists rather than choosing the most convenient path.
The story conveyed the idea that meaningful progress often requires individuals and organisations to confront difficult or uncomfortable situations directly, he said.
Varadharaj encouraged businesses to move beyond familiar approaches, question established practices and address challenges at their source to unlock new opportunities for growth.