1.
What is the significance of “conflict zones” in emerging economies, especially from the
viewpoint of MNCs?
A conflict zone is a temporary signal source that marks the site of an active battle and
appears in systems where two minor factions are waging war or civil war against each other.
The Personal Products (PP) factory of Doom Dooma lay in the heart of a conflict zone. Since
1980’s the entire region is suffering from problems of insurgency and militancy. The PP
factory was set up in 2001 in Doom Dooma and HUL at one stage owned the largest tea
plantations in Assam. Viewpoints of MNCs for having a business in a conflict zone are –
It minimizes costs, but doesn’t ensure the continuity of the business.
Usually governments give grants to encourage companies to do it
It could be lack of workforce. It could be because they are dealing with the conflict,
or because they are not prepared or educated enough for some jobs.
Also, because of the conflicts, there are security and economic risks that will lead to
more expenses.
2. What drivers were behind HUL’s decision to invest in Assam?
There are several reasons why the HUL Doom Dooma unit was set up after a thorough risk
analysis and close consideration of salient factors
1. An important one is the government support to promote investment in this area, giving
the company grants. For HUL, was not the first time in Assam.
2. The company had been present for a very long time in Doom Dooma, and at one stage
was the owner of the largest tea plantations in Assam.
3. It means that they knew how to operate in the country, and there is kind of business
tradition in this zone, what gave them experience to operate there.
4. The choice of location was also important. The company had already set up another PP
plant in 2004 in Haridwar.
5. Investing in Assam would make HUL the single largest company in the area, because other
multinationals preferred not to enter the state.
6. Experience of previous factories in khamgaon, Chhindwara and Pondicherry had adopted
a model of creating shred value for the company’s stakeholders as a basis for profitable
operations.
7. It has three advantages
a) First, the government offered a 10-year special tax and central excise concession to
manufacturing units in the state.
b) Second, being the only company in Assam means a huge potential market and market
share
. c) The third one is HUL would reiterate its stance of operating in line with the national
priority of balanced regional development by ensuring that its investment were in
designated industrial disadvantaged area and thereby could catalyse employment in the
region.
3. Did HUL’s CR strategy differ from that of other businesses (especially Indian businesses)
that you have studied? How did it contribute to sustainable business operations?
For keeping up with company’s ethics and values, a corporate responsibility (CR) program
was implemented from the very first day of factory operations. It sought to create shared
values for both internal and external stakeholders in the midst of a troubled business
environment in a conflict zone. A HUL’s CR strategy was built on the foundations of the
company’s maxim of “Doing Well by Doing Good” and as a result of which it differed a lot
from the CR strategies of other business. With HUL associating brand building and “success
through goodwill” with CR, it allowed them to look for the real issues that needed to be
solved in the region. The value created by its CR program and the resultant goodwill and
legitimacy it earned from the local community, combined with the support from the state
government and internal stakeholders had led to spill over effect on the conduct of business.
As a result HUL was able to carry on its business operations in the midst of risk and
uncertainty during that tumultuous period.
4. What relevant factors should HUL consider when deciding whether to make a fresh
investment in Assam
Some of the salient factors which HUL should consider while deciding to make a fresh
investment in Assam are –
Geographic impact of conflict whether it is localized in the area of investment.
Attitude of policies of government whether it is business-friendly regulatory
environment.
Political risks which includes change of government regime
Security risks like asset damage and personnel well-being threatened.
Economic risks i.e. extra costs incurred by political, security, reputational and legal
risks.
5. Given the current business environment, should the company make fresh investments in
Assam, or should it consider reducing and eventually even shutting down its Assam
operations?
Assam represents the volatile, uncertain, complex and ambiguous (VUCA) environment.
VUCA is here to stay, whether one like it or not. Therefore one must learn to adapt and
make the best of the situation. The key to performing in VUCA times is agility means the
speed of reacting to external changes and adapting with flexibility. One has to be aware,
keep a good look at what is happening in the external environment, be the first to adapt and
change so as to convert VUCA into an opportunity and achieve sustained competitive
advantage to stay ahead. Therefore, Hindustan Unilever Ltd. (HUL) should invest fresh
capital on PP factory to expand the current capacity at Doom Dooma. the ethics and values
of the CR program, it is the responsibility of HUL to remain a strong and influential figure in
the state of Assam. A continued investment in the Doom Dooma factory will have a positive
and lasting effect in this region.
6. If the company decides to undertake fresh investment in Assam, how can it use lessons
learned from past experience to continue to operate a profitable business?
The company should keep following the belief of “Doing Well by Doing Good”. Capacity
expansion in underdeveloped districts will create value and result in legitimacy with the
people, the community and the state government, essential elements to combat challenges
faced in VUCA regions. With challenges ranging from militant activity, workers strike, labor
issues and discontinuance of fiscal incentives from the government, HUL must continue to
operate in line with the national priority of regional development to catalyze employment in
the region.
7. How can MNCs and other businesses contribute to conflict mitigations?
1. Firstly, the risk that corporations become involved in gross human rights abuses is
especially prevalent in conflict-affected areas, as the most serious forms of business related
human rights abuses tend to take place in such areas.
2. Secondly, ensuring access to remedy for victims is most challenging when human rights
abuses are taking place in such areas due to the ‘accountability gap’, both in home states as
well as host states of multinational companies.
3. Thirdly, in fragile and conflict-affected areas these same companies may also spark, drive
or intensify conflict. Their business activities may benefit and support specific parties to the
conflict, for example when sourcing from rebel held territory or supplying them with
resources.
4. Also, their presence on the ground may spark conflict when community grievances are
not adequately addressed.
