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Are They Truly ‘Unorganized’?

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DQC Bureau
New Update

A section of the channel-community strongly objects being referred to as ‘assembler’ or the ‘unorganized’ segment. Instead, they want to be classified as small-scale computer manufacturers. We present a point-by-point dissection of the justifications and arguments. You are welcome to send your feedback on the issues raised here to

dqci@cmil.com

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‘Don’t call us ‘unorga-nized’ claimed smaller and lesser known PC manufacturing brands at the first national conference of IT trade associations which resulted in the formation of National Association of Channels of Information Technology

(NACIT). 

The issue escalated following MAIT’s Executive Director, Vinnie Mehta’s quote in the recent Industry Performance Review:

‘The growing proportion of the assembled/unorganized PC market is of immense concern to us.’ The study found that assembled PCs (the smaller lesser known regional brands and unbranded systems) accounted for 65% of the PC sales in Q1/2003-04. Besides other publications, DQCI too came under fire from the channel community for this reference.

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Vinnie clarified that the words ‘assembled’ or ‘unorganized’ did not construe any disrespect towards this section of the IT channel. He also clarified to DQCI that the term ‘unorganized’ was directed at the large number of gray market operators, which is a subset of this entire segment. 

Earlier, MAIT referred this segment as ‘assemblers’. Later the term ‘unorganized’ was chosen for ease of use in their documents. While MAIT is sticking to its stand, partners assembling and selling PCs as their brands, have taken offense to this usage.

THE ARGUMENT CONTINUES



The word ‘unorganized’ or ‘assemblers’ are being used with regards to the small capital investments and the limited infrastructure.

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Small-scale computer manufacturers (SSCM): The so-called ‘branded’ manufacturers are big assemblers who do large scale assembling. Ultimately both are assembling imported components to build a PC. So why aren’t they called big assemblers?



The ‘unorganized’ sector has references to poor business practices applied by this segment compared to organized branded players.

SSCM: We are known for prompt delivery, customization, better after-sales service, personal relations, up-to-date technologies, better upgradability and better price. What more can be a better business practice? Does giving big advertisements make a company organized?

Good business would mean better bookkeeping of accounts, paying all the duties and taxes.

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MAIT PROPOSES… 
l‘Unorganized’ segment or ‘assemblers’ refer to companies with small capital investments and limited infrastructure 
l Unlike branded players, poor business practices are applied by this segment 
l Better book keeping, paying of duties and taxes required
SMALL SCALE MANUFACTURER DISPOSES… 
lNot having a bigger brand’s capital and infrastructure strength does not make it ‘unorganized’
l Known for prompt delivery, better after-sales service and better price 
l Proper account books maintained with details of duties paid, including customs and excise 
l Though octroi-payers,they don’t enjoy Modvat and VAT benefits 

SSCM: Even the smallest of systems integrators maintains proper books of accounts. They pay higher duties and taxes than branded assemblers. 

Almost all the components of assembled computers are duty paid, including customs and excise, besides octroi. Yet, they are not able to enjoy Modvat and VAT benefits.

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There are many small business involved in gray activities like using smuggled component for building a PC and evading taxes and duties on components. Only that portion is being referred to as the ‘unorganized’.

SSCM: Just because of few gray market players, why should the entire community be called ‘unorganized’? It is not appropriate to assume that a large number of small companies are involved in grey business.

When MNCs came to India, the big Indian brands felt threatened. But today they are the largest selling brands. If small assemblers are doing legitimate business why should they feel threatened by the usage of such words? What is so offending about being in the unorganized sector?

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SSCM: Many partners and systems integrators are of the view that, the term ‘unorganized’ sounds derogatory and puts them down in front of their customers.

Unorganized players are those with no fixed buying pattern. Because of this buying pattern small companies fail miserably when it comes to tender business. 

SSCM: Even big brands source their components from different vendors, driven by cost-effectiveness. What is wrong if small companies source their products from 10 different vendors to maximize their profit? This is a sound business practice, which all good companies adopt to remain profitable. 

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Besides, everything is in black and white. As far as participating in government tenders are concerned, this purely depends on the business strategy of the individual company. Most of them stay away from government business purely because of the long delays in payments.f not the ‘unorganized’, what would they like to be called as?

SSCM: They like to be referred to as ‘Small Scale Computer Manufacturers’ or ‘local brands’ or ‘lesser-known brands’ rather than ‘unorganized’. 

According to them, it is not the branded manufacturers who have helped in PC penetration but the local-brand segment.

Hence, it deserves all the respect when it comes to giving a name to this segment.

If the unorganized sector is so confident about their business practices, let them register as a small-scale industry. Then they will fall under the organized sector. When revenue of a particular small company increases, they usually spin off a new company to evade taxes and remain small. In this way the country can never expect to grow or achieve economies of scale. If this continues, in 2005, when duties will become zero, India will become a trader’s nation. No body will be interested in manufacturing.

SSCM: This is not true in all the cases. It is not easy to run companies with different names. Neither is it feasible. Besides, there is no law, which stops somebody from starting a new company as per the law. If the system is flawed, it is for the government departments to fix it.

What these arguments and counter arguments show is that both the parties have valid points to make on this issue. The debate should continue to arrive at a consensus. Send your views and comments to

dqci@cmil.com.

NELSON JOHNY



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