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  • Warun CK

Legal Contracts: A Competitive Strategy or a Weapon to Safeguard Strategic Interests?

In reality, legal contracts can be ideal for both. However, if we had to pick one – we would recommend you to think of legal contracts as part of your competitive strategy. Legal contracts are essential for all businesses. These are essential to provide a clear, and solid framework of understanding, engage in a detailed roadmap for supply chains, and can also lead to the formation of strategy, keeping in mind the competitors. Moreover, as recent cases like Delhi Vyapar Sangh (DVS) shows, the legal ramification of the competition issue span much beyond the core business needs of profits in the short run.

In the DVS legal case, the prima facie order raised concerns over the exclusive partnership between smartphone manufacturers, and e-commerce platforms. The partnership may have led to the deep-discounting and preferential status of smartphone manufacturers. Special legal contracts like these can lead to serious breaches of the spirit of competition. In this case, the CCI noted that the tactic from manufacturers can “result in an appreciable adverse effect on competition contravening the provisions of Section 3(1) read with Section 3(4) of the act.” Due to such unforeseeable risks, legal contracts as a competitive strategy to boost transparency, trust, and understanding between all stakeholders is key.

Erosion of Trust – A Core Business Challenge

In recent years, businesses have witnessed a massive erosion of trust from key stakeholders. This is apparent in employee lifecycles, as more and more employees see job-hopping as essential to get ahead in their careers. This is in complete contrast to the traditional view of employees and employer relationship as a life-long. Yes, change in business priorities like opting for growth over safety nets has also played their part. However, regardless of the priorities – this is a very dangerous trend for businesses.

On one hand, it is capable of disrupting the workforce, and productivity. On the other hand, it makes way for increased uncertainty in business planning. For example, how is a corporate that changes its workforce in a period of 7 years, likely to accomplish its long-term vision? Can a company really build a strong portfolio of products and services without an experienced workforce?

The Solution

Even if you are a small company, it is highly essential to build an understanding based on proven mechanisms of trust as outlined in the labor code. Law has evolved tremendously since the industrial revolution in the 1800s to bridge the key differences between management, and employees. For example, the Indian labor law mandates a salary of two months for employees who have been terminated. Many companies do not enact these legal principles, for the fear of sustaining additional costs. However, termination goes far beyond the basic understanding of profit and loss. Termination results in a loss of dignity. A key termination can also send shockwaves through a workforce. Additionally, termination is also essential if an employee lacks the attitude to perform.

In order to tackle such a complex challenge, legal leadership is essential in every organization. Furthermore, legal policies need to explain actively, and aggressive to employees. Employees often take their time before making a decision about quitting a safe job that provides them livelihood. It is essential for employers to take the time to make sure they take personal initiative in actively pursuing their relationship with the company. Without a contract based on trust, and mutual respect – the relationship becomes an open wound that goes a little deeper every day.

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