The Hindu Business Line : India Inc takes wing

These questions were put to me in Jakarta by an industrialist, head of a Balinese Hindu aristocratic family, and owner of vast assets all over the world, with whom I was then working, as head of a marketing company. The new economic policy of 1991 had been announced.

Though Indonesia became independent of the Dutch about the same time as we did of the British, the difference was that it had few graduates in any discipline.

And the dependence of the corporate sector in Indonesia on highly paid expatriates continued well into the '90s. Indigenous entrepreneurship was severely limited to an ethnic Chinese minority and foreign investments from notable and well trusted friendly neighbours was welcomed by the enlightened minority of industrialists, if not the official establishment.

In a country still ruled by a mindset of depending on the Western expert, the goodwill and even awareness of Indian corporate brand names was a pleasant surprise.

Indeed, very little else was known about India other than that Nehru gave their leadership the ideal of Panchsheel and that it was the land of Ramayana and the Mahabharata - both of which were deeply intermingled with Javanese legend and myth.

This was an example of the pride of place a few Indian brand names had in South-East Asia, amidst the general ignorance and lack of any significant presence which we suffered from. The recent headlines of Indian companies taking over British, American and European businesses on such a large scale would have been unthinkable even a few years ago.

It is noteworthy that the action is now seen amongst not just the established giants such as the Tata (in steel, hotels, tea, cars) and AV Birla (cement) groups but also the likes of newcomer Suzlon, unheard of until five years ago, fourfifths of whose revenues now come from overseas.

It is now accepted as the fifth largest wind energy company in the world and was described by The New York Times as an example of how to do business in China.

BREAKING NEW GROUND

Others such as Mittals have broken new ground in steel, by acquiring through an aggressive takeover Arcelor, one of the largest European names in steel.

This is not to ignore many others who on a smaller scale have opened up offices and manufacturing operations in the ASEAN region, China and Latin America.

It is no longer news when someone buys a stake in a foreign company, or acquires it totally. The only source of awe is the scale of the multi-billion dollar deals.

The questions asked with incredulity and genuine surprise interlaced with scepticism are: How did they suddenly manage to do this after all these years?

Where did they find the thousands of crores of rupees? And how and where from did we as a country find this courage, for such a scale of exposure to risk? And more to the point, where was this chutzpah all along?

It is difficult to generalise but one can attempt a surmise of an answer. The primary impetus did come from a liberalised economy that allowed investing abroad, as well as largescale access to foreign capital markets.

The second, not so widely spoken of, is the recognition that the free market world was permanent, not a flash in the pan, so one had better get used to dealing with foreign competition, even on one's own home ground.

Increasingly, in the high-growth industries such as computers, software, telecommunications, financial services, consultancy, automobiles and components, India was going to be a magnet attracting the big name investors.

This meant a demand for adopting the best of manufacturing technologies and practices which came next, through the Japanese and Western teachers. Once it was possible to establish that Indian companies across a wide range of industries could achieve, besides economy, both efficiency and quality of product, only scale remained as the biggest hurdle.

India as a base for manufacturing for other markets was clearly going to be a lure for international companies. The competition since the mid-Nineties has become more subtle. Multinational giants have managed to undermine the strength and, gradually,even the cost advantage of home-grown companies.

The presence of a Ford, a GE, a Microsoft, a Toyota or an Intel has made high-quality talent both scarcer and more expensive. On a human level, this is interpreted as the glamour of an MNC job; it meant that the brand image ofthese employers with Indian engineers and managers had to be matched by what the Indian companies had to offer.

Recruitment at higher salaries led to placements abroad - as statistics show. One in six of international IT professionals worldwide now is an Indian.

Already, wholly Indian companies are well aware of the gap in perception as student preferences in both management and technology campus interview trends show. There was onlyso much Indian employers could do to match multinational companies by way of salary alone.

Obviously, the most attractive feature for a young professional in working for an employer with worldwide operations is the vastly increased scope for new job assignments, new learning and networking among the best in the game. This could only be matched by Indian companies if they too had either a large international footprint or a partner, or best of all owned overseas plants and companies.

Thus this is theculmination of a staged process, and one that has been more than ten years in the making. Clearly a snowballing and a demonstrationeffect was felt once a few major forays had beenmade. As regulatory and legal shackles were rapidly removed, the major Indian corporations competed for headlines and recognition.

Fame is a well-known spur. So is the emulation of success of others and the ambition of wanting to establish one's place in the sun. Strategy thinkers and consultants have always held that there was no better way of learning the ropes of international competition than to go where one can learn it fastest.

This implies going overseas in a full sense, not just by exporting one's goods or making a product according to the technical specifications of a foreign principal or customer as an outsourced supplier. Yet, the first step of course would have been most difficult and always required a combination of guts and ambition plus a slice of luck.

Few might recall today the direct instigation from a few experts and visiting faculty such as C. K. Prahalad and the late Sumantra Ghosal. At a CEO Forum launched by Academy for Management Excellence in 1994, the term, `building Indian MNCs', was mooted by C. K. Prahalad of Michigan Business School.

Ghoshal spoke at an AIMA advanced management programme around the same time, of a state of "satisfactory underperformance" in Indian companies. At their best they were willing to look at the vast Indian market and were content with being No. 1 in the domestic market.

They had to take another look at the people, processes and purpose completely afresh, was his prescription. Naturally there were raised eyebrows - and nervous laughter - as well as disbelief when Indian companies establishing beachheads was discussed.

INDIA AS A BRAND

One of the major concerns then was that of the poor overall image of India as a brand. The government in its paternalistic way set up committees and councils and even proposed spending money to establish a brand for India, led by the widely believed fallacy that you create an image by selling your wares more aggressively through media and other forms of promotion.

The wiser leaders understood that it was up to Indian companies to build Brand India. The reputation for their offerings and the nature of their relationships alone could, over ime and taken together, create a favourable set of associations and expectations around products of Indian ownership or manufacture i.e. an Indian brand.

Not surprisingly, this experience has to be created only by the user directly testing and tasting the product. This is far easier in industrial markets than in consumer products or services. This is why the task of establishing from the ground up, say, a beverage brand in the US, a brand of tea in the UK or a luxury hotel in Europe, would be very difficult and expensive.

In a sense, retaining the same company name as before and merely acquiring the equity shares, as the Tatas have done in many places, is the only sensible and faster option, even if apparently a more expensive one.

In intermediate and engineering goods, branding demands a different mental model from what is popularly understood by the word brand building as in consumer soft goods (which is synonymous with establishing a strong customer preference).

The number of people whose perceptions have to be created is fewer - mainly other firms,analysts, media and some channel partners.

LEADERSHIP IS KEY

A further but key element of indirect, slow but sure brand building is the reputation amongst current employees. This is a function of the leadership style adopted by the acquirers, their handling of the transition and HR policies.

All these are crucial for attracting and retaining talent, which is the lifeblood of the business. This makes people management and brands two sides of the same coin - not different and unrelated aspects as textbooks have taught generations of students.

You build a corporate brand by providing an excellent product, of course - but you must back it up with the managerial processes, the leadership, the people management and transition management.

Then you create and sustain a brand, which might well reflect even more of a halo on to the domestic brand image of the same group in India. This is a complex managerial challenge, not to be taken lightly.

It calls for a team of Indian managers who has three additional qualities besides competence and background: the sensitivity o culture and international work habits and styles; the humility to learn and accept things being done differently; and the adaptability to use a different set of tools and practices, at least temporarily until a full integration is achieved.

It is a salutary lesson of mergers and takeovers worldwide that the first few months or years are pretty rocky and difficult. As in any marriage

(The writer is a former Director of Institute for Financial Management and Research, Chennai, and now a management consultant.)

More Stories on : Management | Brands | Economy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
India Inc takes wing