Ever since liberalisation and globalisation became ruling mantras, the world had become borderless, at least from the standpoint of business firms. The distinction between foreign and domestic businesses are getting blurred. Companies of all countries, depending on their financial stamina, technological prowess and political savvy are making their entry into countries which are attractive to them as markets.
Indian companies too are no exception. There has been an incredible surge of confidence among them ever since they were unshackled. You name any sector — pharmaceuticals, auto, telecom, information-technology enabled services, financing, banking, hotels: The more ambitious and aggressive of them are making their presence felt in other countries either by starting new businesses or adopting the route of mergers and acquisitions.
According to Bloomberg, there have been 1995 overseas acquisitions by Indian companies (listed and unlisted) in the period 2000-12, with the amount invested crossing $116 billion.
There has been a spurt in the number of companies which have distinguished themselves by getting listed in foreign bourses.
The net effect of these trends, both in India and abroad, is to make conventional concepts of conducting business operations obsolete. The cosy days when a company had its headquarters in one location and handed decisions from on high to regional and local branches — based on the so-called hub-and-spoke model — are over.
Gone are the days when a product was produced, processed or manufactured in one place or country and distributed from there.
HUNT FOR OPPORTUNITIES
Different parts of the same product are produced at different locations. Ditto distribution. Customers of the same company come with a variety of temperaments, expectations and from different cultures. The employee-mix itself has become bewildering, composed of different nationalities, and characterised by different personality traits, all thrown together in exotic and strange environments. Only 30 per cent of Siemens AG, more than 400,000 employees are located in Germany; all the rest being dispersed across 190 countries.
With footholds and beach-heads in profitable and promising markets worldwide, and eager in their hunt for opportunities for growth, expansion and diversification, companies are going to find it difficult to survive, let alone be successful, if they do not quickly design and adopt new business models on the one hand, and on the other, develop and hone their capabilities for putting into effect new strategies and adjusting them, at short notice, to face new and looming circumstances and demands.
For instance, ensuring the smooth flow of day-to-day functions is no longer enough. The very fact that the business scenario has radically changed and is still changing makes it imperative for companies to give the highest priority to anticipatory planning.
They should, to that end, put in place the effective devices for collecting business intelligence and ascertaining, if not being ahead of, customer preferences.
It is obvious that sticking to a centralised decision-making process in the whirligig that the conduct of business has become will be to court disaster. Indeed, the idea of an omnipotent, omniscient headquarters is out. It will have to confine itself to the role of coordination, policy formulation and guidance in times of crises, and should not demand every proposal to be referred to it and cleared in advance.
Can there be a single business model that would serve every type of business, regardless of the country of its origin, its scale and nature of the products, services and activities it handles?
Many write-ups assume that there can be, and each school of thought pitches for its own model.
In their paper, titled “Twenty hubs and no HQ”, C. K. Prahalad and Hrishi Bhattacharya press for a ‘gateway-hub’ model.
The Strategy+ Business Web site, in an article published on May 7, advocates a ‘regional cluster’ model in which finance, human resources, and IT would be centralised, sales, legal, and communication would be left to local offices, while manufacturing, procurement, and R&D would be in the concurrent list.
I always have a suspicion of models forged by academics with no experience of running a macro- or even a micro-business.
The only point worth making at the end of the day is that each business firm should work out a model and a strategy that suits it best, keeping in view the dynamics of a borderless world.