A global footprint | Anand Mahindra

As our new-found self-confidence blossoms, we increasingly see ourselves as 21st-century knights in shining armour, sallying forth to conquer the world, audaciously building our empires by raiding the outposts of ancient but tired western multinationals—all this in quest of the Holy Grail (as we perceive it) of globalization.

There is, of course, great logic and sense in this heroic adventure. Indian companies will never be safe if they focus only on the domestic market, since there is no dearth of foreign competition rushing to share in the spoils of our growing economy. If our mettle has not been tested on battlefields around the world, it would perhaps be only a matter of time before the greater scale, the greater experience base, and the greater resources of international players begin to overwhelm us on our own turf. So there can be no doubt that it behoves us to create a global footprint.

The question, however, is whether our steps are measured and planned enough to achieve long term value creation. This, really, is the challenge for budding Indian multinationals.

Instead of offering some seemingly learned but actually pedestrian theories on building a global business, let me focus on a sampling of the very real lessons from our own limited experience. It makes sense to divide these lessons into two categories—organic and inorganic expansion.

Organic

First, even in the medium term, cost advantage alone can’t be a reliable source of market penetration. This applies particularly, but not solely, in developed countries. Consumers have become too discerning to be drawn only to a low sticker price. If low cost alone were sufficient, we would not have made consistent progress in our tractor business in the US. There is no dearth of Chinese, East European and even our own Indian competitors to derail us in that market. We have succeeded, in fact, in marketing Korean and Japanese tractors under our brand name principally due to the brand equity that we have slowly and assiduously built up. This has come out of the recognition that creating a reliable dealer network, providing outstanding customer service and responsiveness, and ensuring brand share-of-mind are non-negotiable steps towards serious market presence.

Second, alliances often are more valuable in achieving market penetration than acquisitions. ‘Collaborating to compete,’ is a well worn phrase, but retains its validity. Many multinationals seeking avenues to enter the Indian market are willing to assist partners in carving out some turf in other parts of the world where they own distribution channels. A host of caveats and preconditions apply to the feasibility of such alliances, but they are a less glamorous and thus often overlooked path to global growth.

Third, it is worth paying the sometimes exorbitant fees of the best legal, tax and accounting brains in your target market. Despite the efforts of the WTO to create a unified market where nations compete affably and honestly, every individual market is a minefield of rules, regulations and codes of behaviour that need expert interpretation. This is not the area to do value engineering and adjust your budgets!

Inorganic

First, overseas companies and investment banks understand our sense of urgency for expansion. Today, far from sniffing disdainfully at Indian buyers, they look actively for them, and expect to be paid top dollar. ‘Caveat Emptor,’ therefore, since the days of the great bargain are over. It pays to resist the headiness of the hunt, and have a value-based, walk-away price entrenched in one’s mind before the auctioneer’s hammer comes down.

Second, it pays to have a detailed post-acquisition scenario worked out even before having won a bid. Once a deal is done, you are plunged into a maelstrom of activity involving legal clean-up work, regulatory compliance, and the ‘grunt-work’ of taking administrative charge. Unless clear time-bound strategic goals have been enunciated, these are usually sacrificed at the altar of expediency. It suddenly becomes more important to review sales, meet and retain key customers, set the next year’s budgets, and so on. Not that these are unimportant, but they tend to push aside a needed focus on extracting the synergies that made you pay a high price in the first place!

Third, winning hearts and minds of the new company’s team and the local community could help smoothen an otherwise choppy integration. If the deal maker on your team also has a talent for relationship-building, you have a terrific head start, since this will help tide over many inevitable hiccups. But you will still need some renaissance people who have a genuine curiosity and knowledge of other cultures and who radiate conviction. Just deploying a mob of technical and functional experts is a recipe for disaster. These were only a few of the learnings from a long list. Indian companies are fast learners and I have no doubt the next decade will see the emergence of many muscular Indian multinationals. But, we need to be cautious about thumping our chests too loudly and prematurely declaring the arrival of the ‘Indian Century.’

I have, for many years, been what I call a terminal optimist about India, and an ardent advocate of the need to extinguish our colonial complexes and begin believing in ourselves. But I fear we may have moved too far to the other end of the spectrum at this point. It’s as if our entry on to the world stage is being accompanied by a noisy and garish wedding band.

If we tread a tad more softly, and let our actions speak for themselves, then I think we will earn significant credibility, and the world’s respect in even greater measure.

Anand Mahindra is vice-chairman and managing director of the Mahindra Group

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