Suzuki and strategic alliance

Illustration: Jayachandran / MKint

For a long time, Indians have used bicycle rickshaws or autorickshaws for daily transportation. The word “rickshaw" originates from the Japanese word jinrikisha, which literally means “human-powered vehicle." The fact that Suzuki is now practically synonymous with automobile in India suggests how close the relationship between the two countries can be.

Indeed, India and Japan are natural allies. Their strategic interests are almost perfectly aligned, and each shares a desire to stabilize and preserve Asia’s balance of power. So it is no surprise that Japan is pushing to develop closer economic and strategic ties with India.

Suzuki Motor Corp. first entered the Indian market in 1982, when it started a joint venture with Maruti Udyog Ltd, an Indian state-owned firm. Despite many ups and downs—and fierce competition from other major automobile manufacturers, including the Indian giant Tata Motors Ltd—Suzuki succeeded in establishing its brand as India’s “people’s car."

Currently, Maruti Suzuki India Ltd has at least 4,000 employees and a nationwide sales network of 337 dealers with 8,600 salespersons. The company is planning to build a new factory in 2011, with a production capacity of 300,000 cars per year for a market expected to reach two million in sales this year.

The reason why Suzuki entered the Indian market is clear. Suzuki chose an untapped market while Japan’s bigger auto makers—Toyota, Nissan, and Honda—engaged in fierce competition within Japan. Osamu Suzuki, CEO and COO of the company (and a grandson-in-law of its founder), is a creative decision-maker, a maverick who considers himself an “old man in a mom-and-pop company" that concentrated most of its resources on producing motorcycles and light motor vehicles. Yet when he decided to diversify and focus on India, many criticized him as being reckless, because India was so unfamiliar to Japanese companies. Indeed, while there are currently at least 19,000 Japanese companies in the Chinese market, there are only about 260 in India.

Suzuki’s decision to enter the Indian market turned out to be a resoundingly wise choice. Japan’s population peaked in 2004 and is now falling, while its younger generations show diminishing interest in automobiles. In the past, young Japanese were proud of their knowledge about cars, and every teenage boy knew which model would attract the most girls. Today, however, Japanese driving schools suffer from a fall-off in students, which cannot be explained solely by declining population.

India ’s population, on the other hand, is increasing dramatically in the absence of a one-child policy, such as exists in China. It makes sense, then, that Japanese companies should head to the expanding Indian market.

Doing so, moreover, makes geo-strategic sense as well, with successive Japanese governments increasingly regarding India as a vital diplomatic and political partner. For example, in August 2007, then prime minister Shinzo Abe headed a big delegation to India, followed by an official visit in December by current Prime Minister Yukio Hatoyama.

The “Strategic and Global Partnership between Japan and India," established in 2006, rests on the recognition that Japan and India share common values and interests, as they are the two major entrenched democratic countries in Asia. These shared values distinguish the Japan-India relationship from Japan’s relationship with China. The growing congruence of strategic interests led to the 2008 Japan-India security agreement, a significant milestone in building a stable geopolitical order in Asia.

A constellation of Asian democracies linked by strategic cooperation and common interests is becoming critical to ensuring equilibrium at a time when Asia’s security challenges are mounting due to the shift in global economic and political power from west to east. The emerging Japan-India partnership looks like a necessary foundation for pan-Asian security in the 21st century.

The key point today is that the governments in both India and Japan are keen on developing their strategic consensus about Asia’s future, a fact underscored by the many bilateral discussions between defence and military officials of both countries that are taking place. These discussions include joint initiatives on maritime security, counterterrorism, weapons proliferation, disaster prevention and management, and energy security.

More is needed. India and Japan should, for example, jointly develop new defence capacities. Today, India and Japan cooperate on missile defence in partnership with Israel and the US. Bilateral efforts should also be launched to develop other defence technologies. Suzuki’s joint venture in India suggests that cooperation in high-tech manufacturing is eminently possible.

Suzuki’s success is a powerful precedent not only for other Japanese companies that are looking at the Indian market, but also for further deepening cooperation between the two countries. Osamu Suzuki may not be willing to share all of the secrets of his success with his competitors, but they and Japanese diplomats should be studying the Suzuki method. Japan’s economy and Asian security depend on its replication.

©2010/PROJECT SYNDICATE

Yuriko Koike is a former minister of defence and minister of the environment of Japan, and was her country’s first ever national security adviser. Comment at theirview@livemint.com

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