Archive for January, 2012

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Are Indian companies ready to go global?-a panel discussion

Monday 30 January, 2012

Ashutosh Sinha of NDTV Profit television network moderated a panel discussion on the above-mentioned topic. The panel consisted of Tomas Hult of Michigan State University, Dev Bhattacharya of Aditya Birla Group, Pradeep Parameswaran of McKinsey, Prem Chandrani of SP Jain, Shashank Tripathi of PWC India, Sunny Banerjea of KPMG, & Kannan Chakravarthy of Mahindra & Mahindra. This was a heavy-hitting panel.  The discussion was hosted by the SP Jain Institute of Management & Research Consulting Symposium.

India has demonstrated that it’s ready. The question is what is “global,” & what are the metrics to measure it? It’s a continuum, so M&A is not the only way, but that’s still tough. Globalization is on CEO’s agendas as Indian companies aspire to become the top 3-4 in their industries in the world. It’s reached mid-level companies now, but they’re still in the early stages because execution & integration sometimes fail as probabilities of success rise. Access to intellectual property is still an issue, as are questions of core competencies.
Different companies have different strengths with regard to culture. Indian companies lack sensitivity & that needs to change as they learn how to build bridges. Culture differences can break deals because many times an international deal is all about the people involved, & what happens if those people leave the company? Board compositions need to change too.

Indian companies have a good line of sight for what they want, but they’re still too ad hoc & lack discipline. They need process & diversity. Private enterprise & an educated democracy are advantages, but cost advantages need to lead to other value propositions. Indian banks are not as strong as they need to be. An important question is “why are Indian companies going global?” To acquire resources or technologies? Replicate partners? For example, telecom markets & models differ. Indians like to talk a lot, so in India it’s a volume business. Africans talk less, so when Indian companies expanded there, they made mistakes. Products differ & financial risk is not the only concern. Indian firms are evolving from export-led strategies to establishing subsidiaries to building a physical presence in other countries.

Open Q&A

  • Price points in India differ & need to be made appropriate to the market, but it must start with the value proposition.
  • In global expansion, it helps to start focusing on 5-10 countries which are similar.
  • 70% of M&A deals fail, but doing structured due diligence, planning, developing, & defending the action encourage its success.
  • There has been a bias by foreign companies not wanting to be acquired by Indian companies, but Arcelor-Mittal is an example that has worked out well.
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Human resources management innovation

Friday 27 January, 2012

I attended an HR symposium which featured a number of well-qualified speakers, such as Dr. T.V. Rao, the founder of the National HRD Network, Rahul Amin CEO of Jyoti, Imon Ghosh, Director of the Academy of HRD, & David Wittenberg of the Innovation Workgroup. Dr. Anil Khandelwal also talked about how he transformed the Bank of Baroda from a stodgy state-owned bank into a market leader. This event was hosted by the SP Jain Institute of Management & Research.

Rao opened by quoting Sam Petroda, who observed that we have a 19th century mindset using 20th century technologies to address 21st century needs. Indians are by nature divisible. For example, if a house is on fire in Japan, all of the neighbors bring a glass of water to put it out. In India, everyone simply looks for a higher power to solve the problem. Corruption must be fought 1st @ the family level, then by both corruptor as well as corruptee. 95% of IIM entrants are engineers, not transformers. There is a great need for organizational transformation, but it’s not happening.

Amin described how he proactively took a number of steps to change the business culture & ethics in his company over a period of years. He started by setting an example himself. He pointed out that organizationally, dependence doesn’t work, independence is better, but interdependence is best. These transformations are like bypass surgery: they’re painful but life-saving.

Ghosh talked about 5 issues:

  1. Is HRM too narrowly defined? Hunger & that there are few trained doctors in rural areas in India are national shames.
  2. What’s HRM’s impact beyond corporations? We need to not only think with our heads, but also work with our hands, & make decisions from our hearts.
  3. What are the key HRD indicators? (missed ‘em)
  4. What are the capabilities in the informal sector? 93% of India’s workforce works in the informal sector, so rural development leads to national development. Small cottage industries are bigger than heavy industry. 800M need to be empowered in 600K villages, which are now being served by only 70K bank branches.
  5. Offer of a few ideas to reduce poverty & encourage growth-reduce regional disparities, urban migration, rural interest rates; with India’s 5K year banking history, offer credit with US-type unit banking, & integrate financial markets.

Wittenberg offered a presentation on innovation for HRD & here it is:  Innovative HRM for 21 Century 120113 S P Jain

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MSU prof on total global strategy

Tuesday 24 January, 2012

While in Mumbai for a week, I saw a presentation given by Tomas Hult, the director of the International Business Center @ Michigan State University’s Broad School of Business on how to devise a total global strategy.  He also happens to have authored a book by the same title.  He spoke @ the consulting session of the Academic Conclave @ S.P. Jain Institute of Management & Research.

Hult & his co-author G.S. Yip queried 440 industries to determine the differences & universal factors to success in international business.  They found cross-border business growing exponentially in terms of exports, etc.  However 140 countries of the world still need to improve their infrastructure to compete globally.  Certain industries have become global, such as electronics, while others have not, such as furniture.  The new landscape of the world economy equates 1/2 of the economic power in the world to countries & the other half to MNC’s.  Disney & Sony introduce new products every 3 & 20 minutes respectively.  HP earns 70% of its revenues from products introduced in the last year.

Here are the components of Total Global Strategy:

  1. develop 1 core business strategy
  2. internationalize that strategy by country
  3. globalize that strategy across countries

Hult creates a triangle to align globalization drivers for industry, strategy, & the organization.  Markets, competition, cost differences, & government policies all impact upon industry drivers.  companies need to pick strategic markets in which to compete, not always determined by market criteria, such as Finland when Nokia was strong. E-business has significantly increased the potential to reach globla markets.  The key tradeoff is between global consistency & local responsiveness.  India leverages it’s scale while the US balances both.

Which markets you choose, which products/services to offer where, where you locate specific operations, & how you go to market are all strategic levers.  Global market participation depends on strategic importance, growth potential, & synergies with other businesses.  In the hexagon of competitive advantages, a firm needs to have at least 1 of the 6 to be successful.  The best global products/services are those that are designed to be global & that maximize the amount of common global care.  In locating global activities by country, companies still need some redundancy to protect against unforeseen circumstances, but balance this against multilocal value chains with too much redundancy.

Global marketing addresses variations in content & coverage.  For example, Swedes don’t drink Coca Cola in the morning, but Americans do.  Marketers need to evaluate benefits vs. flexibility & degree of uniformity.

Organizing the structure, management processes, people, & culture to build a global organization can’t be successful today if the organization has a board of directors from just 1 country.  Ikea is a rare exception.

Other important issues to address are regional strategies, measurements, & global strategy analysis of plotting actual results against their targets.  Templates & scorecards are given in the book.