Many foreigners visiting India have a common reaction when introduced to the Indian thali: admiration and frustration in equal measure. Its elegance elicits admiration, but the inability to eat this food in the proper manner leaves them frustrated and hungry. This fate may just befall readers of India’s Global Powerhouses.
“This book is primarily aimed at those wanting to know something about India and its corporate sector,” defends its primary author, London Business School professor, Nirmalya Kumar. “They want the big picture, not necessarily the multitude of nuanced details which would hold the cognoscenti’s attention.”
The companies in the book are, admittedly, eye-catching and include ArcelorMittal, Infosys, Bharat Forge, Essel Propack, Mahindra & Mahindra, Hidesign, and Suzlon, amongst others. Still, the book is short on detail and analysis. So, should BT’s readers skip it? Not necessarily. While inadequate on some fronts, it does have value as a collection of experiences. Anand Mahindra’s candid account of Mahindra & Mahindra’s Greek failure is a great counterpoint to Kumar Mangalam Birla’s ambitious acquisition of Novelis, for example.
In Mahindra’s case, his global ambitions crashed against RBI’S constraints, leading to all kinds of problems and an unsatisfactory outcome. By the time Birla drew up plans to acquire Novelis, a sea change had taken place in the regulatory environment, and he acquired the North American firm for a controversial price.
The Mahindra acquisition was less than strategic, while the Birla one perfectly fitted Hindalco’s growth strategy. But the Novelis acquisition has created a mountain of debt, which is proving to be difficult to manage in a global downturn. The pros and cons of both acquisitions are highlighted efficiently, though somewhat sketchily.
The tabulation of international acquisitions discussed in the book may be helpful to the lay reader, the juxtaposition of experiences to the practising manager. Implicitly—and possibly unintentionally— each chapter of India’s Global Powerhouses brings out the liability of Indianness. It’s a theme explicitly highlighted by the late Euroguru Sumantra Ghoshal, in a year 2000 Harvard Business Review article, “Going Global: Lessons from Late Movers”, coauthored with Christopher Bartlett.
In “Going Global”, Ghoshal and Bartlett argue that the immediate challenge for firms from developing countries is to break out of the mind-set that they cannot compete successfully on the global stage. Once free of that burden, they have to find strategies in which being a late mover is a source of competitive advantage rather than a drawback. Finally, they have to develop a culture of continual cross-border learning that arises from new demand, opportunities and challenges.
Ghoshal and Bartlett then explore the psychological factors that hold back most companies and managers. “Companies from peripheral countries can fall into several traps, which we call liabilities of origin. First, some companies feel as though they are locked in a prison of local standards because of the gap between technical requirements and design norms at home and world-class standards abroad. If demand at home is strong, managers then can reasonably postpone the investments needed to comply with international standards. This insidious situation causes potential-multinationals to duck the challenge of going abroad.”
“Some companies fall into a second trap,” they continue. “Even though their products and services are already up to snuff, because of the peripheral location, management is either unaware of the company’s global potential or too debilitated by self-doubt to capitalise on it.”
Unfortunately, there are no quick solutions to any of these psychological barriers. But as India’s Global Powerhouses illustrates, a handful of Indian firms have overcome them, typically by creating a push from home and a pull from abroad. One example is Essel Propack which followed a global customer (Procter & Gamble) across the world. There is the well-known and analysed story of ArcelorMittal. Sadly, the authors have left out some excellent examples such as Asian Paints and Pune-based Thermax.
They do, however, include the example of Pune-based Bharat Forge. As Kumar et al point out, “Baba Kalyani, an MIT-trained engineer with bold vision, realised that his company’s current capabilities would become obsolete in the new world order. Kalyani bet heavily that the future of Indian manufacturing would be driven by sophisticated production to meet the quality requirement of global original equipment manufacturers. Further, Kalyani knew that to leverage economies of scale and manage cyclical risk, Bharat Forge would have to be closer to the buzz of new scientific and technological development.”
Aside from the psychological barriers, there are some tangible ones, too. My belief is that though many Indian firms have developed world-class competencies in terms of assets (e.g. Reliance), products and services (e.g. Tata Motors, HDFC) and processes (e.g. Asian Paints), very few have simultaneously developed all three capabilities— a hygiene factor for going global successfully.
When Kumar, Mohapatra and Chandrasekhar launched their book project (circa 2006), India had reached a tipping point. As the authors point out, that year “for the first time, Indian outward investment of $10 billion had outstripped foreign investment into India… moreover Indian foreign investment in the financial year closing March 31, 2007, exceeded the cumulative total foreign investment by Indian companies in the 58 years between its independence in 1947 and 2005.”
2009 is a different world altogether. Ratan Tata employs nearly 50,000 people in the UK. What was once a positive, is now a negative. The authors’ hearts must have sunk seeing their research examples buffeted abroad and in India exactly when their book has hit the bookshops. Yet, its timing could not be better: it is an excellent reminder of the resilience of Indian organisations and the people who run them. Moreover, it also gives fair warning to the developed world that emergent Indian MNCs are eyeing its lunch.
Gita Piramal is Chairman, Ergo, as well as author of Business Maharajas and Managing Radical Change