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'Indian companies will have to elevate their status from low-cost producers to innovative businesses'

Indian companies are building strong momentum in international markets and are among the most active players on the global stage.

twitter-logo Sarika Malhotra        Last Updated: April 10, 2014  | 13:40 IST
'Indian companies will have to elevate their status from low-cost producers to innovative businesses'
Anurag Gupta, Managing Director – consumer durables and retail, Accenture India.

Indian companies are building strong momentum in international markets and are among the most active players on the global stage. To help Indian executives plot successful courses to international growth, Accenture conducted a formal research programme examining the strategies of Asian companies. It surveyed 53 senior executives from India across three consumer-facing sectors: pharmaceuticals, automotive and fast-moving consumer goods. Anurag Gupta, Managing Director - consumer durables and retail, Accenture India, talks to Sarika Malhotra about Accenture's thought leadership "Indian Paths to Global Growth: Developing successful business strategies for international expansion".
 
Edited Excerpts:

Q. What are the key takeaways for Indian businesses from the survey?

Some interesting findings from our survey pointed out that more than 90 per cent of Indian companies surveyed remain strongly committed to accelerating international expansion. 47 per cent of companies have made plans to expand aggressively. Indian companies have invested more than US$344 billion in international expansion over the past 10 years. However, only 36 per cent of Indian companies fully met their international revenue and profit expectations over the last three years. Just 38 percent of the Indian businesses say they have the sufficient operational capabilities to expand overseas, and 30 per cent of Indian enterprises felt confident in their business processes and IT structure to support international expansion. Lack of understanding of overseas markets, inability to navigate regulatory complexities and weak brand or reputation in overseas markets emerged as the top three external challenges that Indian globalisers face. Inability to attract and retain local talent, cross-border cultural issues and lack of globally minded leaders were rated as the top three internal challenges.

Q. Which sectors are seeing robust overseas expansion? And why?

According to our research and analysis, Resources, Metals and Chemicals remain the most preferred sectors for investment by Indian globalisers, signifying their quest to secure future resource requirements and move up the value chain.

Q. How are Indian companies different from Chinese companies on the global platform?

There are quite a few unique characteristics of Indian globalisers which differentiates them from their Asian peers. About 77 per cent of Indian globalisers that we surveyed are focused on establishing a global brand.

However, compared to other countries in the region who want to move up the value chain by focusing on high quality products and service, about 43 per cent of Indian globalisers plan to invest in frugal innovation since they see it as their biggest competitive differentiator in the long run.

While it can be daunting to address talent, culture and leadership gaps, Indian companies certainly have an advantage over their counterparts in the region with English language proficiency and presence of a huge Indian diaspora. Also, Indians tend to be more collaborative, as they are comfortable with diversity. They can work harmoniously and cohesively across cultural boundaries. Indian companies can draw on their home-market experience of catering to a diverse consumer base to effectively target other fast-growing markets with similar tastes and preferences. These markets have been typically located in the Middle East and Africa, which have accounted for the largest increase in outbound investment from Indian companies between 2003 and 2012.

Q. What kind of impediments will Indian companies face on this international growth trajectory?  

As competition intensifies in the global marketplace, Indian companies will need to step up the game. Across Asia, globalisers are racing to sell higher-value, higher-quality, branded and more innovative products and services. Indian executives also recognize this trend. 68 per cent of the Indian companies in our study believe that their low-cost operations give them a competitive advantage today. But only 17 per cent of these companies say it will remain this way for them - and for three years. To differentiate themselves, these companies will have to elevate their status from low-cost producers to innovative businesses boasting distinctive offerings for their targeted overseas markets. Indeed, Indian executives anticipate that in the near future - their competitiveness will come from higher value factors such as strong intellectual property (IP), brand equity and employees who have the right skills.

Another key imperative is to build the right talent, leadership and culture to support their ambitious globalization plans. Talent and cultural issues were identified as the top internal barriers for Indian companies to successful global expansion.  More than half of the Indian respondents (58 per cent) said they cannot attract or retain the right talent to expand outside the region.  Some of the measures Advanced Globalisers are undertaking to attract and retain top talent include creating compelling career paths and implementing formal training and development programmes.

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