The biggest stumbling block to global expansion for Indian companies is the country’s own image. Now what?
Indian companies such as Mahindra & Mahindra, Infosys and Tata have put India Inc. on the global business map. But not all Indian firms have managed to successfully break into foreign markets due to a nearsighted focus on profits and a chaotic home-country brand image, according to speakers and participants at the recent INSEAD India Business Dialogue in the heart of the country’s buzzing financial capital, Mumbai.
“In general with exceptions, the Indian philosophy is ‘let me first try and break even, then the local operations must fund brand building in that particular market.’ And that works when you’re doing services; it doesn’t work when you’re doing products,” said Jessie Paul, CEO of Paul Writer, a strategic marketing advisory firm in an on-site interview with INSEAD Knowledge.
“If I look at any U.S. firm that has entered India it has entered with a huge splash. ‘I want 100 percent mindshare, then I will worry about market share, then I will worry about wallet share and so on,’” she added. “We don’t have a historical culture of spending large quantities of money on brand building.”
“The rush to make profits rather than the long haul game of building brands is one problem; Asian Paints expanded rapidly and has withdrawn; Titan Industries went to Western Europe without adequate resources and had to pull out. So you need to understand that this is a long haul game and you need to plan for it and make sure that you have the stomach and the resources for it,” said Amitava Chattopadhyay, INSEAD Chaired Professor of Marketing and Innovation, who also attended the India Business Dialogue.
Other Indian companies go wrong when they acquire foreign companies to make a “statement” or because their peers and competitors are doing so. Not a good idea, says Arun Nanda, a director on the board of automaker Mahindra & Mahindra, one of India’s most successful companies. The company has avoided such pitfalls by sticking to its resolute focus on becoming a global brand - with global standards – and picking its targets carefully.
“It wasn’t only for volumes that we went global. We also went for other things; primarily getting better quality for global customers,” Nanda told INSEAD Knowledge.
Having presided over a company that has gone from car manufacturing to aerospace and even hospitality, he explains how Mahindra took large strides to pin its standards to international levels from the beginning of its international expansion.
“The first market we went to was the U.S., which is the most demanding market and it was primarily driven by the fact that if we can make products which will meet that market, then we can go to any other market,” he said. “We had ambitions in tractors for example to become the world’s largest tractor manufacturer and you can’t get there unless you have a global footprint.”
Elevating a brand
The company formed its U.S. subsidiary, Mahindra USA, in 1994 and subsequently bought Bristlecone, an IT services company, to “have a front end company that had connections and interface with the local automobile market in Detroit,” he said. “We would look at strategic fit…you must know exactly what you’re looking for.”
Mahindra today now boasts a global footprint and is constantly introducing new products to bring its brand position upwards to compete with the likes of global players such as Ford and Toyota. It usually does this by acquisition to enter new segments.
Mahindra’s most recent high profile acquisition was Ssangyong, a struggling, but global Korean automaker in 2011. “Ssangyong was affordable and it had a very good distribution and reach in the countries we wanted to get into.”
According to Chattopadhyay, such an approach has lifted Mahindra’s global reputation and opened doors for the company. “Mahindra has expanded successfully in tractors to the U.S. and Australia, aside from parts of Asia and Africa. They have a reputation for having reliable and durable ‘work horses’.”
Mahindra’s ambitions are tied to a growing aspirational customer base in its home market, visible from the bustling streets of Mumbai, where shiny Mahindra SUVs tussle with trucks and three-wheeler motorised rickshaws amid the Darwinian traffic carnage.
The company has made ambitious attempts to buy into high-end brands, such as Aston Martin, albeit unsuccessfully. However, Nanda explains the company’s motivations: “We still feel that the bulk of our sales turnover and profits are going to come from value-for-money products. But even in the domestic market, we first introduced Scorpio, now SUV, we’re taking our brand positioning up because if you have an aspirational product, even your bottom of the pyramid products sell better because they’re coming from a stable of aspirational products. Aston Martin was looked at primarily from the point of view of improving the brand,” he said.
The other pillar of Mahindra’s strength that Nanda cites is that of empowerment of management. “Empowerment would be the most important criteria for our growth,” said Nanda. “I think that’s our biggest strength because empowerment has not only brought in quick decision making, it has also brought a lot more innovation into the company.”
Ditch the India brand
Mahindra also stands as an example of an Indian company that has done what many have not: disconnect from the negative connotations in the “brand” of India.
“One of the important factors for any Indian brand is you somehow have to control the variables: there is a lot of chaos and ambiguity in terms of power, infrastructure, work ethos, everything. But when you’re going global, you have to figure out a way to make that opaque to your customer,” said Paul.
Paul herself has taken some of India’s biggest brands global. A former chief marketing officer of Wipro and global brand manager at Infosys, she describes her mission as one of “reinventing” India Inc.
“I wouldn’t say India has done a great job of selling itself and certainly the soft power isn’t very high and can a single organisation pull that off? No. Is there an industry body currently working actively on it? No, as well. So part of the disassociation or shall we say ‘not playing it as your trump card’ is that you don’t want to emphasise an attribute that you don’t actually control, and therefore it’s better to play it neutral and say ‘hey this is our country of origin but it’s not a big part of our brand.’”
“Be clear as to what your capabilities are, where you are world class. Be objective in this assessment. Then look to see which markets you may want to enter where those capabilities give you a competitive advantage,” concludes Chattopadhyay.
Amitava Chattopadhyay is The INSEAD Chaired Professor of Marketing and Innovation and co-author of The New Emerging Market Multinationals: Four Strategies for Disrupting Markets and Building Brands.