May 30, 2010

Subbaraoed!December 11, 2011

Sinking rupee and stubborn inflation are derailing the

economy. Does this man really

know what he is doing?

`20

CyruS MiStryRatan Tata’s

successor

D. SubbaraoGovernor,Reserve Bank of India

u102u

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B u s i n e s s i n d i a u december 11, 2011Column

is india globalising?it is not, from a global benchmark perspective. it is, but at a slow pace not commensurate with available resources. This is despite the pioneer-ing effort of aditya Birla who ventured out four decades ago in southeast asia and replicated the indian success story. The aditya Birla group is an excellent example of what we term as a global horizontally integrated company. Lak-shmi Mittal acquired a company 20 years later also in southeast asia but with a global mind-set. His approach created a truly globally inte-grated company, arcelorMittal, the largest steel enterprise worldwide.

We believe that globally integrated companies (gic) create true globalisation and have defined the characteristics of four types of global organisations:

What is a ‘globally integrated company?Globally integrated companies (gic) operate with a global mindset and optimise costs for movements of goods and services by leveraging global resources of capital especially human capital, global markets and global supply chains.

The myth of indian globalisationInnovation drives economic growth and globalisation drives innovation through

deployment of global resources particularly of human capital

Global strategy framework

Global organisation examples

The myth of Indian globalisation

Globallyintegratedcompany

Glo

bal

str

uct

ure

Glo

bal

str

uct

ure

Global verticallyintegrated

Globallyintegrated

International Global horizontallyintegrated

Global vertically integrated Globally integrated

International Global horizontally integrated

Standardised products,strong global supply-chain,collaborative technologies,virtual team management

Global investment andR&D, high collaborative virtual networks tele presence,corporate social responsibility (CSR)with a global mindset

Home country centric; good local supply-chain, program managementfor outsourcing, focus oninternational sales

Good local adaptation, multi-domestic operation, investment in host countries

Strongglobal

structure

High

Low

Low HighGlobal culture

Global culture

The success pattern of the Aditya Birla group’(Globally Horizontally Integrated Company’) and two truly‘Globally Integrated Companies’, Arcelor Mittal and IBM

Global Focus on Think Global Global mindsetmindset India story Act Local institutionalised

Global 1969 1989 1940opeartions

Revenue $30 billion $78 billion $100 billion

Top 99% Indian 80% Global 90% Globalmanagement

Internationalmarketfocus

IntelBoeing

Apple

AMDBollywood

Cisco

Oracle

GM, Ford

P&G IBM

GENokia

MicrosoftCoca Cola

Toyota

GoogleMittalTata

MahindraWiproInfosys

SuzlonLupin

Dr. Reddy

ICICI RILL&T

HCLTVSDabur

HDFCBharati

SBINDTV

IITs, IIMs

RPG

Polaris Starbucks

McDonald

Wal-Mart

Aditya Birla Group

Strongadaptation

to localculture

They strive to enrich the communities they serve and they care for the ecological environment. They do it with a genuine intent and have discovered that the workforce engagement and retention also improves with these activities. These policies concurrently enhance global mindset of these corporations.

Why a gic?The following table illustrates the success pattern of the Aditya Birla group (Globally horizontally integrated company’) and two truly ‘globally integrated companies’, ArcelorMittal and ibm. The data presented is from our own research findings:

Why india must increase pace of globalisation?india’s share of world trade is about 1.5 per cent despite huge advantages inclusive of population and demography. it will again be a land of missed opportunities if indian companies are not in the race for excellence in technology, productiv-ity and creating competitive value for custom-ers by global benchmarking. Their domestic market share will decline, growth prospects will diminish, and the advantages of size offering economies of scale which reduce cost of provid-ing goods and services worldwide will not be available. innovation drives economic growth and globalisation drives innovation through deployment of global resources particularly of human capital.

Global strategy framework

Global organisation examples

The myth of Indian globalisation

Globallyintegratedcompany

Glo

bal

str

uct

ure

Glo

bal

str

uct

ure

Global verticallyintegrated

Globallyintegrated

International Global horizontallyintegrated

Global vertically integrated Globally integrated

International Global horizontally integrated

Standardised products,strong global supply-chain,collaborative technologies,virtual team management

Global investment andR&D, high collaborative virtual networks tele presence,corporate social responsibility (CSR)with a global mindset

Home country centric; good local supply-chain, program managementfor outsourcing, focus oninternational sales

Good local adaptation, multi-domestic operation, investment in host countries

Strongglobal

structure

High

Low

Low HighGlobal culture

Global culture

The success pattern of the Aditya Birla group’(Globally Horizontally Integrated Company’) and two truly‘Globally Integrated Companies’, Arcelor Mittal and IBM

Global Focus on Think Global Global mindsetmindset India story Act Local institutionalised

Global 1969 1989 1940opeartions

Revenue $30 billion $78 billion $100 billion

Top 99% Indian 80% Global 90% Globalmanagement

Internationalmarketfocus

IntelBoeing

Apple

AMDBollywood

Cisco

Oracle

GM, Ford

P&G IBM

GENokia

MicrosoftCoca Cola

Toyota

GoogleMittalTata

MahindraWiproInfosys

SuzlonLupin

Dr. Reddy

ICICI RILL&T

HCLTVSDabur

HDFCBharati

SBINDTV

IITs, IIMs

RPG

Polaris Starbucks

McDonald

Wal-Mart

Aditya Birla Group

Strongadaptation

to localculture

u103 u u

B u s i n e s s i n d i a u december 11, 2011 Column

Challenges for business leaders and policy makersBusiness leaders must have a vision of achieving, say, 30-50 per cent of revenue and profits from operations outside of india. We suggest: u Launch a major initiative to cultivate a global mindset in the organisation; u Hire and retain global talent by creating a multi-cultural environment; u implement global best practices/benchmarks in products, services and operations; andu Leverage international finance by forming sub-sidiaries in overseas locations and joint ventures domestically and internationally.

Policy makers must create a level playing field for indian companies by providing infrastruc-ture, taxation and regulatory reforms in legal and accounting systems, industrial health and safety standards. We suggest: sustain and increase lead-ership in talented manpower of engineers, sci-entists and the work force through maximising funding of education and learning at all levels. There is a crying need for improving infrastruc-ture, roads, ports and airports, communication, internet, digitalisation and energy, especially clean energy. China has shown the way.

To support innovation, government must earmark highest possible resources for research in public and private institutions. To tackle cor-ruption recent moves to enact the Lok Pal Bill are a good start, given the huge scams which have had worldwide publicity. Bringing back the unaccounted money stashed abroad is a good beginning but policy makers must address the root cause that creates the land grab, mining or similar scandals.

Cultivation of ‘global mindset’Global mindset is the cultivation of a thought process which enables the global company to successfully navigate through national bound-aries and cultures by being inclusive of people adding knowledge and deeper understanding of international markets.

Creation of the ‘global mindset’ depends on the business philosophy primarily of the ceo and, to a large extent, the top manage-ment team. ibm, P&G, Tata and unilever, though at different stages of globalisation, are excel-lent examples. investing in continuing educa-tion and training to enhance abilities for creat-ing corporate global citizens (cgc)‟ has to be a deliberate strategy.

indian businessmen are slow in developing trusting relationships and the importance of having a globally diversified team is not per-ceived. Fortunately, a few organisations like the

gics with a global mindset enable higher growth, profitability and sustainability. Following chart is our understanding of some global organisations as per the criteria of global strategy framework presented earlier:

Tata group have started demonstrating the suc-cess of true globalisation and innovation by suc-cessful management of mergers and acquisitions. in spite of the hiccups, the big-ticket acquisitions of Jaguar/Land Rover, Corus and Tetley by Tata, ssangYong Motors by Mahindra and novelis by the aditya Birla group are to be admired. Huge collateral advantage is that indian managers are

inculcating the global mindset.and we close with the following two quotes that

show the power of a global mindset for creating growth, profits and a sustainable organisation.

“And we had to sell our credentials, we had to sell the group, we had to sell India. The India story…so I think the India story is much better known the world over. I think India, as a nation is far more respected. As a people who are a very enterprising lot. And I think it is the sheer spirit of enterprise that India brings to the table.”Kumar Birla, chairman, aditya Birla group (Cnn interview april 8, 2011)

“I am a global businessman, from Indian roots of which I am proud and our company has as much right as any other to make an offer for another company in a global industry.”Lakshmi Mittal, in an interview with The Times of India (July 2006)

u Written & researched by d i n e s H C H a n d R a , V i B H a Y s i n H a and

a V i s H d a H i Y a , dnaGlobal network (www.dnaglobalnetwork.com,

e-mail: info@dnaglobalnetwork.com)

Global strategy framework

Global organisation examples

The myth of Indian globalisation

Globallyintegratedcompany

Glo

bal

str

uct

ure

Glo

bal

str

uct

ure

Global verticallyintegrated

Globallyintegrated

International Global horizontallyintegrated

Global vertically integrated Globally integrated

International Global horizontally integrated

Standardised products,strong global supply-chain,collaborative technologies,virtual team management

Global investment andR&D, high collaborative virtual networks tele presence,corporate social responsibility (CSR)with a global mindset

Home country centric; good local supply-chain, program managementfor outsourcing, focus oninternational sales

Good local adaptation, multi-domestic operation, investment in host countries

Strongglobal

structure

High

Low

Low HighGlobal culture

Global culture

The success pattern of the Aditya Birla group’(Globally Horizontally Integrated Company’) and two truly‘Globally Integrated Companies’, Arcelor Mittal and IBM

Global Focus on Think Global Global mindsetmindset India story Act Local institutionalised

Global 1969 1989 1940opeartions

Revenue $30 billion $78 billion $100 billion

Top 99% Indian 80% Global 90% Globalmanagement

Internationalmarketfocus

IntelBoeing

Apple

AMDBollywood

Cisco

Oracle

GM, Ford

P&G IBM

GENokia

MicrosoftCoca Cola

Toyota

GoogleMittalTata

MahindraWiproInfosys

SuzlonLupin

Dr. Reddy

ICICI RILL&T

HCLTVSDabur

HDFCBharati

SBINDTV

IITs, IIMs

RPG

Polaris Starbucks

McDonald

Wal-Mart

Aditya Birla Group

Strongadaptation

to localculture