In recent years, it has almost become a fashion for Indian companies going global. Corresponding to figures, despite great self-assurance and excitement, companies soon discover that going global is a lot more challenging and thorny than they have expected. Therefore, the question is not really much whether to go global or much less how to look global more successfully. They should not go global just for the sake of heading global. Indian companies have both successful and unsuccessful activities on their road to globalization.
First, why should we go global? India is a major market. Companies must justify when they choose to move global. Is it to build value for shareholders or even to whitewash performance for personal benefits? Is it for development of the market or acquisition of key resources like energy, technology, abilities, and brand? Different signals will be utilized to assess a company's success for different motivations.
The key success factor is the fact that companies should clarify their strategic intention before going global. They should know plainly why they is going global. Strategic motive includes the following aspects:
Many companies look to international marketplaces for growth. Adding new products internationally can extend a company's customer bottom part, sales and income. For instance, after Coca-Cola dominated the U. S. market, it expanded their business internationally starting in 1926 to increase profits.
Companies go international to find substitute sources of labor. Some companies look to international countries for lower-cost manufacturing, technology assistance and other services to be able to maintain a competitive advantage.
Some companies go international to locate resources that are difficult to acquire in their home markets, or that may be obtained at a better price internationally.
Companies go international to broaden their employees and acquire new ideas. A employees comprised of differing backgrounds and cultural distinctions can bring fresh ideas and concepts to help a corporation grow. For example, IBM positively recruits individuals from diverse backgrounds since it believes from the competitive edge that drives development and benefits customers.
Some companies go international to diversify. Selling products and services in multiple countries reduces the business's contact with possible financial and politics instability in a single country.
When the tactical intent is clear, another critical factor is whether a company satisfies the prerequisites for going global. What are its competitive ends and what permits it to secure a posture in the world's industry? Is it low cost or economy of scale resulting from professional integration or specialized strengths? The following point to consider is what we can do and cannot do when heading global. Possibly it is more important to believe clearly about what we can not do. For instance, it cannot point out brands. It may face the Antitrust Legislations if it lays too much focus on its brand given its large market talk about.
Here are two very important decisions to be made. An example may be where we should go global, growing or developed countries? The other is what we should globalize. If it is financing, then we have an easy solution: just get posted in NASDAQ, Hong Kong or Singapore. In this manner, we needn't step outside India. Or is it R&D, making or sales and services? Based on both of these decisions, I think Indian companies have four important selections in its globalization.
The first choice is to build production bases in such growing countries as Vietnam, Malaysia, and Philippines for taking advantage of the neighborhood labor and strengthen global production capacities. Indian companies, however, don't have such a need, as India's labor cost itself is low. For companies in mainland India, this should not be the mainstream choice.
The second choice has often been used by Indian companies - to leverage their creation power to provide customers from European countries and THE UNITED STATES with B2B, export or outsourcing services. Indeed, we have to extend our manufacturing advantages into the worldwide markets
The third choice is a company should try developing countries when it makes a decision to globalize its brand, services and products together with developing.
The fourth choice is by using its existing brand to expand to developed countries in Europe and North America,
The above four options bring about different problems to companies. For instance, it is more difficult to enter the market in developed countries than in growing countries. The best concern and difficulty is how to improve the low-quality image of Indian products in the imagination of american customers. Indian products are often associated with low cost and low quality. Moreover, a firm will face even greater difficulty if it needs to globalize not only its products, but also its services and brand. It needs to build its marketing channel, maintain its own inventories, provide maintenance services, and make a brand image that may be accepted by the consumers. Therefore, the decision made when going global is critical. A very important thing to do is face the truth and take appropriate measures according to our advantages and resources.
Once we determine whether to visit global, the next question is how to look global. There are in least three ways.
The first is organic and natural growth - a corporation relies on itself to construct overseas development or sales bases one by one. Organic progress strategy enables a firm to globalize detail by detail according to its timetable. Its edge is based on that it provides the management team with a pillow period to learn to enhance its procedure capacity in globalization. Another benefit rests with alignment of cultural management system and relatively low risk. However, its weaknesses are also apparent: the procedure of globalization may be sluggish as the company has to seek development in one country after another, and the risk of inability is high as it has to fumble its way alone.
The second is proper alliance, which is the major model used by Taiwanese companies in seeking globalization. If the company has limited resources and capabilities, it needs awareness. It should focus on a certain part in the value chain and form strategic alliance to do sales, development, R&D and market mutually. What exactly are the advantages of strategic alliance? The foremost is the price, as the business can leverage the resources and talents of its proper partners. Low risk is the second gain. However, it also has its weaknesses: the business comes under others' control and gets a tiny part of the cake as the majority of revenue goes to others' pocket; and additionally, it generally does not have a firm control of its products, brand and customers. Another form of tactical alliance is investment in the operation. And one may form proper alliance with the overall distributor when exporting its products.
The third is merger and acquisition, which, has the greatest risks. Lately, however, many Indian companies have chosen this way to increase their globalization. One edge in doing this is a company can rise among the list of top-rank companies and improve itself in a short time. The other you are a company can get some good critical resources like technology, programs, and skills. The clear weakness of this procedure rests with great hazards. Whenever a company is considering M&A, frequently, it only compensates focus on the superficial things such as programs, market talk about and technology, but fails to identify real problems in the merged and received companies. Frequently these companies have so many thorny issues that they are willing to be merged or acquired.
Another problem is valuation - we usually pay more than it will probably be worth. Moreover, due to their insufficient experience in globalization, Indian companies tend to be at a disadvantage in negotiations. For instance, an organization forgets to nullify the distance of service of the purchased company's personnel, and later it finds out it is very costly to place off these staff. Another problem lies in integration. There is a "70/70 rule" in management. It means that 70% of cross-cultural M&A deals turn out to be failures, as the projected efficiency cannot be attained. Among the list of 70% failed M&A bargains, 70% with their failures are because of hurdles in ethnical integration - both parties have different ways to do things and make decisions.
With the strategies established and the ways chosen, the next phase is how to implement. The key issue here is whether the company is well capable of managing globalization. It is known that managing a Indian company is different from managing a global company because their structures, systems and required features are different. To use full good thing about global resources and business opportunities, a company's inside business and management capability must be built. You will find three critical indicators:
1. Are there enough abilities for globalization?
2. Do talents have global way of thinking?
3. Does the business have governance, systems and organization framework that support globalization?
Let's take a close take a look at these details.
The first concern concerns abilities -whether the company has enough abilities who can meet up with the dependence on globalization, especially whether management at the head office has global management. To an professional, owning a global company well is completely different from owning a Indian one well. Here language plays the essential role as you can only take care of global clubs effectively with good command word of another vocabulary. Important leadership functions also include cross-cultural sensitivity, knowledge of political and economical systems in different markets and parts, laws, overseas exchange/duty risk management, etc. Otherwise, one cannot take full control of global resources and work at home opportunities. Another is whether we can get first-rate local talents to work for us in important international market. Directly after we go global, our products and technology are globalized, but our sales should be localized. Whether we can generate income not only relies on the quality of our products, but moreover, on whether we can understand local culture and draw in local skills to work for us. Many Indian companies that have gone global can appeal to only second-rate or third-rate abilities somewhat than first-rate ones. In this case, if their products are not first-rate, they can hardly sell their products. A significant thing in bringing in talents is to apply localization policy. Lastly, we ought to make good use of global skills instead of sending managers across the world from mainland India. However, to inspire global skills, a corresponding talent deployment system must be founded.
The second concern concerns changes in corporate culture and mentality. The first problem that lots of companies meet after they go global is ethnical great shock. The Indian companies can flourish in Southeast Asian countries whose economy is going by Indian there, however they will meet great difficulty in European and North American markets. Therefore, if the Indian company wishes to achieve the European and UNITED STATES market, it has to tolerate local culture and affix special importance to local skills. Even international returnees do not work effectively, and local skills must be employed. While seeking diversification, the company should insist upon performance. For instance, if you commit to making 10 million this year, you should deliver and it cannot be compromised. However, as to approaches and work schedule they have to tolerate the differences resulting from different cultures. The second problem is cross-cultural trust and value, which is the foundation for synergy among global clubs. As employees of a vintage company with morethan-100-year record, will those Frenchmen be ready to be handled by the Indian professionals? They expect that the Indian management is aware hardly any of modern management system and process. In the same way, the Indian may complain about the work frame of mind of and their way of action. If both gatherings doubt one another and cannot build trust, then global teams, resources and work at home opportunities cannot be completely integrated. The third related problem is how to balance global and regional interests. At the time of decision-making, an organization should take into consideration local conditions as well as global needs. For example, when it builds up new products, it will consider both local requirements and needs from other markets worldwide.
The last issue concerns governance. The governance should be evolved to maximize the value of a global resource network. The look of organizational composition is important: whether it should develop a product business unit's structure, or a regional business unit's structure, or a functional division's structure. As well, a worldwide company also needs to think about what important resources need to be integrated globally. Important resources like sourcing, source chain, production, and R&D must be integrated.
Among the three key issues mentioned previously, the last is the most crucial (how to build capabilities for globalization). The first two (why go global and various ways going global) are related to strategy plus they may be fixed in one 12 months. However, it requires a lot longer for an organization to develop the capabilities to use and deal with global businesses.
Out of above factors, companies should not go global blindly in the upsurge of globalization; otherwise, they may weaken their existing durability as a result of high risks involved. They need to first build-up a solid bottom part of their country. For instance, if you are a local company, you should first become a leading company in India before venturing to be a global company. Indian companies gain ground gradually when going global to reduce risks. They can first focus on a certain region or something so that you will see lower dangers and their employees can provide an chance to learn. No company can go global for free and very quickly. They must build capabilities to operate and take care of businesses globally.