A brand new challenge

GOOD TO GLOBAL

When I first heard Kenneth Ramsey say "Mahindra" in a bourbon-smooth Texan drawl, I got goose bumps. I knew Mahindra & Mahindra (M&M) has been selling tractors in the US for the past 10 years, but it suddenly hit me that here was a truly global Indian brand.

Better, Ramsey "" whose son Kenneth Ramsey Jr owns Angus Valley Farm Supply in the town of Elm Mott (population: 200), eight miles north of Waco in Texas "" simply raved about M&M tractors!

I'd cold-called the Ramsey dealership because it was just 21 miles from Crawford, Texas, where US President George Bush owns a ranch, and I was curious to learn if he was an M&M customer. I ended up talking to Ramsey Sr for half an hour.

Deep in Texas farm country, Mahindra is not only a well-known brand, but also one that is preferred over John Deere and New Holland. "Everyone here knows Mahindra," Ramsey assured me. "People walk in asking for Mahindra tractors all the time."

I have a confession to make: of all the paths to globalisation that I have studied over the past eight months, I am most excited by the idea of an Indian brand going global. And I'm not alone. Anand Mahindra, vice-chairman and managing director, M&M, admits to a rush whenever he spots an M&M billboard on a highway in the US.

"The adrenalin that gets pumped into me when I see a Mahindra billboard! There are few other rewards from business that give you a greater high," he says.

There is also nothing more frustrating, prone to failure, and inordinately difficult than building a global brand. Mahindra shudders at the travails the brand suffered in the past due to a weak strategy: lengthy lawsuits in the US, distributor disaster in Greece and marketing mayhem in South Africa.

Warns John Quelch, a professor at the Harvard Business School in Boston: "The quickest way of wasting the shareholder's money is to invest in developing global brand recognition for a product that doesn't have a long-term sustainable advantage."

The author or co-author of 16 books, Quelch is an expert on global marketing and branding in both emerging and developed markets. As a non-executive director of the WPP Group "" and a frequent visitor to India "" he finds it ironic that India hasn't created a global brand despite her world-class talent in advertising. The problem, according to Quelch, is that no Indian company has made the sustained investment needed to build a global brand.

It's not just India, though. The 2004 BusinessWeek/Interbrand ranking of the world's most valuable brands has the US leading with 58 brands, followed by Germany (nine), France (eight), and Japan (seven). It's no coincidence that some countries have a surfeit of global brands while companies in other nations don't dare dream of taking their brands global.

Even though Quelch believes that the Interbrand methodology is skewed in favour of western brands, he admits that the "country of origin" halo plays a role in the growth of global brands.

"The halo can be negative or positive depending on the attributes that consumers all over the world ascribe to a country," he points out.

The good news is that halos evolve. Forty years ago, Japanese brands were burdened by the "Made in Japan" label. Five years ago, the "Made in China" tag drew scorn. "Made in India" is now getting a new meaning across the world.

In the last year, when Mahindra travelled across the world as the Confederation of Indian Industry's president, he saw a huge change in perceptions about India. The tipping point is close, he believes.

"And when Indian companies do set sail to conquer foreign lands, they will be the fastest among all the companies from emerging markets to learn the art of global branding."

Start with a global marketing plan

According to Quelch, many companies make the fundamental mistake of trying to build a global brand without asking: Does the world need our product? Do we have a value proposition that merits our product or service being marketed overseas? What are we offering that is different when compared to whatever else is already on offer?

Quelch also cautions companies against initiating a global gameplan by selling to neighbouring markets and contiguous countries. That half-hearted approach seldom helps sales or reputation significantly.

In fact, opportunistic attempts to push exports often create problems for emerging globalisers. That's exactly what happened to M&M. A key distributor in the US went bankrupt.

In Greece, the local partner stopped paying the company. And a diamond merchant who offered to sell M&M jeeps in South Africa turned out to be a crook.

Mahindra says that it has taken the group years to sort out the mess, and the M&M brand still bears the scars. "We face obstacles in eliminating the damage to our brand in South Africa, for example," says Mahindra.

"Our experiences in the US, Greece and South Africa taught me a hard lesson: you have to go into global markets very methodically, and have clear strategic intent."

In like vein, Quelch recommends that a company first define a global marketing gameplan, and work backwards to design the action plans needed to meet successive goals.

Building a global brand, therefore, requires that a company have a clear idea about which markets it wants to enter, the market share it wants in each product category, and then design the marketing mix necessary to achieve that market share.

Even if a company has no immediate plans to build a global presence, Quelch recommends going through that exercise. It helps scope out the competition and builds the kernel of an organisation that can, one day, aspire to being a global brand owner.

Says Quelch: "Such an approach leads to a different allocation of resources not just in terms of marketing, but also in terms of R&D versus manufacturing versus marketing."

Mahindra, who recast M&M's globalisation gameplan in the mid-1990s, couldn't agree more. "If you start fantasising about building a global brand before you have the opportunity to build a global company "" and the necessity to do it "" that's like the tail wagging the dog."

Borrowing a leaf from Total Quality Management, M&M has a poka-yoke (fool-proof) checklist for global forays. It ranges from guidelines on prioritising global markets according to the size and attractiveness of market opportunity to the micro issues of taking the brand abroad.

Did an M&M manager establish contact with that country's consulate in India? Did an M&M manager visit the Indian consulate in that country?

In 2002, when Mahindra launched Operation Bluechip to improve the stock market performance of M&M companies, one of the four criteria he laid out was that the group would not remain in businesses that didn't have a global potential.

At M&M's senior management conclave in December 2003, the bar was raised: every M&M company was told that a specific percentage of its revenues had to come from outside India. The minimum for all companies is 20 per cent by 2006.

Thus, in M&M's automotive division, the global marketing plan starts with a vision that includes the volumes the division needs to attain global scale. The plan breaks down into the markets the division will target "" Italy, Spain, Serbia, Russia, China et al "" as well as the volumes from each market.

M&M evaluates each market for the demand potential it offers for the value proposition offered by brands like the Scorpio and the Bolero. Finally, specific brand-building agendas are drawn up to help achieve the goals in that market.

Says Mahindra: "I truly believe you cannot make a global strategy come together unless you are building your own brand."

Similarly, M&M's Farm Equipment Division's gameplan is driven by the aspiration to become the world's largest tractor manufacturer by 2008. There hangs a tale, though. Mahindra USA was recast as a subsidiary in 1994, but 10 years later, still deals with brand problems from the past.

The first US distributor tinkered with the M&M brand and used a different logo. Top management agonised over whether it should stick with the Mahindra USA logo, or switch to the Mahindra logo used in India and risk losing sales.

The decision was a compromise: Mahindra tractors are now sold worldwide under the Mahindra USA logo. In terms of strategy, it's a lemon, but Mahindra is trying to make lemonade from it. "There was a huge benefit when we went into China. The Chinese respect anything that succeeds in the US," he points out.

It's not about the money

For Mahindra, the prohibitive cost of building a global brand is a non-issue. Once a company understands the need to have a global strategy, particularly to defend its domestic market from foreign brands, global marketing spend is taken for granted.

Says Mahindra: "It's no easier to defend the local brand in India today than it is to build one overseas."

Although all six M&M divisions plan to go global, each has its own independent allocation for building brands in overseas markets, and there is no cross-subsidisation between divisions.

Even if the automotive and tractors divisions were both to enter South Africa, they would have to build their own brands.

"If the Farm Equipment Division was on its own, it would have to build a global brand on its own, right?" points out Mahindra, who reserves the right to build the corporate brand globally by using the dividends that accrue to the corporate office from each division.

The Internet has levelled the playing field a bit for emerging global brands. Quelch loves the example of Australia's Cochlear, a leading manufacturer of hearing-aids.

Pre-Internet, it would have had to invest in the expensive and laborious process of finding a distributor and setting up a sales team in each country it wanted to sell in. Instead, Cochlear uses its website to connect with doctors treating severe hearing loss anywhere in the world.

Mahindra USA, too, reaches out to farmers through its website. Since most US farmers first check out product testimonials in chat rooms and community groups before shopping for farm equipment, Mahindra USA makes sure online word-of-mouth works in its favour.

In addition, cable television advertising, radio jingles and billboards are deployed in Louisiana, Texas and North Carolina. M&M tractors are also showcased at agriculture fairs; more than six in August 2004 alone.

Mahindra USA managers also pitch products at influence peddlers "" farmers who are respected as mechanical experts in local communities. If one of them buys a tractor, Mahindra USA asks him to share his experience on the Web on popular online destinations such as a Yahoo user group.

"There's no need to advertise on the SuperBowl, or be on primetime TV. There are other ways, especially if you are a niche brand or have small volumes, to build the brand," says Mahindra, who adds that it took surprisingly little effort to set up a 150-dealer network in the US.

Asked if M&M can match the deep pockets of Japanese and American competitors through such low-cost tactics, Mahindra bursts out laughing. For the past four years, he says, Mahindra USA has been selling South Korea's Tong Yang tractors under the Mahindra brand. Then last year, Mitsubishi asked for help.

Out of Mahindra USA's revenues of $150 million in 2004, one-third will come from Indian tractor sales; the rest will come from Korean and Japanese tractors sold under the Mahindra USA brand. In the past six months, the sale of Mitsubishi tractors under the Mahindra brand has vaulted by 50 per cent while those of Mahindra USA tractors have grown by 35 per cent.

"People don't believe that a South Korean or a Japanese company felt the need to ask an Indian company to market their products under our brand name," says Mahindra. "They did, and it was a very proud moment for me."

Centralise control

"Let me say categorically that when you go global, the CEO has to be the brand custodian," says Mahindra. No matter which part of the world, no matter which M&M company, no matter which product category, almost every brand-related decision goes through Mahindra.

He believes his job is to protect core values like "trust" and "reliability" worldwide, and strike a balance between the corporate and product brands in each country.

The biggest challenge is to ensure that there is no dissonance at the brand level in countries where several M&M companies may be operating. To do that, Mahindra works out a brand strategy for each country based on the sophistication and size of the market as well as the number of divisions targeting it.

For example, in South Africa, M&M made a splash in July 2004 by announcing a joint venture to market the Scorpio and Bolero. However, Mahindra knows that many more of his companies will essay an entry into that market in future. He has, therefore, started building the M&M umbrella brand by talking up the conglomerate whenever he can.

In bigger and more complex markets like the US, where synergies are low and customer differentiation is high, there is no attempt to build the corporate brand. Instead, the focus is on the individual company and products.

Mahindra USA sells tractors independent of Mahindra Jeeps, which has nothing to do with Club Mahindra's initiative to market holidays to the Indian diaspora. It might take 15 years for critical mass to build up, but until then, Mahindra will keep tabs on all the brand action in the US.

Says he: "If we create dissonance in the core values of the brand at the product level, it will have a negative impact later." This time, Mahindra is not leaving anything to chance. After all, George W Bush hasn't bought a Mahindra tractor "" yet.

At M&M's senior management conclave in December 2003, the bar was raised: every M&M company was told that a specific percentage of its revenues had to come from outside India. The minimum for all companies is 20 per cent by 2006.

Thus, in M&M's automotive division, the global marketing plan starts with a vision that includes the volumes the division needs to attain global scale. The plan breaks down into the markets the division will target "" Italy, Spain, Serbia, Russia, China et al "" as well as the volumes from each market.

M&M evaluates each market for the demand potential for the value proposition offered by brands like the Scorpio and the Bolero. Finally, specific brand-building agendas are drawn up to help achieve the goals in that market. Says Mahindra: "I truly believe you cannot make a global strategy come together unless you are building your own brand."

Similarly, M&M's Farm Equipment Division's gameplan is driven by the aspiration to become the world's largest tractor manufacturer by 2008. There hangs a tale, though. Mahindra USA was recast as a subsidiary in 1994, but 10 years later, still deals with brand problems from the past. The first US distributor tinkered with the M&M brand and used a different logo.

Top management agonised over whether it should stick with the Mahindra USA logo, or switch to the Mahindra logo used in India and risk losing sales. The decision was a compromise: Mahindra tractors are now sold worldwide under the Mahindra USA logo.

In terms of strategy, it's a lemon, but Mahindra is trying to make lemonade from it. "There was a huge benefit when we went into China. The Chinese respect anything that succeeds in the US," he points out.

It's not about the money

For Mahindra, the prohibitive cost of building a global brand is a non-issue. Once a company understands the need to have a global strategy, particularly to defend its domestic market from foreign brands, global marketing spend is taken for granted. Says Mahindra: "It's no easier to defend the local brand in India today than it is to build one overseas."

Although all six M&M divisions plan to go global, each has independent allocation for building brands in overseas markets, and there is no cross-subsidisation between divisions. Even if the automotive and tractors divisions were both to enter South Africa, they would have to build their own brands.

"If the Farm Equipment Division was on its own, it would have to build a global brand on its own, right?" points out Mahindra, who reserves the right to build the corporate brand globally by using the dividends that accrue to the corporate office from each division.

The Internet has levelled the playing field a bit for emerging global brands. Quelch loves the example of Australia's Cochlear, a leading manufacturer of hearing-aids. Pre-Internet, it would have had to invest in the expensive and laborious process of finding a distributor and setting up a sales team in each country in which it wanted to sell. Instead, Cochlear uses its website to connect with doctors treating severe hearing loss anywhere in the world.

Mahindra USA, too, reaches out to farmers through its website. Since most US farmers first check out product testimonials in chat rooms and community groups before shopping for farm equipment, Mahindra USA makes sure online word-of-mouth works in its favour.

In addition, cable television advertising, radio jingles and billboards are deployed in Louisiana, Texas and North Carolina. M&M tractors are also showcased at agriculture fairs "" more than six in August 2004 alone.

Mahindra USA managers also pitch products at influence peddlers "" farmers who are respected as mechanical experts in local communities. If one of them buys a tractor, Mahindra USA asks him to share his experience on the Web on popular online destinations such as a Yahoo! user group.

"There's no need to advertise on the SuperBowl, or be on primetime TV. There are other ways, especially if you are a niche brand or have small volumes, to build the brand," says Mahindra, who adds that it took surprisingly little effort to set up a 150-dealer network in the US.

Asked if M&M can match the deep pockets of Japanese and American competitors through such low-cost tactics, Mahindra bursts out laughing. For the past four years, he says, Mahindra USA has been selling South Korea's Tong Yang tractors under the Mahindra brand.

Then last year, Mitsubishi asked for help. Out of Mahindra USA's revenues of $150 million in 2004, one-third will come from Indian tractor sales; the rest will come from Korean and Japanese tractors sold under the Mahindra USA brand.

In the past six months, the sale of Mitsubishi tractors under the Mahindra brand has vaulted by 50 per cent while those of Mahindra USA tractors have grown by 35 per cent.

"People don't believe that a South Korean or a Japanese company felt the need to ask an Indian company to market their products under our brand name," says Mahindra. "They did, and it was a very proud moment for me."

Centralise control

"Let me say categorically that when you go global, the CEO has to be the brand custodian," says Mahindra. No matter which part of the world, no matter which M&M company, no matter which product category, almost every brand-related decision goes through Mahindra.

He believes his job is to protect core values like "trust" and "reliability" worldwide, and strike a balance between the corporate and product brands in each country.

The biggest challenge is to ensure that there is no dissonance at the brand level in countries where several M&M companies may be operating. To do that, Mahindra works out a brand strategy for each country based on the sophistication and size of the market as well as the number of divisions targeting it.

For example, in South Africa, M&M made a splash in July 2004 by announcing a joint venture to market the Scorpio and Bolero. However, Mahindra knows that many more of his companies will essay an entry into that market in future. He has, therefore, started building the M&M umbrella brand by talking up the conglomerate whenever he can.

In bigger and more complex markets like the US, where synergies are low and customer differentiation is high, there is no attempt to build the corporate brand. Instead, the focus is on the individual company and products.

Mahindra USA sells tractors independent of Mahindra Jeeps, which has nothing to do with Club Mahindra's initiative to market holidays to the Indian diaspora. It might take 15 years for critical mass to build up, but until then, Mahindra will keep tabs on all the brand action in the US.

Says he: "If we create dissonance in the core values of the brand at the product level, it will have a negative impact later." This time, Mahindra is not leaving anything to chance. After all, George W Bush hasn't bought a Mahindra tractor "" yet.

Manjari Raman is a Boston-based management writer.
Her email is: manjariraman@yahoo.com