<b>Kanika Datta</b>: 'Multinationals' without global brands

Where is the private sector establishment we know as India Inc headed? How do these entities define their “Big Picture” objectives, beyond the usual quarterly metrics? The rapid and much-needed makeovers to organisational size, structure and efficiency following the first challenges thrown up by economic reform peaked in the early 2000s. Since then, India Inc has barely taken a shuffling step forward.  

True, they have not been inactive. Smaller and nimbler entities may have maximised the new opportunities of liberalisation in IT, e-commerce and infrastructure, powered by newer and flexible sources of capital, and the larger ones rightly looked outwards to grow — notably the venerable Tata and Aditya Birla groups, but also younger conglomerates like Bharat Forge, Apollo Tyres, Essar, and Godrej to name some of the prominent ones. The concept of the “Indian multinational” has been one of the biggest legacies of the post-reform era.

  

The focus on “global” acquisition has yielded mixed results for a variety of reasons, including the 2008 financial crash. What this trend has not achieved for Indian corporations is the hard business of brand-building. This is one of the paradoxes of post-liberalisation corporate India. The country is the seventh-largest economy and the second-largest BRIC nation; yet, unlike China (Alibaba, Xiaomi) or Brazil (Embraer, Petrobras), India has no truly global brand. 

Tata, you might say? Probably, but it is better known as an organisational entity (via TCS, Corus and Jaguar-Land Rover) than for a specific product. Bajaj has a respectable market share in the two-wheeler markets of Nigeria and a couple of other African countries. Likewise for Tata (trucks), Godrej (personal products) and Bharti Airtel (telecom services). Mahindra & Mahindra and Bharat Forge are the few Indian brands that have a pretty decent reputation in First World markets — in the southern United States and Europe, respectively.

  

Marketing strategists may tell you that the sparing global presence of Indian brands doesn’t matter since India is a large enough market to sustain domestic brands — and “aspirational India,” as we are constantly reminded, will remain one of the world’s largest growing markets. To think only in these terms can be limiting, because global brands teach you to compete on global standards. 

As evidence, consider the market for TVs and entertainment electronics. Once, Indian brands like Onida, Videocon and BPL bestrode this market like colossi. By the late nineties, they were shoved aside by Panasonic, LG, Sony and Philips. In passenger cars, Hindustan Motors and Premier Padmini were long supplanted by Maruti (its Suzuki avatar being the real tipping point) but it was Korean Hyundai that drove into second place. Tata Motors does weigh in at third but has never produced a passenger car that can be called an outright winner nor anything fit for a First World market. In luxury cars, Indian brands are conspicuously absent.

Part of the problem stems from the manner in which Indian brands choose to compete, which is essentially on cost and price. Two things happen as a result. First, India has remained in the “lowest-cost producer” bracket of world economies where it loses out in varying degrees to China, Vietnam and Bangladesh. Today, even home-grown brands like Madura, Bajaj Electricals and Havell’s increasingly source their products from these geographies. Ironically, Maharashtra-based Videocon hastily decided to transform itself some years ago into a contract manufacturer for several big global brands. But when set against the manufacturing goliath that is Foxconn, the company the same state is now assiduously wooing, it is but a midget. 

Second, price and volume constricting the paradigms of competition, especially when brands from Panasonic to Mercedes teach you that it’s that ephemeral quality called “value” that really counts with consumers. The extreme focus on price was, for example, been the bane of the Nano, “the world’s cheapest car”, which broke the myth of the “price-sensitive” Indian consumer. Yet, it is the sole factor on which a giant like Reliance Jio has chosen to compete with a prolonged free offer for its 4G service that seems to have escaped the attentions of the Competition Commission of India. 

The exception that emphasises the lesson, perhaps, is civil aviation where state-owned Air India has been upstaged by a clutch of private domestically-owned airlines that certainly set new global standards in the art of high-quality low-cost service and have begun to compete internationally with some elan. True, domestic airlines were shielded from global competition for many years, but that argument applies to any number of other consumer markets. In a business environment where the consumer has replaced the power of corporate lobbying on Raisina Hill, “Indian multinationals” urgently need to start competing on global standards.