Managing overseas

As Indian companies step up acquisitions overseas, making a success of running international businesses becomes important. The challenge for many is at the time of entry as well as when attempting post-acquisition integration. The issue gains in both importance and complexity because the acquisitions are now spread across a spectrum of industries, ranging from pharmaceuticals to telecom, and from automobiles and ancillaries to information technology. The geographical spread is also varied, spanning the US, Europe, Africa, China and the CIS countries.

First, managing the environment that a company is about to enter is crucial. The success of LN Mittal's global strategy is partly attributed to managing this well. Another aspect of success when investing overseas is in taking advantage of local incentives and institutional support. Indian companies going abroad have felt the need to have better information about the legal framework, political regime and sector-specific information. There have also been instances where companies and their employees have felt the need for government support in distress situations due to political and legal emergencies.

Internal restructuring to become a truly international organisation is crucial. The tasks here are at many levels. On the one hand, the organisational structure will have to be revamped to be more suited to managing in multiple countries. For example, Ranbaxy has subsidiaries and joint ventures in about 46 countries and reorganised itself a few years back to adapt to this situation. Mahindra & Mahindra and Tata Consultancy Services have also changed to organisational structures that are more suited for an international environment. The second aspect relates to people and leadership teams. While it is important that the local country operations of the acquired firms retain a distinct local nature, it is also crucial that the leadership teams at the headquarters back in India acquire a global flavour. This is already evident in Indian companies inducting expat talent. Taking care of multi-cultural teams and integrating them becomes important in the next stage. Further, accounting norms, corporate governance and board structures will all have to be aligned to international practices.

Indian companies would certainly benefit from more institutional support change for their overseas investments. The guidelines for Indian investments abroad were initially drawn up in line with the recommendations of the Kalyan Banerji Committee report of the early 1990s. These norms have been liberalised many times over the last few years. But with increasing overseas activities, more should be done. A number of countries actively encourage overseas investments through a combination of tax breaks and institutional mechanisms. The US tax code and the Singapore government's measures, under the Overseas Investment Incentive (OII) and Scheme the Overseas Enterprise Incentive (OEI) Scheme, are designed to help companies invest abroad with ease. If Indian businesses are to acquire a true global footprint, companies and the government need to sit together and focus on how the process can be helped along.