'The time is ripe for opportunities'

Q&A/ Mark Foster

Indian companies quite stole the show last year with their global expansion sprees. And M&As appear to be still top on the agendas of most large corporations. But with the US economy struggling and the dollar sliding, there are concerns about the future.

Will an adverse situation impact the growth of Indian companies? Not really, says Mark Foster, group chief executive "" management consulting and integrated markets, Accenture. The world today is no longer monodirectional; instead, it is multipolar and volatility in one particular region is felt less because of opportunities in other parts of the world.

Foster, who leads the consultancy's global initiatives in business integrations and managing partnerships, spoke to Amit Ranjan Rai on the direction and strategies Indian companies need to follow to make the most of a multipolar world. Excerpts:

The current economic situation in the US is causing concern among Indian companies as well. What fallout do you envisage for Indian corporations?

The subprime crisis and the current issues in the world are clearly a manifestation of a multipolar world, which is a world of constant ups and downs. Whether this situation may have deep trends and how is it going to play itself, we do not know yet.

Either way, it makes all global companies think about how robust their strategy is, and be clear about the extent to which they can invest in growth and the areas where they need to cut costs.

To be honest, our advice to most of our clients is that this is actually a time of opportunity. Leading, high-performing companies need to understand what is happening globally and focus their strategies to take advantage of this time of change.

Whether they are companies in the US, Europe, India, China or Brazil, they need to get on the frontfoot to engage in the global economy. In other words, you can't win the game, if you don't play the game.

A time for opportunity? In what way?

This is the time when massively-growing new consumer markets are appearing around the world. There are going to be a billion new consumers between now and 2015, many of them emerging in Latin America, Africa and Asia. Now is the time to build your brand, to connect with those consumers and build markets.

Similarly, there are these vast new pools of skill and talent appearing around the world. The time is ripe to plug into those people, recruit them into your businesses and harness their skills to become a powerhouse of the future, rather than finding yourself on the backfoot in the battle for talent.

But at the same time, there are threats, of course. All the players in your industry are also trying to play the same game. So there's much more dynamism in a fast-changing competitive landscape. We see that in every industry in the world "" where you were once comfortable, you knew who your competitors were, now you see new competitors entering the field. And that is what is creating the dynamism.

Still, isn't the American situation likely to have a ripple effect across the rest of the world?

This is clearly an interdependent world and yes, clearly we are open to more forces of interdependency and ripples can knock on more than they would have done before.

At the same time, the fact that economic growth can be appearing someplace where some market might be up or down, creates more of a portfolio of opportunity for large global players.

Many American companies are making a lot of their money operating globally. So they are not as exposed necessarily to the situation in North America. At the same time, North America does represent a massive consumer market and if it has troubles, that is likely to have knock-on effects on others who rely on that market.

We are not saying that there is not going to be any impact if there is a recession in North America, but that the whole global sort of opportunities for a company are broader than any one market and, if you are more broadly based, it gives you more chance to play the portfolio game.

The impact because of volatility in one particular region is felt less thanks to the shock absorbers created because of opportunities in other parts of the world, be it Europe, Asia or Latin America. You have the chance to play the game multiple times.

What are the dynamics of a multipolar world?

In the past, globalisation was more monodirectional "" from the developed world to the developing world. It was pretty clear where the flows were going "" if a company in the developed world created a product or service, it would push it out to the developing world. That's fundamentally the model for old globalisation.

In a multipolar world, economic powerhouses are growing all over the world, and the headquarters of new growing businesses and the new centres of activity will be truly multipolar "" there can be a Brazilian pole, an Indian pole, a Chinese pole and even a Vietnamese one. And these poles will be developing at different paces and different rates.

But now, the battleground is far more complex than it was before. These poles will be identified and defined by factors such as new markets, new customers, new talent appearing there, new innovation, centres of R&D and excellence for new areas and so on. Capital sources, again, are shifting from being tied up with Western capital markets and are more diverse and multipolar.

What should be the strategy for Indian companies in a multipolar world?

There are clearly opportunities and many are taking advantage of these. The important thing for companies is to be clear about their global business strategy, about where the best markets are, and where they can leverage their competencies when they go global.

Our research shows that in many cases the best places for companies coming from emerging markets to expand is into other emerging markets, because you are bringing insights into consumer behaviour, market dynamics, cost structures and so on.

However, there is also the opportunity to take those same cost structures, apply them in a developed market environment and, immediately, you can change the dynamics in that marketplace.

The critical issue for these companies, after having decided where they want to expand their business, is to put in place the right global leadership team and find the talent they need to operate in that environment.

Also, it is important for Indian companies to understand the operating models of the rest of the world "" be it Chinese operation models or American "" because, to be effective and gain the most out of the synergies, they need to know what they are competing against.

Do you think global acquisitions by Indian companies are based on strong fundamentals and proper due diligence?

I do believe that there is a fair degree of thinking going on. I don't think it's a mad rush. Companies are recognising that they have a position of some strength, which they should take advantage of, and this ability to understand where the leverage comes, in choosing where to go, is fairly important.

If you understand that your business model is unique, you can apply it to a broader footprint. The Tata-Corus story is an example of that. The opportunity to take a structured model from one market to another that has a much higher cost model, and use it to establish synergies "" there is huge opportunity there.

While most of it appears quite well thought-out so far, I am sure there are going to be failures. The trick will be not just to have chosen the right object, but also to have thought through the right way to manage the acquisition in an integrated fashion. There is need for discussion on how to create a new, fused culture.