How difficult it is to catch up, how hard it is to match global standards, how expensive it is to go global "" in other words, all the woes that shackle late movers. What is this miasma, I despair, that traps Indian companies? "We actually have a term for it in Australia: culture cringe. A sense of 'we're-not-good-enough'," says Christopher A Bartlett, professor, Harvard Business School. In 1998, Bartlett, along with the late Sumantra Ghoshal of the London Business School, published breakthrough ideas on globalisation in Managing Across Borders. The duo garnered experiences of emerging global giants from Asia, Australia, South America and India. They found that companies from peripheral countries find it difficult to compete against established giants from Europe, Japan and the United States, partly because they are racked with self-doubt and have low confidence-levels. Those feelings of inadequacy stem from historical baggage. In Australia, it could come from being descendants of convicts; in South Africa, due to a history of racial suppression; in Brazil, from being a less-developed economy. Sometimes, it stems from geographic isolation (New Zealand), sometimes from policy-led isolation (Poland). As a result, diffidence builds about going up against the best in the world. "It becomes a culturally embedded mindset of being second class, of blaming the problems, of feeling not good enough," explains Bartlett. Even 10 years ago, I might have believed that of Indian companies. But the global ambitions of industries like software, pharmaceuticals and automotive components indicate that powerful forces of change are astir. I've heard rationalisations aplenty, but I've also seen many signs of interest in globalisation. What happens when late movers get moving? I don't have to look far to find out. Across the table sits Venu Srinivasan, chairman and managing director of the TVS Motor Company, who calmly tells me that yes, TVS Motor began exports of two-wheelers just two years ago, and yes, exports don't account for more than 2 to 3 per cent of total revenues. But yes, he aims to make TVS one of the top five two-wheeler manufacturers in Asia soon. By September 2004, TVS Motor would have invested in a manufacturing facility in Indonesia, and by December 2005, production will begin. Next, TVS will move into Thailand and then, Vietnam and Burma, and by 2010, China. Almost deadpan, Srinivasan intones: "I want us to have 15 per cent of the Asian market in the next seven years." No signs of culture cringe here! Late movers make a break by overcoming psychological barriers It also means committing to a new organisation structure, where the international division enjoys equal billing with domestic operations well before it delivers proven results. Says Bartlett: "It has to be way ahead of reality. But globalisation requires organisational capability and resources that match your dreams, not your past." It usually takes a triggering event that pushes a company to accept reality, and stop feeling sorry for itself. In the case of TVS Motor, the wake-up call came from the onslaught of giants like Yamaha and Honda in the Indian market. When liberalisation threw open the two-wheeler market to global competition, most players cried for a level-playing field. Srinivasan quietly went to Japan to bring in Total Quality Management to overhaul the shop floor and truly bring it up to world class. By 1998, Sundaram-Clayton, a TVS group company of which Srinivasan is managing director, had become only the fourth company outside Japan to win the prestigious Deming Award, and the first in Asia. Three years later, TVS Motor became the world's first motorcycle company to win the Deming Award. Still, says Srinivasan: "There is a substantial difference between being world class and being global." How can an Indian company figure out if it is secretly hiding a fear of globalisation behind its world-class laurels? Says Bartlett: "If I was to give one piece of advice, it would be: go and benchmark globally. Rub against global companies, take products abroad, talk to distributors, talk to overseas customers, and challenge yourself to ask if you are really world class in what you do." Late movers look for ways to build up their confidence When it comes to globalising, a little confidence goes a long way. Once TVS Motor put in the work to build global competitiveness within India, for example, it found itself driven to test the largest two-wheeler market in the world: Asia. Says Srinivasan, "Once we had it in India, we thought: why limit ourselves to India? We can leverage our competence in other markets and get our cost base down." The way Srinivasan tells it, TVS' globalisation thrust is nothing but an obvious need to amortise development costs over larger markets. Currently, claims Srinivasan, the company has a 20 to 22 per cent of the India market. "If we can get a 12 per cent share of the Asean market, that's a 50 percent increase in volume for us. Then, if we can get 12 per cent in China, it will give us an equal amount of volume." "Were you always this confident about taking TVS global?" I ask Srinivasan. That's the only time I see Srinivasan look uncomfortable. Wryly, he admits that in the 1980s, he was extremely diffident about any talk of going global. He was all too painfully conscious of the lack of world-class standards in manufacturing practices, technology, quality, and even management capability. But then, first the company coped with global competitors in India and then it won the Deming Award. Says Srinivasan: "I'm not a naturally confident person. We did it one step at a time. But if you win something or see something done, you get the confidence that you can do more. Then you keep stretching your horizon." Late movers look for areas of competitive advantage The way he sees it, rivals have already laid the road, potholes and all. TVS Motor will not have to waste resources, and can use them effectively where it matters most. Indeed, the only question before a late mover, says Srinivasan, is: "how can I tweak my advantages in a unique way so that I get a Unique Selling Proposition?" TVS Motor's choice: to focus on the less than 250 cc two-wheeler market, and position itself as a "personal transportation" company rather than a motorcycle company. That resonates with Bartlett, who found that emerging multinationals exploit late-mover advantages in two ways. The first is to benchmark global competitors and adapt their business models. The second is to challenge the established business models of the global competitor with a new business model. The Philippines-based fast-food chain Jollibee did a bit of both when McDonald's made an entry into Manila. First, it learnt from McDonald's practices and then it focused on gaps in the global rival's strategy, such as a lack of knowledge of local taste preferences. It used that knowledge to enter markets like Brunei, Guam and Vietnam, and by 1998, even opened a franchise in San Francisco. Says Bartlett: "You need to build capabilities. Jollibee learnt its lessons from McDonald's, built skills at home, and developed the confidence to take on McDonald's." Late movers understand that globalisation is a learning experience Srinivasan's prep work for globalisation was quite simple. Over the last few years, he simply kept his eyes open and watched all that has been happening around him. What better inspiration for TVS' second-mover strategy than Toyota's entry into the Indian market. Or, for that matter, the manner in which Japanese auto companies carved a chunky share of the US market for themselves. Says Srinivasan: "The Japanese always go looking for a loose brick in the wall. They take out the loose brick and make a small hole. They widen the hole over time. Although it looks as if they took leaps of faith, if you look at it at discrete points of time, they never take huge risks." "Is this what you, too, will do?" I ask. Srinivasan nods. As he continues to talk about the strategic hits and misses of the global majors, I realise that he has closely tracked the entry and survival strategies of a wide variety of multinationals "" even consumer durable companies like Electrolux, Whirlpool, Samsung and LG. He shrugs: "Observation is my way of learning and it has been a tremendous learning in India. It was as if a lab was working right in front of us." When I tell Bartlett about this habit, he is delighted. "Globalisation isn't about capturing incremental markets. It's about learning. Managers have to change the way they look at the motivation for playing in the global field so that they can learn. Unless they do that, they will not be able to compete," he argues. Late movers know where they're going and where they came from "The great challenge for organisations is to understand what their strengths are, and to build on the capabilities that existed in the parent company," he adds. It's clear that TVS Motor is treading a fine balance. The small team set up to spearhead the entry into Indonesia has started benchmarking business practices at other companies doing business in the country. Already, the challenges of managing cross-culturally are rearing up. For instance, TVS canteens in India are strictly vegetarian. Srinivasan knows that will not work in Indonesia, but he refuses to serve beef and local customs dictate no pork. A menu is being worked out with non-vegetarian options like lamb, fish and chicken instead. "Being sensitive will be critical," says Srinivasan, adding, "But the basic way of doing things and the value system will be the TVS way. That's where our strengths are, and if we give that up, we will never succeed." Clearly, TVS Motor can't escape a tryst with its global destiny. More than even Srinivasan, the push from below is forcing the company to seek new vistas. "Youngsters in the company want to know why can't we make it better than Honda?" grins Srinivasan. "These aren't the same Indians of even five years ago." Clearly, a generation of managers that has no hang-ups will be the cadre that takes Indian companies global. For them, when it comes to globalisation, it's better late than never.
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The right moves for a late mover
GOOD TO GLOBAL
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First Published: May 25 2004 | 12:00 AM IST
