)
Among Indian businesses that have expanded their operations internationally, companies that we call advanced globalisers stand apart from their peers. For one thing, they boast a well-established international footprint and a strong presence in terms of assets and capabilities. They have also supercharged their profitability, with international units making major contributions to the top and bottom line. They've built a global advantage by gaining access to promising new markets and customers, critical resources, capabilities essential for innovation and top talent.
What has enabled them to accomplish all of this amid an ever more challenging business environment? In this article - the second in a series of three - we identify three best practices these companies deploy: defining a clear path for international expansion, standing out in crowded markets and constructing a dynamic global operating models.
Define a clear path
The advanced globalisers know exactly what they want to achieve by expanding overseas, and they maintain a laser-sharp focus on their goals when laying out their internationalisation path. The objectives for going global vary, but many advanced globalisers aim to access new market opportunities with an eye toward tapping potential new sources of revenue and profits. To access such opportunities, these companies can draw on their home-market experience to target fast-growing overseas markets where consumers have similar tastes and preferences. Typically, these markets have been located in West Asia and Africa, and they collectively account for the largest increase in outbound investment from Indian companies between 2003 and 2012.
A leading fast moving consumer goods (FMCG) company in India, for instance, defined a 3x3 internationalisation strategy, which called for prioritising three product categories (personal wash, hair care and home care) with the goal of expanding in three continents (Africa, Asia and Latin America). To be sure, 3x3 focuses on markets characterised by large populations and consumption patterns similar to those in India in the three categories.
Other successful globalisers have expanded internationally to build their competitiveness at home and abroad. To achieve this objective, they tap new technologies, enlarge their product portfolio or build economies of scale. For example, in 2010, a leading Indian car maker acquired a sports utility vehicle (SUV) specialist to supercharge its research and development capabilities and beef up its multinational dealer network. The acquisition also supported the company's strategy to cut operating costs and increase product quality.
The move paid big dividends, including positioning the new entity to develop and launch six innovative small engines.
Standing apart in a crowd
In addition to defining a clear path for international expansion, advanced globalisers do whatever it takes to stand out in crowded markets. That's not easy. Today, Asian companies are in a race to sell higher value and more innovative branded products and services to fuel their international growth. To differentiate themselves, Indian enterprises will have to look beyond their low-cost advantage and move up the value chain. But how?
Advanced globalisers differentiate themselves in the marketplace by focusing on their strengths to establish a recognised global brand. According to our research, Indian companies are more aware of this fact than other Asian businesses, with 77 per cent identifying development of a global brand as a primary motivation for expanding overseas, compared to 53 per cent of businesses from elsewhere in Asia.
To carve out differentiated positions, India's advanced globalisers also invest heavily in developing customer insights and using them to create fresh new offerings tailored for local markets. When expanding into West Asia and North Africa, one of India's leading FMCG companies customised its flagship hair care product line to have a lower coconut oil content to suit the needs of consumers in that market. It also created a new product, a post-shampoo hair care treatment featuring herb and garlic varieties, to appeal to West Asian consumers who view garlic as a reliable solution for thinning hair.
Finally, the growth of social media channels can help companies strengthen awareness of their brands and develop deeper understanding of consumers. Some Indian companies have been slow to embrace social media. We believe they can learn valuable lessons from the experiences of multinationals operating in the Asian markets.
Build dynamic global models
The most successful Indian globalisers devise smart and focused strategies to expand overseas and differentiate themselves in increasingly crowded and competitive markets. But they also know that their international growth strategies can't deliver the promised advantages unless they're executed properly. In our survey, only 38 per cent of Indian businesses believe that their organisation has the right capabilities to expand overseas - although this is still above the Asia average of 30 per cent. Furthermore, just 36 per cent of Indian companies believe that they have all the right processes in place to ensure effective global expansion. And only 30 per cent believe that they have the necessary IT infrastructure.
Our research suggests that advanced globalisers construct a sound global operating model that helps them execute their international growth strategies effectively. Another leading Indian FMCG company backs its international growth strategy with an operating model that enables localised manufacturing and innovation. The company has established local manufacturing facilities in key foreign markets, namely, Bangladesh, Dubai, Egypt, Nepal, Nigeria and Turkey so it can rapidly respond to changing customer needs. The company has also developed a suite of products tailored to its foreign customers' needs and preferences. In some markets of West Asia, its hair products are enriched with snake oil, which helps combat the dryness in the region.
Constructing a global operating model is no longer sufficient. As Indian companies expand and acquire new businesses, the best among them regularly review the effectiveness of their operating model. And they revise it to reflect new priorities - such as decisions to target new regions or partnerships or to centralise components of their operations. The success of this recalibration depends on a company's culture, leadership and people. Our research suggests that Advanced Globalisers have established mechanisms to identify, gather and share ideas for improvement from across the organisation, which helps them continuously improve and stay ahead of the competition.
Companies seeking to expand internationally also need to forge partnerships to succeed in challenging, unfamiliar markets. Our research suggests that advanced globalisers based in India actively collaborate with stakeholders across the value chain in ways that help them to innovate and engage more effectively with customers and local communities, and ultimately achieve more profitable growth.
Articulating their objectives for going global and crafting strategies for standing out in crowded overseas markets can help lay the groundwork for Indian companies to expand internationally. However, even brilliant globalisation strategies won't deliver the promised benefits if a company can't execute them effectively. Advanced globalisers know this, and they ensure successful execution of their overseas strategies by building dynamic global operating models. But as with other practices essential for expanding overseas, building a global operating model isn't enough to ensure success. Companies hoping to elevate themselves into the elite ranks of advanced globalisers must also recruit the right talent, build bridges across diverse cultures and assemble leadership teams embodying a global mindset.
Sanjay Dawar
Managing Director & Lead, Accenture Strategy, India
Anurag Gupta
Managing director, consumer durables & retail, Accenture India
Managing Director & Lead, Accenture Strategy, India
Anurag Gupta
Managing director, consumer durables & retail, Accenture India
