"To become an international player, you need to be global in your thinking"

Industry chieftains urge Indian SMEs to develop the right mindset as they set foot in the global market   

Published 7 years ago on Aug 07, 2017 10 minutes Read
RA Chandroo

N Mahalakshmi, editor, Outlook Business: Thank you so much panellists for joining me today for this discussion. We thought of taking up ‘Going Global’ as the theme for this year because it stood out for us while we were working on our 11th anniversary issue, Outperformers. In the past 10 years, a whole bunch of new billionaires have emerged across the country and many of them are under the radar. One such company we have profiled in this edition that really exemplifies this whole idea of going global and scaling up is Motherson Sumi. It's a sensational story of a company that started with nothing, wasn't too big 10 years ago and is a $6.5-billion company today. Moreover, they aspire to be a $20-billion company by 2020. There are a bunch of other entrepreneurs who look at success stories such as this one and are inspired.

When you think about scaling up, you can't be thinking only about India. You need to have a global mindset to compete both locally and globally. We have a fantastic panel with two stellar Indian companies that have grown significantly in the past 10-20 years. Then we have companies that have done a remarkable job of engaging with the Indian vendor base, which is by and large the SME segment. 

Mr Sawhney, you were able to do in less than five years what Maruti took two decades to do, in terms of vendor development and idigenisation of the car. What stood out for you in Indian companies and what has that whole experience been like for you?

Sumit Sawhney, MD & CEO, Renault India: Four years ago, we wanted to launch a global car in India, and we wanted to launch a car in the small or mini car segment. Although the small car segment was not our forte, our global CEO was convinced that to succeed in emerging markets, we had to enter the small and mini car segment. The key to our success was innovation. Usually, automobile manufacturers work with global suppliers, but we had to do something different to succeed. That's where the India of developing Indian suppliers came in. We asked them to bring innovation and quality to the table. Most global companies are scared to give Indian or local suppliers work, because they are unsure of the quality. We were quite surprised when these vendors came up with a lot of innovative ideas. When we launched Kwid in India, it was the first time that any Indian company had 98% localisation at launch. Although it was a global car, we wanted to succeed in India first and then move to other countries. Last month, we launched a car production in Brazil and during its pre-launch itself, the success was astounding. Sixty percent of my suppliers are supplying parts there.   

Mahalakshmi: Tell us one thing that stands out for you about Indian entrepreneurs.

Sawhney: Their energy and zeal to succeed, along with innovative thinking. For instance, in our business if you want to give a fuel-efficient car, you reduce the car’s weight. But if you reduce the weight beyond a point, then there could be a safety issue. We were working with our suppliers to resolve this. They came up with some innovative ideas of smart welding to reduce 6 kg without compromising on safety. Many such examples put together made Kwid one of the most successful cars in recent times.  

Mahalakshmi: Arvind, German companies are known for their engineering and chemical prowess. You have been one of the earliest entrants in the Indian retailing space. What has been your experience with Indian entrepreneurs? What is it that makes them stand out?

Arvind Mediratta, MD & CEO, Metro Cash & Carry India: Let me talk about Metro first. Metro is focused on the trading community, which include 1 crore to 1.5 crore kiranas in the country, and we cater to Horeca [hotels, restaurants and caterers] for which the number could be as high as 1 to 2 crore. In India, the primary source of livelihood is agriculture, but the second biggest source of livelihood is self-employment. In dealing with entrepreneurs, our focus is to make them run their businesses more efficiently and more competitively. If you look at kirana stores, right now their biggest worry is how to compete with the onslaught of e-commerce players. Dealing with multiple suppliers is one of their biggest issues. They have to deal with more than hundred suppliers — for the FMCG companies, for commodities such as lentils for which there is no well-known supplier or brand, for spices and so on. They are a one stop shop for customers. But we provide transparency into the system, and make our prices competitive. We're also digitalising the kiranas, which have been running in a particular way for decades, by providing them with software solutions, so that they can track the selling and replenish as soon as they run of the inventory and keep a check if it falls below a certain threshold.

We are witnessing a lot of innovation in the food space, especially in the booming ready-to-eat market. A lot of suppliers are coming up with ready-to-eat products, but many of them struggle to get the distribution footprint. We are on the lookout for innovative products for our customers, and they [the suppliers] seek a distribution platform for the products, so it's a win-win partnership. In India, the quality of chicken and mutton you consume is often questionable. We were the first HACCP [Hazard Analysis Critical Control Point]-certified wholesalers, so by providing them with training for quality, we provide them with support in terms of competing with global quality standards. 

Mahalakshmi: Jean, you made four acquisitions during the course of your tenure in India. I’m sure that was done to get a quick access to the market. But more than that, did you find something unique about India that attracted you to make these buyouts?

Jean Charles Thuard, MD & CEO, Legrand India: To begin with, we manufacture sales products and systems for electrical and digital network. Last year, we celebrated 20 years of our presence in India. At the group level, we have been very successful here. We started from a very small base of Rs.40 crore. Today, due to new product developments and acquisitions, we have a turnover of more than Rs.2,300 crore. But we are here because of the potential of this fantastic market.

What really made us successful here is the fact that we have been Indian in India. We have based all our development on Indian talent, people and product, and tried to match the local standards because our products are made in India, for India. We developed a network of 6,000 subcontractors and suppliers. The 'Make in India' story is not a recent one — for us, it started from the first day itself. I am really proud to say that more than 80% of what we sell in India, is made in India. We have started exporting and our India operations are becoming the base for the group, as far as manufacturing is concerned.

MahalakshmiUnni, Thermax has really grown both in terms of size and prowess. Can you reflect on your own growth story and tell us about the things you focused on during the growth phase to get to this level? 

MS Unnikrishnan, MD & CEO, Thermax: At the turn of the century, we were a 500-crore company. In 10 years we have grown 10x, reaching 5,000 crore. In the engineering solutions sphere, there would be very few companies like ours. Today, a third of our income comes from outside India, so this is a story of both growth and globalisation.  

First of all, our understanding is that anybody who would be globalising, should first be domestically strong. If you don't have a strong footing in your base country, it is highly unlikely that you are going to sustain as a global organisation in the future. In any business, there are three levels – component, product and solution. The solution level is like nirvana in business. By the time we come to this level, we should have a strong supply chain in place. Of the 33 portfolios that we have, we decided that unless we are number one or two in the country, we will chuck it out — so we first strengthened our portfolios, gave up seven of them and retained only 26 and became a dominant player in India.  

To become an international company, you should be global in your thinking. You start as an exporter, but you cannot be everywhere in the world and it is very difficult to sustain the business in the global market because the laws are different everywhere. You have to choose the country where you want to be and you'll be able to make proper base. We are into the energy and environment business. Energy is provided in the developed world and they are already taking care of the environment. The areas where we can grow are countries in the developing world starting with, China, Asia, Africa, South America, Eastern Europe and select international markets. We have a 10-year plan for how we plan to expand, and we are on track despite everything that has gone wrong in the country. 

Globalisation demands very high levels of governance practices, which Indian companies are not very used to. Indian governance standards are not going to take you globally as a sustainable organisation, you have to be an honest company with better professional practices.

Mahalakshmi: Pratyush, your experience in vendor development in India is more technology-intensive and your ancillaries also are the same. What is the mindset they have when they come on board as partners? Do you take them through that process? How does it work?

Pratyush Kumar, president, Boeing India & vice president, Boeing International: India has had a very well-developed automotive ecosystem, most of those automative players think that there's just one step to get into aerospace — after all they are leaders in global six sigma practices.

The challenge to go from automotive to aerospace is that, you have to jump from a six-sigma manufacturing to a zero-defect manufacturing. It’s a complete mindset change — it requires a different set of quality systems, skill levels and its competitiveness in terms of end-to-end solutions. The companies that we have worked with have been very successful, agile and open-minded to learning. Most of these have been small and medium industries. The total sourcing from India is $1 billion and a bulk of it comes from smaller companies.   

People generally think that aerospace has this domain of large companies. But, we found that if we work with an entrepreneur, who is keen to learn and doesn't come with a ‘know-it-all’ attitude, they can make a lot of progress. For instance, there is a company in Bengaluru, called Rossell Techsys. It has no experience in the aerospace business; it was a food and tea business and we took a chance with them. Its whole pitch was based on the willingness to learn and today it is our 'supplier of the year'. It is among the top 12 suppliers across the world, among 20,000 suppliers for Boeing, which includes companies such as Honeywell, General Electric and others, which is quite a big deal.

Mahalakshmi: Ravi, you have an interesting mix of global and India businesses. You do business for Pepsi in various parts of the world and in India you have multiple businesses. Do you think differently about your global business vs your India business, because your India business is also about customers expecting global standards? For instance, when I walk into a Cafe Coffee Day or Starbucks or Costa Coffee, I am looking for the same global experience.

Ravi Jaipuria, chairman, RJ Corporation: Absolutely. Our customers are looking for the same standards anywhere in the world, if they are drinking a bottle of Pepsi, they expect the same quality that is being provided in the United States, Europe or anywhere else. Our parent company monitors our quality standards and ensures they are the same everywhere in the world. We started with a very humble beginning — one plant in 1991 in Agra, with a turnover of 15 crore to 20 crore. Today, we are a $2-billion group and we have close to 25 plants all over the world. We worked with global companies in India, trained our people, expanded our business in India first and then moved to Nepal, Sri Lanka and other such countries.   

We looked at the African sub-continent as our main growth segment, where people were still learning. I think Africa is still about 15-20 years behind India. When we went to Africa, we had a win-win situation since we trained our people here, in technology and other skills we did much better than our competition. One major learning we got was that if it was not an English-speaking country, we did not have an advantage because our people who could be shifted from here, were all English-speaking. With countries like Mozambique (Portuguese speaking) or Morocco it took us a long time to stabilise that country and we had to ultimately depend on the local people. 

MahalakshmiWhen you compare the skill level of the ecosystem between India versus Africa, is there a huge difference? And compared to other countries where do you plot India?

Jaipuria: I think Indian people are willing to work much harder, learn much faster and are willing to adapt anywhere in the world. We have a whole slew of people available to us, which is not the case in every part of the world.

This is the first of a two-part series. You can read part two here.