Indian MNCs Going Global: The Road Ahead for the Indian Manager
presents articles focusing on
Going Global and Taking Charge:
managerial applications of
management practices, The Road Ahead for the
theories, and concepts
Executive Till a few years back, the term “MNC” (Multinational Corporation) in India meant
Summary an organization with its headquarters located outside of India, and having a pre-
sence in India as a part of its global network. In other words, in Indian eyes, “MNC”
meant a “foreign” company which has come into India.
In recent times, however, the business world has seen the emergence of a new breed
of companies which is beginning to be referred to as “Indian MNCs.” The Indian
MNC is a company which is Indian in origin, now spreading its wings to set up
operations in various markets around the world. Increasingly, Indian MNCs have
resorted to mergers and acquisitions (M&As) as a favourite method for jump-start-
ing their global expansion. Tata Steel, Hindalco, Suzlon, Bharat Forge, and Sundram
Fasteners are typical examples of such Indian companies.
As more Indian companies push ahead with their aggressive global growth strate-
gies, many middle and senior management personnel in these organizations are
faced with significant challenges. They have to “go global and take charge” in a very
short time, and learn how to manage complex businesses on a global scale. They
need to acquire the managerial skills needed to deal with varied customer needs
and diverse competitive forces; learn to work with team members from different
cultural backgrounds; and also learn how to manage the companies that have been
acquired through the M&A route.
In this article, we take a look at these new challenges the Indian manager has to face
Emerging Indian MNC in this era of globalisation of emerging Indian MNCs, and suggest some strategies to
cope with them. We examine the elements of the “global mindset” that is becoming
Middle and Senior
Management essential for the Indian manager’s success, and explain the key dimensions of three
research-based models that will help him understand cultural differences that pre-
vail across the globe. We also examine some real-life examples of the strategies that
Coping Strategies Indian MNCs have begun to adopt, as they pursue their vision of becoming global
Cultural Integration leaders in their industries.
VIKALPA • VOLUME 33 • NO 4 • OCTOBER – DECEMBER 2008 61
THE EMERGING “INDIAN MNC” These trends go to show that the “Indian MNC” is here
n recent times, the business world has seen the emer- to stay; and in each of these instances, the companies
gence of a new breed of companies which is begin- involved will have to work through the challenges (and
ning to be referred to as “Indian MNCs.” The In- the inevitable mistakes) involved in transforming them-
dian MNC is a company which is Indian in origin, now selves into truly global organizations. Let us now exam-
spreading its wings to set up operations in various mar- ine what this means for the operating managers in these
kets around the world. Increasingly, Indian MNCs have organizations.
resorted to mergers and acquisitions (M&As) as a fa-
vourite method for jump-starting their global expansion.
INDIAN COMPANIES “GOING GLOBAL”:
IMPLICATIONS FOR THE INDIAN MANAGER
2007 was a record year for out-bound M&As from In-
dia. A total of 223 deals, worth $33 billion, were trans-
The Dominance of the Customer
acted. This represented an increase of 300 per cent over A key feature of today’s global markets is the emerging
the previous year. The average deal size increased from dominance of the customer over the companies that com-
$58 million in 2006 to $150 million in 2007. Europe topped pete for her attention and business. Through informa-
the list as far as investment destinations were concerned, tion media like the internet and global television
accounting for 54 per cent of the total value. The US fol- channels, today’s customer has instant access to a wealth
lowed in second place, accounting for 27 per cent. In of information on any product or service that she may
terms of sectoral composition of these M&A deals, met- be interested in. Supply chain efficiencies have made it
als led the way with 56 per cent of the total value, fol- possible for companies to make their products available
lowed by engineering (7%), IT (7%), oil and gas (4%), at competitive prices across world markets.
pharma and healthcare (3%). Other sectors contributed
the remaining 23 per cent. This has resulted in a vast shift in power – away from the
companies, and towards the customer. The Indian man-
In terms of size, the five largest deals were the follow- ager has to understand and accept this fact, and discard
ing: any beliefs to the contrary that he may have acquired
over time in the Indian market – where the customer
• Tata Steel’s acquisition of Corus, UK for $ 12.1 bil-
still does not enjoy this dominance in many cases. In
any case, with increasing globalisation, competitive
• Hindalco Industries’ acquisition of Novelis, USA for forces in the Indian (domestic) market itself are getting
$3.3 billion more intense by the day, pointing to the rising impor-
• Suzlon Energy’s acquisition of REpower Systems, tance of the “Voice of the Customer” (VOC) in today’s
Germany for $1.8 billion business.
• Essar Global’s acquisition of Algoma Steel, Canada
for $1.6 billion The Importance of the Brand
• United Spirits’ acquisition of Whyte & Mackay, UK As the customer gets used to making choices on a glo-
for $1.2 billion bal basis, the brand of the product has become signifi-
cantly more important than the country of origin or
While the subsequent global credit crisis (in 2008) has manufacture. Many brands have succeeded in shedding
impacted the enthusiasm for such mega-deals for the their “nationality” – that is, the country from which they
moment, smaller acquisitions of strategic importance originally emerged. Examples are many— MTV, Nike,
continue to be finalized, with an eye on long-term IBM, and so on.
growth. In addition to the M&A route, many compa-
nies have also gone ahead and established 100 per cent Consequently, the manager in the emerging Indian MNC
wholly-owned subsidiaries in overseas markets. A typi- has to have a game-plan ready for building brands on a
cal example is that of Sundram Fasteners setting up such global scale, which will enable the company to compete
a subsidiary in China to manufacture fasteners and bear- with established global brands. This initiative requires
ing housings for the Chinese and global markets. a deep understanding of local customers’ needs in dif-
62 GOING GLOBAL AND TAKING CHARGE: THE ROAD AHEAD FOR THE INDIAN MANAGER
ferent markets, and significant investments in brand- world, and develop an operating culture for the team
building over long periods of time. In scale and com- which builds “bridges” across the cultural differences
plexity, this exercise will test the Indian manager’s that will inevitably surface.
capabilities like never before.
While it is unrealistic to expect that every manager en-
The Need for a Global Mindset tering the global arena will exhibit all of the above ele-
ments of a global mindset, it is important for the manager
Faced with the global customer, and global competition, to recognize that these requirements do exist, and make
the Indian manager in the emerging Indian MNC has to efforts to develop and strengthen areas where he is rela-
work on developing a “global mindset” which is essen- tively weak.
tial for getting a good understanding of today’s busi-
ness dynamics, and developing suitable growth stra- Cultural Differences and Integration
Global business brings people from different cultures
In a speech on “globalisation” delivered by Tarun Sheth, together. They need to overcome cultural differences and
management consultant, at the Ingersoll-Rand (India) collaborate with each other, in order to succeed. The fail-
Leadership Conference a few years ago, he spoke about ure of the Daimler-Chrysler “merger of equals” tells us
the need for today’s manager to develop a “global mind- that cultural integration is a key pre-requisite for global
set.” Some key elements of this global mindset are as managers to be effective and successful.
While there could be several exceptions to the rule, most
• Being open-minded – so that the manager does not Indian managers – especially those employed in the
act impulsively on first impressions, but takes the brick-and-mortar industries – exhibit some common
time to try and understand something that is alien to cultural traits. Here are some examples:
his experience till date.
• He is very comfortable with clear, well-defined or-
• Comfort with diversity – which will enable the man- ganization structures, where reporting relationships
ager to work cohesively and harmoniously with peo- are explicit, and there is no ambiguity as to who the
ple from different cultures and value-systems. manager’s “boss” is. The organization is the classic
• Interest in history, geography, and global phenom- pyramid.
ena – which will give the manager the ability to look • Compared to simpler organization structures in In-
for global trends and cause-and-effect patterns in ap- dian firms, large global corporations routinely resort
parently unconnected events in business. to complex matrix organizations to drive their glo-
• Integrity – in both intellectual and ethical matters so bal business strategies. The Indian manager is rela-
that the manager can be trusted by the corporation tively less effective in (and less comfortable with)
to do the right thing in various business situations matrix organizations, where vertical and horizontal
across different cultures and countries. “relationship” lines cut across functions, businesses,
and geographies. The resultant ambiguity is some-
• Abstract thinking – which will assist the manager in
thing that he finds difficult to manage.
conceptualizing and executing strategies which do
not have any precedent in her prior experience. • In spite of the introduction of holistic performance
evaluation systems and processes, the average Indian
• Risk-taking capability – to make quick and effec-
manager is still more comfortable with the traditional
tive decisions when the information available is less
concept of “seniority.” Grey hair still matters, in spite
of many organizations pushing ahead with merit-
• People management – where the members of the team based decisions when filling senior positions. This
have to be challenged and motivated by the man- contrasts with the US practice, for example, where
ager to achieve group goals. age is not allowed to be used even as a criterion in
• Cultural sensitivity – to understand the behaviour such situations.
and attitudes of personnel from different parts of the
VIKALPA • VOLUME 33 • NO 4 • OCTOBER – DECEMBER 2008 63
• In India, public “face” (i.e., the person’s standing and Approach #1: Geert-Hofstede™
image among colleagues) is crucial at individual Cultural Dimensions
level. Feedback of the negative kind – even when Prof. Geert Hofstede (2001) of Maastricht University,
couched in the most objective terms – is best given based on his research across different countries and or-
behind closed doors, and not in a group meeting. The ganisations (starting with IBM, and extended subse-
West is less cognizant of such sensitivities. quently to include other organisations), has postulated
• Deadlines and commitments are still reasonably four cultural dimensions, with a fifth dimension – long-
“elastic” – missing a target date for a response by a term orientation – getting added to the model at a later
day or two is not seen as a major issue. In Germany, stage:
this would be seen as unprofessional.
• Power Distance Index (PDI): This dimension deals
As stated earlier, these are generalisations about India, with the degree to which less powerful members of
and many of these are getting modified under the re- a society or a group accept, and indeed expect, un-
lentless pressure of globalisation; but given that these equal distribution of power, e.g., “That’s the way it
traits are widely prevalent, the Indian manager now is.”
“going global” needs to recognize that managerial be- • Individualism vs. collectivism: Is the individual a
liefs and behaviour in other cultures – e.g., in Japan, Ger- lone person, who is expected to look after his inter-
many or the US – are likely to be very different from ests by his own efforts? Or is he a member of a col-
what he or she has experienced in India. lective group which looks after its members, in return
for loyalty shown to the group?
Once these differences are understood, the Indian man-
• Masculinity vs. feminity: This refers to the distribu-
ager can work out ways and means of integrating him-
tion of roles between the genders. In “masculine”
self into a hybrid “global” culture, where the group goals
cultures, there is a significant difference in the val-
take precedence over individual differences. Many In-
ues exhibited by men and women, with men being
dian organizations have now started giving their man-
seen as assertive and dominant and the women,
agers specific training in this vital area of cultural
modest and caring; in “feminine” cultures, this dif-
integration, before exposing them to the dynamics of
ference is less stark, with men also showing caring
the global business environment. This minimizes the
cultural shocks, and pre-disposes the Indian manager
to expect and manage cultural differences. • Uncertainty Avoidance Index (UAI): This pertains
to tolerance for uncertainty and ambiguity; the de-
UNDERSTANDING AND MANAGING CULTURAL gree to which a “culture programs its members to
DIFFERENCES: MODELS AND TOOLS feel either uncomfortable or comfortable in unstruc-
When asked to deal with a fuzzy, hard-to-define con- tured situations.”
cept called “culture,” it is natural that the practising • Long-term orientation vs. short-term orientation:
manager from India would say, “All this is fine. I am This dimension deals with values that people exhibit.
prepared to be culturally sensitive, and adapt my ways Values associated with long-term orientation are
in the interests of team-work. But how do I start getting thrift and perseverance, whereas those associated
a handle on this vague subject? How do I measure the with short-term orientation are respect for tradition,
cultural differences?” fulfilling social obligations, and protecting one’s
Fortunately, considerable research has already been con-
ducted in this area, resulting in the formulation of mod- Approach #2: Trompenaars and Hampden-Turner’s
els and tools to assist the manager. In this article, we Cultural Dimensions
will highlight three approaches which share a large de-
Fons Trompenaars and Charles Hampden-Turner (1997)
gree of commonality in the way they look at cultural
identified several dimensions along which cultures vary.
differences, organizations, and teamwork.
64 GOING GLOBAL AND TAKING CHARGE: THE ROAD AHEAD FOR THE INDIAN MANAGER
These dimensions can be summarized as follows: This model consists of ten cultural dimensions along
which the beliefs and actions of different people or cul-
• Universalism vs. particularism: This dimension tures can be mapped. Here is a brief description of each
deals with how people look at actions of others. of these ten dimensions:
Universalism depends on specific rules and regula-
tions; particularism, on the other hand, relies more • Environment: This dimension deals with how the
on relationships. person relates to the environment in which he oper-
ates. Does the person believe that he has reasonable
• Individualism vs. communitarianism: This deals
control over the future, or is it all ‘written’ – decided
with the balance between an individual’s interests
by a higher force? Is harmony important? Is the en-
and the group’s interests.
vironment seen to be full of constraints? And so on.
• Achievement vs. ascription: Is status something that
• Time: Is time seen as something fixed, to be meas-
we get through achievements? Or is it something that
ured and tracked? Is “being on time” of paramount
is “given” – through attributes such as seniority and
importance? Or is time something fluid, something
hierarchy? This is the key question in this dimension.
secondary to higher priorities like taking care of your
• Neutral vs. affective: Neutral cultures avoid open relationships?
display of emotions, and try to stay focused on the
• Action: Is the emphasis more on action that leads to
subject at hand whereas affective cultures use ges-
measurable results? Or is it on building relationships
tures and animated conversations.
and caring for one another?
• Specific vs. diffuse: People from specific cultures tend
• Communication: Does the meaning of words depend
to keep business and personal lives separate and dis-
on the context? Does “yes” mean “yes”? Does silence
tinct. There is very little mixing between the two.
mean something? Are conflicts dealt with through
Diffuse cultures permit intermingling of the two
open communication? Or in an indirect fashion?
• Space: Is space (physical and psychological) seen as
• Internal vs. external: Internally focused cultures are
public or private? Is the office designed on an “open
likely to have a strong belief in their own actions,
plan,” or is it full of cabins and cubicles? Do people
and are resistant to changes induced by the environ-
stand close to each other while talking? Or at a dis-
ment; in contrast, external focus promotes the belief
that the environment is the dominant force, thereby
encouraging a more ready acceptance of changes and • Power: Is power driven by hierarchy, or is it more
events. decentralized and equal? How are decisions made?
By consensus, or by the boss?
• Time as sequential vs. time as synchronized: Does
one see time as something linear (that is, sequential), • Individualism: Is a person’s identity determined by
where discrete elements follow one after the other? individual achievements? Or does the group’s iden-
Or is it something where many things happen simul- tity over-ride that of the individual? Is loyalty to the
taneously? This will determine whether the culture group important?
encourages “one thing at a time,” or will permit par-
• Competitiveness: Is the individual encouraged to
take aggressive action on his own? Or is it a co-op-
erative working style that is valued? Is the reward
Approach #3: The Cultural Orientations Model from
structure designed to emphasise individual achieve-
Walker, Walker and Schmitz
Walker, Walker and Schmitz, in their book (2004), Do-
• Structure: What is the degree of comfort with change,
ing Business Internationally, have postulated a “Cultural
risk, ambiguity, and uncertainty? Does the culture
Orientations Model” (COM), which is a framework for
value predictability and order? Or does it permit
understanding cultural differences between people from
some degree of flexibility and chaos?
different countries and cultures.
• Thinking: What is perceived to be more important –
VIKALPA • VOLUME 33 • NO 4 • OCTOBER – DECEMBER 2008 65
The abstract, and the ‘principle’? Or large volumes brands that have been acquired are getting careful nour-
of hard data? Is the approach holistic, or is it tuned ishment for the long run. There have been no abrupt
to breaking the issue down to small manageable attempts at implementing drastic changes. Overall, as
chunks? seen from the outside, the philosophy seems to be one
of encouraging continuity and growth, while ensuring
BUILDING BRIDGES adherence to the Tata group’s core values.
As mentioned earlier, these three approaches exhibit a In the case of Sundram Fasteners, a trend-setter in the
fair degree of commonality in the way they look at cul- auto component industry in India, the approach has been
tural differences. These models show that people from similar. The UK and German companies that have been
different cultures think and act differently while oper- acquired in recent years have been allowed to retain and
ating on the same dimension–e.g., on communication, strengthen their brands and identities. Fresh investments
or time, or status. Once these cultural differences are in equipment have been made where merited, thereby
recognised and understood, the global manager has a overturning conventional wisdom that such acquisitions
greater chance of succeeding in getting a set of people are always followed by loss of jobs and “hollowing out”
from different cultures to work together reasonably har- of manufacturing assets. There is continuity in senior
moniously. Lack of sensitivity to deep-rooted cultural management staff. Global customers — whose needs can
differences is likely to result in misunderstandings and be met from Sundram Fasteners’ multiple manufactur-
diversion of energy into negative directions. ing units in India, Germany, UK, and China — are be-
The key to success in global business lies in building ing managed as single “accounts” globally, through
bridges across the cultural gaps, and not seeking to coordinated marketing and sales efforts. Best practices
achieve “one size fits all” homogeneity in the team. The in operational excellence are being transferred from one
global manager has to collaborate with the team in es- unit to the other through horizontal deployment, with-
tablishing “cultural ground rules” for day-to-day work out implications of superiority or inferiority between
that focus on the common tasks and goals, rather than countries, companies, and cultures.
try to eliminate the individual cultural differences. It is Bharat Forge, with its headquarters in Pune, is another
a two-stage process: understanding the differences in aggressive player in the engineering industry, with the
culture among team members, and then building bridges goal of becoming one of the top players in the global
across the differences. These bridges can be built on a automotive forging industry. The company has made a
simple, but powerful principle– which is to place the series of acquisitions in Germany, USA, Sweden, and
customer’s needs above individual cultural preferences. Scotland, and has also formed a JV in China. The com-
pany follows a strategy of “dual-shoring” where its glo-
STRATEGIES FOR GOING GLOBAL: bal customers’ needs can be met from at least two of its
SOME CURRENT INDIAN EXAMPLES plants worldwide. This allows the company to satisfy
While in-depth research output on specific strategies its customers’ requirements with fast, possibly “local”
adopted by Indian MNCs is still not available, there are responses, while at the same time meeting the constant
sufficient examples, at company level, to show that In- demand for more competitive prices.
dian companies are fully capable of drawing up and
executing strategies that are sensitive to customer needs, IMPACT OF CULTURE AT OPERATIONAL LEVEL
culture, brand equity, and teamwork. While the above instances are examples of clear think-
The Tata Group’s approach to its acquisitions—in terms ing, planning, and execution at the strategic level, it is
of cultural integration, branding, and customer focus— important to recognise that individual managers need
has been based on very pragmatic considerations. The to be sensitive to each other’s cultural expectations, when
top management teams at Corus, Jaguar, and Land Rover working at the operating level on a daily basis.
have been pretty much left intact, with the Tata head- While this might seem like stating the obvious, real-life
quarters getting involved primarily in long-term direc- experience shows that this is not something that comes
tion-setting and large investment decisions. The global naturally to operating managers. Since globalisation has
66 GOING GLOBAL AND TAKING CHARGE: THE ROAD AHEAD FOR THE INDIAN MANAGER
been a relatively recent phenomenon in India, most was focussed only on the output, i.e., the date of com-
managers have not had the opportunity to get in-depth pletion. To the Indian, saying “no” or “may be” meant
exposure to different cultures. Correspondingly, the an admission of lack of capability and a perceived loss
manager from the other culture (say, from Europe or of “face”; to the German, receiving a “no” for an answer
the US or elsewhere) also has had no opportunity to would have been equally acceptable, and more profes-
observe and understand how the Indian mind works. sional. He would have found another source for the
This results in a gap, which needs conscious effort from product, and got on with his life.
both sides to bridge. The following caselet will make
this point clear. Ultimately, the two sides evolved a working method for
future instances, by which they agreed to discuss the
A Real-life Caselet: The Meaning of “Time” risks and assumptions explicitly before the start of any
new project so that the ambiguity was sharply reduced,
In this example, a manager from a German company and everyone “was on the same page.” The commitment
had given a project for the development of a new prod- to be made to the end customer was agreed to be held
uct to his counterpart in the Indian company (in the same sacrosanct.
group of companies) at a significantly lower cost. The
German was getting increasingly frustrated with re- Learning from such examples, Indian MNCs can pro-
peated delays in the delivery date. He took this to mean actively implement cultural sensitization programmes
that the Indian manager was not serious about his com- at both ends of the ocean, so that such gaps and prob-
mitments, and that he was insensitive to the negative lems are minimised, if not avoided altogether. Many
impact that was created with the end customer. In real- specialist organisations, which offer expert training in
ity, the product was inherently complex, and repre- this relatively new and fuzzy area, have come into ex-
sented something of a challenge to the Indian team. istence in recent times. Given that the financial logic for
many M&A decisions is based heavily on achieving sig-
If the Indian manager were culturally more aware, he nificant synergies in a short period of time, such train-
would have said, “Look, this job is more complex than ing should become a mandatory part of the corporate
what we have done in the past; but I am reasonably con- M&A playbook.
fident we can pull it off. Tell your customer this is being
attempted in good faith, and that it will take a few itera- CONCLUSION
tions before we get it right. We will keep you updated
As more and more “Indian MNCs” go global, their man-
on the progress, and let’s target six months for the whole
agers would need to gear up, in a very short time, the
process to get completed.”
knowledge base needed to face the new challenges they
Instead, the Indian manager had said “yes” to the project, would inevitably face in multiple global markets. Indian
and had taken on an unrealistic deadline, because he MNCs are beginning to show that they are second to
was operating in a culture where people were encour- none in coming up with aggressive growth strategies
aged to take on difficult challenges. The hard work be- which involve putting down roots — for the long term
ing put in was considered important; and the slippage — in many countries around the world.
of dates – while seen as not good – was not a matter of
life and death. But the success of these strategies would depend on the
ability of their managers to understand the dominance
Where are the cultural differences? The Indian was com- of the customer and the importance of the brand. Addi-
fortable with ambiguity (of the outcome); the German tionally, Indian managers should develop a “global
was not. The Indian saw “time” as something fluid and mindset” that would enable them to understand and
continuous; the German saw a finite date, and a discrete manage cultural differences, and lead their multinational
period. The Indian was used to dealing with other cus- teams to success. Ultimately, business people from dif-
tomers (Indian), who were, by and large, forgiving of ferent cultures need to work together in an atmosphere
slippages. The German saw his (German) customer of mutual respect and trust. This is where the cultural in-
walking away. The Indian valued the input, i.e., the ef- tegration models, and the need for a global mindset,
forts being put in to develop the product; the German come in as essentials.
VIKALPA • VOLUME 33 • NO 4 • OCTOBER – DECEMBER 2008 67
REFERENCES AND FURTHER READING
Ohmae, Kenichi (2003). The Borderless World, London, UK: Pro- Hofstede, Geert (2001). Culture’s Consequences: Comparing Val-
file Books. ues, Behaviors, Institutions, and Organizations Across Nations,
Walker, Danielle; Walker, Thomas and Schmitz, Joerg (2004). Thousand Oaks, California: Sage Publications.
Doing Business Internationally, New Delhi: Tata McGraw- Sirkin, Harold L; Hemerling, James W and Bhattacharya,
Hill. Arindam K (2008). Globality: Competing with Everyone from
Hampden-Turner, Charles and Trompenaars, Fons (1997). Everywhere for Everything, New York: Headline/Business
Riding the Waves of Culture: Understanding Cultural Diver- Plus.
sity in Global Business, New York: McGraw-Hill.
Achal Raghavan is a strategy and business excellence consult- held Board-level positions for 10 years in organizations such
ant based in Bangalore. Till recently, he was Head–Interna- as Delphi Automotive Systems, India and Ingersoll-Rand (In-
tional Operations at Sundram Fasteners Limited. A graduate dia) Limited. He teaches as guest faculty at IIM Ahmedabad
of the Indian Institute of Technology (IIT) Madras and the In- and IIM Bangalore, and also writes for management journals
dian Institute of Management (IIM) Ahmedabad, Raghavan and business newspapers.
brings with him over 33 years of work experience in the auto-
motive and engineering industries. During this period, he has e-mail: email@example.com
We must ensure that the global market is embedded in broadly
shared values and practices that reflect global social needs,
and that all the world’s people share the benefits of
— Kofi Annan
68 GOING GLOBAL AND TAKING CHARGE: THE ROAD AHEAD FOR THE INDIAN MANAGER