Archives for posts with tag: China

I read recently in the Economic Times that Unilever finds innovations that have marked its growth in India, are now more relevant than ever, in recession hit parts of the world such as Europe.

As the Unilever CEO, Paul Polman, has rightly mentioned, “Learnings” from India such as lower price points for products in smaller packages or sachets, is gaining acceptance in the European market, poverty has returned as the local economies continue to reel under recession.”

It is transferability of such learnings that makes knowledge of international business practices so valuable. I remember my time in Toyota where we applied our learnings from implementation of kaizen principles for just-in-time (JIT) logistics across countries. Thus, Oman could benefit from learnings from Poland, and in turn teach a lesson (or two) to Australia and South Africa.

According to the newspaper, Paulman, also highlighted the success of the affordable water purifying product, Pureit.The product entirely developed in India, is now being sold by Unilever in at least 15 other countries, where according to him, it has become a popular brand. “

This reminded me of the concept of “reverse innovation” that was popularized by GE. Why is it called reverse? Previously, innovation occurred in developed markets, and products were sold across the globe. However, those markets are now saturated, or even in decline as Unilever is discovering. Undiscovered markets lie in populous emerging markets like, China, India and Indonesia. Thus, there is profit to be made by innovating for these markets. And, what sells here can also be sold in the fast-becoming-poor markets of the developed world. Learning frugal engineering has become so important that Carlos Ghosn of Nissan Renault invested USD 1 billion for starting a greenfield factory in India.

I suspect, eventually, as this becomes the mainstream model, the “reverse” will then be dropped from the nomenclature.

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A recent Times of India strategy piece “Why Ghana is ideal destination for Indian IT companies” caught my attention, because of my own personal experience of visiting Ghana five years ago. It was a time when Ghana celebrated its golden jubilee of nationhood, it was hosting the African Union Summit and also its currency got re-denominated.

The Times article was a timely reminder. As Chinese historical anger towards Japan inflamed recently, many Japanese are now turning to India, not only for the market potential here, but also as the base to springboard into Africa. For early adopters of a See Africa policy in international business, India and Africa are a close link. The step into Africa could be through Kenya, where my cousin is enjoying the wonderful weather of Nairobi, but based on my own experience I think Ghana is just as good, if not better.

The Ghana I saw even five years ago was a nation with the potential to lead its continent out of the developing world into the developed. Ghana has already been a leader by virtue of being the first sub-Saharan country in colonial Africa to gain independence. Even at that midnight hour in 1957, leader Dr. Kawame Nkrumah declared, “The independence of Ghana is meaningless unless it is linked to the total liberation of the African continent“. Ghana was instrumental in helping to found the Organization for African Unity (OAU) in Addis Ababa in 1963.

Ghana has demonstrated a commitment to education, a touchstone for transitioning to a service economy. Literacy level of 75% in the 15+ age group is continuously rising, with almost 100% school enrollment achieved. It enjoys one of the highest per capita GDP in Western Africa and with unemployment at over 10% there is sufficient slack for finding educated labor for growing business.

Except for the pioneering Chinese, I suspect international businessmen will still not rush into Africa. Many highly educated businessmen still harbor such stereotypical fears as – “Africa is no place for a woman to do business”. Memories of kidnappings in Nigeria persist. The point I want to make is that Ghana is not like the rest of Africa. Accra’s lively beaches, casinos and nightlife tell a different story. Ghana is relatively safe, full of the self-described “friendliest Africans.” Nevertheless, Ghanaians again need to lead Africa in reassuring the international world that there is a respect for human rights and rule of law.

Five years ago I went, saw and concluded that Ghana can be a valuable investment destination for international business, with its increasing political stability, educated workforce and budding will to establish rule of law. It can pave the way for Africa’s long road to economic independence. International businesses can help strategically to create role models for Africa. By doing so, international business will share in the benefits reaped by such progress.

As I landed at Phnom Penh airport last week, there was a certain déjà vu feeling. The smallness and atmosphere at the airport, even as seen from the runway, was so much like Accra in Ghana that I had experienced a few years ago. The efficiency inside and the traffic situation on the way to the hotel also reminded me about my trip to Ghana.

In terms of poor countries, Cambodia seems to be worse off with per capita GDP in PPP terms at 2,727 USD compared to India’s 3,751 USD. However, unlike Ghana that is shackled by its African location, Cambodia exists in a geographical location central in Southeast Asia, the engine for global growth. In my first email from Phnom Penh to a friend I wrote, “Cambodia will overtake India within 5 years”.

Why do I say this? Well, the Chinese, Japanese and Koreans are already pouring money in, not only as aid but also part of international business investments. The streets and basic infrastructure of Phnom Penh is neat and tidy compared to Delhi. The first thing my Japanese colleague asked me to notice as we drove from the airport to the hotel downtown was the lack of traffic noise, the honking and weaving in and out that is experienced on India’s chaotic roads.

One of the basic start points for Kaizen (=improvement) at any worksite is 4S. 4S is a production management concept referring to a state of sifting, sorting, sweeping and cleaning and the resulting spic and span condition that forms the basis for productivity growth. Based on my experience with worksite Kaizen I am convinced that Cambodia with 4S in place is ready to improve productivity; India lacks 4S in its cities and countryside and is therefore going to be left behind.

The second thing I noticed was the right pricing of services. Though, I stayed only at the Sofitel Hotel, its superior facilities and excellent services that out performed most Indian hotels were priced at about half of what top class branded hotels in Delhi charge. In that sense too, Cambodia will be more attractive.

Of course, with the national population that is about one per cent of India’s, or roughly the size of Delhi’s, Cambodia’s economic size has its natural limitations. This means that Delhi will be further lulled by a false sense of security in its market size and shall continue to slumber. My expectation is that international business shall continue to clamor for this sleeping giant India to wake up; meanwhile Cambodian people will get better off. They just talk less and do more, while Indian politicians are easily massaged by reference to the country as a tiger oblivious to the adjective “sleeping” being used in description.

Earlier this month I had the chance to travel back to Japan on home leave. My youngest son is very keen about Ninjas and on his insistence we went to Ninja Mura (= Ninja Village) in central Japan. Though initially I went along as the chauffer, but gradually I became more and more engaged as a learner in this beautiful journey.

It seems there are a couple of Ninja Muras in central Japan. The one we went to was in Iga city in Mie Prefecture, known more for its beef than Ninjas. It is less than two hours’ drive from Nagoya, the home of Toyota and Mitsubishi’s manufacturing.

Ninja and ninjutsu (the art of the ninja, which is not a martial art)have become a part of the English lexicon. Appearing all the time on TV, in movies and cartoons, they are an established part of Japanese imagery now. I realized how little I knew about this element of Japan, and now I am able to share much more.

The Ninja Mura is a museum about the ninjas, with live demonstrations of their art, ninjutsu. The Ninja were agents of espionage and stealth hired by warring factions to gain intelligence about the activities of their enemies, and sometimes to assassinate them.

The interesting thing for me though was the fact that apparently ninjutsu originated in India. Yes, that is right. According to the museum, “those roots are found in the art of warfare that began around 4000 B.C. in Indian culture, was passed to the Chinese mainland, and around the 6th century, passed through the Korean peninsula and crossed over to Japan.”

The other interesting fact about the ninjas that also corroborates this India origin theory is the fact that ninjas were vegetarian. Yes, they were the vegetarian exceptions in the land of exceptional beef. For health, ninja avoided meat, fish, dairy foods and sugars in favor of a diet centered on whole-grain rice and vegetables. It seems they avoided meat and other foods that might lead to body odor to avoid being detected when sneaking or hiding.

There are so many more interesting pieces of information that are far better experienced than reduced to the written world, for example, my sons enjoyed throwing the shurikens (ninja stars). The younger one dressed up as a ninja and was even inspired to design his own ninja house once he grows up! We also saw revolving walls, trick doors, safe compartments, etc.

My second son and youngest son with a Ninja at the demonstration ground – The wood wall shows embedded Ninja Stars

The inspirational Ninja Mura can be enjoyed as a day trip from Nagoya or Osaka, though from Tokyo, I would combine it on a journey on the way to Kyoto, etc.

BOOM! That is the sound reverberating throughout the Asian region.

This sound has nothing to do with gunfire or an attempt by terrorists to gain control of a vital installation. It is the sound of a booming economy. Yes, the economies in the Asian region are fast out pacing their western counterparts. The centre of economic power shift that started towards Japan in the eighties now seems to be moving to China and India. This has geo-political significance and there appears to be a lot of talk in the corridors of power about how best to react to this new shift in economic power. The American economy will take time to be back to its former glory and as Ben Bernanke said, “Over the years, the U.S. economy has shown a remarkable ability to absorb shocks of all kinds, to recover, and to continue to grow”. However, that will be some time in coming.

The first thing that anyone with an ear to the ground will notice is that there are increasing international business tie-ups with Indian companies. Collaborations with Indian companies seem to be the order of the day as western countries try to take advantage of the Indian connection. The Indian economy may have experience a slight setback recently as the expected growth has dropped from an amazing 9% to 6% but that is still higher than most of the western countries and European countries in particular. While European countries battle with austerity and spending cuts, India marches ahead in its quest for economic supremacy.

All this has made India a happy hunting ground for many western businesses. This is working the other way round as well. Many Indian companies are thinking of going global. Indian companies are making acquisitions on a global scale. Jaguar is a case in point. Today, Tata Motors, a leader in the Indian business environment has acquired Jaguar and this is no flash in the pan.

India is also likely to throw its doors open to foreign direct investments. As Anand Sharma, the Indian minister for commerce and industry said recently “For FDI, we have a policy which is stable and progressive and there have been changes made in the recent past, which has gone down well with investors.” This is great news for western businesses. Many companies that specialize in clean and green energy could also have a growing presence in India, as the demand for clean energy increases in India. For example the National Solar Mission is targeting 20GW of solar power by 2022.

Environmental degradation is the bane of some developed western countries. This could befall India as the country tries to gain economic supremacy. This could pose a huge challenge to Indian leaders.

Japan has had a series of natural disasters to contend with and the Tsunami washed away more than just some land and a lot of money. It washed away a lot of economic hopes. However, Minoru Masujima, director of macroeconomic analysis at the Cabinet Office said, “Domestic demand is relatively firm and the economy is gradually picking up”.

The Asian economies are growing rapidly and western economies are gravitating towards Asia and India in particular.

Developments in clean technology and environmental policy are a necessity for the growth of any nation. For many years, only the major economies of Europe could fund such development. However, major Asian countries such as China and India are currently dealing with the realities of rapid industrial expansion. In an effort to avoid the environmental crises of Japan in the 1960s and 70s, Asian countries can make use of the European sustainable development model to direct their efforts.

Japan’s environmental crises should inspire caution in the environmental policies of major Asian countries. Japan’s lack of strict policies concerning the disposal of toxic waste led to widespread health problems. In the 1960s, industrial waste containing methylmercury caused residents of Minamata City to develop a medical condition that caused approximately 6,500 deaths. The 1970s saw a dramatic rise in cases of chronic arsenic poisoning due to inadequate safety measure at arsenic mines in Japan. These events should direct the focus of technological research to key issues threatening the environmental health of Asia.

"Clean technology Asia", "Clean technology India", "Clean technology China","Clean technology Japan"

Clean technology Asia

China and India will inevitably encounter increasing greenhouse gas emissions. By taking a cue from European policies, major Asian countries could design efficient methods for combating increasing levels of these gases. The 20-20-20 Directive is an excellent example of European air quality control measures. This program sets a goal for the EU to increase renewable energy and reduce pollution by 2020. If China and India employ a similar policy, these countries could set an excellent foundation for their industrialization.

The European think tank, Bruegelhas also advocated measures for the environmental health of the EU. It is taking an active role in the EU’s Strategic Energy Technology Plan. They work to promote the use of sustainable energy, aiming for a 30% reduction in pollution. By setting emissions restrictions and encouraging innovation, China and India could begin to reduce pollution before it becomes uncontrollable.

The continual industrialization of major Asian countries is inevitable. Without proactive interference, equally inevitable are the serious pollution issues these countries will face. These serious problems will be rendered manageable and less harmful if a Europe-like program of environmentally responsible development is utilized. By carefully monitoring their growth, countries such as China and India can create energy policies that are as proactive and forward-thinking as those found in the EU. International business solutions could then help meet those policy goals.

Asian strategy for many businesses is pillared around Japan, the cash cow, China, the star and India, the next rising star. These are three huge continent sized markets –either in geographical or economic size. As a result, successful Asian teams need powerful central leadership, high decentralization and strong awareness of the field.

First, let’s talk about decentralization. Located in Asia, Japanese multinational companies are quickest to understand that Asia has several distinct markets. Leaders like Toyota have long had a separate China Department. Last year, Hitachi too delinked India into a separate regional Head Office, at par with its American or European Head Office.

When I looked after Toyota’s India project based out of Japan, I realised that Japanese have poor understanding of Indian business methods and the Indians too felt the same frustration. Coordination between Japanese and Indian teams became an important subtext of my job.  In terms of ease of doing business, in global rankings Singapore places in the top 10, Japan in the top 20, but alas India with its unhygienic conditions, pot holed roads and poor infrastructure doesn’t figure even in the first 100. Indian managers are therefore toughened to deal with adversity and are more likely to succeed in globally than the Japanese. It would seem that the Chinese would lie somewhere in between. This was confirmed recently when I asked Chinese visitors to an exhibition in India. They were shocked by India’s backwardness, just as Indian businessmen are surprised by China’s advanced infrastructure when they visit there.

For international business, fortunately common Asian values such as the hierarchical nature of society persist. This is where strong leadership becomes important. Fortunately for Toyota, its Head Office in Japan had a lot of know-how on global best practices, because they know what has been successful where. For example, in the area of just-in-time logistics I could explain to team members of South Africa, based on hands on experiencein Australia, Oman and Poland. Team members in other geographies, from China to Thailand to India could look up to Nagoya for advice on problem solving.

Adding strength to know-how, awareness of the field is imperative to team leadership. Hitachi’s Asia Head Office could not serve India sufficiently because of its inability to understand the field. Managers from cosmopolitan Singapore resisted visiting India with its heat, dust, poverty and disease. The same problem exists with other companies. An Australian manager working based in Singapore for the regional Head Office of a European company told me, “Ashok, it is difficult for me to travel in India. My customers visit me at my hotel. I cannot handle India beyond the local Hyatt, Hilton or Sheraton.” The same manager had problems with the raw fish of Japan. China was not yet a major market, fortunately. Another Englishman stationed in Singapore told me, “I can’t imagine living in India”.  I have seen only failure in all cases of armchair management of India, China and Japan from cosmopolitan comforts of Singapore and Hong Kong. I repeat, failure.

Successful team management in Asia requires a solid grasp of business fundamentals that establishes authority, and secondly a strong stomach to go out and get hands dirty in the field. 

A recent IMF report placed India as the third largest economy, overtaking Japan. When I heard this, I was shocked. It reminded me about what they say: there are lies, damn lies and then there are statistics. When I probed further, I understood that the size was being measured in terms of purchasing power parity (PPP).

Why was I shocked? Well, I recently spent three months in Japan, living in Tokyo. There is no way that anything in Japan, compares with India. During my stay, I had the opportunity to travel to within Japan as well as to Singapore, China and Thailand. As far as infrastructure goes, India is a long way away from Shanghai, Bangkok or Singapore, let alone Tokyo. So, this IMF report should best remain buried, until India reaches the same league as it peers in Asia.

However, there is a caveat. India is in the same league as other Asian countries in terms of its business potential with high requirements for infrastructure. Still lacking in high speed rail connectivity, India can be compared to Japan in the early sixties. That means there is a tremendous amount of investment potential in social infrastructure like roads, ports, power and water, lasting at least another 50 years. At the same time, to avoid the problems that Japan of the sixties and seventies faced and that Shanghai faces now, Clean Technology is the need of the times. European companies like, Siemens from Germany in renewable energy and Veolia from France in water are already leading the way. With 20GW of solar power targeted under the National Solar Mission, the total value of this sector alone is expected to be USD 35 billion. International business would do well to add India to its portfolio.

In anticipation of improved infrastructure, frontline automobile companies from Europe such as Renault, Volkswagen and BMW have followed Asian giants such as Toyota, Honda and Suzuki, starting manufacturing plants here to develop new markets. Companies like Bosch and Valeo, automobile components suppliers in Tier 1 are already active, and Tier 2 should also follow shortly. The auto components industry is expected to grow to over USD 110 billion by 2020, exporting up to USD 30 billion. Then to help these, auxiliary services firms such as those in IT systems developments would follow.

With a weakening market for infrastructure and automobiles at home in Europe, Western businesses would do well to have a tri-pronged Asian business strategy: India, Japan and China.

A half century of business opportunity waits.

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