Archives for posts with tag: International Business

We sat on the edge of our seats in the cinema theaters while watching Bhuvan’s (Aamir Khan) team play its last cricket match in the movie Lagaan, despite knowing the fact that India will win. Why did we do that? It was a plain scripted match in the movie, so why was there so much of thrill and excitement about the same. We still watch the same movie over and over again with the same fervor as the first time, even when we remember each and every move of the Ashutosh Gowarikar’s Team 11.

Half my children’s generation has grown up watching World Wrestling matches between those Hulk Hogans, Shawn Micheals and The Undertakers, regardless of knowing that every punch thrown or even those TLC (Table, Ladder and Chair) matches in the same are scripted. So, why is there so much of Gung-Ho about the spot-fixing happening in IPL, when it had and has been promoted as ‘Entertainment Ka Baap’ (= Father of Entertainment) by its airing partner, Sony Max. Why are Fast pacer S Sreesanth and spinners Ankeet Chavan and Ajit Chandila being bestowed with Life Bans for spot fixing?

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Any façade that in the international business that IPL has become, cricket was more of sport than World Wrestling, came off when Ajay Jadeja, Hansie Cronje et al were caught in match fixing. My own conjecture is that the play-off slots too are pre-decided, and who will or will not make it is pre-scripted. This is similar to the laughter we hear in our favorite sit-com shows on television. Irrespective of whether the jokes are funny, the audience at home hears the laughter. Similarly, irrespective of any proven sports ability, the audiences at home or in the stadiums see what the organizers want them to see.

As we have seen over this season of IPL 6, Team Rajasthan Royals have “performed” real well and have qualified for the Play-offs, regardless of its team players involved in match fixing and “under-performing”. It might be a different matter that there are parallel organizers, the official IPL and the unofficial underworld. The problem is created because there are two conductors, whose intentions do not coincide. Hence, it is bound to become a way of making money by scripting it like a movie, when the matches are tagged as entertainment.

County cricket is tagged as a serious affair; so are ODI and other forms, hence charting out Life bans to the likes of Ajay Sharma, Danish Kaneria and Hansie Cronje were justified; ten years later when T20 has degenerated to mere entertainment, a ban on Sreesanth is not justified (perhaps it is a part of the drama). Superficially, the ban is just a way to cover the suddenly uncovered but usually ever coveted parallel conductor here. If we consider the parallel with politics – Bangaru Laxman of BJP (India’s leading opposition political party) was caught accepting a 100, 000 rupee bribe (approx USD 2,000 at current exchange rate) He was despised not because he was corrupt, but for two other reasons:

a) He got caught and

b) The amount was so small.

Now, Sreesanth is “caught” for charging Rs 60 lacs for performing badly in one over. Here, the 6 million rupees (approx. 110,000 USD) taken is a lot of money for me and most people I know. It would exceed lifetime earnings of many in India. Yet in the entertainment world of cricket, this sum being relatively small or large is still unclear to me. Should he have asked for more? Was he despised and therefore released to the police for undercutting others who charge more? There are many such questions that remain unanswered.

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To the point of MS Dhoni or Harbhajan Singh being blamed or counted responsible for his arrest is away from my area of understanding. The motive for targeting Sreesanth this time is not clear. However, I remain convinced that there are many more players, bookies or the parallel conductors that are engaging in entertaining cricket and will continue doing so.

People in our country still follow cricket as their religion and live in the state of constant denial that IPL is a scripted game. I can still understand that Sreesanth reigns the Twitter trends list, but I am amused by the seriousness offered to this by the main-stream media. Times of India and Hindustan Times make it a headline issue, while IBN Live covers it on a jungle fire scale. I don’t think it does deserve that much of news space or air-time. However, if this scheme of scripting business is followed in the world of international business, I hope it makes it as friendly and loved as the world of Cricket.

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One of the perks for international businessmen, and especially their wives, in India is the comfort of having servants, something that would be a luxury they could not afford back in their home country. However, for the Indian middle class, servants or house helps are still more a “necessity”, rather than a “comfort” or “luxury”.

Sanjay Agarwal, a power industry professional, eloquently speaks about “The exploitive Indian Middle class: looking through the prism of ethics- Social commentary” (http://isanjay.in/archives/582) in his blog. Here he talks about the problems of unavailability of maidservants that are so much the talk of the best of parties in the Indian metros. Additionally, looking at the arbitrary steps taken by governmental institutions such as the police in the rural districts of East India, the problem is compounded, as it invariably is when government starts to interfere in economic activity.

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In Sanjay’s weblog, he brings up the exploitation of the underpaid maidservants in our country. Upper strata people have always hired help. In the current scenario of nuclear families and both partners working, there is a need of someone to take care of your house or children in your absence. Thus, this is not a sudden growth and this phenomenon of keeping house help has been around for ages. Getting and keeping maid servants seems to boil down to economics and supply and demand.

I am reminded about my studies of Economics 101 (and I have forgotten most of what came after that). I then read that prescribing minimum wages went against the grain of employment creation (in the case of over-supply of labor), and, unions that seem to create better employment conditions for those that got through actually erect barriers to entry for those who haven’t made it. This is for the simple reason that higher cost of employment makes it all that more difficult for the employer to justify hiring one more person.

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Sanjay identifies the common complaint of the Birkined class (sometimes also referred to as the Chanel class), of maid servants that don’t return from “home leave”. That alas is on the other side of the transaction; the maid that chooses not to return from her village is simply deciding not to enter into that transaction with the “exploitative” auntie.

Additionally, it seems that now police forces prevent young women from boarding trains from their villages, lest they be exploited in faraway lands for purposes other than what their agents (read: pimps) might be promising them. This in my opinion is a matter of inability to enforce law in the faraway Delhi, resulting in checks in the interior, the legitimate being checked along with the illegitimate.

This police action in the hinterland causes an under-supply creating an upward pressure on wages. The maid servants become choosy, leaving the employing aunties aghast at demands of the working class.

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In any case, in any dealing with fellow humans, I agree with Sanjay that it is good to remember everybody’s feces stinks, including our own. Let’s be polite to our fellow humans, while not forgetting the human forces of economics. One of the attractions of Singapore for international businessmen and their families is the ready availability of maid servants. I wonder how they mange it there and in other countries.

Something to think about, by those wishing to create employment….

Provoked by Justice Sotomoyer’s observation of dealing with her atypical “imposter syndrome”, in a recent Business Standard Op-Ed piece, Shyamal Majumdar writes, “The ‘imposter syndrome’ – Even high achievers often dismiss their success as some fluke or luck, and not the result of their own competence.”

This got me thinking. Internet based research revealed that, “The impostor syndrome, sometimes called impostor phenomenon or fraud syndrome, is a psychological phenomenon in which people are unable to internalize their accomplishments. Despite external evidence of their competence, those with the syndrome remain convinced that they are frauds and do not deserve the success they have achieved. Proof of success is dismissed as luck, timing, or as a result of deceiving others into thinking they are more intelligent and competent than they believe themselves to be.”

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Analyzing this wiki definition, I feel that at least partial description of “imposter syndrome” in the West is simply being realistic. After all, in my case I am sure what I am today is also a function of the bosses, colleagues and subordinates in the teams that I have worked in, as well as suppliers, customers and well-wishers in the extended environment. Thus, it is difficult to find a purely self-made individual. Hence, I believe that my success can be attributed to luck, fortune and timing.

I remember my days in Toyota, when our domestic market share in Japan in the segments we operated was increasing from 40 to 44 %, while Nissan’s was in decline. Sitting in the smoking corner during lunch, one of my colleagues made the observation that“managers and executives at Nissan are just like us, from the same classrooms of the same universities”.  In many cases, the choice between the two companies was made purely on geographical reasons, while choosing their office locations in Japan. Yet, one company is rising and the other is declining. Certainly, decisions taken by our seniors were instrumental in the current success and failure, rise or decline, but the fruits that WE were enjoying (or not, as in Nissan’s case) were more a matter of providence”.

Back then, my Toyota colleagues and I shared the perception that we were part of destiny.

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I remember another instance of a junior, call him Taro for now, who joined us from one of the leading private universities in Japan, Keio. Being assigned to an operations group that was very busy with re-structuring, his seniors could not mentor him sufficiently. They just did not have enough time. His development as an executive dragged, until he was transferred to an administrative job. There, under appropriate mentorship he became like a fish taking to water. He was admired for his attention to detail, his confidence grew and he started commanding respect. Different circumstances, different results, same person. Taro would not internalize failure changing to success purely to his competence.

I dedicate my own competency development to being a function of luck, timing and hard work. What about you?

The Schumpeter column in the recent Economist, “Mammon’s new monarchs” describes the emerging world consumer as king. It seems that Western companies are interested in knowing how to appeal to emerging world consumerism and compete with home-grown domestic rivals. Consultants from Boston Consulting Group (BCG) advise companies to jump in early. I agree that going in early can be useful, but according to my observations, this is not essential nor a panacea.

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Consider the automobiles industry – Honda started early in India, in 1998. Toyota started shortly afterwards in 2000. Their early start has certainly helped. Honda’s City and Toyota’s Innova enjoy stable market leadership in their respective segments. Though many thought Renault-Nissan to be a late entrant to India (over a decade later than Honda), given that automobile ownership is still at the lower tail of the S-curve, it still has potential to emerge a winner. Renault is already doing well with its Duster shining in the market this year.  The same applies with Volkswagen, which really kicked off with the Polo in 2010. So, coming in later, even a decade later can be okay. On the other hand, in the absence of quality offerings, coming in early is not a cure-all as Fiat has failed to learn in repeat attempts at conquering the market.

Similarly, in the appliances arena, Hitachi that started early in the upper end high quality air conditioner segment, continues to enjoy aspiration status. Panasonic that is just starting its big bang could yet do well. LG may have made early inroads, but eventually quality shall become the priority of the consumer. Already, at the “non-frugal” end LG finds it difficult to attract the well-to-do. Experience with air conditioners also demonstrates that starting early is fine, but quality is perhaps more important.

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My own feeling is that when deciding market entry into emerging Asian economies, companies shall do well to concentrate on two things. Firstly, they need to get the price point right and match local tastes, while matching the quality expectations. This is where Hyundai succeeded with Santro. The second point is to focus on a core competency. So, for example, Daimler Benz did well to first start with its Mercedes E-class, a core competency yet economically right for India. It’s A-class is only now being contemplated, over a decade later (the price point is no doubt more suitable, but not what Daimler is more commonly associated with).

Many people try to bring out a single point solution, such as “start early”. This pithy advice can result in disasters as the Fiat experience in India demonstrates. Instead, international business strategy needs to concentrate on what sells (the buyer’s desires), and what can be sold (the seller’s competency), which are perhaps more important to conquer the Asian consumer.

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.

Most of my writings to date have recommended a course of action on a general basis that challenges the status quo of International business in the current scenario. However, earlier today, when I read The Economist’s recent article on Hitachi, I was gladdened to see that President Hiroaki Nakanishi is following my prescriptions, points that I made repeatedly to my then boss Mr. Yasunori Taga, the Chief Executive for Asia (CEA).

When I had joined Hitachi India, the sub-continent subsidiary was controlled by Hitachi Asia in Singapore. Despite my strong desire to relocate to Singapore, I remember telling Mr. Taga (against my personal interest) that it would be difficult to control an emerging economy like India from a developed city-state Singapore. President Nakanishi, finally upgraded Hitachi India to a regional Head Office in 2011.

I also agree with Nakanishi’s reported goal of attracting the best talent and allowing them the freedom to move around across business units. Other MNCs would do well to adopt this strategy. I often see foreign companies preferring to do things “their original global way”.  It takes some longer than others but eventually they have to adapt to local ways. It is either adapt or accept losses.

What can be true about human talent is also true about products. International business giant McDonald’s is good at this. It adopted vegetarian menu for India right from the start, and additionally was quick to give up the mutton offerings, substituting them by the more popular chicken. It has taken longer for America’s Kentucky Fried Chicken, or more lovingly known as KFC, to abandon its “original recipe”; they now serve only “Indianized” versions: spicy chicken or fiery grill chicken. The choice is between “hot” and “very hot”.  Hitachi’s appliances business unit has its own development center outside Ahmedabad, in the rapidly industrializing state of Gujarat. GE, Denso, Bosch etc. are leading global companies that are going native and understanding India better.

As European, especially German, companies look to Asia to grow business they would do well to heed these points about local talent and local products. Remember Brand India is noted for affordable products and superior global managers. Hitachi took over 50 years to learn such important lessons for doing business in India. Fortunately for European followers, they have a visible short-cut.

It was interesting to read recently that Honda is planning to review its product strategies for the Indian market. Though third-placed in the Japanese car market, as a global player it is actually second to Toyota in the Japanese manufacturers rankings. However, in India Honda as a brand has been at a distant seventh, despite being here for nearly 17 years.

Even as of now, Honda is considering only a revamp of its product line-up, which does not seem enough as a survival/winning strategy in the Indian context. A recent McKinsey Quarterly reports that to succeed in the complete Indian market and not merely its niches, international companies will have to learn to do business the Indian way, rather than simply imposing global business models and practices on the local market. The scorecard suggesting techniques to win in India, gives out seven pointers that need to be taken care of. Alas, Honda as a brand has failed to live up to the scorecard.

In international business, Brand India is associated with affordable products and good global managers. According to the newspaper report, Honda is just now delving into affordable products in the form of the smaller diesel options, but what they really need to address is the “scaled down in terms of function but even more aggressively lower priced” cars. Honda requires an understanding of the needs of Indian consumers and should customize itself accordingly.

Many multinational companies have hired Indians visibly into their executive board, not only to gain goodwill among the Indian market but also have understanding of natives and the exact market pulse. They are the people who have grown up in India and have better experience about the market. In the auto industry, market leader Suzuki of Japan has Indian R C Bhargava as its Chairman. Japanese giant Toyota has hired veteran Sandeep Singh and others on their board. Deputy Managing Director Sandeep has been with Toyota for years leaving briefly for stints with Mahindra and later JCB. He has helped the company get a better insight of the market and has helped Toyota place them better in the market. Newer vehicles will have only a limited impact on Honda’s business here, until the company manages to get a grip on the consumer pulse.

My own limited experience about Honda leads me to believe they are arrogant. There are two types of foreign companies that try and win in India. The Honda-type believe that they can conquer using their global strategies and global experience by “teaching the natives”, while the others are companies that try and learn from the natives and address the needs of the natives. They get the idea that Brand India (or any market different from the highly developed countries) has to be dealt in a separate way than the global market. Again contrast with Toyota: While Honda is severing relations with the local partners it entered the market with, Toyota have retained Vikram Kirloskar as Vice Chairman even though Kirloskar group has now only about one per cent share in Toyota Kirloskar Motor. While Honda is keen to remove vestiges of its local flavor, Toyota chooses to accentuate its belonging to society. What a contrast!

Arrogant companies will not succeed in India. Adaptation to the Indian consumer’s demand for innovative, low-cost delivery systems and high value for money products is a “must”. Invading companies learn this over time – some sooner than others. Of course, some just remain unsuccessful and have good basis to complain about corruption and difficulty of doing business in India 🙂

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.

On my way back from Cambodia, I transited through Bangkok for less than 24 hours. I had enough time to marvel at the progress of the country. The huge vibrant Swarnbhoomi Airport is an immediate indicator of the golden success of the nation. By the way Swarnabhoomi is a Sanskrit word meaning Golden Land, and being Indian it is always gladdening to see our contribution to their progress. 🙂

Despite the wonderful shopping that Bangkok has to offer, over the last few weeks I have come to the conclusion that Delhi can be a good alternative to Bangkok, simply because there is much more to do in terms of business and consequently to enjoy life.India’s pathetic infrastructure got highlighted most recently last month when power cuts on successive days managed to put half the population (= 600 million persons) in darkness. That means that almost 10 times the population of Thailand needs much improved power infrastructure in India.

Statements made for power, can also be repeated for roads and water. And, this development along with auxiliary development gives an indication of the vastness of economic opportunity waiting in India. Thailand enjoys a more than double of India’s per capita GDP, again leaving less room for growth. Thus, the income opportunity is higher for me if I am in India.

With higher per capita income, disposable income is also higher in Thailand. This results in a higher cost of living. Even a visit to the international McDonald’s is more expensive in Thailand. A quick Internet based search reveals that Bangkok is at least 50% more expensive than Delhi; exceptions exist such as the cost of reasonable quality Japanese food! I would certainly like to see more international food at reasonable prices in India. Otherwise the costs are lower for me in India.

Higher revenues and lower costs translate to better profits. This is good, but what use are profits if they cannot be enjoyed? Certainly Bangkok seems to offer much higher quality entertainment as its shopping centers and variety of eateries demonstrate, but for me there is less freedom because I don’t know the local language. In Delhi, I can manage very well with English. Additionally, lesser road congestion of Delhi allows me to get around more smoothly. The rapid expansion of the Delhi Metro will make transportation even better in the years to come.

I am in international business. Bangkok certainly has its appeal, but if Delhi can work for me, it might for you too.

Singapore of course would be very different. Ideas differ though….

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.

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