Best in the world

"Certain Businesses are more likely to succeed in the Global Market Place, how do they look?"  

At last it happened, the rupee appreciated and an industry so used to being "Cheap" started complaining. It has often been said that Indian Industry should focus on value rather than cheapness of its products. I guess it is just a question of time, before this starts to happen. After all, Indian Business in many ways got Independence only in 1991. Earlier there were hardly any linkages with the world in terms of business, and today of course the world is the market place. The forces of competition and choice for the customer has got the best out of Indian Business, and today Tanishq jewelry is exported abroad, Tata Steel because of Corus has more revenues abroad than from India, and blue blooded Indian Companies are taking on the world. The story was not as straight forward for Small and Medium companies. For instance Peenya Bangalore, one of the biggest Industrial areas in Asia, saw many units being closed and changing hands, the buzz of activity is slowly coming back. So in a market place open to the world, where cost advantages cannot last long, how does one compete, and which business has an advantage? Here are some thoughts:

Local Advantage: The most likely business to survive for a long time are those which have a local flavour, where assets are locally owned catering to local needs. The famous MTR restaurant in Bangalore comes to mind. These businesses could be very profitable, yet limited in terms of growth. They however will survive for a long time since their offering and customers are insulated to some extent from the global winds. Taste Buds they say are the most difficult to change, no wonder local cuisine will always have a presence. The other businesses that come to mind are those that have a terrific advantage of producing locally because of high logistic costs, a local granite query, is an example of this.

Local Knowledge: MTR took the Pudi Powder, and the Awakkai Pickle to the world, of course mainly catering to the Indian diaspora, which itself is a big market and could form a nucleus around which other segments could be catered to. Local knowledge like Ayurveda, however can be packaged to suite the global markets the way Natural Remedies is doing (see article in this issue). There are lot of young companies who are building businesses on this line, Kaati Zone, is creating a fast food model around the favourite Kaati Rolls, its founder Kiran Nadkarni wants to take this model to the world from Bangalore, a la McDonald's.

Best in the world Become the best in the world at something as small as a Radiator Cap, Sundaram Fastners did exactly that. Here the model is to become so good at a process, or an item in terms of quality, cost, and scale that everyone sources that product from you. Scale advantages and other linkages make this model robust after a period of time. Here the source of advantage is not necessarily local advantage but skills, processes, scale. Cafe Coffee Day for instance now has plans to become an International Chain. Well if it has to beat Starbucks at its own game it better do that. Moser Baer has world scale capacity and technology for Compact Discs and is expanding its horizons to other areas.

Demographics: The Indian population might soon be the youngest in the world which is greying. All activities just cannot be automated, some jobs have to be done by humans, young and able bodied, so where will this kind of work come to but India. India is where the population is, irrespective of the exchange rates or labour costs.  Of course MNCs could themselves set up shop in India to leverage this labour pool, so an Indian company needs to have an edge in managing huge teams of people to be able to compete in this game. The large IT companies like TCS, Infosys and Wipro have shown the way in IT. Will there be similar models in Manufacturing, Healthcare, BioTech etc. Where outsourcing happens to India, and companies here have developed the expertise to manage this process across customer segments. The competence here is not lower price but better methods to manage "Global Delivery" and large number of people. The IT/ITES industry which at first took advantage of the lower cost of manpower here will soon start to leverage on the expertise aspect of  managing this process rather than just cost.  Other industries did not take advantage of this huge population as best as the IT/ITES industries due to the problems of poor infrastructure in the country. However some companies are showing the way, Karuturi exports Roses to Europe, Rajesh Exports sells gold jewellry mostly abroad.

Thomas Friedman in his book "The world is flat," says, "When the world goes flat- and you are feeling flattened- reach for the shovel and dig inside yourself. Don't try to build walls." Figure out what is it that you are the best in the world at, focus on it and take on the world. 

The author is the Chief Catalyst of businessgyan. His area of interest include business strategy and innovation. For feedback and more information, e-mail: www.businessgyan.com/balaji

Issue BG78 Sept07