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Can India Inc build global brands?
BS Bureau | December 08, 2005
No one doubts the ability of Indian companies to run global businesses, but building a brand involves a totally different set of abilities.
So can corporate India build global brands? Two experts give their opinion.
A brand is simply a name; a strong (that is, global) brand is one that has unique and positive associations with it. Traditionally, India's business enterprises have developed strong domestic brands. This is not to suggest that they weren't capable or lacked a vision to go global.
Through the 1970s and 1980s, Indian groups like the Tatas, Oberois, Mittals and Birlas set up successful global operations in Africa, south-east Asia and west Asia building brands in a number of locations. A restrictive business environment back home was not conducive to building global brands.
Brand building isn't magic. It takes decades of investment in a globalised environment; Japanese and Korean companies have competed to produce only a clutch of truly global brands from Asia -- Honda, Toyota, Samsung, Hyundai, Sony, Nintendo, Panasonic, Nissan and LG.
Based on this logic, some would argue that Indian firms still have a long way to go. But the basic building blocks are in place for the eventual creation of global brands from India.
First, a liberalised policy regime aids a growing belief in Indian companies to compete internationally; Indian firms have started acquiring a global footprint.
They've made global acquisitions of over $3.5 billion in the past two years; from Tata's acquisitions of Tetley Tea and Daewoo Motors to Videocon's purchase of Thomson and Bharat Forge's buyout of Federal Forge. According to our estimates at the India Brand Equity Foundation, this number could cross the $10-billion mark in the next two years.
Second, revenue streams of Indian firms have also got increasingly internationalised. Today, 20 of India's top 100 companies, ranked in terms of market capitalisation, generate 50 per cent or more of their revenues from international sales.
Third, is the aspiration to go global. Mahindra wants to build the largest tractor brand in the world; TCS, Wipro and Infosys are targeting slots amongst the top five IT consulting firms in the world. Besides consumer products, a number of Indian brands will emerge from the service space.
"Incredible India" continues to draw global attention. Now, high-end surgeries and world-class management, engineering and medical education are helping build the medical and educational tourism industries. In time, the Apollos and Escorts; the IITs, IIMs and Manipals are bound to become globally preferred brands.
Before the economic reforms began in 1991, Indian firms didn't have the choice to compete globally. Today, they do have capabilities to build strong brands, and without the shackles of a restrictive business environment, they are now going global -- building brands with a newfound confidence and as a strategic imperative.
India Inc is now "willing" to play the "global ball game". We should see global Indian brands emerging -- in products and in services -- in the near future.
The question is not whether Indian companies have the capability to build global businesses, that is, have appropriate products and price points to fulfil consumer needs in markets around the globe. This capability does exist across several industries.
The question to debate is whether they have built or have the capability to build global brands.
What's the difference between brands and businesses? Brands are where you talk your business walk. Your customers and potential customers recognise your name and recall it whenever they think about the business arena you exist in.
And firmly attach certain positive (and sometimes negative) rational and emotional benefits to the name, which travel with the name. Consider, for instance, an Infosys marriage bureau; it will have process, and truthfulness and will improve your odds for sure, and you can feel safe and sensible!
As a result of all this there should be a potential to command a price premium and/or have a guarantee of a certain value of business -- ideally, business that seeks you out rather than the other way; but more pragmatically, business that is very easy to sell, since the customer is predisposed to buy, to begin with.
Many Indian companies have chosen to pass on the onus of market development and customer ownership to distributors, marketing agents and middlemen and merely supply as demanded; or have chosen to be suppliers of choice/partners to other international businesses.
Such companies do not even begin to qualify on having brand capability. However, there are a few Indian companies across sectors that have taken the painful route of owning end customers, either by themselves or by acquiring and growing an existing brand. They can show the way and inspire the rest.
Provided, of course, that we manage to capture and disseminate their learning, through industry fora and academic research -- something we are historically not good at.
The two big areas of learning that Indian firms need to have for building global brands are: one, how to gain market access all the way to the end customer, and still retail reasonable bargaining power with retail intermediaries, and, two, how to find innovative ways to reduce the enormous cost of conventional brand building communication? What vehicles, what partnerships, what new channels and so on?
The best way to accelerate this learning is for Indian companies to acquire an appropriate size strong brand company that is preferably global or at least is strong in one major geography, and use it to learn.
Whenever I have seen this happen, I have noticed that the "what if" timidity vanishes and the whole body language of the company changes with respect to how they think about operating in overseas markets. I recommend that boards of companies should push for at least one global "brand building learning through an acquisition programme". The rest will follow automatically.
Views expressed are personal.