Managing change indian mn cs

VIKALPA • VOLUME 33 • NO 4 • OCTOBER – DECEMBER 2008 61

Going Global and Taking Charge:The Road Ahead for theIndian Manager

Achal Raghavan

KEY WORDS

Emerging Indian MNC

Middle and SeniorManagement

Global Mindset

Coping Strategies

Cultural Integration

I N T E R F A C E S

ExecutiveSummary

presents articles focusing onmanagerial applications of

management practices,theories, and concepts

Till a few years back, the term “MNC” (Multinational Corporation) in India meantan 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 breedof companies which is beginning to be referred to as “Indian MNCs.” The IndianMNC is a company which is Indian in origin, now spreading its wings to set upoperations in various markets around the world. Increasingly, Indian MNCs haveresorted to mergers and acquisitions (M&As) as a favourite method for jump-start-ing their global expansion. Tata Steel, Hindalco, Suzlon, Bharat Forge, and SundramFasteners 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 arefaced with significant challenges. They have to “go global and take charge” in a veryshort time, and learn how to manage complex businesses on a global scale. Theyneed to acquire the managerial skills needed to deal with varied customer needsand diverse competitive forces; learn to work with team members from differentcultural backgrounds; and also learn how to manage the companies that have beenacquired through the M&A route.

In this article, we take a look at these new challenges the Indian manager has to facein this era of globalisation of emerging Indian MNCs, and suggest some strategies tocope with them. We examine the elements of the “global mindset” that is becomingessential for the Indian manager’s success, and explain the key dimensions of threeresearch-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 thatIndian MNCs have begun to adopt, as they pursue their vision of becoming globalleaders in their industries.

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THE EMERGING “INDIAN MNC”

In recent times, the business world has seen the emer-gence of a new breed of companies which is begin-ning to be referred to as “Indian MNCs.” The In-

dian MNC is a company which is Indian in origin, nowspreading its wings to set up operations in various mar-kets around the world. Increasingly, Indian MNCs haveresorted to mergers and acquisitions (M&As) as a fa-vourite method for jump-starting their global expansion.

2007 was a record year for out-bound M&As from In-dia. A total of 223 deals, worth $33 billion, were trans-acted. This represented an increase of 300 per cent overthe previous year. The average deal size increased from$58 million in 2006 to $150 million in 2007. Europe toppedthe list as far as investment destinations were concerned,accounting for 54 per cent of the total value. The US fol-lowed in second place, accounting for 27 per cent. Interms of sectoral composition of these M&A deals, met-als led the way with 56 per cent of the total value, fol-lowed by engineering (7%), IT (7%), oil and gas (4%),pharma and healthcare (3%). Other sectors contributedthe remaining 23 per cent.

In terms of size, the five largest deals were the follow-ing:

• Tata Steel’s acquisition of Corus, UK for $ 12.1 bil-lion

• Hindalco Industries’ acquisition of Novelis, USA for$3.3 billion

• Suzlon Energy’s acquisition of REpower Systems,Germany for $1.8 billion

• Essar Global’s acquisition of Algoma Steel, Canadafor $1.6 billion

• United Spirits’ acquisition of Whyte & Mackay, UKfor $1.2 billion

While the subsequent global credit crisis (in 2008) hasimpacted the enthusiasm for such mega-deals for themoment, smaller acquisitions of strategic importancecontinue to be finalized, with an eye on long-termgrowth. In addition to the M&A route, many compa-nies have also gone ahead and established 100 per centwholly-owned subsidiaries in overseas markets. A typi-cal example is that of Sundram Fasteners setting up sucha subsidiary in China to manufacture fasteners and bear-ing housings for the Chinese and global markets.

These trends go to show that the “Indian MNC” is hereto stay; and in each of these instances, the companiesinvolved will have to work through the challenges (andthe inevitable mistakes) involved in transforming them-selves into truly global organizations. Let us now exam-ine what this means for the operating managers in theseorganizations.

INDIAN COMPANIES “GOING GLOBAL”:IMPLICATIONS FOR THE INDIAN MANAGER

The Dominance of the Customer

A key feature of today’s global markets is the emergingdominance of the customer over the companies that com-pete for her attention and business. Through informa-tion media like the internet and global televisionchannels, today’s customer has instant access to a wealthof information on any product or service that she maybe interested in. Supply chain efficiencies have made itpossible for companies to make their products availableat competitive prices across world markets.

This has resulted in a vast shift in power – away from thecompanies, and towards the customer. The Indian man-ager has to understand and accept this fact, and discardany beliefs to the contrary that he may have acquiredover time in the Indian market – where the customerstill does not enjoy this dominance in many cases. Inany case, with increasing globalisation, competitiveforces in the Indian (domestic) market itself are gettingmore intense by the day, pointing to the rising impor-tance of the “Voice of the Customer” (VOC) in today’sbusiness.

The Importance of the Brand

As the customer gets used to making choices on a glo-bal basis, the brand of the product has become signifi-cantly more important than the country of origin ormanufacture. Many brands have succeeded in sheddingtheir “nationality” – that is, the country from which theyoriginally emerged. Examples are many— MTV, Nike,IBM, and so on.

Consequently, the manager in the emerging Indian MNChas to have a game-plan ready for building brands on aglobal scale, which will enable the company to competewith established global brands. This initiative requiresa deep understanding of local customers’ needs in dif-

GOING GLOBAL AND TAKING CHARGE: THE ROAD AHEAD FOR THE INDIAN MANAGER


ferent markets, and significant investments in brand-building over long periods of time. In scale and com-plexity, this exercise will test the Indian manager’scapabilities like never before.

The Need for a Global Mindset

Faced with the global customer, and global competition,the Indian manager in the emerging Indian MNC has towork on developing a “global mindset” which is essen-tial for getting a good understanding of today’s busi-ness dynamics, and developing suitable growth stra-tegies.

In a speech on “globalisation” delivered by Tarun Sheth,management consultant, at the Ingersoll-Rand (India)Leadership Conference a few years ago, he spoke aboutthe need for today’s manager to develop a “global mind-set.” Some key elements of this global mindset are asfollows:

• Being open-minded – so that the manager does notact impulsively on first impressions, but takes thetime to try and understand something that is alien tohis experience till date.

• Comfort with diversity – which will enable the man-ager to work cohesively and harmoniously with peo-ple from different cultures and value-systems.

• Interest in history, geography, and global phenom-ena – which will give the manager the ability to lookfor global trends and cause-and-effect patterns in ap-parently unconnected events in business.

• Integrity – in both intellectual and ethical matters sothat the manager can be trusted by the corporationto do the right thing in various business situationsacross different cultures and countries.

• Abstract thinking – which will assist the manager inconceptualizing and executing strategies which donot have any precedent in her prior experience.

• Risk-taking capability – to make quick and effec-tive decisions when the information available is lessthan complete.

• People management – where the members of the teamhave to be challenged and motivated by the man-ager to achieve group goals.

• Cultural sensitivity – to understand the behaviourand attitudes of personnel from different parts of the

world, and develop an operating culture for the teamwhich builds “bridges” across the cultural differencesthat will inevitably surface.

While it is unrealistic to expect that every manager en-tering the global arena will exhibit all of the above ele-ments of a global mindset, it is important for the managerto recognize that these requirements do exist, and makeefforts to develop and strengthen areas where he is rela-tively weak.

Cultural Differences and Integration

Global business brings people from different culturestogether. They need to overcome cultural differences andcollaborate with each other, in order to succeed. The fail-ure of the Daimler-Chrysler “merger of equals” tells usthat cultural integration is a key pre-requisite for globalmanagers to be effective and successful.

While there could be several exceptions to the rule, mostIndian managers – especially those employed in thebrick-and-mortar industries – exhibit some commoncultural traits. Here are some examples:

• He is very comfortable with clear, well-defined or-ganization structures, where reporting relationshipsare explicit, and there is no ambiguity as to who themanager’s “boss” is. The organization is the classicpyramid.

• Compared to simpler organization structures in In-dian firms, large global corporations routinely resortto complex matrix organizations to drive their glo-bal business strategies. The Indian manager is rela-tively less effective in (and less comfortable with)matrix organizations, where vertical and horizontal“relationship” lines cut across functions, businesses,and geographies. The resultant ambiguity is some-thing that he finds difficult to manage.

• In spite of the introduction of holistic performanceevaluation systems and processes, the average Indianmanager is still more comfortable with the traditionalconcept of “seniority.” Grey hair still matters, in spiteof many organizations pushing ahead with merit-based decisions when filling senior positions. Thiscontrasts with the US practice, for example, whereage is not allowed to be used even as a criterion insuch situations.

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• In India, public “face” (i.e., the person’s standing andimage among colleagues) is crucial at individuallevel. Feedback of the negative kind – even whencouched in the most objective terms – is best givenbehind closed doors, and not in a group meeting. TheWest is less cognizant of such sensitivities.

• Deadlines and commitments are still reasonably“elastic” – missing a target date for a response by aday or two is not seen as a major issue. In Germany,this would be seen as unprofessional.

As stated earlier, these are generalisations about India,and many of these are getting modified under the re-lentless pressure of globalisation; but given that thesetraits are widely prevalent, the Indian manager now“going global” needs to recognize that managerial be-liefs and behaviour in other cultures – e.g., in Japan, Ger-many or the US – are likely to be very different fromwhat he or she has experienced in India.

Once these differences are understood, the Indian man-ager can work out ways and means of integrating him-self into a hybrid “global” culture, where the group goalstake precedence over individual differences. Many In-dian organizations have now started giving their man-agers specific training in this vital area of culturalintegration, before exposing them to the dynamics ofthe global business environment. This minimizes thecultural shocks, and pre-disposes the Indian managerto expect and manage cultural differences.

UNDERSTANDING AND MANAGING CULTURALDIFFERENCES: MODELS AND TOOLS

When asked to deal with a fuzzy, hard-to-define con-cept called “culture,” it is natural that the practisingmanager from India would say, “All this is fine. I amprepared to be culturally sensitive, and adapt my waysin the interests of team-work. But how do I start gettinga handle on this vague subject? How do I measure thecultural differences?”

Fortunately, considerable research has already been con-ducted in this area, resulting in the formulation of mod-els and tools to assist the manager. In this article, wewill highlight three approaches which share a large de-gree of commonality in the way they look at culturaldifferences, organizations, and teamwork.

Approach #1: Geert-Hofstede™Cultural Dimensions

Prof. Geert Hofstede (2001) of Maastricht University,based on his research across different countries and or-ganisations (starting with IBM, and extended subse-quently to include other organisations), has postulatedfour cultural dimensions, with a fifth dimension – long-term orientation – getting added to the model at a laterstage:

• Power Distance Index (PDI): This dimension dealswith the degree to which less powerful members ofa society or a group accept, and indeed expect, un-equal distribution of power, e.g., “That’s the way itis.”

• Individualism vs. collectivism: Is the individual alone person, who is expected to look after his inter-ests by his own efforts? Or is he a member of a col-lective group which looks after its members, in returnfor loyalty shown to the group?

• Masculinity vs. feminity: This refers to the distribu-tion of roles between the genders. In “masculine”cultures, there is a significant difference in the val-ues exhibited by men and women, with men beingseen as assertive and dominant and the women,modest and caring; in “feminine” cultures, this dif-ference is less stark, with men also showing caringtraits.

• Uncertainty Avoidance Index (UAI): This pertainsto tolerance for uncertainty and ambiguity; the de-gree to which a “culture programs its members tofeel either uncomfortable or comfortable in unstruc-tured situations.”

• Long-term orientation vs. short-term orientation:This dimension deals with values that people exhibit.Values associated with long-term orientation arethrift and perseverance, whereas those associatedwith short-term orientation are respect for tradition,fulfilling social obligations, and protecting one’s‘face.’

Approach #2: Trompenaars and Hampden-Turner’sCultural Dimensions

Fons Trompenaars and Charles Hampden-Turner (1997)identified several dimensions along which cultures vary.



These dimensions can be summarized as follows:

• Universalism vs. particularism: This dimensiondeals with how people look at actions of others.Universalism depends on specific rules and regula-tions; particularism, on the other hand, relies moreon relationships.

• Individualism vs. communitarianism: This dealswith the balance between an individual’s interestsand the group’s interests.

• Achievement vs. ascription: Is status something thatwe get through achievements? Or is it something thatis “given” – through attributes such as seniority andhierarchy? This is the key question in this dimension.

• Neutral vs. affective: Neutral cultures avoid opendisplay of emotions, and try to stay focused on thesubject at hand whereas affective cultures use ges-tures and animated conversations.

• Specific vs. diffuse: People from specific cultures tendto keep business and personal lives separate and dis-tinct. There is very little mixing between the two.Diffuse cultures permit intermingling of the twospheres.

• Internal vs. external: Internally focused cultures arelikely to have a strong belief in their own actions,and are resistant to changes induced by the environ-ment; in contrast, external focus promotes the beliefthat the environment is the dominant force, therebyencouraging a more ready acceptance of changes andevents.

• Time as sequential vs. time as synchronized: Doesone see time as something linear (that is, sequential),where discrete elements follow one after the other?Or is it something where many things happen simul-taneously? This will determine whether the cultureencourages “one thing at a time,” or will permit par-allel-processing.

Approach #3: The Cultural Orientations Model fromWalker, Walker and Schmitz

Walker, Walker and Schmitz, in their book (2004), Do-ing Business Internationally, have postulated a “CulturalOrientations Model” (COM), which is a framework forunderstanding cultural differences between people fromdifferent countries and cultures.

This model consists of ten cultural dimensions alongwhich the beliefs and actions of different people or cul-tures can be mapped. Here is a brief description of eachof these ten dimensions:

• Environment: This dimension deals with how theperson relates to the environment in which he oper-ates. Does the person believe that he has reasonablecontrol over the future, or is it all ‘written’ – decidedby a higher force? Is harmony important? Is the en-vironment seen to be full of constraints? And so on.

• Time: Is time seen as something fixed, to be meas-ured and tracked? Is “being on time” of paramountimportance? Or is time something fluid, somethingsecondary to higher priorities like taking care of yourrelationships?

• Action: Is the emphasis more on action that leads tomeasurable results? Or is it on building relationshipsand caring for one another?

• Communication: Does the meaning of words dependon the context? Does “yes” mean “yes”? Does silencemean something? Are conflicts dealt with throughopen communication? Or in an indirect fashion?

• Space: Is space (physical and psychological) seen aspublic or private? Is the office designed on an “openplan,” or is it full of cabins and cubicles? Do peoplestand close to each other while talking? Or at a dis-tance?

• Power: Is power driven by hierarchy, or is it moredecentralized and equal? How are decisions made?By consensus, or by the boss?

• Individualism: Is a person’s identity determined byindividual achievements? Or does the group’s iden-tity over-ride that of the individual? Is loyalty to thegroup important?

• Competitiveness: Is the individual encouraged totake aggressive action on his own? Or is it a co-op-erative working style that is valued? Is the rewardstructure designed to emphasise individual achieve-ments?

• Structure: What is the degree of comfort with change,risk, ambiguity, and uncertainty? Does the culturevalue predictability and order? Or does it permitsome degree of flexibility and chaos?

• Thinking: What is perceived to be more important –

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The abstract, and the ‘principle’? Or large volumesof hard data? Is the approach holistic, or is it tunedto breaking the issue down to small manageablechunks?

BUILDING BRIDGES

As mentioned earlier, these three approaches exhibit afair degree of commonality in the way they look at cul-tural differences. These models show that people fromdifferent cultures think and act differently while oper-ating on the same dimension–e.g., on communication,or time, or status. Once these cultural differences arerecognised and understood, the global manager has agreater chance of succeeding in getting a set of peoplefrom different cultures to work together reasonably har-moniously. Lack of sensitivity to deep-rooted culturaldifferences is likely to result in misunderstandings anddiversion of energy into negative directions.

The key to success in global business lies in buildingbridges across the cultural gaps, and not seeking toachieve “one size fits all” homogeneity in the team. Theglobal manager has to collaborate with the team in es-tablishing “cultural ground rules” for day-to-day workthat focus on the common tasks and goals, rather thantry to eliminate the individual cultural differences. It isa two-stage process: understanding the differences inculture among team members, and then building bridgesacross the differences. These bridges can be built on asimple, but powerful principle– which is to place thecustomer’s needs above individual cultural preferences.

STRATEGIES FOR GOING GLOBAL:SOME CURRENT INDIAN EXAMPLES

While in-depth research output on specific strategiesadopted by Indian MNCs is still not available, there aresufficient examples, at company level, to show that In-dian companies are fully capable of drawing up andexecuting strategies that are sensitive to customer needs,culture, brand equity, and teamwork.

The Tata Group’s approach to its acquisitions—in termsof cultural integration, branding, and customer focus—has been based on very pragmatic considerations. Thetop management teams at Corus, Jaguar, and Land Roverhave been pretty much left intact, with the Tata head-quarters getting involved primarily in long-term direc-tion-setting and large investment decisions. The global

brands that have been acquired are getting careful nour-ishment for the long run. There have been no abruptattempts at implementing drastic changes. Overall, asseen from the outside, the philosophy seems to be oneof encouraging continuity and growth, while ensuringadherence to the Tata group’s core values.

In the case of Sundram Fasteners, a trend-setter in theauto component industry in India, the approach has beensimilar. The UK and German companies that have beenacquired in recent years have been allowed to retain andstrengthen their brands and identities. Fresh investmentsin equipment have been made where merited, therebyoverturning conventional wisdom that such acquisitionsare always followed by loss of jobs and “hollowing out”of manufacturing assets. There is continuity in seniormanagement staff. Global customers — whose needs canbe met from Sundram Fasteners’ multiple manufactur-ing units in India, Germany, UK, and China — are be-ing managed as single “accounts” globally, throughcoordinated marketing and sales efforts. Best practicesin operational excellence are being transferred from oneunit to the other through horizontal deployment, with-out implications of superiority or inferiority betweencountries, companies, and cultures.

Bharat Forge, with its headquarters in Pune, is anotheraggressive player in the engineering industry, with thegoal of becoming one of the top players in the globalautomotive forging industry. The company has made aseries of acquisitions in Germany, USA, Sweden, andScotland, and has also formed a JV in China. The com-pany follows a strategy of “dual-shoring” where its glo-bal customers’ needs can be met from at least two of itsplants worldwide. This allows the company to satisfyits customers’ requirements with fast, possibly “local”responses, while at the same time meeting the constantdemand for more competitive prices.

IMPACT OF CULTURE AT OPERATIONAL LEVEL

While the above instances are examples of clear think-ing, planning, and execution at the strategic level, it isimportant to recognise that individual managers needto be sensitive to each other’s cultural expectations, whenworking at the operating level on a daily basis.

While this might seem like stating the obvious, real-lifeexperience shows that this is not something that comesnaturally to operating managers. Since globalisation has



been a relatively recent phenomenon in India, mostmanagers have not had the opportunity to get in-depthexposure to different cultures. Correspondingly, themanager from the other culture (say, from Europe orthe US or elsewhere) also has had no opportunity toobserve and understand how the Indian mind works.This results in a gap, which needs conscious effort fromboth sides to bridge. The following caselet will makethis point clear.

A Real-life Caselet: The Meaning of “Time”

In this example, a manager from a German companyhad given a project for the development of a new prod-uct to his counterpart in the Indian company (in the samegroup of companies) at a significantly lower cost. TheGerman was getting increasingly frustrated with re-peated delays in the delivery date. He took this to meanthat the Indian manager was not serious about his com-mitments, and that he was insensitive to the negativeimpact that was created with the end customer. In real-ity, the product was inherently complex, and repre-sented something of a challenge to the Indian team.

If the Indian manager were culturally more aware, hewould have said, “Look, this job is more complex thanwhat we have done in the past; but I am reasonably con-fident we can pull it off. Tell your customer this is beingattempted in good faith, and that it will take a few itera-tions before we get it right. We will keep you updatedon the progress, and let’s target six months for the wholeprocess to get completed.”

Instead, the Indian manager had said “yes” to the project,and had taken on an unrealistic deadline, because hewas operating in a culture where people were encour-aged to take on difficult challenges. The hard work be-ing put in was considered important; and the slippageof dates – while seen as not good – was not a matter oflife and death.

Where are the cultural differences? The Indian was com-fortable with ambiguity (of the outcome); the Germanwas not. The Indian saw “time” as something fluid andcontinuous; the German saw a finite date, and a discreteperiod. The Indian was used to dealing with other cus-tomers (Indian), who were, by and large, forgiving ofslippages. The German saw his (German) customerwalking away. The Indian valued the input, i.e., the ef-forts being put in to develop the product; the German

was focussed only on the output, i.e., the date of com-pletion. To the Indian, saying “no” or “may be” meantan admission of lack of capability and a perceived lossof “face”; to the German, receiving a “no” for an answerwould have been equally acceptable, and more profes-sional. He would have found another source for theproduct, and got on with his life.

Ultimately, the two sides evolved a working method forfuture instances, by which they agreed to discuss therisks and assumptions explicitly before the start of anynew project so that the ambiguity was sharply reduced,and everyone “was on the same page.” The commitmentto be made to the end customer was agreed to be heldsacrosanct.

Learning from such examples, Indian MNCs can pro-actively implement cultural sensitization programmesat both ends of the ocean, so that such gaps and prob-lems are minimised, if not avoided altogether. Manyspecialist organisations, which offer expert training inthis relatively new and fuzzy area, have come into ex-istence in recent times. Given that the financial logic formany M&A decisions is based heavily on achieving sig-nificant synergies in a short period of time, such train-ing should become a mandatory part of the corporateM&A playbook.

CONCLUSION

As more and more “Indian MNCs” go global, their man-agers would need to gear up, in a very short time, theknowledge base needed to face the new challenges theywould inevitably face in multiple global markets. IndianMNCs are beginning to show that they are second tonone in coming up with aggressive growth strategieswhich involve putting down roots — for the long term— in many countries around the world.

But the success of these strategies would depend on theability of their managers to understand the dominanceof the customer and the importance of the brand. Addi-tionally, Indian managers should develop a “globalmindset” that would enable them to understand andmanage cultural differences, and lead their multinationalteams to success. Ultimately, business people from dif-ferent cultures need to work together in an atmosphereof mutual respect and trust. This is where the cultural in-tegration models, and the need for a global mindset,come in as essentials.

68 GOING GLOBAL AND TAKING CHARGE: THE ROAD AHEAD FOR THE INDIAN MANAGER

Achal Raghavan is a strategy and business excellence consult-ant based in Bangalore. Till recently, he was Head–Interna-tional Operations at Sundram Fasteners Limited. A graduateof the Indian Institute of Technology (IIT) Madras and the In-dian Institute of Management (IIM) Ahmedabad, Raghavanbrings with him over 33 years of work experience in the auto-motive and engineering industries. During this period, he has

REFERENCES AND FURTHER READING

Ohmae, Kenichi (2003). The Borderless World, London, UK: Pro-file Books.

Walker, Danielle; Walker, Thomas and Schmitz, Joerg (2004).Doing Business Internationally, New Delhi: Tata McGraw-Hill.

Hampden-Turner, Charles and Trompenaars, Fons (1997).Riding the Waves of Culture: Understanding Cultural Diver-sity in Global Business, New York: McGraw-Hill.

Hofstede, Geert (2001). Culture’s Consequences: Comparing Val-ues, Behaviors, Institutions, and Organizations Across Nations,Thousand Oaks, California: Sage Publications.

Sirkin, Harold L; Hemerling, James W and Bhattacharya,Arindam K (2008). Globality: Competing with Everyone fromEverywhere for Everything, New York: Headline/BusinessPlus.

held Board-level positions for 10 years in organizations suchas Delphi Automotive Systems, India and Ingersoll-Rand (In-dia) Limited. He teaches as guest faculty at IIM Ahmedabadand IIM Bangalore, and also writes for management journalsand business newspapers.

e-mail: [email protected]

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

globalization.

— Kofi Annan