Académique Documents
Professionnel Documents
Culture Documents
Submitted By
Ashish Bhasin
Roll No 8
MBA PT 2012-15
Introduction:
Globalisation is the new buzzword that has come to dominate the world
since the nineties of the last century with the end of the cold war and the
break-up of the former Soviet Union and the global trend towards the
rolling ball. The frontiers of the state with increased reliance on the
market economy and renewed faith in the private capital and resources, a
process of structural adjustment spurred by the studies and influences of
the World Bank and other International organisations have started in
many of the developing countries. Also Globalisation has brought in
new opportunities to developing countries. Greater access to developed
country markets and technology transfer hold out promise improved
productivity and higher living standard. But globalisation has also thrown
up new challenges like growing inequality across and within nations,
volatility in financial market and environmental deteriorations. Another
negative aspect of globalisation is that a great majority of developing
countries remain removed from the process. Till the nineties the process
of globalisation of the Indian economy was constrained by the barriers to
trade and investment liberalisation of trade, investment and financial
flows initiated in the nineties has progressively lowered the barriers to
competition and hastened the pace of globalisation
Impact on India:
India opened up the economy in the early nineties following a major crisis
that led by a foreign exchange crunch that dragged the economy close to
defaulting on loans. The response was a slew of Domestic and external sector
policy measures partly prompted by the immediate needs and partly by the
demand of the multilateral organisations. The new policy regime radically
pushed forward in favour of a more open and market oriented economy.
Indians have been quick learners in internationalization both in scale and
speed. With the domestic market fast catching up with the developed market,
the learning has had a multiplier effect. With booming local economies, the
emerging market multinationals are reaching for the stars .
India is Global:
For Asia and around the world, India is not simply emerging. India has
emerged US President, Barack Obama addressing the Indian parliament on
8th November, 2010. In the aftermath of the global financial crisis, the
Western economies are under pressure as their growth has either stalled or
drastically slowed down and there is growing awareness that their dominance of
the global economy might be under serious threat. They increasingly see their
future in the emerging markets. At the same time, major emerging economies,
including China and India, are powering ahead and in the process are redefining
the global economic landscape. Multinational companies from emerging
economies, particularly from Asia, now account for 70 of the Fortune Global 500
list and according to the United Nations Conference on Trade and Development
(UNCTAD), today account for over 16% of outward foreign direct investment
(FDI).
With its increasing integration with the international economy and the
burgeoning
middle class, Indian economy offers a fertile ground for
international expansion for Western multinationals. As we see, Indian firms are
fast internationalizing by investing abroad and employing locals. According
to a Columbia University study, Indian firms have invested over $75 billion
overseas in the past decade. A joint study by the University of Maryland, IndiaUS World Affairs and the Federation of Indian Chambers of Commerce and
Industry reported that over the last five years, Indian FDI projects in the US
created about 60,000 jobs with investment worth $26.6 billion. Similarly,
according to the Confederation for Indian Industry (CII), Indian firms are
the second highest foreign employers in Britain, with Tata, the UKs largest
foreign investor, employing over 47,000.
Indias two most well known and established companies, the Aditya Birla Group
and the Tata Group. Both of them have a strong Indian heritage and have
contributed immensely to the modernization and globalization of India. They
are firmly embedded in the psyche of the nation and instead of resting on
their past laurels, they have reinvented themselves as modern multinational
corporations in a range of sectors, both manufacturing and services.
The founder of Birla Corporation, Ghanshyam Das Birla, was a close
associate of Mahatma Gandhi and the founder of the Tata Group, Jamshedji
Tata was known for his vision for India and established the nation building
industries, from steel to chemicals to cement and aviation. While both the
companies are still India centric, they have expanded overseas rapidly and
successfully.
Aditya Birlas internationalization journey began in South East Asia in line with
Indias so- called First Wave of internationalization in the 1970s when the
Government of India actively encouraged South-South cooperation in foreign
investment. At the time, the major Indian industrial houses, including Tata
and Birla, opted for Greenfield investments by pursuing joint ventures with
firms in the host countries and leveraged on their capability in reverse
engineering by replicating foreign technologies in cost efficient modes,
mostly in the manufacturing sector. While 90% of Aditya Birla Groups income
comes from the commodity business, over 60% of its revenues are generated
outside India.
However, Birla chose the acquisition route to expand downstream
aluminum business (Novelis in the USA) and the BPO business (Minnax in
Canada) as these acquisitions offered big and sticky clients with marquee
names. The current Chairman, Kumarmangalam Birla set the goal in 2003
to join the Fortune 500 league and having achieved that his next goal is
to join the Fortune 150 league which meant tripling the businesses.
The international character of the Tata Group was evident more than 130 years
ago when its founder Jamshedji Tata employed foreign managers in Tata Steel
and Tata Electric. The present Chairman, Ratan Tata believes in the same
philosophy. He says one of the reasons I have been keen to find a way to
really prepare the organization proliferated with other nationals is nothing
changes the perspective quicker or deeper than in fact having to have a
coexistence of cultures.
Whilst like the Birlas, the Tata group is a conglomerate with multiple business
lines, here we focus on Tata Motors which has a dominant market share
in trucks in India and the neighboring countries, including South Africa. Its
product profile has traditionally suited the bottom of the pyramid emerging
markets which is now changing with new world class products, such as
pick-up trucks and prestige cars, being added. Global auto companies that are
coming to India are forging collaborations with Tata Motors. For example, the
company has a joint venture with Marco Polo in Brazil for bus body building and
distributes Fiat cars in India. It has been in the car market for only 10 years and
already boasts an impressive range of cars from Nano, the worlds
cheapest car to prestige global brands with the acquisition of Jaguar and
Land Rover (JLR). It also recently acquired the truck business from Daewoo.
Lack Of Innovation and Support : Indian firm had never been leaders in
Innovation and research, which is challenge to acquire firm which are
innovation centric
Export procedures. One of the most cited obstacles with regard to exporting
concerns the time and paperwork required to comply with foreign and domestic
market regulations. Governments do not solely impose these procedural
requirements. Also independent organizations
such as banks, shipping
organizations and insurance companies, have their own procedures. A firm
that wishes to enter the export market or intends to increase its export activity
will have to acquire the knowledge and skill to deal with administrative
procedures. In particular for inexperienced managers foreign documentation and
paper work may appear very difficult to cope with
Suzlon today
Suzlon has a global market share in the wind-turbine business of about 10.5%
(BTM, 2007). The company operates in 21 countries (Annual Report 2008, p.
3) and employs almost 14,000 people from 15 nationalities The company
derived 58% of its revenues in FY 2008 from outside India against 34% the
earlier year. The USA accounts for almost 20% of total revenues, while Europe
and the rest of the world together account for about 27% of revenues.
As part of its internationalization strategy, in 2006 the company
acquired Hansen Transmissions of Belgium for USD 565 mn . Hansen was the
worlds second largest gearbox maker and Suzlon expects that the acquisition will
give it manufacturing and technology development
capability
in
wind
gearboxes, and enable an integrated R&D approach to design more
efficient wind turbines. In May 2007, Suzlon acquired a 33.6% stake in
REPower for USD 698 mn . RePower is one of the worlds largest manufacturers
of offshore and onshore wind turbines and the acquisition is expected over the
years to add to Suzlons technological capability, especially in the production of
large wind turbines
Company Structure
Suzlons global marketing center is located in Amsterdam, Netherlands; the
international business headquarters are based out of Aarhus, Denmark; while the
Indian operations headquarters are in Pune, India As on 31 March 2008, Mr. Tulsi
Tanti was the Chairman of the Board at Suzlon, while Mr. Toine van Megen, a
Dutch national, was the CEO of the wind energy business at the company. In a
subsequent reorganization
in December 2008, Tulsi Tanti retook direct
operational charge of the companys operations to better deal with the difficult
business environment, while Mr. van Megen shifted back to supervisory
responsibilities at the Group level Suzlon seems to have been moving towards
increased decentralization in the last few years. Until a few years back, Suzlon
was a promoter-driven company.
As a first step towards empowerment and increasing accountability, the
promoters created strategic business units (SBUs) and appointed nonpromoter heads of the SBUs. This change led to decentralization in the
company. Additionally, individual functions got embedded in the SBUs and
the whole corporate paradigm shifted to the SBUs. Within the SBUs, there was a
matrix structure, with about 70% weight to line manufacturing and about
30% to the functional heads. This led to a need for balance, but since people with
existing experience within the company were sent to the SBUs, there was a
common understanding of overall priorities, which facilitated the change to the
SBU and matrix structure.
The chief executive in Amsterdam is empowered to hire his own team for the
international operations. Some functions like CFO and CHRO are located at
Amsterdam. The choice of location is decided upon what makes best sense for
the business and what makes for the most effective way of working. Each
country is responsible for creating its own deployment strategy, team, etc led
mainly by respective country heads who could be of any nationality.
Promoters have steadily decentralized decision-making autonomy to the global
management team. This change to being more international is also changing the
company culture to being more diverse. Professionalization is increasing at
Suzlon.
Human Resources
Suzlon employs more than 14,000 people from 15 nationalities is a very strong
financial brand. The challenge lies in making it an employment brand. Green
industry and the companys growth and success story give the company a
strong pull.
Leadership
After envisioning the future potential for wind energy, Tulsi Tanti and his brothers
helped develop a business model offering end-to-end and hassle-free
solutions, and worked towards impressing policymakers in India, and companies
in India and abroad to go for their wind-energy solutions . Suzlon has grown at
twice the industry average over the last few years .Recognizing his efforts and
success in the area of fostering renewable energy, Like many family-owned
businesses in India, leadership at Suzlon has so far been centered around
the family patriarch Mr. Tulsi Tanti and the Tanti family. But, recognizing
the importance of introducing professional management and people with
international experience in the business, the family appears to be moving
into the background and focusing on more strategic roles according to Rao. As
on 31 March 2008, the company had a Dutch national as its CEO. The Group
Executive Council led by the CEO reports to the Group Supervisory Council led by
the promoters of the company in order to ensure effective corporate
governance. The Board of Directors at Suzlon has a couple of members
with several years of international banking experience.
Culture
Suzlons corporate culture is undergoing a certain transformation as the
company internationalizes. For instance, there has been an increasing call for
greater transparency in decisionmaking as the company internationalizes, and
international employees are demanding greater empowerment. There is also a
need to substitute promoter involvement with process orientation. In order to
facilitate this change, the company is conducting programs for leadership
development at its Corporate Learning Center.
Conclusion
Suzlon appears to be transforming itself from a family-owned and family-driven
business to acquiring qualities of a professionally-run MNC. A part of Suzlons
success can be attributed to its being in the right place at the right time, in
terms of the timing of its founding and the sudden international focus on
renewable energy. At the same time, Suzlons strategy emphasizing aggressive
international expansion and organizational transformation might have played
a role. Key features of organizational transformation and excellence at Suzlon
include:
1. Decentralization and professionalization in its structure over the last year
2. Investment in international R&D and innovation
3. A change in focus towards performance-orientation in its HR and compensation
policies
4. Increased presence of international managers in its top management team
5. Efforts to emphasize the binding and motivating effects of corporate culture
While Suzlon has achieved been successful in the international environment over
the last few years, the fast growth track inevitably means that there will be
occasional challenges in managing this growth such as quality issues faced by the
company recently. To deal with such challenges, the company will have to work on
keeping its current spirit of growth alive while constantly focusing on upgrading its
organizational and operational excellence to world standards.
Some of the major patterns and conclusions that the study converges upon are
as follows:
From comparative to competitive advantage: With shift towards
advantages based on availability, lower cost and skills of the technical and scientific
manpower, Indian companies need to create complementary skills and the
success
are governed by competencies developed within a company and
aspirations of its top management.