October 4, 2005

Indian Corporates going global

The list of Indian companies going global is expanding rapidly. I am not referring to the IT services /BPO companies which had a global model to start with. I am referring to companies like asian paints, Tata motors, Auto component industries, Pharma companies like Ranbaxy and banks like ICICI  etc.

Clearly the factors for success in the global market would be different from those in India (more in some industries than other). It is difficult to come up with some unifying logic on the factors as each company, its market and strategy is different.

A company like asian paints is expanding in countries like Singapore, Thailand etc but avoiding the developed markets. It is leveraging its capabilities in distribution, channel management, sourcing but not extending its brands. On the other hand ICICI targeting the developed countries, but specifically Indians. It is leveraging its brands, technology etc to expand in these markets.

The common thread I have been able to see among these early globalisers is that these are successful Indian companies who are leveraging their existing capabilities into these global markets. However these companies appear to be defining their strategy clearly by identifying a niche in the global markets and attacking that niche with the distinct capabilities they already have.

For example, Ranbaxy has used its reverse engineering skills and low cost production base to attack the generics market (although some of these pharma companies are getting into drug discovery too).

Auto component companies are using the low cost and engineering talent to become the sole / preferred suppliers for Global auto companies. Another interesting point I noted was that most of Auto component companies have their own niches within the product groups.

I personally think understanding and evaluating the strategy of these companies for these Global markets would be very critical to come up with a proper valuation and a buy/ pass decision.

Any hasty / overly optimistic assumption would mean that one would end up paying for the likely growth potential with no margin of safety if the market also believes in the same thing

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