Here is a question that was posed to a panel of marketers recently; If “Made in Japan” – stands for quality, and, “Made in China” – stands for price then what does “Made in India” – stand for?
In the last few years, the world has watched in amazement and fascination as Indian companies strode on the world stage making a number of foreign acquisitions. Our track record in M&A has not been great but that is in keeping with the global norm. We are as good or as bad as international companies; just 3-4 companies out of every 10 are successful in delivering share holder value.
Some of our big acquisitions in the last five years include Tata Steel buying Corus, Tata Motors buying Jaguar and Land Rover, Tata Tea buying Tetley, Taj Hotels buying international properties, Hindalco acquiring Novelis and Bharti Airtel buying Zain.
Is this a signal that the ‘Made in India’ tag too has come of age?
Brand India first caught global attention with the IT companies, Infosys, TCS and WIPRO gaining momentum with their work related to Y2K. Since then the IT brand is well established, but in the “low-value added” end of the market. This is the key challenge for Brand India; it is seen as good at “affordable products” but not with any leading technology. Even in the case of Jaguar, Tata Motors bought both the brand and innovation pipeline. They did not export the innovation from India. Mahindras were able to develop an affordable SUV – the Scorpio – as they designed it in India at one fourth the design cost. They are now able to export this to other emerging markets but do not seek to compete in the premium global SUV market.
Take the TAJ hotels abroad; in India they are the epitome of luxury and service. Internationally, however, the TAJ acquired properties are nowhere near the top end, they are in the middle league.
Another export from India is “Good management talent.” IIT graduates are well known in every corner of the world especially in Silicon Valley. And there are several Indian managers who have made their mark in international board rooms. Multinationals like Unilever and Citigroup were amongst the first to spot and leverage Indian talent globally, and today this is being done by many companies.
Over the last decade, India has come to stand for AFFORDABLE Products, and Quality GLOBAL MANAGERS. . .
So can India make successful global brands in the future? Some Indian brands are finding markets in other countries; a few companies have been successful in leveraging their scale in India to be low cost operators in other markets a la Mahindras with the Scorpio. Or through tackling niche markets globally that other MNcs are not focused on, for example Marico and Godrej. They have taken their brands and products to foreign markets and focused on niche segments that are too small for the big multinational companies to serve.
While these brands are successful they remain niche brands serving small consumer segments. Indian companies will find it very difficult to truly build a global brand till they invest in technology like Samsung and LG. Indian spend on R&D is about 0.9% of GDP.
This compares with China at 1.5% of GDP which in absolute terms is second to the US! South Korea spends about 3.4% of GDP, Japan about 3.5% of GDP, and the US about 2.8% of GDP. It almost appears that you need to spend about 3% of GDP to be world class leader in technological innovation.
China, like Korea and Japan, started with companies that used scale to deliver low cost manufacturing. However, a number of Chinese companies are now moving up the technology chain and providing new innovations to China and to the world. BCG recently published a list of the 50 most innovative companies in the world, four of these were Chinese (none were Indian). These were BYD, Haier, Lenovo and China mobile.
While you must have heard of the last three, BYD is an interesting case study- it beat Toyota, GM &Nissan to market with a hybrid car. It has now launched a full electric car with a range of 300km based on its unique battery which costs 50%less than a lithium iron battery and lasts twice as long, and the battery fluid is nontoxic- the CEO drank it in public!
So China will surely develop global brands as Japan and Korea did. It is important to emphasise here that despite the acquisitions, the Tata name doesn’t appear either on Jaguar & Land Rover or on Tetley tea. We need to invest in R&D before ‘Made in India’ tag gains recognition and respect.