accenture india goes global
TRANSCRIPT
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How cross-border acquisitionsare powering growth
India goes global
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Executive Summary
The India story has seen a profound
shift in gear and direction during2006. While in recent years mostmedia references to Indias growth
have focused on the sub-continentas a destination for outsourcing andinvestment, this year has seen the
arrival of India as a shaping force onglobal markets. This is particularlyevident in the powerful new trend
towards overseas acquisitions byIndian companies.
In 2006 Accenture conducted a uniquesurvey of key industry players inIndia that looked into the imperatives
driving globalisation. This survey, inconjunction with wider economicanalysis, has prompted this report.
It outlines the engines for the cross-border expansion of Indian companiesand details the opportunities and
challenges ahead.
Our analysis strongly suggests that
the main factor driving Indian cross-border mergers and acquisitions (M&A)is the search for top-line revenue
growth through new capabilities andassets, product diversification and
market entry. This trend is not driven
purely by opportunistic factors: Indiancompanies are in many cases motivatedto look abroad in response to newly
competitive, complex or risky domesticmarkets or to find capabilities andassets that are lacking in India.
The steep increase in the numberof major cross-border transactions
in recent years - from 20 in 2002to more than 80 predicted in2006 - has been facilitated by the
relaxation of regulations on overseascapital movements as well as a moresupportive political and economic
environment, including deepercurrency reserves, and easier accessto debt financing, both at home and
from international banks.
This M&A trend is a key factor helping
Indian companies to emerge on theglobal stage. Six Indian companiesfeature in the Fortune Global 500
list of the biggest companies inthe world. These are Indian Oil,Reliance Industries, Bharat Petroleum,
Hindustan Petroleum, Oil & NaturalGas, and the State Bank of India.
Based on current growth and M&A
trends, we would expect this numberto double by 200.
The strategy by which many Indiancompanies are expanding globally isalso distinctive. As Indian companiesare relatively small by the standardsof global multinationals, their cross-border acquisitions also tend to besmaller. These deals are thereforeoften carried out as part of a broaderglobalisation drive involving a string
of strategically-targeted acquisitions.This is particularly the case forIndias larger corporate groups, forexample Tata, that look to strengthenspecific parts of their value chainand develop globally integratedofferings. The locations of theacquisitions also reflect the strategiesof Indias globalisers. Attractedby the markets and higher-valueofferings of developed economies,Indian companies are making the
vast majority of their transactionsin North America, Europe and themore developed economies in Asia,with transactions equally distributedbetween these locations.
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Indias current success in overseas
acquisitions is fuelled by a newclass of business leaders. Theconfidence within the Indian businesscommunity, combined with its naturalentrepreneurial zeal and intuitive easewith global business models, creates aformidable force. This report, based onAccentures recent survey and widereconomic analysis, identifies fourkey imperatives for Indian companiesconsidering overseas acquisitions:
Maintain clear but flexibleorganisational structures andaccountabilities
Conduct deep and wide duediligence
Take a strategic approach tolocation decisions
Ensure commitment andcommunication from leadership.
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1Whats the deal?
Indias economic liberalisation in 99
sparked fears that the country wouldbe overrun by foreign multinationals.However, Indian companies have notonly managed to fight off competitorson their home ground, they also havetaken the commercial battle abroad.In the recent Accenture study Indiameets the World, 95 percent ofIndian respondents highlighted theimportance of going global, with 62percent seeing this as an overridingobjective driving strategy. Moreover,
85 percent of respondents identifiedacquisitions or joint ventures asthe preferred approach to thisglobalisation. A combination offactors, sparked by legislative reformsbeginning in 999, has led to aremarkable surge in activity by Indianbusinesses abroad.
In 2006 there has been a flurry ofmedia interest in Indias positionon the world stage, focused on the
increasing number of cross-bordermergers and acquisitions. More Indiancompanies are acquiring firms abroad,and are doing so more frequently. Thetotal number of cross-border M&As
until August 2006 was 8 percent
of the figure for the whole of 2005.Indian companies made 4 overseasacquisitions, compared with 42 dealsat home, in 2005. The number ofdeals has increased from 0 in 995to 7 in 2000, and is predicted to be8 in 2006. At current growth ratesthe number of deals could almostdouble by 200. About three quartersof acquisitions conducted by Indiancompanies since 200 have beencross-border. In the first 0 months of
2006 India was responsible for M&Adeals worth US$2 billion.
Moreover, Indias cross-border M&Aactivity is anticipated to acceleratedramatically in the immediate future.A recent Grant Thornton study foundthat 94 percent of Indian companiesthat expect to do a deal in the nextthree years expect it to involve foreignacquisitions.2
As Indian companies mature, overseas
acquisitions offer the most tangibleevidence yet of their newfound readiness
to compete on the global stage.
* Annual forecast for 2006 based on data for first 7 monthsSource: Accenture analysis of Thomson Financial data
Figure . India cross-border M&A deals
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Numberofcross-borderM&As
Indian companies are going global with a series ofbold acquisitions.
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The need to capture new
markets
Some 8 percent of participants in
the Accenture study said that a keymotivation for going global was tofind new markets to sustain top-line
growth. Entry to overseas markets viaM&A may be attractive for reasons
that include increased proximityto customers, access to resources,competition at home, or domestic
regulatory barriers.
From 995 to August 2006, 29 percentof Indian cross-border M&As occurred
in the European Union and 2 percentin North America (see Figure 2). Thesedeveloped economies are attractive
because of their large consumermarkets, transparent business
processes, rule of law, advancedtechnologies, skills and knowledgecapital. Moreover, as the markets in
these economies tend to be mature andsaturated, it often proves difficult for
Indian companies to gain market sharewithout acquisitions. In line with thistrend, the more developed economies
of Singapore, Hong Kong and South
Korea together account for 40 percent
of the cross-border acquisitionsconducted by India within Asia in the
first half of 2006.
Accentures research found that 76
percent of Indian companies thatexpanded abroad did so in orderto operate more closely to global
customers. Targeting established firms,particularly in developed economies,is an effective way to gain marketshare as well as provide a platform for
regional growth. Further, it is usuallyeasier to access other resources andbenefits once a company is established
in a foreign market. Once companieshave a foothold in a market, theycan explore further acquisition
opportunities to consolidate their localpresence, reach new customers, andacquire new sources of supply and
further assets and capabilities.
Less developed economies also
have their attractions, such as lowacquisition costs and favourable termsdue to a high demand for foreign
direct investment (FDI) and capital.The recent global spending spree by
Tata which has concluded deals in
the United States (Eight OClock), theUnited Kingdom (Tetley) and Thailand(Millennium Steel) - illustrates some ofthe strategic thinking behind locationdecisions: the groups industrial andmanufacturing businesses have clearlyfound it more attractive to targetacquisitions in developing markets,while the services companies in thegroup tend to seek opportunities indeveloped markets. Emerging marketsalso may be attractive to Indian
companies because they provide accessto consumer markets which are oftenoverlooked by Western firms.
In contrast to India, China has investedheavily in emerging economies inAfrica, Central Asia and Latin America,largely to secure the natural resourcesessential for its own economic growth.The urgency for India to step up itsefforts to do the same is quicklybecoming apparent. But competing
with China on this global hunt forresources will prove a major challengefor India which cannot begin tomatch its neighbours state-leveragedfinancial power.
2Why Indian companies lookbeyond their bordersThere is no doubt that Indias globalisers aresearching for expansion opportunities to strengthentheir offerings in India and abroad. There are fourimperatives driving this expansion:
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North America32%
Europe29%
Asia22%
Africa6%
Pacific5%
Middle East4%
South America2%
Figure 2. Geographic distribution of Indian cross-borderM&As by number of deals (995 to August 2006)
Source: Accenture analysis of Thomson Financial data
The need to expandcapabilities and assets
Many Indian companies are seekingto expand their distinctive capabilitiesby acquiring specific skills, knowledgeand technology abroad that areeither unavailable or of inadequatequality at home. Sun PharmaceuticalIndustries, for example, acquired AbleLaboratories Inc of New Jersey forUS$2.5 million in December 2005 togain its in-house manufacturing anddevelopment capabilities for genericpharmaceutical products.4
Indian companies are also using M&Asto assimilate technologies that havebeen tried and tested abroad. i-Flex,for example, the software companybased in Mumbai, recently paidUS$.5 million for the US companySupersolutions Corp5 to accesstechnology that is widely used in USbanks. At a broader organisationallevel, such acquisitions can also
improve overall standards of customerservice, processes and quality.
Our analysis suggests that M&Asare helping Indian companies to
capitalise on their traditional low-
cost structures. Indian companies areable to identify foreign firms thathave value-added offerings whichcomplement their own low-costproducts and services to create anefficient integrated global businessmodel - turning the conventionaldirection of such deals on its head.In this way they can more closelyreplicate the model of Westernmultinationals involving a mix ofhigh-value and low-cost capabilities
distributed across different geographiclocations.
In more direct ways, larger Indiancompanies also look to their foreignM&As to provide new assets. WhenTata Motors purchased the DaewooCommercial Vehicle Company in 200for US$88 million, it did so for thestate-of-the-art production facilitiesof the South Korean company.6Acquisitions are increasingly
prompted, too, by the need for lesstangible assets, brand equity inparticular. Welspun India bought an85 percent stake in CHT Holdings forUS$24 million to benefit from the
premium UK brand Christy,7 while
the Indian pharmaceutical giantRanbaxy Technologies acquired theFrench company RPG Aventis in 200for US$70 million to gain access to itswell-established and respected name.8
The need to expand productor service portfolio
Our analysis reveals that a significantnumber of Indian companies areendeavouring to increase their marketshare by building the size of their
product and service portfolios. This isparticularly true in the pharmaceuticalsector. Ranbaxy, for example, acquired8 generic drug patents from Spanishcompany EFARMES earlier thisyear.9 Similarly Nicholas Piramal, anIndian healthcare company, enteredinto a US$50 million, five-yearmanufacturing agreement with Pfizerto gain 2 products.4 Acting on asimilar imperative Sobha RenaissanceInformation Technology acquired
Billing Components to sell products inthe telecoms market; previously it had
provided only services.0
While these companies are purchasing
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particular foreign expertise to stay
competitive, a number of Indiancompanies are already competing ata global level and need acquisitionsto secure scale. This is a key driverbehind Indias latest and biggestcross-border announcement - theUS$8. billion bid by Tata Steel toacquire Corus a bold but necessarymove to stay competitive in the new,Mittal-Arcelor-dominated global steelmarket.
The pressures of domesticcompetition
As well as pursuing the desire toenter new markets for competitiveadvantage some companies arebeing pushed away from Indiaby increasingly stiff domesticcompetition. In some cases this hasencouraged companies to exploreopportunities in less competitivemarkets, thereby spreading their riskacross geographies.
Though Indias operating environmentis unrecognisable from that of adecade ago, some companies stilllook outside India to avoid domestic
obstacles. Indian pharmaceutical
companies, for example, often preferto carry out certain stages of clinicaltrials in developed markets becauseof the lag times that are inherent inIndias bureaucratic processes, despitethe other cost advantages of keepingthem in India.
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The surge in Indian M&A has not occurred within avacuum. A combination of economic, political andinstitutional factors have created a more conduciveenvironment for overseas acquisitions.
Creation of a favourable
political and economic
environment
The removal of policy and regulatoryobstacles has been an essential firststep in opening up global expansionopportunities for Indian companies.
The rhetoric and legislation of Indianpolicymakers has encouraged overseasexpansion. In January 2004, PrimeMinister Singh announced that
Indian corporates will hereafter befreely permitted to make overseasinvestments up to 00 per cent oftheir net worth, whether through anoverseas joint venture or a wholly-owned subsidiary.This will enableIndian companies to take advantageof global opportunities and also toacquire technological and other skillsfor adoption in India.2 In 2005, theReserve Bank of India (RBI), for the firsttime, allowed domestic banks to lend
money to Indian companies for overseasacquisitions. The timeline in Figure outlines some of the key Indian capitalcontrol policies that have facilitated theboom in cross-border M&As.
Economic conditions have also become
more favourable. As of June 2006,India had foreign exchange reservesof US$64.5 billion, compared withless than US$ billion in 99.Companies can therefore fundoverseas acquisitions more readily,
since the RBI has a greater capacity toconvert domestic currency to overseascurrency on their behalf.
Improving financing
conditions
Indian firms have traditionally
used large cash reserves to acquireforeign companies and targetedless expensive, distressed assets.Cash transactions are still relativelycommon, thanks to the positive cashflows of efficient Indian businesses.
However, as Indian companies havebecome more global in culture and asthe Indian banking system has becomemore sophisticated, M&A transactions
are increasingly financed via debt.Access to capital is also made easier
by the improvement in Indias countryrisk ratings. And the fact that certainIndian companies have credit ratings
higher than the sovereign rating
means that they have greater accessto capital in overseas markets. Abonus of this greater need to accessdebt financing will be to boost Indiassomewhat weak corporate debtmarket.
Since 2005, Indian companies havebeen permitted to fund foreign directinvestments using external commercialborrowing. As a result, more Indiancross-border deals are being financed,in whole or in part, by foreignbanks. In 2006, Tata Steel borrowedUS$500 million in Singapore in asyndicated loan involving 7 banksto fund growth and acquisitions inSoutheast Asia and China.4 In 2006,Suzlon Energy acquired the Belgiancompany EVE Holding, for US$565million; the deal was underwritten byBarclays Capital, Deutsche Bank andthe Industrial Credit and InvestmentCorporation of India (ICICI) Bank.
As India has become embedded inthe international finance system, therole of private equity players also hasincreased. In Grant Thorntons M&Astudy, 4 percent of the companies
3How India is helping itself
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that had conducted acquisitions
had used private equity investors.Moreover, 54 percent of those thathadnt used private equity investors inthe past were planning to use them inthe next few years.2
As deals get larger, particularly insectors like natural resources, it islikely that firms will finance moreacquisitions through leveragedbuyouts.
Surging business confidence
Something that cannot be illustratedthrough figures and examples is thepalpable sense of confidence that hasbeen instilled in the Indian businesscommunity.
Many Indian executives have longsince overcome cultural barriersthrough their experience workingin multinationals and many morethrough work in outsourcing, not tomention the vast number of Indians
who have studied abroad. All of thisprovides a level of comfort and easein conducting business globally andin taking a more global perspective ofbusiness opportunities.
Encouraged by visibly successful
deals around the world, Indianbusinesspeople are thriving inan environment where theirentrepreneurial zeal and enthusiasmis being recognised globally. Nameslike Ranbaxy and Mahindra andMahindra are no longer only familiarto industry insiders. They are globalbrands, making waves on globalmarkets. India has joined Chinaon the agendas of multinationalboardroom strategy meetings and
conferences around the world, andno longer simply as an outsourcing orinvestment destination.
This confidence is not restricted toIndias large companies with manysmaller firms also taking to the globalmarketplace. The entrepreneurialreputation of Indian businesspeopleis now visible to more and morecompanies around the world as Indianfirms of all sizes reach outside theirtraditional borders to discover the new
opportunities on offer.
Figure 3: Key Indian capital control policies
1999
Foreign ExchangeManagement Act: Regulatingforeign exchange transactionsincluding foreign investment
Indian companies allowed
US$15 million in overseasinvestment
2002
Competition Act: Law toensure free and faircompetition in market
Annual limit of overseasinvestment raised to US$100
million (up from US$50million)
Indian companies in SpecialEconomic Zones can makeoverseas investment withoutthe restriction of US$100million
2004
Indian companies can investup to 100 percent of their networth even if the investmentexceeds the previous US$100million ceiling
Indian companies can investor acquire abroad in areasunrelated to their business athome. Can be overseas jointventures or wholly ownedsubsidiaries
2001
Professional servicescompanies and registered
partnership firms allowed tomake overseas investments
Companies can make overseasinvestment up to US$50million under automatic route
2003
Indian companies allowed toinvest up to 100 percent of
net worth in a foreign entity(up to US$100 million),through the automatic route
Indian companies maypurchase foreign exchange upto 100 percent of their networth as of the date of theirlast audited balance sheet
2005
Special Economic Zones (SEZs)Act: Provides for establishment,
development and managementof SEZs to promote exports
Indian companies are allowedto fund foreign directinvestment using externalcommercial borrowing
2006 onwards
Increased liberalisationexpected
Source: International Monetary Fund Annual Reports on Exchange Arrangements and Exchange Restrictions, 996-2005
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Deal sizes are increasing but
they still have room to grow
The value of Indian cross-border M&Adeals in the first ten months of 2006was US$2 billion, compared withUS$7.8 billion in the same periodthe previous year. This was partlydue to the higher number of large-value cross-border deals. In June2006 alone, 0 deals had a combinedtransaction value of US$.5 billion.Acquisitions like Dr Reddys purchase
of Betapharm, the fourth-largest drugmanufacturer in Germany, for US$570million in February 2006, and AbanLoyds acquisition of the Norwegiancompany Sinvest for US$446 millionmade headlines around the world. TataSteels US$8. billion bid for CorusSteel represents India Inc.s boldestoffer to date.
The average deal size also hasincreased from US$2 million in2005 to US$47million in the first half
of 2006.
Despite this trend, however, the sizeof Indias acquisitions is still roughlyhalf the size of average global M&A
deals (see Figure 4). Indian companies
have tended to follow a string ofpearls approach - making a series ofsmall transactions, each with its ownstrategic rationale, rather than simplybuying up expensive competitors.This strategy is different to Chinasexpansion which tends to be drivenby large-scale, state-sponsoredorganisations that often target largenatural resource supplies in developingeconomies.
Acquisitions are helping Indiancompanies to emerge as significantplayers on the global stage. SixIndian companies feature in theFortune Global 500 list of the biggestcompanies in the world. These areIndian Oil, Reliance Industries, BharatPetroleum, Hindustan Petroleum, Oil& Natural Gas, and the State Bank ofIndia. Based on current growth andM&A trends, we would expect thisnumber to double by 200.
4Indias evolving storyAs overseas acquisitions by Indian companies becomemore frequent, our analysis suggests that a distinctivepattern is beginning to emerge. Indian companiesare relatively small by the standards of globalmultinationals, so their cross-border acquisitions alsotend to be smaller. These deals are therefore often
carried out as part of a broader globalisation driveinvolving a string of strategically-targeted acquisitionsacross an increasingly diverse range of industries. Thispattern exhibits the following trends:
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AverageM&Adealsize(US$millions)
0
20
40
60
80
100
120Global
India
Jan - June 20062005
Figure 4: Average M&A deal sizes, India versus global
Source: Accenture analysis of Thomson Financial data
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The diversity of targetindustries is increasing
The dominant industries involvedin Indias cross-border merger andacquisition activity between 995and 2000 were consumer goods andservices, energy, pharmaceuticals andhealthcare, which together accountedfor about 66 percent of cross-borderM&A activity.
At the start of the century, Indiasbusiness environment changed with
the relaxation of government policies,the boom in the IT software andservices sector, and the improvedliquidity of the Indian stock market. Asa result, more companies from a morediverse range of industries have beenable to look abroad for acquisitionopportunities. Since 2000, industriesas diverse as forest products, humanresources and market research aregetting involved in cross-borderacquisitions. The most notable
increase has been in the IT servicesand electronics & high technologyindustries, which account for morethan half of cross-border transactionspost-2000.
The motivation varies for each
company, but trends can be identified
within industries facing similar
challenges and opportunities. For
example, the IT industry typically
searches for access to customers and
intellectual property, while financial
service companies tend to seek targets
that will improve their regulatory,
governance and licensing status.5
Figure 5. Breakdown of Indias cross-border M&A activity by industry group
0
20
40
60
80
100
120
140
160
180
200Resources
Professional Services
Products
Financial Services
Communications and High Technology
2006*20052004200320022001200019991998199719961995
Numberofcross-borderM&As
* Annual forecast for 2006 based on 7 months of data from Thomson Financial
Source: Accenture analysis of Thomson Financial data
Communications & High Technology
Communications, Electronics and High Tech
Financial Services
Banking, Capital Markets, Insurance
Products
Automotive, Consumer Goods and Services,
Health and Life Sciences, Industrial Equipment,
Retail, Transportation
Professional Services
Consulting, Financial analysis, IT Services,
Outsourcing
Resources
Chemicals, Energy, Forest Products, Metals,
Mining, Utilities
Breakdown of industry groups
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The challenges to increased
cross-border expansion
Asked what they see as the critical
success factors and challenges of going
global, 60 percent of Indian business
leaders selected the management
mindset or process immaturity
of Indian businesses as the main
constraint. This finding suggests that
there is scope for far greater global
growth as more Indian managers are
exposed to global operations and
gain confidence to make the movethemselves. It also highlights the need
for a dedicated management team to
give clear strategic direction to any
acquisition and integration process.
The next most common challenges
identified were regulatory factors and a
lack of knowledge of foreign countries.
These issues must be resolved before
making any foreign acquisition
decisions and represent a fundamental
part of the due diligence process.
How these challenges can
best be overcome
Our analysis of the opportunities and
challenges of Indias global expansion
identifies four imperatives for
Indian businesses looking to acquire
companies abroad:
. Flexible organisation structuresare essential
The execution of complex M&As
often intensifies the incentives on
leaders to maintain a tight-hold ofthe organisational reins. Paradoxically,
successful integration actually requires
a much more flexible and fluid
approach by management to ensure
the ability to adopt cultural, social,
and other factors that vary acrossmarkets. Accenture research among
India business leaders has identified the
development of flexible organisational
structures as the most critical capability
for the success of globalisationstrategies, mentioned by 8 percent
of respondents. Establishing flexible
but clear structures and processes and
assigning leadership responsibilities
has to form an important part of pre-
integration planning, and includescareful consideration of personal andcross-cultural issues. Indias family-run companies sometimes limit controlover information and decision making
to a small number of people. Thistendency is often heightened in thecase of decisions as sensitive as cross-border acquisitions. This underlines theimportance of involving key managersat an early stage in deals.
2. Due diligence must becomprehensive
The due diligence for cross-bordertransactions needs to cover unknownmarket landscapes as well as additionalfactors like governance, legislativeand regulatory rules and processes.
Complying with regulations inoverseas markets was the second mostcommonly highlighted capability forsuccess in Accentures globalisation
questionnaire, identified by 77 percentof respondents. For example, the
extent to which environmental laws areadhered to in India varies from stateto state, but many other countries
5Indias way forwardWhile carefully-constructed acquisitions are alreadycreating real value for Indian companies, there are manychallenges ahead. Our analysis suggests that a successfulM&A strategy must concentrate on four key areas.
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have stringent penalties for even
minor infractions, including possiblefacility closure. Indian companiesintending to export their processes toacquired operations must be mindfulof regulatory implications. Wherepossible, Indian companies shouldtreat the governance standards ofcompanies they are acquiring as anadditional asset. For example, thoughnot strictly an Indian merger, thewell-reported Mittal-Arcelor deal wascarefully constructed to allow the new
company to benefit from Arcelorshighly evolved corporate governanceand operating structures.
In terms of scoping the competitivelandscape, cross-border due diligenceshould also include forward-lookinganalysis to anticipate the competitiveresponses from both the host marketand other companies entering fromother countries - India is not the onlycountry going global.
. Location decisions need astrategic approach
In our attitude survey, Copingwith country risks in overseasmarkets was selected as a criticalcapability for success by 76 percentof respondents. With potentialacquisition targets often spreadthrough multiple countries, care mustbe taken to incorporate a wide rangeof country-specific factors into thedecision-making process. For example,
decisions should take into accountlonger-term regional growth prospectsand political ramifications.
Pre-integration planning shouldinclude an analysis of the expectedcompetitive advantages of eachlocation to support decisions onwhere to base functions for the
joint entity. These plans shouldstrategically manage how risk isspread around different locations.For example, it may be preferable to
base intellectual property, researchand development and manufacturingin different locations, accordingto where competitive advantages
lie. Issues such as which locations
standards to harmonise to andwhat organisational and governancemodels to use should also beassessed. In some cases, it may bebest to leave the operating model ofthe acquired entity untouched andallow it to carry on with business asusual, just under new ownership.
Particular attention should be paidin cases where political sensitivitiesor historical tensions are important
factors. Developed economiesfeel increasingly threatenedby competition from emergingeconomies such as China andIndia. Political relations becomean important part of marketentry strategies as protectionistsentiments harden. Chinas recenttrade quarrels with the EuropeanUnion and United States are cases inpoint, and India is not immune fromthis trend.
60%
42%
35%
17%
11%
Management
mindset or process
immaturity
Regulatory factors
Lack of knowledge
of other countries
Lack of funding
Inadequate support
from shareholders
Figure 8. Key challenges companies face when going global
Note: The percentage figures represent the percentage of respondents rating each itemas or 2 on a scale of -5 (where =critical, 5=not critical)Source: India Meets the World, Accenture, September 2006
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Indian companies looking to gain
market share in foreign countriesshould watch how previous Indiancompanies have fared in theirattempts, noting their experiencesand avoiding their mistakes. Thisallows faster and cheaper entryinto the foreign marketplace oncethe investment decision is made.
Indian companies acting as first-movers should look to secure anearly advantage by building brand
and credibility quickly.
4. Strong communication isfundamental to success
A successful integration processrelies on effective, consistent andregular communication from companyleaders to all constituencies, includingcustomers, employees, regulators,shareholders, partners, suppliers andcompetitors. Internal stakeholdersshould feel that they are positively
contributing towards a better future,one in which they themselves willbenefit. Indias family-run structuresoften have close, focused leadership
teams which can build a strong sense
of commitment. If communication
channels and organisational structuresare managed carefully, strong familyleadership can instil a more inclusiveand embracing culture that supportsthe integration process. The acquiringcompany should also manage externalcommunications to position itself asa positive new force, rather than anunwelcome intruder vulnerable tocriticism from the media, politiciansand wider society.
The next chapter...The speed of Indias entrance intoglobal markets illustrates the naturalurge of Indian businesses to take partin the global economy. Globalisationhas allowed the country to achievegreat success in low-cost sourcing andservices, but globalisation promisesto deliver much more for India. Thenext challenge is to build higher-valuemarkets and to give Indian companiesthe capabilities to contend against
international competitors.
The increasing scale and geographicscope of investment by Indiancompanies will in turn be a catalyst
for wider industry and economic
change, such as:
Consolidation in key industries,
e.g. information technology,
pharmaceuticals, steel
Intensification of competition in
many industries as Indian companies
apply their low-cost business models
in Western markets
Greater interdependence between
economies as investment flows
become more complex and
multidirectional
After years of anticipation, Indian
companies have finally arrived, and
seem set to leave a lasting impression
on global markets and competition in
the decade ahead.
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India Meets the World, Accenture,September 2006
2 Corporate Indias voice on The M&A
and Private Equity Scenario 2006,Grant Thornton, 2006
Accenture analysis of ThomsonFinancial data
4 India Inc. on global shoppingspree, The Financial Express, June28, 2006
5 i-flex board okays SuperSolutionsbuy, The Hindu BusinessLine,December 7, 200
6 India Inc goes global, Asia TimesOnline, November 29, 2005
7 Welspun buys UKs Christy, TheEconomic Times, July 4, 2006
8 Ranbaxy buys Aventis generics unitin France, The Hindu BusinessLine,December 4, 200
9 Ranbaxy acquires GSKs genericsbusiness in Spain, The HinduBusiness Line, July 9 2006
0 Bangalore technology companybuys German telecom softwarecompany for over US$ million,The Economic Times, July 2006
Corus accepts 4.bn Tata offer,BBC News, Friday, 20 October 2006
2 Indias Outward FDI: a giantawakening?, United NationsConference on Trade andDevelopment, 2004
Going Global: India Inc. in UK,India Brand Equity Foundation, 2006
4 India finance: Banking on growth,Economist Intelligence Unit, May ,2006
5 Some M&A gyan for Indian cos,The Hindu Business Line, January 2,2006
Editor
Armen Ovanessoff
Project team
Soma Dey, Olivia Donnelly, Armen
Ovanessoff, Mark Purdy, BV Sriraman
Senior executive review group
Sanjay Dawar, Anish Gupta, Sanjay
Jain, Harsh Manglik, Sadeesh
Raghavan, Mark Spelman
We would also like to thankTim Adams, Henry Egan, Torbjrn
Fredriksson, Jeffrey Playford,
Carter Prescott, Rowena Rees,
Yukiko Rivera and Meng Yen Ti for
their contributions to this study.
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