Iim-K Ib-E 2021-22 Ab s21-22 Emerging India

Session 21-22
Global Strategies & Emerging Markets:

India
PGP 24 IB-E 2021-22 S21-22: Global

September 6, 2021 1
Strategies & Emerging Markets: India
Emerging Markets
As business origin
As business destination
PGP 24 IB-E 2021-22 S21-22: Global

September 6, 2021 2
Emerging Market Features
Income level GDP, population

Price level Cost of living, demand/supply factors
Price sensitivity Purchasing power, disparities
Supply bottlenecks Infrastructure, regulations
Socio-cultural factors Risk appetite, corruption
External factors Globalization, international agreements
Random factors Geopolitical, environmental
PGP 24 IB-E 2021-22 S21-22: Global

September 6, 2021 3
Global Product Life Cycle
Domestic
(Developed)
Market
International
Unit Sales
Developed Markets
Emerging
Markets
Introduction Growth Maturity Decline
PGP 24 IB-E 2021-22 S21-22: Global

September 6, 2021 4
India: Growth &
Business Constraints
Social constraints:
Lack of consistent
Corruption, caste-politics
forward-looking policies
& trust issues
Slow absorption of
Conservative approach
technologies: Agriculture
to investment & informal sectors
Constraints to labour
Constraints to supply:
productivity: Education &
Infrastructure & logistics
health
Institutional &
informational constraints
©2019-2021 P Rameshan
PGP 24 IB-E 2021-22 S21-22: Global
September 6, 2021 5
Indian Market: Metro’s Experience
Highly fragmented wholesale market without global

competition
International companies accounting for a tiny fraction of grocery
retail market relative to China, Russia & other emerging markets
Almost full traditional markets served by unorganized sector

while in Brazil it was nearly half
Retail market expected to grow rapidly
Lack of cold-storage infrastructure leading to wastage of fresh food
Mom-and-pop stores with limited unpredictable assortments
Strong growth, urban migration, rising living standards,

westernization urban practices & habits, & a fast rising consumer
spending suited Metro’s business
PGP 24 IB-E 2021-22 S21-22: Global

September 6, 2021 6
India as Global Business Destination: Perceptions*
Democracy is vibrant, govt. is highly bureaucratic; corruption is
rampant in state & local governments
A dynamic press & vigilant NGOs act as checks on politicians & companies
Restrictions on green-field investments & acquisitions in some sectors

make joint ventures necessity
Red tape hinders companies in sectors where the govt. allows foreign
investment
Some local design capability is available in product markets; IPR problems

exist with US in some sectors; regulatory bodies monitor product quality &
fraud
Suppliers are available; but their quality & dependability varies greatly
* Strategies That Fit Emerging Markets, HBR, June 2005, pp.9-10
PGP 24 IB-E 2021-22 S21-22: Global

September 6, 2021 7
Roads are in poor condition; ports & airports are underdeveloped
Consumers buy both local & global brands; global ad agencies are present,
but they have been less successful than the local ad agencies
The country has a highly liquid pool of English-speaking management

talent fueled by business & technical schools; local hires are preferred
over expatriates
TU movement is active & volatile, although it’s becoming less important;

TUs have strong political connections
Local banking system is well-developed; MNCs can rely on local banks for
local needs
Equity is available to local & foreign entities
PGP 24 IB-E 2021-22 S21-22: Global

September 6, 2021 8
VC is available in some cities & from the Indian diaspora
Financial reporting is based on common-law system; it functions well
Bankruptcy processes exist, but are inefficient; promoters find it difficult

to sell off or shut down sick companies
PSUs do not any more have a significant role in the economy unlike in
China
India is wary of FDI even by its diaspora; but it has many globally-
competitive private organizations
Private companies succeed on their own despite the govt., unlike in

China (where success is linked to govt. connection)
PGP 24 IB-E 2021-22 S21-22: Global

September 6, 2021 9
India’ Business Environment: EY Survey 2014
Fourth largest FDI recipient in projects started in 2012
FDI diversification: Middle-east & Southeast Asia as new sources
FDI still focused on major traditional cities in India
Technology, media & telecom most attractive; infrastructure emerging
Wave of competition from China, Indonesia, Philippines & Vietnam
High expectations of 2020 about Indian economy (? Covid disruption!!!)
Six steps of improvement: operating environment, development of

infrastructure, boosting production, improving taxation system, easing
FDI regulations, & increasing awareness about emerging cities
Additional factors (other sources): Democracy, demography,

demand; Make-in-India; improved policies; improved
procedures; refined bureaucracy
PGP 24 IB-E 2021-22 S21-22: Global
September 6, 2021 10
Positive Changes in India’s International Business
Environment (1991-2015)
Strong business clusters & local suppliers
Growth of middle class & large urban centres
Buyer sophistication & conspicuous consumption
Well-educated, highly skilled, English-speaking workforce
Financial market sophistication
Rising innovations & patents
Institutional development
Evolution of independent media
* The Business Environment of India: A New Mandate for Reforms
PGP 24 IB-E 2021-22 S21-22: Global

Gaps in Indian Brand
“Negative press covering India’s corruption, inadequate infrastructure, and
fractured government has done far greater damage to Indian companies,
than those companies have done defending their brand, counteracting
negative public opinion, and ultimately building rock solid strategies to
expand abroad.”
“only 30% [of companies] invested 10% or more of their annual revenue on
innovation related R&D, while 33% of Indian companies invested 5% or less”
www.marketingjournal.org/the-5-biggest-global-challenges-for-
indian-brands, 2017
PGP 24 IB-E 2021-22 S21-22: Global
India’s Global Competitiveness Rank
Year No. of Overall Basic Efficiency Innovation &
Countries Rank Requirements Enhancers Sophistication
2005-06 117 45
2006-07 125 42 60 41 26
2007-08 131 48
2008-09 134 50 80 33 27
2009-10 133 49 79 35 28
2010-11 139 51 81 38 42
2011-12 142 56 91 37 40
2012-13 144 59 85 39 43
2013-14 148 60 96 42 41
2014-15 144 71 92 61 52
2015-16 140 55 80 58 46
2017-18 137 39 63 42 30
2018 58
2019 141 68
PGP 24 IB-E 2021-22 S21-22: Global
India’s Global Competitiveness: Basic Requirements
Year No. of Institutio Infrastru Macro Health &
Countries ns cture Stability Prim. Edu.
2006-07 125 34 62 88 93
2007-08 131
2008-09 134 53 72 109 100
2009-10 133 54 76 96 101
2010-11 139 58 86 73 104
2011-12 142 69 89 105 101
2012-13 144 70 84 99 101
2013-14 148 72 85 110 102
2014-15 144 70 87 101 98
2015-16 140 60 81 91 84
2017-18 137 39 66 80 91
PGP 24 IB-E 2021-22 S21-22: Global

India’s Global Competitiveness: Efficiency Enhancers
Year No. of Higher Goods Labour Financial Techno. Market
Countries Edu. & Market Market Market Readine Size
Traing. Efficien. Efficien. Sophistic. ss
2006-07 125 49 21 55
2007-08 131
2008-09 134 63 47 89 34 69 5
2009-10 133 66 48 83 16 83 4
2010-11 139 85 71 92 17 86 4
2011-12 142 87 70 81 21 93 3
2012-13 144 86 75 82 21 96 3
2013-14 148 91 85 99 19 98 3
2014-15 144 93 95 112 51 121 3
2015-16 140 90 91 103 53 120 3
2017-18 137 75 56 75 42 107 3
PGP 24 IB-E 2021-22 S21-22: Global
India’s Global Competitiveness: Innovation & Sophistication
Year No. of Business Innovation

Countries Sophistication
2006-07 125 25 26
2007-08 131
2008-09 134 27 32
2009-10 133 27 30
2010-11 139 44 39
2011-12 142 43 38
2012-13 144 40 41
2013-14 148 42 41
2014-15 144 57 49
2015-16 140 52 42
2017-18 137 39 29
PGP 24 IB-E 2021-22 S21-22: Global
Case 10
House of Tata
PGP 24 IB-E 2021-22 S21-22: Global

Case Significance
A large group globalizing out of India
A case of sudden audacious globalization

after prolonged conservatism & focus on
home market
PGP 24 IB-E 2021-22 S21-22: Global

Tata as Pioneer
India’s first luxury hotel 1903
India’s first private steel company 1907
India’s first airline in 1932
India’s first software firm 1968
PGP 24 IB-E 2021-22 S21-22: Global

Discussion Question
Was Tata’s globalization process driven more by external

environment than by internal compulsions?
If yes, how?
If no, why?
PGP 24 IB-E 2021-22 S21-22: Global

Catalysts of Tata’s Internationalization Process
Changes in the Group’s thinking under Ratan Tata
Dramatic reforms of Indian economy since 1991
Rise of foreign competition since 1991
Learning global capabilities from partnerships
Market-diversification triggers of Asian crisis of 1997
Expansion of domestic operations into global scale
Persistent operating challenges in India
Liberalization of forex & overseas investment norms
Expansion of foreign funding possibilities
PGP 24 IB-E 2021-22 S21-22: Global

Discussion Question
Did Group Center play any role in Tata’s globalization process

that was driven by individual companies?
If yes, how?
If no, why?
PGP 24 IB-E 2021-22 S21-22: Global

Group Center’s Role in Tata Companies’ Globalization
A Group ED to coordinate globalization
Group operations in key markets for government & media

coordination, brand promotion & procurement
Group coordination of business development efforts in less-

developed markets
Coordination among executives of different group companies in

a market to facilitative mutually beneficial initiatives
Group assistance on common business processes such as HR &

finance & Group guidelines on M&A
Group financial support for M&A for topping up where M&A

was important from company & Group angles
Group intranet for all companies to help share information &

coordinate common initiatives
PGP 24 IB-E 2021-22 S21-22: Global

Discussion Question
Was Tata Motors well-positioned around 2007 as a successful

company to undertake major global acquisitions?
If yes, how?
If no, why?
PGP 24 IB-E 2021-22 S21-22: Global

Tata Motors Around 2007 & Before
Significant share in domestic car market
Domination in domestic commercial truck market
Reputation for producing sturdy vehicles
First ever loss in 2000-01
Efforts to de-risk by diversifying away from cyclical commercial

truck business
Intensifying foreign competition
Refocus on key priority markets abroad
Failure of MG Rover partnership in UK in 2003
Acquisition of Daewoo commercial division in 2004
PGP 24 IB-E 2021-22 S21-22: Global

Tata Motors Around 2007
Stake in Spanish bus-maker Hispano Carrocera in 2005
JV with Marcopolo in Brazil for bus-making
JV Thai pickup maker AAP in 2006
Agreements with Fiat of Italy
A technical centre in US for product development support
Successful introduction of small truck Ace in 2005
Development project of small passenger car Nano
Decline in domestic sales of commercial vehicles in 2007-08
Negative overall free cash flow & lowest margins in 5 years
Absence of senior executives except Ratan Tata with global vision
PGP 24 IB-E 2021-22 S21-22: Global

Provoking Question
Was Tata Motor's proposed acquisition of Jaguar and Land Rover

consistent with Tata's strategic priorities?
If yes, why & how?
If no, why?
PGP 24 IB-E 2021-22 S21-22: Global

Provoking Question
Was acquiring ‘Jaguar and Land Rover’ a right strategic

decision for Tata Motors?
If yes, why?
If no, why?
PGP 24 IB-E 2021-22 S21-22: Global

Provoking Question
Is acquiring Jaguar-Land Rover a good strategy for Tata

Motors?
If yes, why?
If no, why?
PGP 24 IB-E 2021-22 S21-22: Global

Solution Question
Should Tata Motors acquire Jaguar-Land Rover?
If yes, why?
If no, why?
PGP 24 IB-E 2021-22 S21-22: Global

JLR Acquisition
Ratan Tata’s Desire Premium Stretch
High D-E Ratio

New Technology & Markets Financial Stretch Perilous Cash-flow
Longer Payback
Ishaat Hussain:
Group Backing Loss-making Jaguar May not touch a
sick company
Industry Experience Bidding War
70% acquisitions
Past Acquisitions New Market Risk do not gain share-
holder value
Constraints to
Financing Options Trade Union Posture restructuring
Prestige of the Targets Performance Issues at TM
Yes No
PGP 24 IB-E 2021-22 S21-22: Global

JLR Acquisition
Leadership Backing Risky New Segment
Part of Globalization Ford’s Losses
Past Acquisitions Working High Cost Acquisition
Funding Possibilities Tata Motors’ Problems
Leverage of Reputed Brands Labour Issues at JLR
Strategic Insights JLR’s Rigid Structure
New Technology & Distribution Earlier UK Failure
Risk Diversification Other Planned Projects
PGP 24 IB-E 2021-22 S21-22: Global

September 6, 2021
32
JLR Acquisition
Do we want an acquisition-based growth? Yes/No
Do we want to enter the developed markets? Yes/No
Do we want to acquire a developed-country business? Yes/No
Do we want to acquire a premium brand? Yes/No
Is the target brand consistent with our current positioning? Yes/No
Is this acquisition consistent with our strategic priorities? Yes/No
Do we have the necessary competence to manage the target brand? Yes/No
Will the acquisition target be comfortable in our stewardship? Yes/No
Can we add value to our company through this acquisition? Yes/No
Is the valuation of the acquisition target right? Yes/No

33
JLR Acquisition
Do we want an acquisition-based growth? Yes
Do we want to enter the developed markets? Yes
Do we want to acquire a developed-country business? Yes
Do we want to acquire a premium brand? Yes
Is the target brand consistent with our current positioning? No
Is this acquisition consistent with our strategic priorities? ?
Do we have the necessary competence to manage the target brand? ?
Will the acquisition target be comfortable in our stewardship? ?
Can we add value to our company through this acquisition? ?
Is the valuation of the acquisition target right? ?

34
Decision
It’s highly risky to acquire JLR
If acquired (by determination or gut-

feeling), success may be uncertain
unless TM has a special strategy
PGP 24 IB-E 2021-22 S21-22: Global

Recent Tata Motors
(Rs. billion) 2018-19 2013-14 2012-13 2011-12
Revenue TM 692 381 469 549
TM Group 3019 2366
JLR £24.2 b £19.4 b
EBITDA TM 79 33.7 38.1 47.5

TM Group 22 382.5
JLR £2 b £3.4 b
PAT TM 20 3.3 3.0 12.4

TM Group (-)289 141.0
JLR (-)£3.3 b £2.5 b
2018-19
JLR Units 0.579 m↓ TM Group Units 1.258 m↑
JLR Revenue £24.2 b TM Group Revenue ₹3019 b
JLR PBT (-)£3.6 b TM Group PBT (-)₹314 b
PGP 24 IB-E 2021-22 S21-22: Global

Recent Tata
Global revenue 2014-15 $109 billion 2018-19 $113 b
Market Capitalization (30 cos.) $134 billion $160 b
Employment 600,000 720,000
Total assets $118 billion
Profits $6.7 billion
Tata Starbucks (84 stores in India, Rs.171 cr. revenue, still

losses) extends partnership beyond India
Tata Group financials to be seriously affected by Brexit
PGP 24 IB-E 2021-22 S21-22: Global


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Session 21-22

Global Strategies & Emerging Markets:

PGP 24 IB-E 2021-22 S21-22: Global

PGP 24 IB-E 2021-22 S21-22: Global

Income level GDP, population

Random factors Geopolitical, environmental

PGP 24 IB-E 2021-22 S21-22: Global

Introduction Growth Maturity Decline

PGP 24 IB-E 2021-22 S21-22: Global

Highly fragmented wholesale market without global

Almost full traditional markets served by unorganized sector

Lack of cold-storage infrastructure leading to wastage of fresh food

Mom-and-pop stores with limited unpredictable assortments

Strong growth, urban migration, rising living standards,

PGP 24 IB-E 2021-22 S21-22: Global

Restrictions on green-field investments & acquisitions in some sectors

Some local design capability is available in product markets; IPR problems

* Strategies That Fit Emerging Markets, HBR, June 2005, pp.9-10

PGP 24 IB-E 2021-22 S21-22: Global

The country has a highly liquid pool of English-speaking management

TU movement is active & volatile, although it’s becoming less important;

Equity is available to local & foreign entities

* Strategies That Fit Emerging Markets, HBR, June 2005, pp.9-10

PGP 24 IB-E 2021-22 S21-22: Global

VC is available in some cities & from the Indian diaspora

Financial reporting is based on common-law system; it functions well

Bankruptcy processes exist, but are inefficient; promoters find it difficult

Private companies succeed on their own despite the govt., unlike in

* Strategies That Fit Emerging Markets, HBR, June 2005, pp.9-10

PGP 24 IB-E 2021-22 S21-22: Global

FDI diversification: Middle-east & Southeast Asia as new sources

FDI still focused on major traditional cities in India

Technology, media & telecom most attractive; infrastructure emerging

Wave of competition from China, Indonesia, Philippines & Vietnam

High expectations of 2020 about Indian economy (? Covid disruption!!!)

Six steps of improvement: operating environment, development of

Additional factors (other sources): Democracy, demography,

Strong business clusters & local suppliers

Growth of middle class & large urban centres

Buyer sophistication & conspicuous consumption

Well-educated, highly skilled, English-speaking workforce

Financial market sophistication

Rising innovations & patents

Evolution of independent media

* The Business Environment of India: A New Mandate for Reforms

PGP 24 IB-E 2021-22 S21-22: Global

PGP 24 IB-E 2021-22 S21-22: Global

Year No. of Business Innovation

PGP 24 IB-E 2021-22 S21-22: Global

A large group globalizing out of India

A case of sudden audacious globalization

PGP 24 IB-E 2021-22 S21-22: Global

India’s first luxury hotel 1903

India’s first private steel company 1907

India’s first airline in 1932

India’s first software firm 1968

PGP 24 IB-E 2021-22 S21-22: Global

Was Tata’s globalization process driven more by external

PGP 24 IB-E 2021-22 S21-22: Global

Changes in the Group’s thinking under Ratan Tata

Dramatic reforms of Indian economy since 1991

Rise of foreign competition since 1991

Learning global capabilities from partnerships