Question 1- Considering CUMI’s operations in its homeland (India) and other

countries, what is driving CUMI’s success? Is it sustainable? Which part of it is

transferable internationally?

Carborundum Universal Ltd., popularly known as CUMI is an Rs.2,200 crore Abrasives

major. A part of the business conglomerate, Murugappa, CUMI is a pioneer and trendsetter in

abrasive technology. The company is the leading manufacturer and developer of abrasives,

ceramics, refractories, aluminium oxide grains, machine tools, polymers, adhesives, and

electro minerals in India. CUMI was formed in April 1954 as a tripartite venture with three

well-known companies coming together: Carborundum of the USA, Universal Grinding

Wheel Co. of UK, and the Murugappa Group. CUMI operates in three segments viz

Abrasives, Ceramics and Electrominerals and that is what drives CUMI's success. After a

joint venture with Wendt Gmbh, CUMI was able to offer both conventional and super

abrasive, leaving virtually a duopoly in the industry, with only competition from Grindwell

Norton. Another success-driven factor is that the company has achieved a reputation for

quality and innovation and is one of the five manufacturers in the world with fully integrated

operations that include mining, fusioning, wind and hydropower stations, manufacturing,

marketing and distribution.

With time, the company expanded and had eight manufacturing plants and a nationwide

marketing and dealer network and operations in five continents, truly spreading its wings to

reach out to the world with its cutting-edge technology. The establishment of in-house

Research and Development and strategic alliances with global leaders in grinding technology,

have not only ensured its market leadership in India and abroad but also international

recognition as a manufacturer of quality abrasives and a provider of total grinding solutions.

The company has subsidiaries in India, Russia, South Africa, Australia, China, Thailand, and

Canada. In China, the company faced an imminent challenge on its entry. However, its

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 technological capacity attracted a Jingri industrial diamond company to form a partnership

after discovering a matching interest with CUMI. After acquiring partnerships with South

Africa and Russia, and they roll out a 100-day integration plan. The 100-day integration plan

set out product growth and new profitability targets implemented technical improvements,

and most importantly, integrated the Russian and Indian teams to immediately collaborate as

equals. This is believed to have led to increased productivity, lower costs, and a more

pleasant working environment(Cumi India’s Global Strategy - Solving the China Puzzle -

MGasiorek, n.d.).

Even in the face of national economic restructuring that restricted CUMI's business, the

company declared its goals to become a self-sufficient input material business, investing in

the development of new products, and placing a unique emphasis on R&D of transferable

business processes. The outcome became a vertically integrated company with strong

sourcing and manufacturing competence, market-leading core products open to regionally

specialized application, and a humble, effective method of cultural collaboration -all

transferable internationally, and integral to maximizing improvements in newly acquired

partners. These internal strengths have allowed CUMI to address multiple markets

intelligently(Cumi India’s Global Strategy - Solving the China Puzzle - MGasiorek, n.d.).

CUMI materialises the focus on 3E - Energy, Engineering & Environment by continuously

improving their products and processes. It continued to build capabilities in Plants and

process systems that are aligned to futuristic and sustainable technologies, to accelerate their

transition to Industry 4.0 with IoT enabled processes that enhance efficiencies in energy,

productivity, and quality while reducing environmental impact(CARBORUNDUM

UNIVERSAL LIMITED, n.d.)

Question 2-What was CUMI’s entry-mode strategy in Russia and South Africa? In

terms of corporate strategies, what type of diversification was pursued?

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 In both Russia and South Africa, the entry-mode strategy was the Foreign Direct Investment

strategy through acquisition investments. CUMI acquired 84 percent of the ordinary shares of

Volzhsky Abrasive Works (VAW), located in the Volgograd Region of Russia, through its

wholly-owned subsidiary, CUMI International Ltd., Cyprus, for consideration of around $37

million(CUMI NEWS, n.d.-a).

For South Africa, CUMI International Ltd., Cyprus, entered into a binding agreement with

RHI AG, Austria, for the purchase of 100 percent of the equity of RHI’s South African

subsidiary, RHI Isithebe (Pty) Ltd., including the refractory manufacturing facilities of RHI

Refractories Africa (Pty) Ltd. in South Africa(CUMI NEWS, n.d.). The acquisition of the

subsidiaries was to grow its electro mineral and refractory business and therefore did a related

diversification strategy. In Russia and South Africa, CUMI optimized the regions for raw

material extraction, maximized labor cost savings, and positioned the subsidiaries to take

advantage of future value add/raw material opportunities to sustain growth.

Question 3-What are some of the challenges that CUMI faced in Russia and South

Africa? Divide your answers for each country.

CUMI penetrated the Russian market during a period of uncertainty. CUMI considered

investing in Russia to be a high-risk proposition even in the late 2000s, owing to the country's

political and economic situation. The challenges in Russia were not only political and

economic but also linguistic as many of the executives only spoke Russian and without the

guidance of local Russians, CUMI wouldn’t have maximised gains as quickly. This helped

CUMI quickly optimize local operations, breed a sense of mutuality between the

companies, and

share best practices in both directions.

In South Africa, CUMI experienced many challenges as the partnership did not go as

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 smoothly as the Russian partnership. There was a doubling in the prices of zircon sand, a

global growth meltdown that crushed the steel industry demand. They also had challenges

with the internal work culture and leadership culture. They appointed an experienced Indian

CEO to replace the disobliging South African head and diversified production to mitigate

price increases by investing in zirconia bubbles instead of grains, increasing its production

and broadening its customer base. While the role of the new CEO was difficult in its

workplace demands, the cultural adaptability was yet more difficult. South African hierarchal

and racial norms created a work environment alien to CUMI management. However,

instead of imposing "enlightened" foreign practices, management adapted by learning from

each group equally and moving towards gradual workplace changes like wage equality and

consensus-building(Cumi India’s Global Strategy - Solving the China Puzzle - MGasiorek,

n.d.)

Question 4-What did you learn from CUMI’s venture in Russia and South Africa?

Divide your answers for each country.

The Carborundum Universal Murugappa Limited had its production less by 20 times

compared to the Volzhsky Abrasive Works. VAW was looking for an infusion of capital

and growth

-focused management talent, while CUMI aimed to expand overseas silicon carbide

manufacturing-and in considering Russia, would also be absorbing an Eastern European

manufacturing powerhouse with plentiful access to high-demand materials of the present and

future. CUMI's approach was careful, calculated, and collaborative. They considered mutual

gains: CUMI would become a global leader in the product category with a new

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 manufacturing center; VAW would benefit from scaled best practices, experienced

international management assisting local experts, and access to new markets; finally, Russian

stakeholders were assured the business would grow, not be liquidated. The people-focused,

benefit-driven approach allowed CUMI to win the bidding on the basis of future potential

rather than immediate turnover with a high price tag.

For South Africa, CUMI analyzed the deal as win-win: CUMI would gain a major raw

resource production point and hedge bets for further local development, while the selling

company received an infusion of capital, experienced international management, and

process sophistication. The acquisition will enable the Isithebe plant, to be renamed Thugela

Refractories, Isithebe, to grow its electro mineral and refractory business. The deal, however,

would be subject to necessary clearances from appropriate authorities.

Question 5- Why CUMI’s experience in China was not as successful as in Russia? In

other words, what were the challenges of the company in China

CUMI’s experience in China was not as successful as in Russia because the Chinese market

was highy competitive and the organization was culturally diverse. Chinese methods were

different from Indian methods and since most of the employees were Indian workers, it was

difficult for CUMI management to understand the challenges and complexities unique to

China and the Chinese market, so it was critical to have local leadership. Unlike in Russia

where CUMI had local Russians help them overcome the language barrier. The Indian vision

was incompatible with the Chinese reality. CUMI's cultural strengths meshed well with local

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 opportunity, but only with the leadership of a local expert. Overlooking the importance in

managing socio-cultural differences with its partner was detrimental. A Chinese executive

was a must to take advantage of the huge, profitable, and quickly growing local market

(Cumi India’s Global Strategy - Solving the China Puzzle - MGasiorek, n.d.).

Question 6-Why CUMI entered China, despite its various challenges? In other words,

why is China crucial for the company’s global leadership vision?

China presented a huge opportunity after the company has embarked on the global strategy.

China would play a bigger role in the company because it requires soma raw materials like

silicon carbide and alumina, which are used globally to manufacture abrasives and were only

available in China (Ramnarayan et al., 2013). China represents the largest market for CUMI's

products and holds 50% of the global raw resources for the industry with annual growth of

10% expected to reach US 17.0 billion in 2015. The manufacturing business is expanding,

and there is a strong demand for manufactured goods in domestic and international markets,

implying substantial development in the coming decade. establishing a base in China was

made to gain a competitive advantage.

Question 7- How would you summarize your learning of this case in a few sentences

based on what we have discussed since the beginning of the semester? What are those

key factors for successful international management?

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 I believe that first of all, for a company to be competitive and successful, it has to offer

unique and sustainable products or services. The products have to be able to adapt to local

customers’ needs and for that, it is important to have intercultural competence. This will

increase a company’s ability to function effectively across cultures to think and act

appropriately, and to communicate and work with people from different cultural backgrounds

and avoid problems like the ones CUMI had in China with understanding the Chinese market

and how to go about it in order to profit from its growing market. It also reinforces my beliefs

about how FDI can expose a company to financial and political risk as it did with the zircon

sand incident in South Africa causing a loss in revenue. It showed that when wanting to

expand to countries with whom you share very little cultural values, FDI is also very risky to

do if you are not ready to have intensive research and training programs in order to know

what is expected from you. In expanding globally, having an already established

brand/company with a good reputation is very important as it can enable you to merge or join

alliances with other very well-known and already competitive companies abroad that can help

you gain further competitiveness. A decentralised organizational structure will also be crucial

to meet customers' needs in various countries around the world as it allows managers lower

down the chain to make decisions to suit their local area and customers. Intensive research to

assess the opportunities, strengths, weaknesses, and threats and a pest analysis of the

international market you plan to enter is crucial. Without that, CUMI wouldn’t have entered

Russia as they had economical and political problems but the intensive pest analysis helped

them see other advantages of entering the market regardless. Therefore, technological capital,

financial capital, relational capital, and a well-trained human capital are all necessary

resources to have successful international management.

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 REFERENCES

- about us. (n.d.). CUMI. Retrieved October 26, 2021, from https://www.cumi-

murugappa.com/about-us/

- Ramnarayan, S., Dhanaraj, C., & Sankaran., K (2013). CUMI INDIA GLOBAL

STRATEGY: THE CHINA PUZZLE

- Cumi India’s Global Strategy - Solving the China Puzzle - MGasiorek. (n.d.).

Docshare.tips. https://docshare.tips/cumi-india39s-global-strategy-solving-the-china-

puzzle-mgasiorek_5790cb83b6d87fe9b48b4657.html

- CUMI NEWS. (n.d.). CUMI to buy South African arm of RHI.::CUMI::. Retrieved

October 29, 2021, from https://www.cumi-murugappa.com/abrasives/news_r/cumi-to-

buy-south-african-arm-of-rhi/

- CUMI NEWS. (n.d.-a). CUMI buys Russian firm.::CUMI::. Retrieved October 29,

2021, from https://www.cumi-murugappa.com/abrasives/news_r/cumi-buys-russian-

firm/

- CARBORUNDUM UNIVERSAL LIMITED. (n.d.). Sustainability Matters. Retrieved

October 26, 2021, from https://www.cumi-murugappa.com/wp-

content/themes/CUMI/pdf/CUMI-Annual-Report-2020-21.pdf

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