Internationalization of Indian firms

Submitted by:

CHANDRA BHUSHAN TYAGI (2009MB36) RAKESH KUMAR GUPTA (2009MB05) JASPREET KAUR KAHLON (2009MB60)

Growth
Spreading R&D and Labour cost

Profitability

Marketing opportunities

Reason for entering international market

Economies of Scale

Uniqueness of product or services

Access to imported Inputs

Risk Spread

GLOBALIZATION
Globalization describes the process by which regional economies, societies, and cultures have become integrated through a global network of political ideas through communication, transportation, and trade. The term is most closely associated with the term economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, the spread of technology, and military presence.

INTERNATIONALIZATION OF INDIAN FIRMS

The number of Indian firms venturing into international markets is consistently rising over the last decade. With the liberal foreign exchange policies and strengthening of the Indian rupee, Indian firms are moving towards establishing foreign operations and international acquisitions. Globalization of the market accelerated by liberalization in economic policies around the world and their integration with WTO has remarkably increased the business opportunities.

Introduction
Tata Steel , formerly known as TISCO and Tata Iron and Steel Company Limited, is the world's seventh largest steel company, with an annual crude steel capacity of 31 million tonnes. Tata Steel has not limited its operations and businesses within India but has built an imposing presence around the globe as well. It has operations in India, Europe, and South East Asia, has approximately 80,000 employees across five continents. The Groups South East Asian operations comprise Tata Steel Thailand, in which it has 67.1% equity and Nat Steel Holdings, which is one of the largest steel producers in the Asia Pacific with presence across seven countries.

NATSTEEL
Headquartered in Singapore and is a leading supplier of premium steel products for the construction industry. It became a 100% subsidiary of Tata Steel in February 2004. NatSteel is the dominant steel producer of Singapore and owns steel mills in China, Thailand, Vietnam, the Philippines and Australia. The business is focussed on long products and has a

cumulative capacity to produce about 2 million tons per annum

of rebars, wire rods, pre- stressed concrete wires and strands.

Tata Steel Thailand

The Company was established on July 12, 2002.
Initially it was Millennium Steel Public Company Limited. In 2005, Tata Steel acquired 40% Stake in Millennium Steel based in Thailand for $130 million. On dec 14 2006 , Change the Company name from

Millennium Steel Public Company Limited to Tata Steel

(Thailand) Public Company Limited.

Tata Corus Deal

Corus Group plc was formed on 6th October 1999, through the merger of two companies, British Steel and Koninklijke Hoogovens. Corus has manufacturing operations in many countries with major plants located in the UK, The Netherlands, Germany, France, Norway and Belgium. Supplier to many of the most demanding markets worldwide including construction, automotive, packaging, engineering . TATA Acquired CORUS on 2nd April 2007 . The deal price was US $ 12.11 Billion.

Reason for BID

To tap European Mature Market. Cost of acquisition is lower than setting up of Green field plant & marketing and distribution channel TATA manufactures Low Value ,long and flat steel products ,while Corus produce High Value Stripped products. Helped TATA to feature in Top 10 players in world. Technology Benefit. Economic of scale. Corus holds number of patents and R&D facilities.

Reason for Corus to Accept

To extend its Global reach through TATA. To get access to Indian Ore reserves, as well as untapped market for steel. To get access to low cost materials.

Saturated market of Europe. Decline in market share and profit

Internationalization
Evaluating Industrial Potential for Globalization. The market needs for steel was homogeneous . Global customers. Because of homogeneity of needs, the brands and advertising were transferable. Identifying organizational ability to implement globalization Tata steel had the ability to implement globalization because of its rich experience of 99 years of running a business successfully in India Hence it had the ability to acquire big steel company like Corus.

Economic factors were also favorable for globalization Because of standardization of core products. The company was able to enjoy economies of scale in manufacturing. The raw material cost in U.K. is high. This can be offset by sourcing from India, where raw materials are comparatively cheaper.

Environmental factors increased the potential for global strategy Since Corus had good sales network at various countries, the transportation costs of Tata steel will be reduced.

Government policies like easing foreign currency restrictions

both in UK and India were favourable for global strategy. Global moves of competitor i.e. Mittal acquiring Arcelor also forced the Tata steel to go for global strategy.

Diagnose scope and direction of required changes

The Tata steel has to do is to encourage the transfer of people between nations. The average hourly rate of pay in UK steel was 6 times that of Brazil and 10 times that of India.

So by movement of people, the company can reduce the cost

and strengthen its competitive advantage of low cost leadership.

Introduction
Bharti Airtel Limited, usually referred to simply as "airtel", is a Indian telecommunications company that operates in 19 countries across South Asia, Africa and the Channel Islands. It operates a GSM network in all countries, providing 2G or 3G services depending upon the country of operation. Airtel is the fifth largest telecom operator in the world with over 207.8 million subscribers across 19 countries at the end of 2010. It is the largest cellular service provider in India, with over 152.5 million subscribers at the end of 2010.

World Wide Presence

3 countries in the Indian Subcontinent. Bangladesh , Srilanka and India. 16 countries in Africa Burkina Faso, Chad, Democratic Republic of the Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, N igeria, Seychelles,Sierra Leone, Tanzania, Uganda and Zambia. Channel Islands Jersey and Guernsey

Contd
Countries Bangladesh Burkina Faso Remarks Airtel Bangladesh had about 3.2 million customers at the end of 2010 Airtel Burkina Faso is the dominant player with 1,433,000 customers representing 50% market share Airtel Ghana had about 1.76 million customers at the end of 2010. Airtel is the market leader with almost 152.5 million customers at the end of 2010 Airtel Kenya is the second largest operator and has 4 million customers

Ghana India Kenya

Countries

Remark

Republic of Congo
Srilanka

Airtel Congo is the market leader with a 55% market share.

Airtel Lanka commenced operations on 12 January 2009. It had about 1.8 million mobile customers at the end of 2010. Airtel operates in the Channel Islands under the brand name Airtel-Vodafone through an agreement with Vodafone

Jersey and Guernsey

Uganda

Airtel Uganda stands as the no. 2 operator with a market share of 38%.

Bharti-Zain Deal
Zain is a Kuwait based company started under the name of Mobile Telecommunication Company (MTC) in 1983 and was later rebranded to ZAIN in 2007 . As on February 2010, about 60% of the Zain customers are in Africa contributing only 15% to the net profit of Zain . Zain has a total of 65 million customers. Out of which 39 million customers are from Africa. Airtel has always looked at the overseas market also.

Why Africa ?
One of the best penetrating opportunities for the global telecom players is the telecom market in Africa. In Asia, Europe, North America, the telecom sector is approaching a saturation point. The growth in these areas will be comparatively slower. If the market reaches a saturation point then there is no opportunity to increase the sale. And if the company cannot decrease the cost then it will try either to diversify or to expand it grip in the global market.

Its Time To Africa

The processes of liberalization and privatization have been taken into consideration by African countries such as Uganda, Tanzania, Nigeria, The Sudan, South Africa and Kenya. Many African governments have developed their telecommunication infrastructure by privatizing their former state-owned enterprises. So these open up the stage for global players to perform in it. Africa has become the fastest growing mobile-network market during last five years. A survey by Ernst & Young shows that between 2002-07, the industry grew by 49.3 percent as opposed to Asia which recorded a 27.4 percent growth.

Contd
Even there was a report by The World Bank in which it mentioned that Afro-nations like Kenya have 95% of mobile network penetration and coverage gap of only 5%. Thus making it an attractive market to lure some of the major player from the world. In 2004, only 6% of the African citizen owned mobile. Companies produced low cost and user-friendly phones and network plans to attract more and more customer so that the company can increase its customer base.

Contd
The Law of Land also affects the company to design its operation in a country. Because of these regulations , there are only three players in telecom network market. The heavy tax burden on both the operator and consumer is the major challenge for the industry. The total tax paid is 30 %. But still the government of these nations say that the industry is highly profitable. The company may sustain the loss in the short-run but it may earn profit in the long-run.

ASIAN PAINT history

On 1st February, 1942 Champaklal H. Choksey, Chimanlal N. Choksi, Suryakant C. Dani and Arvind R. Vakil get together to manufacture paint in a garage on Foras Road, Bombay. They name their company 'The Asian Oil & Paint Company', a name that they picked randomly from a telephone directory. 1954 Asian Paints mascot Gattu, the mischievous kid, is born. 1957 - 66 The family-owned company makes the transition to a professionally managed organization.

Contd..
Asian Paints embarks on an ambitious grassroots marketing campaign, partnering with thousands of dealers in small towns all over India.
1967

Asian Paints emerges as India's leading paint company ahead of any international competition. Today Asian Paints becomes the 10th largest decorative paint company in the world Present in 22 countries with 27 manufacturing locations.

FINANCIAL STRENGTH
Fig in crores Mar ' 10 PAT 774.35 Mar 09 362.36 998.55 167.86 Mar ' 08 375.20 832.58 163.06 Mar ' 07 272.05 648.16 124.70 Mar ' 06 186 526.36 119.90

Reserves 1,461.30 & surplus Equity dividend

SOURCE:

258.98

http://money.rediff.com/companies/asian-paints-ltd/11580001

Growth strategy and M&A

Market share gain Organic growth

Market Expansion

International M&A
Inorganic growth Domestic M&A

Contd.
Asian Paints is one of the most globally diversified companies of India. To increase its global market presence, the company has focused on setting up overseas ventures rather than exporting paint and coating from India. The company started its global operations in 1977 when it entered Fiji through a joint venture. Thereafter, Asian Paints (South Pacific) Ltd was formed in 1979 in Fiji and this company went on to become the largest paints company in Fiji.

 In its pursuit towards globalization of its operations, the company made two significant overseas acquisitions in 2002. It first acquired 50.1 per cent stake in Berger International Limited and then went on to acquire 60 per cent stake in SCIB Chemical, Egypt, the fifth largest paints company in Egypt at the time of its acquisition.

INTERNATIONAL PRESENCE
Regions Countries Operating company

South Pacific

AustSamoa,Tonga,Vanuaturalia, Fiji, Solomon Islands,

China, Malaysia, Myanmar, Singapore, Thailand

Asian Paints and its subsidiaries

Berger International and its subsidiaries

South-east Asia

South Asia
Middle East, Oman Egypt Caribbean

India, Bangladesh, Nepal, Sri Lanka

Bahrain, UAE, Asian Paints and its subsidiaries SCIB Chemical Barbados, Jamaica,Trinidad & Tobago

Asian Paints and its subsidiaries

Berger International and its subsidiaries Berger International and its subsidiaries

Contd.
Countries India Manufacturing Plants 9

Sri Lanka
Nepal Bangladesh Singapore Fiji & Tonga Samoa Islands

1
1 1 1 1 1

Contd.
Egypt 1

Jamaica Barbados Trinidad & Tobago Vanuatu Oman Bahrain Dubai

1 1 1 1 1 1 1

Total

23

faCtors fuelling asian paints global initiatives

The company is an innovator and has introduced thousands of colour shades for customers to choose from. It has been a market creator like in the case of exterior paints at a time when exterior paints used to be mostly cement paints. It has been following an aggressive marketing strategy in India and this has helped it in entering and competing with multinational companies in global markets. Huge cash reserve is one of the major reason for the company to foray into the international market.

Contd.
In order to increase the pace of globalization, the company has also focussed on acquiring international companies with widespread presence in the global markets like the acquisition Berger International.

In order to capture the maximum market share and to create new markets, the company manufactures a wide range of paints, from acrylic emulsions to synthetic enamels and from automotive paints to industrial paints. Asian Paints has targeted companies in emerging markets of Africa, Southeast Asia and South Asia, Middle East and Pacific region.

INTERNATIONAL PRESENCE

M&A International - Strategy

To enter the high-growth emerging markets. Adopt a regional hub approach to international operations. Apply the emerging market business model: Introduce new products suited to local needs Introduce new technology, accordingly Focus to improve all areas of operations, especially supply chain No single MNC is present across emerging markets Asian Paints believes there is plenty of scope to achieve significant presence in targeted countries

Contd.
BILs operations are mostly in emerging markets which

synergizes with the vision of Asian Paints.

No overlap of BIL operations with Asian Paints. Exports to neighboring countries.

REFERENCE
Globalization Wikipedia International marketing by Rakesh Mohan Joshi,oxford University press. The Economic Times, 8 Jun 2010 www.airtel.in www.tatasteel.co.in www.asianpaint.com