Forming Indian MNCs

In the global business scene, these are the days of corporate courtship. Traditional rivals join together, acquire a new character and clout, and wage new battles. For instance competitors like IBM, Motorola and Toshiba are cooperating to penetrate global markets in the IT business. Similarly Digital Equipment Corporation and Apple Computers are foregoing strategic alliances to gain more competing clout. In other words what single organizations cannot do is now being attempted by cooperative networks of such firms.

If Indian companies individually cannot wage global business, some of them can form partnerships among themselves to fight in the global arena. To fight transnational companies like GE, Siemens or Philips. Indian companies like L&T, Telco, BHEL, Tata Electric and Reliance can team up, pooling their resource and expense and sharing the burden of hefty investment. Such alliances need not compromise their interests on the domestic front. Such corporate courtship is one strategy through which, at least a few truly global corporations can merge from India.

Such a coming together of Indian companies would be essential not only for investing abroad on a big scale and carrying on as a global corporation but even for export from the home base. For, in the emerging global scenario, size would be of crucial importance in winning export orders. A trade bloc like EU would not like to deal with pigmy suppliers. It may need millions of pieces of a given product at a time. It would go through large trading giants, who will make bulk procurement to cater the large unified market. Indian companies with their present limitations in size of operation will hardly be in a position to cater to orders of such magnitude.

Alliances with suppliers and dealers also are essential to enhance competing clout.

Acquisitions of plants and facilities in overseas markets: Acquisitions of ongoing plants and facilities in overseas markets is a convenient route to enhance the scale of operations. It also saves time and cost involved in the start up route. If large plants are beyond the reach one can consider smaller units for a buy-out. Design and engineering boutiques of relatively small sizes exist all over Europe and the US, in almost every industry. These small outfits started usually by engineers who do not want to work in large organizations, are always looking for capital partners and alliances. It is found that their know how is comparable to that of full fledged firms but come with a much lower price tag.

ISPAT building global business through acquisitions: The Indian business group Mittal’s steel empire spans several countries like Kazhakstan, Ireland, Mexico, Trinida, Indonesia, Germany and the US. In these countries the Mittals have never built new plants. ISPAT’s entry and growth here has been driven by a series of acquisitions. The group has consistently taken over sick companies and turned them round. Mittals have shown that one does not need billions to enter the global arena. Today, ISPAT is the fourth largest steel producer in the world.

The basic requirement is that Indian companies must enjoy size advantage. They have to become big by international standards through acquisitions, alliances, mergers and expansions, and be assured of a large supply, so that they can play the global game. Using the large domestic market and high production capacity as a leverage, the battle can be launched.

Bridging the technology Gap:

Indian companies have to satisfy the technological specification and standards of the overseas markets. The government has already initiated certain measures to facilitate import of modern technology payment of royalty for know how etc., Indian companies have to do their bit by opting for latest technology, adapting it, working out technology tie-ups and by committing higher investment for technology up gradation. Upgrading technology is also the durable route for price competitiveness and quality improvement. Even in the post liberalization era, technology up gradation has been the missing ingredient. Despite changes in industrial and trade policies, lack of dynamism to Technology front has prevented a quick increase in exports.