Honda Motor?s new Hero in Africa

African and Latin American countries may soon have a new ambassador from India: the Hero group, the world?s largest manufacturer of bicycles and one of the biggest makers of motorcycles. This newspaper has repor-ted that the Munjals are exploring collaboration with Honda Motor Company, to turn around the latter?s loss-making motorcycle businesses in these regions.

As news of Indian companies? overseas forays pour in, one may not pay much attention to one more excursion. But, Hero?s footprint in Africa, should it come about, would be qualitatively different from other Indian companies? expansions abroad. Normally, Honda would seek partnership with an emerging market company, for the latter?s knowledge of the local market, distribution network, ability to manage the regulatory environment, etc.

This time, however, Honda seems to be seeking something else. Though it is the global leader in the art of motorcycle manufacture, some of its plants in Africa are running at a loss and it wants the Munjals to turn them around. The Hero group is, therefore, being asked to step in where Honda, one of the world?s most outstanding companies, has failed. Obviously, Hero is being sought for its prowess at low-cost manufacturing and the experience gathered while making a mark in India. The ability to keep costs low, even while meeting the high product standards set by Honda, is clearly the competence being sought for the joint venture in Africa.

The Hero group?s ability to develop the skills of its human resources and put together teams that can lead operations in global markets would be key to the new venture?s success. India?s advantage lies here and Hero seems to have leveraged this in full measure. It cannot be that Honda does not have the manufacturing ability or production technology: the failure in Africa could be due to the high cost of Japanese managers and supervisors. Two, what Hero would also bring to the table is its experience in dealing with price-sensitive custo-mers in India.

The Indian middle class consumer today increasingly wants products that compete with the best in the world, but is willing to pay only a fraction of the prices these products are sold at in advanced markets. This forces companies such as Hero to constantly innovate their business and manufacturing processes to achieve cost efficiencies.

Third would be Hero?s ability to achieve these results in a business environment a lot more difficult than what is available in advanced markets, such as Japan. For example, Hero cannot assume the cost and quality of power or infrastructure and logistic support available in India would be the same that is available to Honda in Japan. All put together, it is Hero?s skills in delivering quality at low cost in a difficult working environment that is being sought to be replicated in the emerging markets of Africa.

ICICI is similarly leveraging its experience in the Indian market to compete in global markets. It now has a presence in a number of developed markets and is also foraying into Russia. After establishing its presence and testing these markets, it is diversifying its product range to compete with global leaders. In the UK, for instance, it is now planning to roll out retail products through an ex-panded network of branches. Once again, ICICI counts on the experience of dealing with price-sensitive, small-volume customers in India. What would drive this competitive experience abroad is ICICI?s success in developing its human resources and building leadership that can tackle the challenge of global markets. Indeed, ICICI would be, in a way, replicating the success of HSBC in leveraging the competencies it built in an emerging market to establish itself as a global leader.

There are a number of other Indian companies, in manufacturing and in services, making similar forays and creating brand equity for India Inc. The success of our IT leaders are known well, though their experience has been different and not based on lessons learnt in the home market. In other services, such as hospitals and even hospitality, Indian firms do have the potential of creating space for themselves in global markets. Some years down the road, it is possible for some of our airlines to also emerge as global leaders.

In manufacturing, companies such as Tata Motors, Tata Steel, Bharat Forge, Ranbaxy and many others are moving towards becoming global leaders. As Indian companies grow with the expansion of the home market, a footprint abroad would become a logical element of their growth plans. For, with tariff rates falling and foreign majors entering India in almost all sectors, competing in the home market is becoming akin to competing in the global market.

But the road to becoming global leaders is long and arduous. Global leadership is not only about having a foreign footprint. It is also about being recognised for delivery of quality at competitive cost, customer satisfaction and constant innovation for creation of new platforms and products. And also branding, depending on the segment of operation. For example, to be a global leader, the Hero group would have to move beyond cost competitiveness, to become an innovator and developer of new technologies, as Ranbaxy is beginning to do in pharmaceuticals. However, one thing is certain. In the years to come, Indian firms would become the country?s most powerful ambassadors abroad. They would spread the message of Indian capabilities and competence through the customers they come in contact with.

It is important, then, for the government to recognise our corporate sector?s role in foreign policy. And to actively facilitate their growth in foreign markets.

The writer is an advisor to Ficci. These are his personal views