There are two ways in which Indian companies seeking to establish their footprint abroad have begun to make their presence felt. The first is the more orthodox pattern of identifying a potential takeover candidate abroad and then making a bid for it. The other is to downplay the role of the parent company in India, and instead develop a global value chain that could orchestrate multiple cross-border linkages. The joint venture announced by Tata Steel and Sodemi to mine the iron ore deposits of Mount Nimba in Ivory Coast that would, in turn, supply ore to Corus plants in the UK and Netherlands, fall in the latter category.
According to news reports, Mount Nimba?s iron ore deposits, spread across three countries (Liberia, Guinea and Ivory Coast), are among West Africa?s biggest. This will be Tata Steel?s first joint venture for iron ore, with the Indian company holding a 75% stake in the project. The initial phase will involve exploration and detailed feasibility assessments, followed by construction of the mine and other facilities. The mine will start production during the next two or three years. This type of value chain is becoming quite the norm for the Tata group. For instance, TCS?s plans in Mexico are quite similar to the pattern followed by Tata Steel. TCS is setting up a huge presence in Mexico that in turn would tap into the value chain of the US market. In both cases, the Tata group is not using its existing facilities in India as the central element of the foray, except to leverage its financial strengths. This approach has the advantage of making the local government a willing partner in the expansion forays of the group. At a time when xenophobia against foreign capital has begun to erupt in several parts of the world, such a globalised approach has its merits. Long distance buyouts are often associated much too strongly with the base country establishment, which could be a dampener, as the group?s failed attempt to woo Orient Express has shown. Of course, the Tata group has never let its image solidify in any particular mould that could injure its ability to generate universal value. It is aware of the need for flexibility in its approach to globalisation, and other businesses in India would be well advised to take cues from its successes.
