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As most family-owned businesses expand, they look towards creating a global footprint. Expanding outside home country brings for the business owner a multitude of challenges at organizational as well as personal level.

India today is a land of opportunities, a beacon for investors everywhere in the world. It has gained strength even in the wake of turmoil and instability in more-mature western markets. However, Indian businesses are aggressive in their plans to expand in global markets. Here we discuss what drives business owners to step out of their home ground and create a global footprint.

Capitalise on a good business opportunity
One of the most discerning features of business owners is their ability to identify an opportunity and generate value—in simple words, make money. This has always been a differentiating ability. Coupled with will power and ability to take calculated risks, this feature has the most significant impact on the pace and quantum of growth. But, this still does not answer the question that why do Indian businesses have this compelling urge to establish themselves on foreign shores?

India is the third largest economy in Asia with rising income levels, growing urbanization, increasing lifestyle aspirations and favorable demographics—all contributing to its attractiveness as a
domestic market. This is happening in the backdrop of ailing developed economies with prohibitive cost structures that are, in most cases, neither able to serve home country demands nor the demands of emerging markets. This provides a great opportunity for Indian business owners to establish their presence in global markets.

Since liberalization, Indian companies have battled it out for market share and shelf space with a multitude of multinational companies setting up shops in India. The experience of Indian companies has prepared them to claim a stake in mature markets which were considered the bastion of multinational companies. Most Indian businesses will get a sizable share of their revenue from export.
Indian businesses today have the right capacity, availability and access to appropriate skills and technology. Agility and will power to capitalize on the opportunities presented by the world markets add to these qualities.

In the end, it’s all just good business sense. Apart from giving access to new markets and pools of revenue, expanding outside home country helps businesses gain global footprint—especially in the face of volatile socio-economic conditions.

Global recognition
One of the biggest reasons why business owners want to expand outside their home ground is to gain global recognition for the company and themselves. Stuck for years behind the pre-liberalization curtain and struggling to match up with swarming multinational companies in the post-liberalization period, business owners have a strong urge to establish themselves in foreign markets.

Peer pressure, too, has a role to play in the expansion of businesses abroad. Business community in India is close and interconnected. Traders are aware of each other’s actions. This is not only keeping up with the joneses but also tracking competition.

A matter of national pride
There is a fair amount of national pride associated with the decision to go global. Most business owners have a sense of their standing and role in the Indian community. The decision to go global is somewhere rooted in the desire to prove to the world that India, a developing economy, is a force to reckon with.

Till today, best brains of our country have been serving the global companies and universities. Most of the best professionals abroad are Indians. Today we are trying to establish ourselves as the creators of reputed global companies and universities where the best talent of the world would aspire to work. For years, Indian business owners have tried to emulate global companies and their best business practices. Today Indian business owners aspire to build and lead businesses that become the benchmark of growth and management and organizational practices for multinational companies.

Regionalization of businesses
One of the key trends in business is creating value by leveraging technology, supply chain and other core organizational capabilities across geographies. Markets today are not defined by political boundaries but by economic opportunities to consolidate and drive effectiveness and efficiencies.

So, one cannot actually think of state boundaries as contours of business presence and hence moving outside home country has become a business necessity. For example, it just makes more sense to have a sourcing team that has access to markets in various geographies or a supply chain that is able to serve different markets, takes advantage of economies of scale, creates competition and manages key sustainability issues.

Entrepreneurial vision drive and conviction
This is probably the most powerful driver for business owners to look towards foreign markets. While different businesses have a different way of expanding in global markets, business acumen and environment definitely have a role to play. Also, a business owner’s instinct, conviction and risk appetite play a major role. Let us briefly look at some preferred modes for globalization:

Setting up sales, marketing offices and outposts
This is the most common, easy to execute and a relatively low-risk option in taking the first step towards global expansion. Most family owned businesses would have a sizable portion of their revenue coming from export.

Acquisition or inking a JV with suppliers, competitors or distributors
Indian business owners have toyed with the ideas for quite sometime now and have made bold moves. However, today we see inorganic expansion as a stated strategic objective for most Indian businesses. We can only anticipate this activity to gain more momentum over
the next few years.

Setting up greenfield and brownfield manufacturing sites near potential markets
This allows businesses to serve markets faster, in a more cost-effective manner and with a more customized product portfolio. A few years ago, I worked with a plastic manufacturing company which supplied to some of the world’s largest consumer products companies. Later, this Indian company moved most manufacturing locations closer to customers. Customer/consumer intimacy is a big driver for setting up manufacturing locations abroad. Some firms are also setting up contract manufacturing sites in Srilanka, Bangladesh and Thailand.

Sourcing locations
Regionalization of business and the need to compete in a globally interconnected business environment drive companies to look for locations that provide a variety of raw material quickly, in bulk and at
competitive prices.

MITALI BOSE is Managing Consultant & Building Effective Organizations (BEO) Practice Leader, Hay Group

©Entrepreneur October 2011

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abroad, country, expansion, family business, mitali bose, owner