Oct. 16--MUMBAI -- Nirmalya Kumar , professor of marketing at London Business School(on a long leave of absence) and a member of the group executive council at Tata Sons Ltd, says one of the big items on the agenda of corporate India over the next 10-20 years will be innovation. Indians need to be given "the resource, structure and the process to become innovative".
Considered one of the world's leading thinkers on strategy and marketing, Kumar, whose latest book is titled Brand Breakout: How Emerging Market Brands Will Go Global, spoke in an interview about what Indian brands should do while operating in tough economic conditions. Edited excerpts:
What would you say are the key challenges faced by emerging market brands looking to go global?
The biggest challenge is that most emerging market countries have a very negative "country of origin" image with Western consumers. We assume that any brand coming from an emerging market will be of low quality, poor on environmental considerations; will be a cheap, shoddy product. So we have to overcome that. That's the first challenge. The second is that for most of the countries, the competitive advantage is low cost or natural resource abundance. It's not natural for most companies to go from that position to that of selling a brand. For instance, China's problem is that their existing business model -- of producing products for global manufacturers and brands -- is so successful. It's an efficiency- oriented business, a very large-scale volume, low-margins business, but one that requires a lot of capital investment. They have perfected that. But when it comes to building a brand, it is not a capital-intensive model. It requires you to be creative and to invest without knowing, absolutely certainly, what returns you may get. So Chinese companies understand how to invest in production facilities, manufacturing and supply chain. This marketing-branding thing, however, seems to be very fluffy to them. For emerging companies to become brands, they have to change their mindset, and they have to change their business model, which is not easy. With Indian companies, the challenge is different. They don't have to struggle with understanding branding. The problem is quality.
What are the best ways for an Indian brand to grow internationally? Is the acquisition route preferable?
While that's one route, it's the least interesting. But the three routes that are most interesting for Indian companies are: the diaspora route, where you use own immigrants from your country to the other country, use them as a beachhead, you sell to them and through a demonstration effect you attack the host population. But for that strategy to work, you need enough Indian immigrants in that country, so a US or UK would be an obvious example. Also, you need a brand that has global appeal. So Bollywood, for example, is always restricted to the diaspora, whereas an ICICI Bank can expand outside the diaspora.
The second route is that of natural resources. You take a natural resource of the country and make a brand out of it. So, for example, we could do that with Darjeeling tea or the Alphonso mango. So, when you claim that (location), you are already unique. France has done the best job of this. It's not just about using that location, but also imbibing some myth along with that location. An Israeli company, Premier Cosmetics, bases its products on the Dead Sea, which has 32% salt content. What's so special? I'm not sure, but Cleopatra apparently got her beauty secrets from the Dead Sea salt. So you imbibe that myth. You also have to have an elaborate production system to show customers that this is quality and it has to be very expensive to bring up entry barriers to others. Not to mention strict independent auditing.
The third route is the cultural resources route. Overall the (country's) image may be negative, but there may be certain aspects of the culture that may be positive. Ayurveda, yoga, exotic location, these are all the positive association that India has. If you say Brazil, everyone knows it's about the sun, sea, music and fun. So Hava