The current issue of Fortune International carries an interview with Mr Carlos Ghosn, currently CEO of Nissan and as per Fortune, the clear front-runner in the race for being the best automotive CEO of the 21st century.
I am taking the liberty of using an excerpt from this interview.
In answer to a query from the Fortune journalist about "What are the winning strategies in China?," Mr Ghosn states that, "Any strategy in China is a winner for the simple reason that there is undercapacity. You can't say who is going to lose and who is going to win, because everybody is going to win.
Little by little, you are going to come to a situation of overcapacity, which is the normal situation of the industry. The challenge is not to get carried away too much by your present results. Don't believe in your present success.
Prepare yourself for when we come to, overcapacity and cars will not be a rare commodity in China. So if you are sleeping on your laurels now and saying, "I am doing fine in China" and you are not working on quality or cost or efficiency or speed, you are going to have problems."
He then goes on to give advice on what action an auto company needs to take in a situation like that.
If we can fast-forward to the year 2007 or 2008, then substitute 'China' with 'India', and 'automobiles' with 'other' consumer good industries and businesses such as durables, electronics, FMCG, textiles/ fashion, retail, retail malls, entertainment complexes such as multiplexes, food services, hospitality etc., the message can be relevant to Indian companies as well.
The so-called 'feel good factor', coupled with encouraging growth prospects for the Indian economy as a whole, and far easier access to finance from options ranging from traditional (industrial) development finance institutions, to external borrowings, to foreign direct investment/foreign institutional investors/ venture capitalist investments, and the recently jump-started primary market is now resulting in the beginning of a fresh wave of large investments in most industrial or consumer goods sectors.
With gestation periods ranging from between 12 months to 24 months, most of the new capacity will be coming to the market by mid-2005 or 2006.
In the interim period, the consumer demand would have continued to grow, creating a situation for many of the existing businesses to record exceptional profitability due to excess demand compared to supply.
However, 2006 or 07 may see the return of equilibrium between demand and supply, with supply substantially augmented from global sources as well (in addition to the indigenous ones), leading to a very competitive business environment once again.
So what is the message behind this hypothesis? I would strongly recommend to Indian companies that while they plan for starting new businesses or expand capacities in their existing ones, they should put in more-than-the-usual Indian effort in getting themselves familiarised with the globally best-of-the-breed players in their sector of operation, and then embark on the arduous journey of inculcating the best-practices as relevant to their industry, and establish product innovation, product / service quality, business efficiency, speed of response, and cost competitiveness parameters that can be benchmarked with the very best in their sector.
Establishing standards that compare with the worlds best comes at a substantial cost -- both financial and management time. Unfortunately, too often, many Indian companies continue to under-estimate the true financial needs for establishing such standards, and the management quality and commitment that is needed to put such standards in place.
One of the most time (and, even cost) effective way is to get access to know-how and experience from whichever part of the world, rather than trying to reinvent the wheel each time or learning-on-the-job by making mistake after mistake.
Fortunately, India's image outside the country has undergone a very positive change in recent months, and this has made it easier to seek technical and commercial know-how from international sources including experienced expatriate-managers.
Joint ventures / strategic alliances with leading international players are also far more feasible now for the Indian companies, and this could significantly shorten the learning process while giving access to tried and tested business operation systems and practices. It would, indeed, be a pity if we do not see hundreds of world-class Indian companies in the years to come, when the conditions currently are so conducive to build them!