Mr. Jalaj Dani
President - International, Asian Paints Limited
Executive Chairman, Berger International Limited
Good afternoon friends. As I always say whenever I get invited to one of these sessions, that it is very glamorous I think to build a multi national business. I also think that it is equally stressful because what makes you successful in one market does not make you successful in some other market, and if you have that humility to learn as you go to new markets then you will probably succeed. Other point is that every one wants to build a global business but it is a journey, and we embarked on this journey a long time back, but in a fairly serious manner only in the last few years. The job is not over for us. I think you can raise capital- internationally- most corporates do in the Indian context today. You can buy material from all over the world. Some of us are beginning to sell material services and products, around the world. Some of us also source a lot of other things as we grow our business, but if we can do this all together at one time I think it is an art. I think organizations go through this journey only over a period of time, and may be we are at level 2 or level 3 or third step of this journey, and I think it will be at least 5 years before we know whether we have finally arrived.
We are among the top 10 decorative paint companies in the world today…fairly large in this part of the world. We have paint manufacturing facilities in 22 countries. Our results are not announced yet but, for last year, sales across 600 million US super markets, capitalization of 1.3 billion, which is a reflection of quality of management and profitability.
These are the brands we have acquired over a period of time. Berger is an acquisition we made about 3 and ½ years ago, and because of that we have manufacturing in a fairly big way in South East Asia, Middle East, and the Caribbean. Apco and Topmans is what we have in the South Pacific. Asian Paints is what we have in India and other parts of South Asia. In Egypt about 3 and ½ years ago, we bought a local brand which is Skip.
I believe that as you become, or as you aspire to become a global player, and most of the people are usually national champions, it does not matter who you are…in some part of the world is where you usually start, whether it is 40, 50, or 60, some corporates 100 years ago or as back as 5 years ago. I think it is an orientation you have to develop over a period of time. The word I like to use is not multi national but meta-national, by which I mean it is beyond borders. Somewhere geographies are restrictive but what you are after are corporate customers. The questions that run in your mind, and as I was discussing with some one at lunch today, which I have not put here, is when Indian economy is growing at 10% then why do you want to be or go outside India?...a question people have begun asking once again. I think it is a question we need to continuously ask because what is it that you bring from your successes from abroad to India, and what is it that you are taking abroad. I think we need to be fairly accurate in these things, and this is something we need to recalibrate every year. Are you willing to take long term calls on some of the markets? Are you willing to go to markets abroad and expect returns in the short term, much lower than what you have in India? In India, the return on capital employed is 40% and outside of India, if we do 10-15% we are quite happy. Are you willing to adopt a challenger mind set because as Dharen started out saying you can be leader in a market, can take it for granted, but when you go to somebody else’s market then what do you do as a challenger? What is the difference you are going to make in that market place? How do you portray your capabilities? Is it service? Is it price? Is it technology? Is it a combination of these things? And what it is all about in this seminar is how do you build brands? How is it being done?
I will spend the next few minutes talking about the Asian Paints experience. We have identified, I think identification of markets you saw in the presentation of earlier speakers, is something that is very critical. You have got to identify markets to which you are best suited to serve. We have identified fast growing emerging markets because retail is fragmented the influence of contractors is fairly large. That is why our vision also states that we want to be the leading decorative paints company across emerging markets. We have taken the route of acquisitions because when you make acquisitions in emerging markets you get brands, you get access to the distribution network, you have ready made manufacturing facilities, and most of the time we spend evaluating people more than accounting or legal reasons. You buy the right company then you get great set of people on the ground on day one. Also it gives you size. Otherwise as a challenger trying to establish your identity, most of these markets are not very easy.
I will spend the next few minutes on the human resource challenge and what it is to build values in these markets, whether it is with consumers or other stake holders? Today at Asian Paints we have more than 1500 people of more than 20 nationalities working with us. How do you respect cultural sensitivities? How do you put systems and procedures in place that take into consideration these aspects? Communication. How do you integrate? How do you inform people? When acquisitions happen…when low cost countries like India are buying assets allover the world, people’s first fear is that they are going to lose jobs. How do you build that common platform across all the employees? How do you create that win-win feeling as far as all the stake holders are concerned? Also it is very necessary to be truthful in these acquisitions. Are you going to lay-off people? Who are the people who are going to go? Why? Are you going to build the organization? Are you going to move jobs? And putting a performance-focus management system on day one, because, then at least at the end of the year, you have a basis on which you can communicate to people about performance and benefits.
Also it is necessary to have a model, an operating model in place which helps you to transfer knowledge and skills. How do you take the best practices? How do you cross pollinate, whether it is technology, whether it is sourcing, how do you take it from one subsidiary to another? And again in every industry you have to figure out your own model. Every company has to figure out their own model depending on what part of the cycle they are in. How do you bring in that feeling of oneness other wise there is always us versus them feeling in most acquired entities.
We have over a period of time launched TOP, which is Top Operating Performance as far as the supply chain and manufacturing is concerned. ESTRIVE is an ERP solution we use around the world…sitting in any part of the world you can access information as to what is happening.
Now to what we call in Asian Paints as guiding principle which is the 4 values that we hold most dear…and how do we build on those and succeed in the market place…and 120 key managers that we identified as global managers…and how do we bring them in various platforms over a period of time.
In our business, and this is something we have done lot of good work with Dharen also, we have learnt that the consumer buys the product once but the brand gets established 3,5,7 years hence so the same consumer comes and wants to use the same product again. When you do acquisitions and if you have bought the right brands, it really helps. Also the corporate brands are much more important than the product brands and this is something we have attempted to build regionally over a period of time in all these markets.
In Sri Lanka we have bought the third largest player, this was in 1999, and through a launch of products we discovered that the brand we bought was not very strong, and this was our first acquisition within India or outside. We rolled over to the parent’s name, which was Asian Paints, and today we have a full range of products and services, and also we were able to take the efficiencies out of India.
The company we acquired in Egypt, Skip chemicals, we renamed it Skip Paints. Today, from number 5 position we have already moved to number 3 position, and we sell more than 100 crore worth paints in the Egypt market last year.
We have also adopted common brand architecture across subsidiaries. So at the economy product range, in most of the markets we will see the brand Decora. In India we have grappled the brands like Apcolite, Tractor, and Three Mangoes. I think as we globalize our business we will have to migrate to some of these brands over a period of time.
Berger, an acquisition we made in Singapore gave us rights to brands in 70 countries. We now have a fairly strong presence in the Middle East and South East besides leadership in the Caribbean markets.
Just to close, we at Asian Paints believe, each market is different and needs a different strategy. So you cannot take the experience of Dubai market to Oman or even to Qatar. Organizations have to align the products and customer offerings in each of the markets and it is never the same solution every time. For us, acquisition is a preferred mode of entry and localization of talent is a fairly big challenge. It is very easy when you acquire and send people from a country of billion people but you will have issues over a period of time, and we have spent a lot of time and money in creating local managers as far as these 120 key positions are concerned. You need to constantly keep your lines of communication open. And how do you leverage relationships whether it is an intra or inter group level. Also multi nationals are about processes…they are about robust processes…managing very different requirements, but ensuring that you are giving value to the consumer, because I have seen parts of our organization also getting carried away with processes and losing out on customer focus.
Speed of integration. Clearly setting benchmarks as in how much cost you will take out, how much you will grow the market, what kind of market share you will have, and putting this with clear milestones from day one…and celebrating some of these successes as you make progress. Last but not the least we are in the era of SOx and other compliance issues. Control is a necessary and sufficient condition. It is necessary and it is sufficient but in the end it is all about trust because you are working with human beings. So putting reward mechanism in place for people to be truthful, to tell you the bad news when something has gone wrong out there instead of discovering at the end of the year after an internal audit visit and things like that. These are some of the experiences for us at Asian Paints. Thank you.
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