2. Introduction to Carborundum Universal Murugappa Limited (CUMI)
• Carborundum Universal Murugappa Limited (CUMI) is a leading
company in the abrasives and ceramics industry in India. Founded
in 1954 as a tripartite joint venture, CUMI has grown to become
the flagship company of the Murugappa Group, with total revenue of
US$4 billion in 2011. The company has a rich history, starting as
a steel furniture manufacturing company in Chennai and later
expanding into the abrasives industry through partnerships with
global players.
3. strategic vision and growth
targets
• CUMI's strategic vision is to become a global leader in the
abrasives industry by 2020. The company aims to achieve this by
expanding internationally, gaining access to resources such as raw
materials, energy, technology, and markets. CUMI has set ambitious
growth targets, including reaching sales in excess of $2.5 billion
by 2020, with an annual growth rate of more than 20 percent.
4. Key Challenges in the Chinese
Market
• The complexity and foreignness of the Chinese market
• facing issues with high costs
• cultural differences
• the need for local leadership
5. CUMI's strategic visioning
exercise and the "Vision 2020"
plan.
• CUMI's strategic visioning exercise involved a comprehensive analysis of
the company's strengths and weaknesses, leading to the articulation of a
new vision known as "Vision 2020." The vision aimed for CUMI to become
a global ceramic/abrasive company with sales exceeding $2.5 billion by
2020. This ambitious plan required an annual growth rate of over 20% and
an international expansion to access resources and global markets. The
company recognized the need to step outside of India to gain access to
resources such as raw materials, energy, technology, and brand, and to
access global markets. The strategic vision also emphasized the
importance of a resource-restricted expansion, given the company's
cautious approach due to the absence of deep pockets compared to
developed world multinationals.
6. Company's growth targets and
expansion plans.
• CUMI's growth targets included expanding internationally to gain access to
resources and markets, with a specific focus on acquisitions in Russia and
South Africa to control input costs and access markets. The company
aimed to grow more than 20% annually and recognized the need for a
different approach to size and risk profile due to resource restrictions.
7. The need for international expansion and
access to global markets.
• The need for international expansion was driven by the company's
recognition of the challenges in the Indian market and the potential for
growth in international markets.
• CUMI's global strategy involved product-specific, backward-integration
strategies to access cheap sources of raw materials and country-specific
strategies to leverage competitive advantages and access markets for their
products.
8. challenges encountered by CUMI in
the Chinese market.
Cultural and business differences between India and China
The struggles of CUMI's stand-alone operations in China
9. Cultural and business differences
between India and China
• The language and cultural differences, as well as the Chinese
government's insistence on joint ventures, presented significant barriers to
CUMI's expansion in China.
10. The struggles of CUMI's stand-
alone operations in China
• CUMI's stand-alone operations in China faced difficulties in reaching profitability. The
company's original objective was to produce low-cost commodity products for export, but
it struggled to compete with local companies that enjoyed certain advantages, such as
preferred access to raw materials and capital. The high cost of capital, cultural
differences, and the need to understand the nuances of doing business in China were
among the challenges that hindered CUMI's success in the Chinese market.
11. Addressing Challenges
• Strategies implemented by CUMI to mitigate cultural and business differences in
China
1. CUMI initiated the recruitment of a Chinese executive to lead its operations in
China.
2. CUMI established a 100% subsidiary in China.
• Discussion on the recruitment of local leadership and the establishment of a
subsidiary in China
aimed at adapting to the Chinese business environment and positioning CUMI for success in the
challenging Chinese market.
• Analysis of the shift from a cost strategy to a product performance strategy
12. Market Access and Service
• CUMI's market access and service strategies
CUMI's market access and service strategies have been integral to
its international expansion and distribution approach. The
company has focused on leveraging overseas partners and growth
stories to establish a global presence and access new markets.
13. Analysis of the company's
approach to international
expansion and distribution.
• This approach has allowed CUMI to tap into resources and markets in countries such as
Russia and South Africa, where the company made strategic acquisitions to control input
costs and gain access to key raw materials for abrasives.
• The company has established marketing offices in various countries, including China,
Thailand, the Middle East, and Europe, to provide application support to key customers
and expand its presence in international markets. By carefully treading overseas and
leveraging partnerships, CUMI has aimed to address customers' unique problems and
establish a worldwide stance for its products.
14. The importance of leveraging
overseas partners and growth
stories.
• CUMI has emphasized the importance of leveraging overseas partners
and growth stories when pursuing acquisitions and identifying growth
opportunities, and providing application support to customers in various
international markets.
15. India/China Trade and Business:
Cultural and language barriers
Have been significant challenges for Indian companies entering the
Chinese market. The cultural distance between India and China, as
well as the language differences, have posed obstacles for Indian
businesses. The Chinese government's insistence on joint ventures
with local partners has also been a constraint for Indian
companies, requiring them to navigate complex cultural and business
differences.
16. • The historical success of Western companies in China and
its implications for Indian companies:
The historical success of Western companies in China has implications
for Indian companies seeking to enter the Chinese market. Many Western
companies have mastered the art of joint ventures in China, leveraging
their expertise to navigate the complexities of the Chinese market
successfully. Indian companies have been advised to learn from the
experiences of Western companies and adapt their strategies to align
with the unique business environment in China.
17. Some recommendations
• Leverage Overseas Partnerships.
• Strategic Visioning.
• International Expansion Strategy.
• Understanding the Chinese Market.
• Product Performance Strategy.
• Addressing Workforce Challenges.
