India today can boast of world-class companies across industries. Why then is ‘Made in India’ not regarded the same way as ‘Made in Germany’ or ‘Made in Japan?’ Why do many Indian B2B suppliers struggle to prove that they are as high quality, reliable and innovative as the best of them? Why is India’s share in global manufacturing exports or as a percentage of GDP so low in global or Asian comparisons?
The answer is simple. The current negative country of origin bias that many Indian companies experience can only be turned into a positive one by concerted, industry-wide change. While many companies are gaining global recognition, quality & performance must be driven down across Tier 1, 2, and 3 suppliers. Solid management techniques must be applied in all industries, even in those that so far could opportunistically leverage factor cost advantages to drive sales.
Clearly, the government and society have a role to play in building the ‘Made in India’ brand. Initiatives such as ‘Make in India’ must generate a measurable impact on improving the ease-of-doing business rankings quickly. While the government and society need to support it, the industry has its work cut out for itself. The distribution of the degree of application of management techniques in India is rather wide and its average management practice score rather low in comparison with developed countries.
The difference in the management practice score of about 20% vs the US that is large and indicates a significant potential for improved productivity and quality in India through the widespread adoption of modern management techniques. While it is comforting that India fares well in comparison to China and Brazil, aiming for a replication of the Chinese low-cost, low-quality production model is clearly not desirable. What worked in the 1980s should not be blindly copied in 2017. The challenge facing India’s corporations and government alike is not only to create lots of jobs, but also to drive ‘Made in India’ as a globally recognised brand that stands for quality and innovation.
India’s dispersion of the management practice score is qualitatively different from the ones seen in the US, China or Brazil. Rather than presenting a continuous distribution of management practices vs firm density, India sports a double hump. India has world-class companies that are able to compete internationally. However, rather than pulling the rest of the companies along and driving them to better performance, the large majority of Indian companies are de facto de-coupled from these high-performers. Their average management practice score trails China and Brazil. Clearly, a lot more work is necessary to drive consistent firm performance in various industries.
Performance gaps between industries need to be closed. Although productivity and quality improvements require work and investments, they are possible and pay off as the experience of numerous companies operating in India shows.
This is a guest editorial feature by Dr Wilfried G Aulbur, Managing Partner India & Chairman Middle-East & Africa, Head Automotive Asia, Roland Berger