Discuss about the International Management for Welspun Group of India.
Globalization is a process through which the businesses start operating at an international scale. The aim of the assignment is to analyze the problems faced by the Welspun group of India while expanding it operation to UK and US. The paper addresses the procedure of globalization to understand success of the organization and the problems faced. The company has grown from capital base of US$250,000 to US$3 billion. Welspun group of companies began its operation in 1985 in a small town of India. It started as a polyester manufacturing company. The company has now expanded its branches to fifty countries over the globe (Beck 2015). The company has been identified as one of the fastest growing global companies and a leading company is market of textiles, yarns and pipes. The company has its expansion on countries such a UK, US, Portugal, Mexico and Saudi Arabia and has a business relationship with foreign companies such as Exxon Mobil, Chevron, Wal-Mart and Target.
Identification of the Problems and Solutions
Expansion of Welspun Group of Companies
The Welspun group of companies was established in a small town of India in Maharashtra. Over the span of ten years, the group had set up two manufacturing plants. With the rise in the investment made by the country the business segment was also rising. The Welspun group of companies had diversified its products from polyester to pipes, cotton textiles and yarns. The revenue and the profit of the company have been rising steadily since 2007. The international subsidiary was set up in 2000 in New York. This was done to cater the marketing needs of US and stay in close proximity with their international client that is Target and Wal-Mart (Sampler 2014). The group was steadily expanding from 2000 to 2005 in the segments of pipes, textiles and energy sector. The first big move was in 2006 when the group bought an acquisition of one of the leading companies in US that was also a supplier to Wimbledon Tennis championships. Until the year 2010, the company has established its subsidiaries in various parts of the world. The focus of the company in 2010 was on increasing its capacity in energy and infrastructural sector that is one of the fastest growing industries in India as well as emerging markets (Kar 2015).
The main reason for the expansion of the company in such a short span of time is simultaneous concentration on geographical product diversification or the growth of the company. The first problem identified with such a strategy is that it is cumbersome and risky to market new products into new market, as it requires different sets of capabilities. Despite of this problem Welspun group of companies was careful in its selection of expansion of products and market so that the limited resources can be utilized optimally (Cavusgil et al. 2014). The focus of the company was on developed countries and not the underdeveloped or developing countries that helped the company eradicate the problems that it faced. The group used diversified products in its expansion such as pipes, infrastructure, energy, textile that were not related.
The strategy that has helped the organization in expansion in international countries is its constant evaluation of the strategies and the structure of the organization. The company also uses off shoring and outsourcing strategy for development and expansion of its subsidiaries. The aim of the strategy is to minimize the cost of production. The business partners of the company such as Wal-Mart and Target would collaborate with the manufacturers in low cost countries and act as suppliers (Singh and Agarwal 2014). Since India is a low, its country Welspun group grabbed in this opportunity and acted as the suppliers to the leading retailers of United States. The motto of the company “Dare to commit” has helped the group in expansion for experiencing phenomenal growth (Mellahi et al. 2015).
The two faces behind the growth of the company are B.K Goenka and R.R. Madewewala. Despite of the problems faced by the company it as successful in the expansion of the company in the international markets. The challenges that were faces were due to limited capital resources and small and medium enterprises. The annual growth rate of the company is thirty percent since 1995 that is higher than the average standard. The business of expansion is risky (Hirst et al. 2015). The Welspun group of companies was not only successful in expansion of its business in international market but was also successful in diversifying its products in the home market and expanding new products into the new market.
Expanding the new products, existing products and diversified in the international market was not easy the Welspun group had to take many risks and face many challenges. The company was involved in large amounts of investment that was a sky affair. The company was not sure whether the investments would turn into the profit or not. The first pipe manufacturing plant was set up with the risk of US hundred million dollar, which was paid multiple times. The risk is high when the company gets involved with the new establishment (Joshi and Raichurkar 2016).
The company should ensure that the strategies that it has formulated are implemented efficiently to get a professional outcome. The strategies implemented should not only focus on expansion in new markers but should include both expansion and diversification. Analyzing the market situation of the country that it is planning to expand is essential to avoid the risks and uncertainties (Baylis et al. 2013). The analysis of the country should be categorized in proper heads. The analysis should be on the basis of target market, customer analysis, competitor analysis and economic analysis. The strategies implemented by Welspun group of companies were optimal and efficient as it focused on both diversification and expansion.
Another problem faced by the companies while expanding its operation in international market is the risks of competitors. As the company expands its operation in the market there are many competitor present that has already established its operations. Hence, it is difficult to expand its business and attract the customers in already well-established market. The objectives should be set in such a way so that it is achievable and attainable. The objective set should be practical. The concentration of Welspun group of companies is on expansion and not the competitors (Ambos and Håkanson 2014).
The Welspun group of companies has expanded its business in a very short span of time and this is only possible due to the strategies that it has used for its international expansion. The two strategies used by the company are:
- Geographical diversification
- Product diversification
These strategies have helped the company gain popularity in the international market and attract larger customer base. The risk identifies while expansion was of availability of little resources for expansion. In addition, expansion requires huge amount of capital investment, which is difficult for the companies to attain due to the rules of the banks for providing loans. If the business fails then it becomes difficult for the company to repay its loans putting the business at risk. The strategies used by the company have helped in the expansion ad globalization of the company (Pucik 2013).
The study on the Welspun Group of Companies concludes that the company was successful in its international expansion. It sets a good example for understanding the process of globalization. The company has successfully expanded its business to other fifty countries in a very short span of time and this was only possible because of the strategies used by the company. The study identifies that the company through its effective strategy formulation properly handled the problems and issues of globalization. The challenges that the company had to face was achieved through proper organizational structure and strategies.
Ambos, B. and Håkanson, L., 2014. The concept of distance in international management research. Journal of International Management, 20(1), pp.1-7.
Baylis, J., Smith, S. and Owens, P., 2013. The globalization of world politics: An introduction to international relations. Oxford University Press.
Beck, U., 2015. What is globalization?. John Wiley & Sons.
Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. Pearson Australia.
Hirst, P., Thompson, G. and Bromley, S., 2015. Globalization in question. John Wiley & Sons.
Joshi, V. and Raichurkar, P.P., 2016. Investment Opportunities in Decentralized Textile Industries-Cluster Development Approach: A Path Way.
Kar, M., 2015. The Role of Foreign Collaborations in the Textile and Clothing Sector. In The Indian Textile and Clothing Industry (pp. 69-82). Springer India.
Mellahi, K. and Frynas, G., 2015. Global strategic management. Oxford University Press.
Pucik, V., 2013. The challenges of globalization. Japanese Multinationals (RLE International Business): Strategies and Management in the Global Kaisha, p.218.
Sampler, J.L., 2014. Bringing Strategy Back: How Strategic Shock Absorbers Make Planning Relevant in a World of Constant Change. John Wiley & Sons.
Singh, R. and Agarwal, S., 2014. 3 Corporate social responsibility in emerging markets. Corporate Social Responsibility and Local Community in Asia, p.65.