• Strategy
  • CFO Asia

Can You Hear Me?

How to work better with headquarters.

The shining glass building that houses the offices
of ICI India is an unusual sight. The structure itself
is ordinary — it would blend in perfectly in a suburban
London office park. But this isn’t England. It’s Gurgaon,
India, the chaotic and dusty special economic zone more than
an hour’s drive from Delhi. On the sidewalks, vendors carry
on a lively trade in the mid-day heat (over 40 degrees Celsius
on a recent afternoon). A cow grazes in an empty plot across
the street.

Inside the air-conditioned office, Sandeep Batra is explaining
the peculiarities of the Indian paint business. “We don’t sell
our paints through big retailers as you would in Europe or the
U.S.,” says Batra, the urbane CFO of Imperial Chemical Industries’
Indian operations (ICI is now owned by Dutch chemical
company Akzo Nobel). “We sell through mom and pop shops
in the markets.”

Convincing the store owners to carry ICI’s products requires
a costly but essential investment: tinting machines that allow the
store to mix the full range of ICI’s paint colors. And because the
company sells through hundreds of tiny shops instead of big home
improvement centers, its distribution model is necessarily different.
Instead of the one or two warehouses that ICI has in most countries,
there are 60 in India. The number of sales staff is also many
times bigger.

Such deviations from ICI’s usual way of doing things cost
money, of course, and expensive exceptions don’t generally
win the goodwill of corporate managers. But Batra and his colleagues
in Gurgaon have learned how to overcome objections.
“Our business situation is impossible to explain to someone
who has never visited India,” he says. “So when the CEO or any
other senior visitors come, the first thing we do is take them to the
market. We take them to the shops and to the warehouses where
we sell materials — that’s a very different India from what you
see in this office. Once we do that, we never have any difficulty
explaining about the need to put these tinting machines in, or the
need to have feet on the ground, or whatever else is required to
chase the opportunities we have here.”

It’s always been helpful for a regional CFO to build this kind
of understanding with headquarters. But having informed advocates
in the head office is about to become absolutely essential.
The reason: as growth grinds to a halt in the United States and
slows in other developed markets, CEOs are demanding that
Asian operations grow faster to help make up for shortfalls in
global earnings. CFOs find themselves squeezed between growing
pressure from headquarters and the constraints of doing
business in local markets. If those applying the pressure don’t
understand the limitations, they may well impose strategies
that don’t suit conditions on the ground and push for results
that are out of reach for local operations.

Discuss

Your email address will not be published. Required fields are marked *