Critical Thinking on Cumi

Overview of Business Strategies in China

CUMI is an Indian manufacturing company with a focus on abrasives and ceramics industry.

The previous business strategies CUMI adopted when entering the China market and before its separation from its Chinese joint venture was a “simple low cost strategy”. Due to the incompetency of the cost leadership strategy, CUMI is contemplating a “product performance strategy”. This new strategy will focus on producing premium abrasive products to differentiate themselves and win the high-end market share in China.

However, the effectiveness may still be limited as R&D for a totally new market segment requires tremendous resources and CUMI in this case does not have the “deep pocket. Furthermore, once the R&D fails to deliver the required products, loss suffered by CUMI will be inestimable.

Hence, the further improvement will be focusing on adopting an integrated approach. For example, Beijing factory will be assigned with R&D tasks to produce the high-end products. In addition, another factory will be set up in Changchun, China to continue tapping on the cost-effective abrasives market.

CUMI’s core competencies in China

For the financial perspective, CUMI is a leading manufacturer in India with robust financial performance. However, the market cap of CUMI makes it rather cautious when investing abroad compared with the western companies. Hence it can only reach competitive parity.

In terms of physical resources, CUMI holds plant and land in China that its competitors such as Saint-Gobain also has. Therefore, it is competitive parity. For technology, CUMI has starter advantage as it was the only few Indian firms who initiated Application engineering and in-house R&D in the early 1960s. However, these advantage may get eroded overtime and hence being categorized as temporary advantage. This provides competitive edges for CUMI in China as application engineering can help CUMI differentiate themselves from other cost effective competitors and R&D drives the cost lower.

Reputation and culture are key selling points for CUMI in China. The previous two successes in Russia and South Africa help CUMI to build an International image. The humility makes whoever cooperating with CUMI more comforting. However, the reputation card may not be that effective as Chinese companies prefer bigger names such as “Tata” or “NIIT”. CUMI has competitive advantage in its human resources as it has a group of technologists and a workforce with rather diversified background. However, the effectiveness in China may be challenged as the “Indian in China gets Indian price”. CUMI also has sustainable advantage in corporate functions as it was successful in international management in Russia and South Africa. The issue with China is that it may take longer for CUMI to find out how the excel in the Chinese market.

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