Mack Valves - Case Study

Establishing a new enterprise in a developing country can be a double-edged sword – fraught yet full of potential. Mack Valves, a business that has been providing specialised valves to various industries for more than 75 years, including defence forces in Australia and the US as well as leading mining and industrial gas companies, is a good example.

When Ravin Mirchandani acquired Mack Valves along with his partners in 2013 and became chairman, he decided to take Mack Valves back to its roots as an Australian family-owned and managed company. This included placing a premium on quality innovation with a global manufacturing and supply chain outlook. The business has since had significant growth, expanding its operations in late 2014 with the commissioning of a new factory in Pune, India. To achieve this strategic direction, Mack Valves engaged a new senior management team, recruiting external Australian managers with significant international experience.

This was not Mack Valves' first foray into India. Its previous American owners had expanded into India as a low-cost, offshore option to manufacture products. They established a plant in a remote town and faced challenges that included a low-skilled workforce and limited access to electricity, water and transport infrastructure. This raised difficulties with the production of valves, which required highly skilled teams and the use of leading technologies to ensure safe production.

The senior management team at Mack Valves envisioned something quite different with the new Indian factory. The company wanted to embrace the nation's full potential as part of a growth strategy into the region, gaining access to the burgeoning Indian market while having the potential to supply products to Australia, China, the US, the Middle East and Africa. After equipping the plant with state-of- the-art machinery, the strategy was to complement the Australian operation in Melbourne by doubling the size of Mack Valves' engineering and research and development teams, rather than offshoring production. But turning this vision into a reality was not without its challenges.

Key learnings

  • Take a measured risk - Establishing a business in a developing country can be a gamble. Mack Valves demonstrated the benefits of listening to clients' requests and pursuing an identified demand before investing in the market.
  • Source and retain capable talent - Finding, developing and keeping talent are key challenges when operating in Asia. Mack Valves had to understand the capability gaps of its new Indian workforce to meet Australian standards. Its retention strategy incorporates building a supportive corporate culture with strong employee links.
  • Proactively manage cross-cultural teams - Management and employees both need to understand the differences that exist within cross-cultural teams. Mack Valves has taken the approach of actively adopting best practices from both the Indian and Australian context to improve processes and relationships.
  • Give back to the community - Expanding into India does not have to be about a low-cost option. Mack Valves strongly believes in its corporate social responsibility (CSR) and have introduced training for disadvantaged women to be international-standard welders.

Taking a measured risk: listen to your clients' requests

Ravin knew there was significant potential for growth in the area because he had listened to clients' frustrations about the long delays in importing high-quality valves into India. But after two decades in the industry, he also understood the risks. The new factory has to be operating efficiently before it can acquire certification by the relevant authorities in each of the countries it intends to export to. This can take several months.

Despite not having any signed client contracts, Mack Valves invested in setting up the new plant in Pune, relocating
from the earlier location that proved unsustainable. As Ravin explained: 'It is
 a long process. It could take between three and five years until the Pune factory is at full capacity, but the potential is immeasurable. One has to have the stamina for the long run when investing outside of Australia.' The gamble
is already starting to pay off. At the function to inaugurate the plant in Pune, potential global clients, many of whom already had smaller contracts with the Melbourne-based operation, provided positive feedback and were impressed that the new factory was adhering to Australian standards. Once certification is received, Mack Valves intends to develop these client relationships to secure new contracts.

"It is 
a long process. It could take between three and five years until the Pune factory is at full capacity, but the potential is immeasurable."

Sourcing and retaining capable talent: invest continuously in your Indian workforce

One of the bigger challenges for Mack Valves has been the recruitment of local talent for the Pune factory. India's high-skilled and educated workers are in hot demand at home and abroad, where multinationals recruit them for projects in cities such as Dubai. Those who remain in India are recruited by leading corporations that offer attractive packages. Australian businesses generally underestimate the high competition for talent in India, making it one of the leading obstacles in establishing a business.
 
Once a preferred candidate is identified after a process of interviews and a technical assessment, Skype sessions are then held with the Australian management team to determine if there is an appropriate fit and to evaluate attributes. Even the recruitment process can present difficulties because often the prerequisites for a role in Australia cannot be applied in an Indian context. For example, the Indian sales team may have good sales experience but not specifically in the valves industry; in Australia, specialised knowledge of an industry is a must. This has meant that management has had to adjust its expectations and consider strategies and training to address capability levels of the new recruits to meet Australian standards.
 
Retaining talent has also been a challenge for many Australian businesses operating in India. Poaching highly skilled workers is common among multinationals and local Indian firms. Mack Valves' Indian management team highlights this as a potential issue it is actively preparing for.
 
In an effort to retain staff, Mack Valves adopts a supportive corporate culture. This is fundamental to increasing employee satisfaction and commitment. "We don't want sub-cultures and hierarchy throughout our plant, but rather a flatter structure where everyone is equal, approachable and willing to help each other for the benefit of the business as a whole," Ravin said. That's a big ask in a country where a hierarchic caste system has flourished for generations.

Providing flexible hours, proper sanitation, a rooftop space to relax on breaks and a cafeteria has gone some way to creating the Mack Valves 'family'. Staff members who work hard and follow and encourage safety standards are duly acknowledged, and this has forged good team morale. "You need to make your talent want to work for you", Ravin explained. "This starts with first having a mechanism of correctly identifying someone who supports your vision and shares the excitement of your company's dreams and aspirations. Then you paint the picture and follow through with the promises that were made to them when they joined your team." The company has invested significantly in its engineers, dispatching them to Melbourne for training and committing to sending staff to overseas conferences where they can network and develop their knowledge and skills.

Conclusion

Expanding operations into another country is not easy and involves a long process with commitment from all parties. Mack Valves' experience highlights that India is more than a low-cost offshoring opportunity. As India's socioeconomic environment continues to develop, Australian businesses wishing to expand overseas should consider the potential of operating in India as an effective strategy to access the region and the growing markets of Asia. With it may come challenges, but as Mack Valves demonstrates, knowing the risks, preparing for potential difficulties and understanding differences among your cross-cultural teams is crucial for success.

 

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