Making of global leader:

CUMI had 60 years of legacy and was leading player in the abrasives and ceramics industry.
As of 2011 they had 4 segments (I.e) abrasives(41%), industrial ceramics (11%), electro minerals
(36%) and Super refractories (12%).
Abrasives are used for grinding and polishing operations.This is used in almost all industries.
 
Early History:
CUMI was the flagship company of Murugappa group. They had total revenuw of $4 billion in 2011.
The founder of the group is Dewan Bahadur A.M Murugappa Chettiar. Initally it was a banking
business in burma in 1900 and later they extended to Malaysia, Sri Lanka, Indonesia and Vietnam. In
1930s, they moved to India and started their business in Chennai, Ajax Inida Ltd.
 
Ajax after change of lot of business they entered abrasives market. Carborundum university and
Universal Grinding wheel company merged and was looking for a perfect industry in India. They
joined along with Murugappa group in 1954 as a tripartite joint venture. Later Murugappa group
took over the entire business and listed the company and had more than 17000 shareholders. They
also diversified in financial services and rubber plantation.
 
Post-independence CUMI integrated vertically as it was the only way to expand the business due to
license and export/import issues.
The team had R&D during 1974 and they also collected raw materials from outside the country.
 
Post Liberalization Growth and Internationalization
In 1990s India had revised its economic reforms which helped the business to connect with the open
market. The main competitors of CUMI are Grindwell Norton(GN) and Wendt which were US and
Indian company . The GN had a plan of having aggressive expansion in India like how Jio came into
the market in 1994.Similarly Wendt had a joint venture along with the house of Khataus.
Owing to heavy competition they planned to diversify to avoid the risk in the industrial ceramics.
 
The company opened 2 offices first in US and then in Australia in abrasives. Later they established
offices in China,Thailand, the middle east and europe. They had good success post having
international extension.
 
Strategic Visioning and Diversity:
In 2004 Murugappan became Chairman hence Srinivasan became the vice president of marketing.
He had experience as a marketing head , CEO of Wendt India ( competitor )
BGMC Committee was for having strategic plans. As part of predicting analysis they found that the
growth of the company was in pace to inflation hence they looked for other growth strategy. The
target was to achieve $2.5 billion by 2020. This plan was called vision 2020. To achieve this they
need to grow minimum of 20% annually and expand internationally. The major set of employees
were from south india.
 
Global Venturing:
 
They had lot of competition hence focused on two strategy for internationalization. One is product
specific strategy that is going overseas to access cheaper source of raw materials to control input
cost and the other one is country specific target going to countries to leverage competitive
advantages and to access markets for their products.
 
VAW ais a company in Russia who was having the highest market share .They were looking for a
investor. CUMI also lookedup to setup a manufacturing facility at middle east and north africa for
silicon carbide. Since raw materials are available in Russia they thought of investing in VAW.
 
Issue with acquisition :
Political and economic conditions of Russia was not stable owing to which investment will be a high
risl
The language barrier will be an issue as they speak only Russian language.
 
They had translators from both the side for communication and also the existing managers were
getting trained. They went ahead with the acquisition and the target was to increase the production
of silicon carbide by 25%. They also implemented cross function between india and Russia team to
build new ideas. This worked well and the company had success and the employees of Russia got
wages hike.
 
Acquisition of Foskor Zirconia, SA
IDC of south africa founded Foskor Corporation in 1951 for agriculture sector to produce phosphates
acid and fertilizers. The company also started production of Zirconia a raw material used in Ceramic ,
refactory products etc. CUMI group took over this company as they were falling down the value.
CUMI took 51% of this company. The strategy was to become leading supplier of Zirconia
products.But CUMI was not satisfied with the SA leadership team hence they removed the head and
replaced with an Indian guy as CFO and CEO. There was lot of cultural difference in the people. They
also faced currency issues and rising of raw material issues.
 
 
China Strategy:
Raw materials like Silicon carbide and Alumina were available only in China at a large scale hence
they were CUMI's strong competitors. Hence they wanted to set a base in chian but international
investment in grinding wheel business was restricted. Hence they planned for acquisition in China to
gain the license to start its own venture hence they approached JID company and took 49% of share.
Initially they got good support from China team. They had technical team from india and other
employees were Chinese. Eventually the team collaboration didn’t go well hence after three years
they went under a friendly demerge.
 
Growth Opportunities and Challenges in China.
The China team planned for having 10% increase of revenue annually as they were leading in the
market. The standalone office was struggling gain profit. Since the team was a state owned
enterprise they where getting lot of benefits which got stop after demerge. Hence they focused on
cost reduction. Since most of the people were indians the cost was very high.
To reduce this gap they though of recruiting a chinese executive.
 
India/China Trade and Business:
The war and the issued faced by the Country made CUMIs to explore other places rather than China.
Only well established companies could survive in china like TCS , NIIT etc.
 
Since china is a country which has huge market share they need to look for better options to invade
their market value.