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Experian is a leading global information group that offers credit services, marketing services, decision analytics, interactive etc. Experian collects information on loan repayments, credit facilities, bill payments, regular debt etc. from lenders, traders and other organisations. At the same time, not only organisations (Government, NGO, public, private etc) but also consumers seek helps from Experian to avoid the risks regarding financial decisions. Experian was founded as CCN in 1980, in Nottingham, UK. When CCN became international in 1997 entering in US market, it was renamed as Experian. By 2010, Experian is truly a global enterprise, as it operates its businesses in 40 countries with the workforce of almost 15,500 to serve the clients from more than 65 countries. (experianplc.com)
Experian's corporate headquarter is in Dublin, Ireland (not in origin country), though its operational headquarters are in Nottingham, UK and California, US (international). Moreover, over 80% revenue of Experian came from its international operations in 2009 (experianplc.com). In 2009, Experian started joint venture (owning 49%) in partnership with seven other financial services in India (proactiveinvestors.co.uk), though it established its office there in 2006 to get services from IT workforce (guardian.co.uk). Therefore, FDI from Experian to Indian market indicates one further step to be global.
This article aims to critically evaluate the international strategy of Experian, emerged in India. In order to evaluate, an overview of Experian's operations in India has been examined and based on that, this writing has been developed. First this will focus on the literature review of Experian's international operations based on framework and theories. Then it will analyse the international business strategy (especially Indian market) of Experian using theories, data and evidence, cultural differences etc. Next it will illustrate the current position of Experian both global and Indian market against competitors such as, Credit Information Bureau of India, Equifax Credit Information Services and Highmark Credit Information Services (outlookindia.com). Finally, the article will reveal some recommendations and how the changes might be implicated to achieve the success in certain market.
Experian is the fastest growing credit bureau as its international presence among its competitors. It has three main strategies- focusing on data and analytics, driving profitable growth and optimising capital efficiency. Since there are competitors (e.g. Equifax, Trans Union etc.) of Experian worldwide level, it is a global industry (Porter, 1986). According to Stonehouse et al. (2004), globalisation of a company depends on four forces, such as technical, economical, political and social forces. On the other hand, globalisation is necessary for a company in order to capture globalising customer segment and economies of scale (Govindarajan and Gupta, 1999). Moreover Experian entered into Indian market as one of the first providing the service of credit bureau and so simply they could be a dominating power. However Experian has wider opportunities to be globalised as its key resources are people, data and technology. Figure 1 shows major revenue of Experian in 2009 from international operations. Moreover growth is high in new markets like Latin America and Asia Pacific.
Revenue ($m) by Geography
UK and Ireland
Figure 1: Revenue by region; source: experianplc.com
In primary stage, a multinational company should consider proper entry time and the scale of entry before entering into a new foreign market (Hill, 2009). Long-term benefit from continuous business should also be considered so that it might reduce the costs and risks (Hill, 2009). Again the market size, the purchasing power, and future wealth of consumers have to be taken into account to be long term-beneficial (Hill, 2009). Experian started operations in India as an IT supporter of UK operations (Experian.co.uk) in a small scale. However it also considered long-term profit entering into Indian credit market. Hence, though it set up its Indian office in Mumbai in 2006, it established credit bureau in 2009 as a joint venture.
Based on the integration-responsiveness framework, introduced by Bartlett and Ghoshal (1989), Experian might be differentiated as 'global' among four MNE strategies. Experian is vertically integrated and linked to with central database (Experian.co.uk) and local responsiveness is low as it deals with people, data and technology. Therefore integration is high and local responsiveness is low and that makes Experian a global enterprise (shown in figure 2). In fact, Experian is led by centralised management of resources and global strategic co-ordination.
Experian's Position (Global)
Benefits of world-wide Integration
Need for local responsiveness
Figure 2: MNE integration/responsiveness framework (Bartlett & Ghoshal, 1989)
Again if Experian is placed in 'strategic planning for a global business' (Chakravarthy and Perlmutter, 1985) model, it might be considered as 'ethnocentric'. The reasons are that it is controlled by parent company, organised to meet the needs of parent company, key personnel from home country and standardised with less local adaptation.
International Strategy of Experian
Experian entered into Indian market in a small-scale setting up IT workforce in Mumbai that balanced the value and risks of expanding in a new market (Hill, 2009). Moreover a mall-scale entry might be helpful to collect information for the future expanding in the existing market. Though the small-scale entry could limit the market share (Hill, 2009), Experian was able to make familiar itself until it invested directly as a joint venture. Experian knew India is an emerging economic country with more than 1 billion population. As Experian's business is linked to people and data, India would be a profitable market in near future.
According to Dunning (1977), multi-national enterprises have ownership advantages (superior assets that are under exploited) as well as location and internalisation. In that sense, Experian has advanced technology, managerial competence, marketing capabilities, vast access to resources. Moreover it prefers direct investment through acquisitions (e.g. North America) in most cases and joint ventures (e.g. India) in few places. Those investment decisions were taken considering the physical distance, cultural distance and consumer loyalty to local players, national regulations etc. (Hymer, 1970). However, considering all those situations, Experian has taken right decision to be a joint venture in Indian market.
According to Laughton (1995), there are four basic ways of going international such as, exporting, licensing/franchising, joint venture and FDI. As an information service provider, Experian is dealing with sensitive data of clients and other general people. So it has no option for exporting or licensing. The best way is to choose FDI (either wholly owned or joint venture depending on the country). Though joint venture has both positive (e.g. sharing knowledge, sharing of costs and risks, more politically acceptable etc.) and negative (e.g. loss of control over technology and management, sharing of profit etc.) aspects, it might be the only route to enter into developing countries such as India.
Experian developed its products/services in UK and then expanded worldwide. It built up core competences (e.g. skills, value chain etc.) within the firm and dynamic capabilities (ability to organise resources in dynamic environment). There is remarkable growth in Experian; according to Robert (2008), the Chairman of Experian, "Experian's performance this year (2008) is undoubtedly testimony to the underlying strength of the business".
The acquisition of Hitwise in mid - 2007 made the Experian's online performance stronger. Hitwise was supporting its clients to level their online performance against competitors and to expose new opportunities in their businesses. Hitwise is still continuing expanding its global markets, though it was already in the market of the US, UK, Australia, New Zealand, Singapore and Hong Kong before being acquired. Acquisition expenditure was $1.7 billion in 2007 and major investment was in acquisition of 70% stake Serasa, Hitwise, Tallyman, N4 Sollutions and a number of smaller infills.
Successful expansion of businesses in Asia Pacific region has added inner growth to Experian's analytics activities. New sources of data (e.g. visa transaction data) through the acquisition of Hitwise expanded the markets throughout the world. In 2007, the company invested in Chile, India and Bulgaria to set up delivery centres and IT workforce, considering the cost effectiveness through off shoring. That proceeded to further investment in India through the new joint venture agreement.
Since culture is the means that can solve problems of a group of people (Trompenaars and Hampden-Turner, 1997), no international company can ignore it in order to achieve its success in a specific market. Moreover international company should respect all levels of culture (e.g. national level, regional, gender, generation, social class, organisational etc.). Culture can produce three vital components, such as artefacts, values and assumptions (Schein, 2004). Further more culture can be a source of gaining knowledge, a basis for strategic adjustment, a source of competitive advantage etc. Again culture has impacts on organisational structure and decision-making practices, management style and communication, market selection and mode of entry choices etc. Hofstede (1983; 1991) identifies 5 dimensions of national culture that are power distance, uncertainty avoidance, individualism-collectivism, masculinity-femininity and long-term-short-term orientation. There are some key components of culture; these are religion, education, social structure, language, political system and economic system. However joint venture with other local companies should resolve the cultural barriers for Experian of doing business in India.
Effectiveness of the strategy in Experian
Experian has a wider range of effective strategies that might lead the company coming years. First Board of Experian has its own vision that is related to the client, data and technology. It believes all those are a vital part of the global economy. More and more businesses and organisations are becoming dependent on its business for the major decision analyses. As the mission of Experian is to control the information market and build a continuous growth, it are taking steps to maximise its market opportunities for the long term success.
Experian has intending centre of attention on data and analytics. It has the leadership to operate databases about consumers and businesses. The company is using unique software for their own analytics which is the key differentiator from other competitors. Moreover, all the businesses of Experian have the market leading positions. Furthermore, there are high barriers for new entrants because it is globally popular and posses extensive growth in the long run. Experian will utilise its long experience of worldwide operations in India as well.
Another effective strategy is Experian's activities related to finance (Bock, 2009). Experian is investing more and more to expand its core capabilities so that it can widen its businesses to build up new activities in credit risk management and its consultancy. It is continuing development in its own software development in order to assist the clients to their risk management (Experianplc.com). Products and services Experian is selling are the driving force for the business not only in developed market like the US and UK but also emerging markets such as Brazil, India etc.
Experian is ready to cope with new technological environment though the emergence of latest information-rich channels (Bock, 2009). Such channels are helping marketing campaigns driven by more effective strategies. Experian is creating synergies among the credit and marketing activities. They are utilising their data to serve the consumers as well as the businesses. Their major synergies are Credit services, Decision Analytics, Marketing Services and Interactive.
Experian's vision is to make organic revenue growth, by placing a very strong position in credit markets. This dynamic long term growth keeps Experian in constraint rise in profit. This strong position in market is the direct result of some factors. It is increasing global network and developing existing framework into new markets. It endorses new ways of novelty and finding new data sources so that it can provide valued services to the clients. It is enforcing operational excellence through high standard of global brand imposed into new market.
Next Experian has strong cash flow through continuous investment. This opportunity supports Experian to be stronger. Even there is returning surplus cash which are given to shareholder as dividends or share purchases (experianplc.com).
The economy of India is expanding faster because of recent industrialisation. As a result, the income of individuals are increasing and so the lifestyles also improving. All those have created a new atmosphere for credit market and there are increase competitions for obtaining credits. On the other hand, local and international companies require risk assessments to take financial decisions. Hence India is an attractive market for global credit bureaus. Therefore it is right rime for Experian to develop its activities in this rising market. In India, there are 300 million consumers and consumer lending is growing at nearly 29% rate in recent years (Chakravarti, 2005).
Competitors of Experian
In India, Experian will compete (as it stared its operations in 2009) with Credit Information Bureau of India, Equifax Credit Information Services and Highmark Credit Information Services. Credit information Bureau of India is currently leading in Indian market is the oldest among others (established in 2007). Moreover, CIBI is a joint venture with Trans Union, a leading US credit bureau. Equifax also entered in Indian market in 2009 (eqiufax.com) similar joint venture of Experian (owning 49%). Therefore all these three credit companies are mainly operated by international companies proving their own technology and management systems. On the other hand, fourth company Highmark credit information services is a private company based on India only (myhighmark.com). However Equifax and Trans Union are two main competitors of Experian in India, since they all entered into Indian market as joint venture with their own expertise.
Therefore it is important to analyse the international operations (e.g. current market shares, profits and growths) of Experian, Equifax and Trans Union in order to evaluate Experian against it competitors. Experian posses the leading position among the businesses of its kinds. Equifax and Trans Union are two main rivals of Experian, though both of them are far behind from Experian in line with current position in the market. Experian is running businesses in 40 countries and the revenue in 2009 is $3.8 billion (shown in figure 3) (experianplc.com). On the other hand, nearest competitor, Equifax with nearly 7,000 employees has spread its businesses in 14 countries and the total revenue in 2009 is $1.5 billion (equifax.com). Again Trans Union has 3,100 employees in 25 countries with the revenue of $0.9 billion in 2009 (transunion.com).
Figure 3: Sales Revenue
Experian earned net profit of $825 million in 2008 and $945 million in 2009. As a result, the growth in profit is 14.5% (shown in figure 4) between 2008 and 2009. In contrast, Equifax's profit growth is 0% between those years ($272.7 million in 2008 and $272.8 in 2009). Although Equifax (established in 1899) and Trans Union (founded in 1968) have long experience in data information businesses, Experian is more successful because of its structures, policies, strategies and above all underlying strength.
Figure 4: Growth
The above market position was about the global businesses Experian, Equifax and Trans Union. But the scenario of Indian market might be different, as Trans Union is working with Central Bank of India and it entered the market earlier than others. Moreover it is leading in US, though far from Experian as international presence. So Trans Union (or CIBI) might be the main competitor of Experian in India.
In India, Trans Union (part of CIBI) is offering two main products, for example consumer products (with 7 sub-products) and commercial products (with 2 sub-products). On the other hand, Experian has four main products globally, such as credit services, decision analytics, marketing services and interactive services. At present, it is providing only decision analytics and marketing services that means it is giving solutions only to commercial firms. So Experian needs to provide credit services as well as interactive services to reach to consumers' level.
Experian, at present, is in a leading position over its rivals such as Equifax and Trans Union (discussed earlier). They will aim to overcome their limitations and set up new plans to benchmark the business. Experian might hold leading position, if some recommendations are followed.
Experian is dependent on like other commercial organisations and government bodies to obtain data. But getting accurate information is not easy in India, as there are inadequate electronic data available (Chakravarti, 2005). So it should collect possible recent date to be more accurate. Because of confidentiality, data collection might be difficult. In this case, it should follow the nation culture and government rule and regulations (Chakravarti, 2005). Moreover, Experian needs to increase consumer awareness, as most of the consumers do not have any idea about credit bureaus.
On the other hand, Experian would have considered the PEST analysis (Johnson, et al., 2008). Especially when it emerges in a new market, it should consider many important situations situated there. First Experian should estimate the political situation there and if it is not favourable, it has to find the way to encounter that. For example, while doing business in India, Experian should follow the government legislations in order to obtain and distribution of personal or organisational data. Then Experian may struggle for environmental and social problems in those new markets. Experian can hire local experts to get support in case of social or environmental crises. It is expected that Experian would be more powerful than its competitors in Technology (as it demands). So Experian might be in full strength of technological advances during its initial stage in India. In 2005, Experian was fined ($300,000) by Federal Trade Commission of America, because of unfair trading, violating the rules (ftc.gov). However, it should be careful of the government legislations of India to avoid such misconducts.
Millions of people in the globe are the victims of identity theft (Pernes, 2007; Conger, 2009) that could be a threat for Experian. Experian should be careful of protecting the identities of its billions of clients. The software it uses is secured but still it must be carefully watched about the leakages of that software (Sullivan, 2004). A single mistake from its security can lead a major threat to business. Moreover proper trainings and employees' loyalty might overcome that.
Moreover Experian can be considered as star according to BCG matrix (Johnson et al., 2008). As it has been observed that Experian is in continuous positive profit growth and its Market share is rising every year (discussed earlier), it can follow current strategies in India but close observation on national culture, political situation, local organisational culture, is a must. Finally effective products/services (suitable in India and better than competitors) should be promoted not only to survive in the new market but also to raise the market share. Moreover it should introduce interactive services (these are already in other markets) for 300 million consumers as soon as possible.
Experian, a leading global credit bureau, is continuously expanding its international business. Since it mainly deals with people, data and technology, it has less variation of international operations, in spite of geographical difference. So it has less influence of local responsiveness but more benefits of world-wide integration. Moreover its majority of revenue (more than 80%) is earned through international business. Therefore Experian is an ideal global enterprise.
Experian is recently investing in developing countries (e.g. India, China, Brazil etc.) because those are potential markets to integrate itself globally. Since Experian maintains sensitive information of its clients, FDI (whether wholly owned subsidiaries or international joint venture) is the suitable way to enter into a new market. Though it requires high cost, there is high control over operations.
In India, the economy is growing through industrialisation and the credit market is moving fast forward. So, all the giant credit bureaus, like Experian, Equifax, Trans Union, are entering into Indian market. Because of political situation, cultural differences and local organisational culture, Experian chose joint venture entry mode that might reduce costs and risks. Still there are some challenges of accurate information, national identification, confidentiality and consumer awareness in Indian market. However, Experian might overcome all those barriers using its international experience that it has gained from 38 other countries.