CLEVELAND -- Already ranked among the world's largest automotive suppliers, Eaton Corp. is pursuing a global growth strategy aimed at boosting annual revenues from last year's record $6.8 billion to $10 billion by 2000.

Stephen R. Hardis, who took over as chairman and chief executive officer in January after serving as vice chairman and chief financial officer since 1986, says the targeted growth will be accomplished through a combination of tactics: increased capital investments, higher research and development outlays targeted more directly toward truly new products, acquisitions and expansion in five key developing markets: China, Korea, India, Brazil and Mexico, with China emerging as Eaton's biggest single opportunity. The company already has established joint ventures in China covering hydraulics and truck transmissions.

Looking 15 years out, he calculates that "We should be doing at least $2 billion" in those five nations by 2010 and perhaps $500 million in incremental business within five years (both based on 1994 dollars and both on the assumption Eaton captures half the market share in those countries that it enjoys in North America).

Eaton's moves follow a blueprint developed by a task force established two years ago to evaluate its position in developing nations. Labeled the "International Growth Initiative (IGI)," it produced some eye-opening results. "First of all, the market potential was far bigger than we intuitively understood when they really drilled this down on a country-by-country and product-by-product basis," says Mr. Hardis. "I don't think we had internalized how big the market was."

The plan also prioritized opportunities by matrixing Eaton's products by country, and shot down some long-standing myths. Typically Eaton entered developing markets using a low-risk strategy based on minority-interest joint ventures that often included "trading technology or old equipment," and with limited capital outlays and modest exposure to market and currency fluctuations.

Although fairly successful, Mr. Hardis says that lacking Eaton's full commitment and resources, "It shouldn't have been a big surprise that we had a high failure rate." Moreover, the IGI folks concluded that Eaton historically has had "a very expense-conscious management," which meant "we tended to avoid putting (our) people on the ground (in developing countries) until we were active and in the black." In retrospect, that philosophy proved to be "shortsighted," he concedes, adding that, "I think we've had a basic change now... clearly we feel that our experience shows we've done far better on a more consistent basis when it has been Eaton's management in control."

Eaton and other suppliers, of course, still must rely on joint ventures in nations such as China and India where foreign equity ownership is restricted. But that doesn't mean it can't strive for a larger imprint and more effectively contribute its knowledge in quality and productivity to establish "world-class" manufacturing facilities, he says.

Eaton also is becoming increasingly aggressive in acquiring companies that mesh with its global strategy, including those in its primary automotive categories (passenger-car, light-truck, heavy-truck and off-highway equipment) that make up nearly half of its revenues, and in the electrical and electronics side of the house (also about half, but importantly including a large automotive controls business).

Last year alone Eaton acquired an Australian maker of switchgear and controls, a Dutch automotive controls manufacturer and the remaining 49% interest in a Brazilian manufacturer of appliance controls.

More recently, in April Eaton won full control of CAPCO Automotive Products Corp., a builder of medium-duty truck transmissions located near Sao Paulo, Brazil, by going directly to stockholders despite opposition by CAPCO's directors. Eaton previously owned a 7.3% stake in CAPCO and its products generated 40% of the company sales.

Mr. Hardis says that Eaton isn't keen on hostile takeovers, however, preferring to cut deals through negotiations beneficial to both sides.

Other interview highlights:

* Eaton's capital outlays, running at record-high levels for seven years, will likely top $500 million yearly before 2000. "This year we've been struggling to hold it at $400 million," he says, vs. $399 million in 1995 and less than $200 million in 1991. The "bulk" of the spending will go into Eaton-owned facilities in North America and Europe.

* R&D spending likely will remain at 3% to 3.5% of sales ($227 million in 1995), but with a major shift in where it's spent. "We were spending 90% of our money on defensive R&D ...but our target by 1998 is to have 40% of the spending on really new products."