Winning in the Indian Market
The Economic Times - October 19, 2007
If the ET awards has a category for the non-Indian multinational that built a businesses in India of the scale, scope and profitability of either ICICI, Bharti or Infosys, it is a reasonable guess that the jury would not have had the problem of plenty to choose from. While it could be argued that the same holds true for Indian companies too, the fact is that the golden greats from overseas have far larger war chests, far deeper competencies and all the benefits of an already global business. Why then has Indian market not been over run by MNCs from outside? Why are there not many, many more Nokias, LGs, Samsungs? At a pinch, we can count Honda in that list, although it is the Hero Honda JV that has changed the landscape of personal transportation in urban and rural India. Maybe Hindustan Unilever can also be counted in this category, but only technically. HUL has been in India since 1933 and is as homegrown as Dalda and Fair & Lovely.
Most American and European MNCs which have set up shop here after liberalization, say that they are very disappointed with the mismatch between their expectations of market potential based on the GDP numbers and the growth hype and the reality on the ground in terms of the market environment, which includes customer sophistication and level of development of the business ecosystem and infrastructure. While a lot has been written on the success and failure of Coke or Kellogg or Mercedes or Sony's strategy in India, and each seems to have its reasons, there is an underlying truth at the heart of this. Most large and successful MNCs from the western world are unwilling intellectually and operationally to create a "made for India" business with "made for India" products and services. Often the business battle being fought by such MNCs in India is not in the market with local competitors but within the organisation between the global head office and local management. Local managers push very hard to get access to the considerable global competencies, especially in R&D, that exist within the corporation, and to use them to develop customised businesses for India.
For example, why wait for the government of India to get its act together on electricity before deciding that the market is ready for the latest light bulb sold in other parts of the world? Why not recognise that there is big business to be created from innovating community lighting by bundling the competencies that the company has in solar energy, LED displays, large-scale lighting projects and more? Especially given that rural India understands community purchase and usage. Why think only of selling cars and not of creating large, modern taxi services in several Indian cities where incomes are on the increase but autorickshaws are still the primary mode of public transportation?
MNC head offices are not convinced that fresh effort is required to re-invent the wheel for India, reasoning that whatever is available on shelves or in the archives of developed markets has to be good enough for an emerging market. What's more because these products are of "global standard", their prices also have to be close to "global standard", because all markets have to measure up to "global standard" on margins. Local managers plead that margin sacrifices or significant investments in market development or R&D are very worthwhile because there is a lot of money to be made for value - right businesses; and the thrust must be to build businesses that are robust engines of growth that can ride the sure growth wave of the Indian market. |
