How Muli national copration is successed in current sanerio
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Many multinational corporations have struggled to get it right in India. These include big names such as Fiat and Electrolux and a host of Japanese companies including Sony and Panasonic. In contrast, Korean companies have been more successful even though sometimes they entered India as many as ten years later than their rivals from other countries. I often wondered why.
Why Korean companies succeeded
When I researched this question some years ago, I found that Korean companies made a strong commitment to the Indian market even before they entered. They were clear that India is a market where they have to be successful and, hence, they gave it everything they had. They started with an India-specific team that spent an extended period in India understanding the context. This team enjoyed the confidence of the Korean headquarters to take whatever local decisions were necessary to make the business successful. This gave them the flexibility to respond to the fast-changing Indian market.
Korean companies have been sensitive to the market by launching the products most appropriate for India. Remember that Hyundai changed its market entry vehicle from the Accent to the Santro when it realised that there was a huge market looking for an alternative to the Maruti 800. They have made product modifications to suit Indian conditions - they were the first to provide washing machines with the ability to re-start from the same point in the event of a power outage. At the same time, they were careful not to dump old products, thereby, showing respect to the Indian consumer - remember that Ford and Hyundai started in India around the same time, but it took Ford years to recover from the wrong choice of an obsolete Escort model as their first product offering. Korean companies made considerable efforts to build their brands in India. And, they paid a lot of attention to execution, working closely with their Indian teams.
What made it easy
Conquering the Chaos, the new book by Ravi Venkatesan, ex -CEO of Microsoft India, tells you the other side of the story — why American and Japanese multinationals lost out to the Koreans in India. Venkatesan attributes this to their efforts to push high-end products at the Indian market even though only a small proportion of the market can afford them; short CEO tenures which mean that a CEO is ready to leave India before (s)he comes to grip with the Indian market; and verticalised reporting structures that require managers in India to report to global product divisions, which results in the Indian market never getting the attention it deserves.
So, what should multinationals do to make a success of India? According to Venkatesan, they should make India a strategic priority, and give India a special geographical focus outside the product division structure. They should make sure they avoid the “midway trap,” straddle a large part of the market, and not get stuck in the small upper-end of the market. To facilitate this, the CEO for India and corporate headquarters should jointly formulate and own a three to five year plan for India.
The most prominent example of this approach is General Electric, which appointed John Flannery, a senior Vice-President of GE, as India CEO in 2010 with the mandate of growing rapidly in the country. Flannery not only reported to the Vice-Chairman of GE but had a separate budget, cutting across verticals, to do what was necessary to succeed in the Indian market.
Of course, a company’s willingness to make these major changes would depend on its evaluation of its future business prospects in India. Venkatesan acknowledges that India’s performance so far makes it a hard sell, but argues that mastering India not only helps a multinational company position itself for one-sixth of the world’s population but also to succeed in smaller “India-like” markets. Of course, events in the last few months make this an even harder sell than before!
Why Korean companies succeeded
When I researched this question some years ago, I found that Korean companies made a strong commitment to the Indian market even before they entered. They were clear that India is a market where they have to be successful and, hence, they gave it everything they had. They started with an India-specific team that spent an extended period in India understanding the context. This team enjoyed the confidence of the Korean headquarters to take whatever local decisions were necessary to make the business successful. This gave them the flexibility to respond to the fast-changing Indian market.
Korean companies have been sensitive to the market by launching the products most appropriate for India. Remember that Hyundai changed its market entry vehicle from the Accent to the Santro when it realised that there was a huge market looking for an alternative to the Maruti 800. They have made product modifications to suit Indian conditions - they were the first to provide washing machines with the ability to re-start from the same point in the event of a power outage. At the same time, they were careful not to dump old products, thereby, showing respect to the Indian consumer - remember that Ford and Hyundai started in India around the same time, but it took Ford years to recover from the wrong choice of an obsolete Escort model as their first product offering. Korean companies made considerable efforts to build their brands in India. And, they paid a lot of attention to execution, working closely with their Indian teams.
What made it easy
Conquering the Chaos, the new book by Ravi Venkatesan, ex -CEO of Microsoft India, tells you the other side of the story — why American and Japanese multinationals lost out to the Koreans in India. Venkatesan attributes this to their efforts to push high-end products at the Indian market even though only a small proportion of the market can afford them; short CEO tenures which mean that a CEO is ready to leave India before (s)he comes to grip with the Indian market; and verticalised reporting structures that require managers in India to report to global product divisions, which results in the Indian market never getting the attention it deserves.
So, what should multinationals do to make a success of India? According to Venkatesan, they should make India a strategic priority, and give India a special geographical focus outside the product division structure. They should make sure they avoid the “midway trap,” straddle a large part of the market, and not get stuck in the small upper-end of the market. To facilitate this, the CEO for India and corporate headquarters should jointly formulate and own a three to five year plan for India.
The most prominent example of this approach is General Electric, which appointed John Flannery, a senior Vice-President of GE, as India CEO in 2010 with the mandate of growing rapidly in the country. Flannery not only reported to the Vice-Chairman of GE but had a separate budget, cutting across verticals, to do what was necessary to succeed in the Indian market.
Of course, a company’s willingness to make these major changes would depend on its evaluation of its future business prospects in India. Venkatesan acknowledges that India’s performance so far makes it a hard sell, but argues that mastering India not only helps a multinational company position itself for one-sixth of the world’s population but also to succeed in smaller “India-like” markets. Of course, events in the last few months make this an even harder sell than before!
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