Why do multinational companies prefer to open companies in india
Answers
A few days ago when our country's prime minister gave the clarion call of 'Make in India', he didn't just announce a new national programme to foster investment. He also laid out an invite for multinational companies (MNCs) from around the world to truly see the potential that exists in India and capitalize upon it. This vision of our political leadership must be applauded. It should also spur MNCs to come forward to help transform the manufacturing landscape in this country much like the way they have been able to do in the services industry over the last decade or so.
"Make in India" can no longer be seen as "a choice" by MNCs looking to get a bigger pie of the market here. Today, it has become a 'necessity to win'. And there are three reasons for this:
1. Manufacturing locally in India enables companies to make significant savings on import duty and logistics costs, which remain considerably high (up to 25-30% of total landed cost). In UTC's own case, wherever we have localised our products, like chillers and elevators, we have been able to bring the cost down by at least 10-15%, thereby increasing our competitiveness and ability to penetrate new customer segments/ price points.
2. There is also a significant reduction in lead time for deliveries to the customer, especially in the case of complex engineering or high-tech products. Over here, by localising some of our product lines, we have been able to reduce the order to delivery lead time from 12 weeks to as low as four weeks. This allows companies to be far more responsive and flexible to changing customer needs.
3. Local manufacturing also provides an opportunity for MNCs to design and manufacture products that are tailored to Indian operating conditions, which are different compared to other countries - be it how products get transported, how they are installed or under what power conditions they operate. Winning in India requires "designing and manufacturing for India".