FIVE LESSONS WHICH CAN MAKE COMPANIES SUCCESSFUL IN INDIA

Since the English East India Company first landed in Gujarat state more than 400 years ago, Western businesses have looked at India and seen profits waiting to be reaped.

The lagre middle class population , education , strong legal system , good infrastructure are some of the reasons which makes India a very favoured destination for MNCs.

However there are certain unique attributes which are imporatnt to understand to succeed in India

INDIA's UNIQUENESS BECAUSE OF IT'S DIVERSITY

In terms of Racial diversity the  Indian sub-continent received a large number of migratory races mostly from the Western and the Eastern directions.Majority of the people of India are descendants of immigrants from across the Himalayas. People belonging to these different racial stocks have little in common either in physical appearance or food habits. The racial diversity is very perplexing.Herbert Risley had classified the people of India into seven racial types. These are- Turko-Iranian ,Indo-Aryan,Scytho-Dravidian,Aryo-Dravidian,Mongo o- Dravidian,Mongoloid and Dravidian. 

In terms of Linguistic diversity there are as many as 1,652 languages and dialects. Since most of these languages are spoken by very few people, the subsequent census regarded them as spurious but the 8′h Schedule of the Constitution of India recognizes 22 languages. These are Assamese, Bengali,Gujarati,Hindi,Kannada,Kashmir,Konkani,Malayalam,Manipuri,Marathi,Nepali.OriyaPunjabi,Sanskrit,Tamil,Telugu,Urdu,Sindhi,Santhali,Boro,Maithili and Dogri. 

India is also not religiously a homogeneous State even through nearly 80 per cent of the population profess Hinduism. India is a land of multiple religions. We find here followers of various faiths, particularly of Hinduism, Islam, Christianity, Sikhism, Buddhism, Jainism Zoroastrianism.

 India is a country of castes. Caste or Jati refers to a hereditary, endogamous status group practicing a specific traditional occupation. It is surprising to know that there are more than 3,000 Jatis in India.These are hierarchically graded in different ways in different regions.

While Hindus and Muslims are found in almost all parts of India, the remaining minority religions have their pockets of concentration. Christians have their strongholds in the three Southern States of Kerala, Tamil Nadu and Meghalaya. 

Sikhs are concentrated largely in Punjab, Buddhist in Maharashtra and Jains are mainly spread over Maharashtra, Rajasthan and Gujarat, but also found in most urban centres throughout the country.

So what are the most common mistakes that Western companies make in India?

A. Failure to Understand the diversity

Failure to understand that India is not a country but a union of various castes , races with diverse habits , cultures , spending habits , lauguages and dialects they speak in , food they eat , clothes they wear , festivals they celebrate .India is an amalgamation of various cultures and traditions wihere although there are more than one billion people they are with diverse background , culture , eating habits , entertaining ways , language barriers and even from various ethnicities and physical features. 

So one one hand there is so much diversity and on the other hand this diverse population is again sub divided basis education , income and social standing .Another factor which comes into play in their re-settlement in search of employment and therefore understanding about the population present mix .

B.Bringing Leaders with no experience of Indian Market

Now imagine if in a country with so much diversity the leaders are imported from outside the cuntry to run the busienss it would always be difficult for them to run and grow the busienss as comfortably as by an Indian. Let us look at the example of auto cmpanies  We have Maruti Suzuki , Ford , Audi , BMW . 

Maruti which was established in 1981had two India MDs RC Bhargava From 1985 to 1997 & Jagdish Khattar from 1999 to 2007 .whereas General motors always chose to have MDs brought in from outside. 

I am not doubting on their capabilites but the ideal way in a country as diverse as India a person to be chosen as MD is to have real ground level knowledge of the Indian market as only then he'she can take decisions basis the current situation and advuce his team as otherwise he just becomes a administrator rather than a leader.Some of the recent announcements from various companies have shown that they agree to this with Ford India appointing Anurag Mehrotra as MD BMW appointing Vikram Pahwa and Audi appointed Rahil Ansari

C.Imagining that rules operate in India the way they do in the West

Vodafone has been locked in a $2.2 billion tax dispute with the Indian government, which claims it owes the bill for acquiring an Indian subsidiary in 2007.

The mobile phone company won a court battle to overturn the ruling. But then in response, the previous congress-led government promptly enacted new legislation allowing the firm to be taxed retrospectively.

The lack of transparency has been criticized by foreign firms, but according to Pattanaik, Westerners are overly concerned with rules and the legal system.“Indians hate rules,” he said. “So ‘process culture’ is at odds with the desire of Indians to find a short cut. This is not seen as short-changing the system. This is seen as being smart and innovative and highly appreciated.”

While Indians enjoy and celebrate ‘jugaad’ — an improvised solution that is just good enough — the practice can be problematic for larger corporations that need to comply with regulations back home.In fact, trying to adopt a jugaad approach is precisely what gets foreign businesses into trouble.

D.Failing to adapt to local attitudes

“Many big US companies have struggled to truly understand what localization means,” Mutton said. “Calling a Big Mac the Maharaja Mac should do the trick, thought McDonald's but it took years before they realized the serious vegetarianism of the average Indian citizen.”

Anti-beef campaigners from the Hindu nationalist Bharatiya Janata Party and a related group, Shiv Sena, smeared cow dung on a Ronald McDonald figure as part of a protest in 2001. The campaigners filed a lawsuit over claims that 

McDonald’s used beef fat to cook french fries, and refused to accept the restaurant chain’s assurances that it only used vegetable oil. In 2009 Hindus also objected to TV commercials that referred to pujas — a Hindu religious ceremony.

Now McDonald’s has opened two vegetarian restaurants and has a menu that is almost unrecognizable compared to its American restaurants.

E. Believing that English-speaking Indians must think like Westerners

Indian companies tend to be much more hierarchical than Western firms, with leaders expecting to micro-manage their staff, who are often discouraged from showing initiative. That’s because although it’s a democracy and English is widely spoken, India has very different ideas about leadership and subordination.

“There is an assumption that since Europe rejected feudalism in the 21st century, after centuries of struggle, and America was created on democratic principles which evolved to include all, over 200 years, India must immediately give up its feudal legacy without struggling with it for some time,” Pattanaik said. “Indian feudalism is very different from European feudalism.”

Moreover, Pattanaik said “India is very strongly driven by personalities, while modern management is uncomfortable with the personality cult and prefers faceless institutions.”

The expectation from Indian leaders that Western firms operate a similar way can also lead to confusion. Swedish furniture firm Ikea has been trying to find a location for its first store in India, and has held a series of meetings with chief ministers of various states.

INDIAN MARKET

India is an attractive proposition for American and European businesses of all varieties. There’s the population of 1.2 billion. English is an official language. The government is democratically elected. And there’s a diaspora of educated expat Indians who can bridge cultures — a key skill set that demands a premium in many Asian countries.

Yet recent history shows that failure comes just as easily .General Motors, once the world’s largest car maker, has decided to stop selling vehicles in India by the end of 2017, since it considers its India operation to be not profitable. The company re-entered a liberalizing India in 1994, after abandoning the country in 1954. Like its American compatriot Ford Motor Company, GM’s market share in India has always been in the single digits, but recently Ford has reported rising monthly sales of 36% in India.

A few years ago cosmetics company Mary Kay also exited India, blaming local issues for its problems. While India now claims to attract more foreign direct investment than China, American companies have not been as visible as European and East Asian players. Is there something wrong with the India opportunity, or are American companies being unnecessarily restrained about the world’s fastest-growing major economy? We think it is the latter, and that it is correctable with the right approach to India. After all, we have seen dozens of large American players become successful in modern India. Boeing, Cisco, Coca-Cola, Cummins, Dell, General Electric, Google, HP, McDonald’s, and PepsiCo are examples.

Five Management Lessons that can make MNCs successful

1.Consistent & Local Leadership Over Time Matters in This Market

India is a complex country and has a unique mix of Asian and Western values. Understanding it takes time and focus. For a period of 14 years, General Electric had the same American expat running the India operation, Scott Bayman and still it cannot be termed as very successful whereas Pepsico choosing to go with Indian leaders for India has worked well as far as their growth in India is concerned . Also shorter stints is another problem which has been seen in companies like Generak Motots which had nine different people lead its India business in 21 years. A motivated executive needs about three years to become fluent in India, yet GM’s average CEO only lasted a little over two years. It does not matter whether the leader is a local Indian or an expat, in our experience, but consistency in India requires a steady hand at the top.

2.Local Leaders Need as Much Autonomy as Possible

Having local autonomy is key to succeeding in India, since its market structure is fundamentally different from the West’s and therefore demands extreme customization.

Large American companies have complicated structures that often require international leaders to have regular face-to-face interaction at headquarters; this can take away from being in close touch with the Indian market. 

To succeed in India, an American company either needs to have robust electronic communication processes at the top management level or must be willing to set its leaders in India free of the bureaucracy at corporate headquarters, so that they can address local issues and opportunities.

Local autonomy makes important decisions possible. 

PepsiCo is again an example which developed an entire line of snack foods, Kurkure, just for India and Nestle making Maggi for India. Whirlpool designed its washing machines to attract Indian buyers who preferred hand washing. 

3.Competition Is India-Specific, and Your Strategy Needs to Be, Too

In many sectors, American entrants to India encounter new competitors, which might be local or foreign players.

For example, Suzuki has been successful in India because of it's insisitence on value for money models which Indian customers love and availability of spares at very cheap rates and very easily , It is the same company which is known in America for its motorcycles but did not tries to sell it;s models in India as it knew that it would not be able to competer with Hero Honda and Bajaj Auto's value based models.  Hyundai has succeeded in India precisely because it developed lower-priced subcompact cars tailored to the needs of the Indian middle class.

4.Strategy Also Needs to Be Based on Volume and Scale

To make money in Indian market the strategy has to be built around volumes and scale of operations and if we look at any MNC wheher Unilever , Pepsi , Suzuki , Colgate , Honda ( in its tie up with Hero )  which has been successful it has always been on volumes and scale with affordable price points .

Success in India requires a commitment to volume and scale. Unlike Bentley or Rolls-Royce, GM is a mass-market car company in the U.S. To be successful in India, GM must participate not just in the top of the economic pyramid but also in the middle. That is how you build scale and volume that allows the company to leverage assets like dealerships.

5.It’s a Long Game

Companies such as PepsiCo and Boeing took the long view of India, and have reaped profits due to persistence as much as vision.

Success in India is a marathon and not a sprint .

It is like Peshawari Daal ( Famous Lentils you should try at ITC's Peshaarai , one of the best food you get in India , favourite of Obama , Bill Clinton and  many more ) which needs to be cooked slowly on a burner and cannot be cooked on a  Micro Wave .