INDIA ENTRY STRATEGY: MANTRA FOR GLOBAL MULTINATIONALS
As the English idiom,to each his own’, global businesses can’t impose the global practices in the local Indian market. Such practices may not work in the Indian context. While many companies have entered the Indian market in last two decades, many of them have failed to create an impact or rather failed to create a mass appeal, mainly due to less focus on the right India entry strategy. They have only reached a certain section of the population but have failed to capitalize on the country’s talent or maximized the economies of scale.
For instance, in the past seven years, a multinational company’s revenue has only grown 7% annually, which is almost twice that of the parent company in the same period of time. However, the growth rate of the company is just half of that of the sector in India.
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The way forward for many global multinationals is to formulate the right India entry strategy, and do business the Indian way rather than copying practices from the world over. Many global companies have learnt the lesson in China, which is the now being treated as the second home market. Though, the trend has been slow in India, there are few examples were such success is in full display:
- When a leading beverage company entered the Indian market, its approach was sole ownership of distribution which not only raised costs but also dampened the penetration in Indian market. The managers zeroed on other two big challenges of Indian market which made organised distribution extremely difficult. There was the requirements for multiple channel handoffs and labour laws. The company contracted distribution to entrepreneurs instead of sole ownership of distribution which helped the company in raising market penetration and cutting costs.
- One of the largest manufacturers in India is a global automobile company growing at a rate of over 40% per year since the last decade. It has a local manufacturing plant, research and development facility to understand the Indian milieu and mindset and a popular Indian figure as its brand ambassador.
Invest, empower and commitment are keywords that multinationals should keep in mind while crafting their India entry strategy. They should invest in local talent, empower local population and be committed towards Indian market to be able to make a name. Customization or personalisation in order to increase appeal can help multinationals enter the Indian market.
India’s economy is expected to grow by 6% and upwards annually in the next few years, and is among the highest emerging economies of the world. In several product categories including mobile handsets, India could account for more than 20% of global revenue in the next decade. Therefore, it will not be wrong to consider India as a yardstick or a benchmark that could assess the value of multinationals with their ability to stick it out in Indian economic conditions and succeed in the country.
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