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A study of Management Practices ofMNCs in India Chapter 1 INTRODUCTION 11 Globalization and MNCs Until it opened up in the early nineties, the hidian Economy was a ‘mixed’ one (a considerable section of the industry was ftinded and managed by the government). Today, post liberalization the terms ‘privatization’ and ‘globalization’ are no longer taboo and India is on its way to becoming a globally competitive marketplace, part of a boundary-less world with an unhindered flow of capital, I’he key factors that differentiate today’s world from its predecessors are the concepts that time has shrunk and that the customer is queen. Trends also reveal that charity to mitigate social suffering will be part of an organization’s greater purpose this millennium. The Confederation of hidian hidustry (CII) adopted ‘Managing Globalization in the New Millenium’, as its theme for 2000. While the expanding job market offers executives many more opportunities, it appears to have resulted in declining organizational commitment. Rahul Bajaj, CEO Bajaj Auto (Business Today, 2000) foresaw the development of stronger bonds between business, politics, and society; a nev/ ethos of partnership in the larger interest of India’s growth and development. According to Central Electricity Regulatory Authority (CERA) Cliairman SL Rao (Business Today, 2000) India will be a major manufacturing economy by 2020. However, National Council of Applied Economic Research (NCAER) data further suggests that India will be one of the largest consumer goods markets in the world by 2020. Thus, the emerging economic environment looks more competitive, dynamic and inviting to foreign investment and technology than ever before. Foreign investment could be in the form of financial collaboration (foreign equity participation) where foreign equity alone is involved, or technical collaboration (technology transfer), which invol ves licensing of technology by the foreign collaborator. New and existing businesses established in specified backward areas of the country are now able to obtain finance for major expansion plans at lower than existing interest rates. Why is India the preferred place for many foreign investors? ® First, India has the second largest English speaking population after the U.S.

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A study o f Management Practices ofM N C s in India

Chapter 1

INTRODUCTION

11 Globalization and MNCs

Until it opened up in the early nineties, the hidian Economy was a ‘mixed’ one (a considerable

section of the industry was ftinded and managed by the government). Today, post liberalization the

terms ‘privatization’ and ‘globalization’ are no longer taboo and India is on its way to becoming a

globally competitive marketplace, part of a boundary-less world with an unhindered flow o f capital,

I ’he key factors that differentiate today’s world from its predecessors are the concepts that time has

shrunk and that the customer is queen. Trends also reveal that charity to mitigate social suffering will

be part of an organization’s greater purpose this millennium.

The Confederation of hidian hidustry (CII) adopted ‘Managing Globalization in the New Millenium’,

as its theme for 2000. While the expanding job market offers executives many more opportunities, it

appears to have resulted in declining organizational commitment.

Rahul Bajaj, CEO Bajaj Auto (Business Today, 2000) foresaw the development of stronger bonds

between business, politics, and society; a nev/ ethos of partnership in the larger interest of India’s

growth and development. According to Central Electricity Regulatory Authority (CERA) Cliairman

SL Rao (Business Today, 2000) India will be a major manufacturing economy by 2020. However,

National Council of Applied Economic Research (NCAER) data further suggests that India will be

one of the largest consumer goods markets in the world by 2020. Thus, the emerging economic

environment looks more competitive, dynamic and inviting to foreign investment and technology than

ever before.

Foreign investment could be in the form of financial collaboration (foreign equity participation)

where foreign equity alone is involved, or technical collaboration (technology transfer), which

invol ves licensing of technology by the foreign collaborator. New and existing businesses established

in specified backward areas of the country are now able to obtain finance for major expansion plans at

lower than existing interest rates.

Why is India the preferred place for many foreign investors?

® First, India has the second largest English speaking population after the U.S.

[iiLrodiiction

e Second, India has the largest pool of trainees, scientific and technical manpower in the world.

This manpower is very cheap compared to costs around the world.

® Third, research and development costs in hidia are generally very low when compared to any

major industrialized country,

® Last, but not the least, India is a member of the Convention on the Multinational Investment

Guarantee Agency, which provides insurance to foreign investors against political risks.

As a matter of fact, many people in academia and business talk of a new paradigm, o f new realities.

In his book Dynamic Organization (1997) Jackson highlighted some key changes that characterized

the new millennium. For instance, the speed of change. Things are changing at a faster pace and with

the development of new information technology the cost of entering new markets can be reduced. The

new, more demanding customer uses global networks to reach new markets, particularly for

information-based products and services, at minimal cost. As a result of which India is now one of the

world’s leading suppliers of software development services.

Over the past decade, explosive growth in the multinationalization o f business (Levitt, 1983; Kobrin,

1988) has emphasized the need for understanding management practices across national boundaries.

However, notions of the existence of universal principles of sound management, regardless o f

national or cultural environments, endure (Boyacigiller and Adler, 1990). This is inappropriate since

most aspects of organizational theories developed in one culture are probably inadequate in other

cultures (Triandis, 1983; Hofstede, 1983). According to Laurent (1986) and Schneider (1988),

management practices regarding human resources seemed to be the most vidnerable to cultural

relativity. This is because they are often designed by members of one culture to handle members o f

that culture. Therefore, a human resource management system may be potentially meaningful and

effective in one culture but ineffective in another (Laurent, 1986).

Western corporations and academic consultants are very eager and willing to share their management

techniques with interested recipients. Problems may arise because the assumptions inherent in those

techniques do not seem to fit the cultures and situations (economic, political, and cultural) of the

various countries.

Sclineider (1988) found that Germans, in contrast to the French, received management by objective

(MBO) more favourably. Gemian employees displayed preference toward decentralization, lesser

emphasis on hierarchy importance, and formalization of goals, time frames, and measurement. All o f

these combined to enable a positive transfer of MBO to Gemiany. Schneider also reports how

preferences for compensation and bonuses are tied to culture. In the Danish subsidiary of a large

multinational corporation (MNC), a proposal offering incentive pay for sales personnel was turned

A study o f Management Practices ofM N C s in India

down because it ran counter to the egalitarian nature of that society. The employees felt there should

be no differences in pay.

Laurent (1986) interviewed and surveyed managers from various countries on criteria most important

for managerial career success, and what behaviours effective managers display. He found that

managers from different national/cultural backgrounds selected very different criteria for managerial

success within tlie corporation. Laurent also found that Americans had a higher degree of consensus

between the perceptions of suitable criteria and the criteria actually used, as compared to the

Germans, Britishers, or die French. This makes sense because the human resources management

systems for this US-headquartered MNC were designed in the United States.

Seddoji (1987) argued that managei’s in developing countries do not share the same beliefs as Western

managers about hov/ employees sliould be evaluated and about subsequent motivational

considerations (e.g., relationship between feedback and performance). He pointed out that in Kenya,

employee behaviours both on and off the job were important in the appraisal of employees.

Kovach (1994-95) discussed the impact of transferred practice-performance appraisal in an MNC run

by the erstwhile Soviet Union in Hungary, highlighting problems inherent in the transfer of practices.

The major constraint according to Kovach was the local Hungarian culture. The author concluded that

most practices were developed in the US and those “miraculous American management techniques,

researchers and practitioners must be sensitive to the fact that these techniques are cultin'ally bound,

and they should therefore proceed with caution.”

It is thus established that perceptual differences exist among executives belonging to different socio­

cultural environments. It is, therefore, worth undertaking a study on employee perception o f

organizational practices, in MNCs that have their roots in the East or in the West, especially given the

fact that there seems to be hardly any in-depth work on understanding perceptions about MNC

organizational practices among Indian executives.

This study proposes to examine organizational practices, mainly organizational structure,

management style, human resource practices and non-work practices.

The study of organization and their impact on human behaviour is o f paramount importance.

Different behavioural scientists have defined organizations according to their own perspectives,

Schein (1967) visualized an organization as the rational coordination of the activities o f a number o f

people for the achievement of some common explicit purpose or goal through division o f labour and

responsibility. In order to achieve its goals, sustain itself and continuously adapt to meet the changing

needs of its environment, an organization has to have devoted and committed workforce.

Introduction

The link between organizational Commitment (OC) and various indicators of effectiveness (such as

turnover, absenteeism and others) has been well established (Steers 1977; Angle and Perry 1981;

Mowday et al 1982; Mathieu and Zajac 1990). Committed employees are more likely to have a high

morale, cordial relationships with co-workers and management, maintain good attendance records,

and are less likely to quit the organization. The factors affecting OC mainly fall into four categoi’ies

(Mowday et al 1982): personal characteristics (Salanick 1977; Steers 1977; Weiner 1982), job

characteristics (Morris and Sheerman 1981; Angle and Perry 1983), work experiences (Meyer, Allen

and Gellatly 1990) and structural characteristics (Morris and Steers 1980).

1.2 Work-role Related Factors

Meta-analytic review of 124 published organizational commitment reports by Mathieu and Zajac

(1990) describes 48 different variables as antecedents, correlates and consequences. Broad groupings

include personal variables, role stress, job characteristics, group relations and organizational variables

as antecedents, motivation and job satisfaction as correlates and job performance and turnover iis

consequences. Among job characteristics skill variety, challenge, and job scope relate positively to

organizational commitment. Many of the group-leader linked variables are also related v;z, task-

interdependence, leader initiating structure, leader consideration, leader communication and

participative leadership. Sharma (1997) also found organizational characteristics (i.e., adequacy of

resources and a humane and feir management style) and task characteristics (difficulty and ambiguity)

to be significantly and positively related to organizational commitment.

Morris and Steers (1980) examined the impact of structural variables; formalization, decentralization,

supervisory span of control, span of subordination, perceived functional dependence and work group

size. Their findings indicated that aspects of organization structure do influence employee

commitment. In addition to this other organizational practices have also been found to positively

influence organizational commitment. For instance, the recruitment and socialization process relates

positively to organizational commitment (Caldwell et al 1990).

A study o f Management Practices ofM NCs in India

13 Non-work Role Related Factors

However in this era of liberalization, executives have many occupational choices, which sems to be

resulting into decline in employees’ commitment. Cappali (2000) suggested that the significance of

building social relationships at work affected organizational commitment positively. Certain practices

beyond ‘work-role’ such as recreational activities, picnics, and interaction outside work seem to play

a vital role in the organization. Equally vital are organizational processes, which ensure that

successful application of these practices so as to achieve organizational commitment.

Employee perceptions about organizational practices play significant role in affecting commitment.

As pointed out by Lawler (1996), high involvement work processes like power, information, reward,

and knowledge result in employee involvement, which can be an effective source of control and

organized action. Vandenberg et al (1999) examined the impact of high involvement work processes

on organizational effectiveness. Their analysis supports a model in which a collection of

organizational practices positively influences organizational effectiveness. The present study, whilst

deriving a model of its own, has also refen'ed to this model.

1. 3.1 MNC Practices and Organizational Commitmeiit

With the advent of MNCs, many authors have tried to study tlie impact of transferred organizational

practices on the commitment levels of MNC employees. Kostova (1999) proposed that the successful

transnational transfer of organizational practices is mediated by the congruence between the social,

organizational and relational contexts.

Raval and Subramanin (2000) pointed out that any transfer of best practices between sharply distinct

cultures arose from the variances related to conceptual, perceptual, standardization, gradation and

validation, substitutability and decision rule varances. They remarked that variances give rise to

differences in perception, understanding, interpretation and motivation pattern o f customers,

competitors and other role players in the environment. Sinha and Kao (1988) also noted that many

organizational jractices and management training programmes, based on parent country culture,

gi'ossly disregard the fimctional differences in socio-cultural constraints and local conditions and

circumstances.

Introduction

Findings of various studies iiave indicated that prevailing organizational practices are the result o f a

combination o f three kinds of effects i.e., societal effect {MmtKQ, 1979; Streeck. 1985; Loveridge,

1990), organizatioml effcct {M x iWqx, 1992) and globalizatum effect { B & it le it and Ghoshal, 1992),

Societal effect points to the role and influence of various institutions (educational, financial, and

governmental) and cultural forces on organizational practices. Hofstede’s (1980) study triggered

interest among a number of researchers who examined how socio-cultural forces influenced various

organizational practices such as specialization and centralization (Tayeb, 1988; Adler, 1991).

Comparative social research, based upon matched sample comparison o f organizations located in

different countries, found that organizational relationships were shaped in culturally or socially

specific ways. Kreder and Zeller (1988) compared a sample of German and US companies. They

found that decentralized, participatory, socio-emotional control was more prevalent in Germany, On

the other hand a system-oriented, directive, task-oriented concept was more prevalent in US firms.

Two major studies (Streeck, 1985; Streeck and HofT, 1983) of the automobile industiy in Britain and

Germany found systematic differences between subsidiaries o f both Ford and General Motors, and

established the significant role played by the national institutional environment in shaping these

differences. Germans, for instance, displayed no resistance towards accepting modern production

technology, since the cooperative nature of industrial relations and the labour market in Germany had

pushed many firms into adopting a new industrial strategy of up market restructuring. In Britain,

however there w'as much greater difficulty in modernizing the shop floor.

The societal effect w'<x& highlighted by Maurice (1979), and Sorge and Mourice (1990) who identified

distinct national patterns of work organization with respect to type of hierarchy, promotion avenues,

and wage differentials, among other areas.

The societal effect is thus related to the isomorphism argument; th a t organizations can be

viewed as social entities Integrated into the institutional and value structures constituting the

culture of a society.

globalization effect h based on the modemization-convergence theory (Kerr et al. 1960, Dunlop

et al. 1975), which argues, on the other hand, that institutional differences and idiosyncrasies would

gradually disappear and emphasis would be on universal adoption of similar technology. MNCs have

served as the engine of globalization.

The organizational effect is an indirect outcome of foreign direct investment (FDI), since FDI

inflows are often followed by the transfer of technology and management practices through

expatriates, or the implementation of a iirm specific management style. Organizational processes,

(which appear would thus appear to work against the societal effect), include technology diffusion,

A study o f Management Practices ofM N C s in India

and the diffusion of organizational and management practices. For example Muller (1992) reported

that Ford, in Britain and Spain, embraced a teamwork organization, (whicli requires more skills in

production, much fewer demarcations and more cooperative attitudes), although this was in contrast

to their historical shop floor practices.

hi contrast to wholly owned enterprises, MNCs (especially, international joint ventures) are a hybrid

organizational form in which partners share control as well as the benefits of cooperation. The

exercise of managerial control is one of the most important subjects in the prevailing literature on

MNCs or joint ventures (Beamish, 1984; Parkhe, 1993). Since Peter Killing’s (1983) in-depth study

of the different types of parent control structures and their performance implications, significant

progress has been made on the subject over the past 15 years. It has become very difficult to survive

and succeed without being effective.

Empirical studies have been conducted on joint ventures created by partners from every corner of the

world, for example Mexico (Schaan, 1983), the USA (Blumenthal, 1988), Japan and Thailand

(Tillman, 1990), Canada (Hebert, 1994), the UK (Hill and Hellriegel, 1994), China (Child et al.,

1997) and Norway (Mjoen and Tallman, 1997).

Further, for the purpose of synergy and efficiency, organizations often engage in cross-unit transfers

of business practices that reflect their core competencies, superior knowledge and that they believe to

be a source of competitive advantage. Internal transfers of practices are important for all types of

organizations, but critical for MNCs, for a primary advantage that an MNC brings to foreign markets

is its superior knowledge, which can be utilized in its subsidiaries worldwide (Bartlett and Ghoshal

1997). However, along with other researchers, they list various barriers to transfer success — some

relating to the characteristics of the practices that are being transferred and others o f a cultural and

organizational nature (Ghoshal and Bartlett 1988; Szulanski 1996; Zander and Kogut 1995). On many

occasions, foreign subsidiary managers may decide not to implement a particular practice while

reporting otherwise to headquarters. Or they may implement practices only partially, adopting those

components that they feel “people here will buy in” and ignore the rest.

Research, with respect to the relationship between control and performance, has produced highly

conflicting results — some studies reported a positive relationship, others found a negative one and

still others failed to generate any direct relationship between the two variables. Consequently, it is

suspected that the control-performance relationship may vary in international MNCs in developed

versus developing countries (Beamish, 1983) or may be subject to important mediating variables

(Hebert, 1994),

Introduction

On the basis of foregoing discussions, the present study is designed to:

Understand how MNCs manage local operations In India.

Wliat kind of practices do tliey adopt?

How are these practices experienced and perceived by Indian employees w oridng in those

MNCs?

Wliat is tlieir Impact on the commitment of employees, which would in tu rn affect the

organizational effectiveness ?

1,4 Multinational Corporations in India

Since the liberalization process started in India, the nature and degree of competition has changed

qualitatively. The opening up of the markets has lured a lot of MNCs to tlie Indian market. Many

organizations of American, Far Eastern and European origin have invested in India via subsidiaries or

setting up joint ventures with local organizations; drawn to India due to its large and phenomenally

growing market. Venkata Ratnam (1997) cites not just a huge market, but also India’s vibrant

democracy, credible judicial system, strong bureaucracy, competitive himian and natural resources

and continued popularity of English as a business language.

In the early 1990s many Indian companies went in for foreign collaborations, while many foreign

companies increased their stake in Indian operations. This was followed by a phase o f mergers and

acquisitions. Established Indian brand names began to be replaced by foreign brand names and a new

practice of charging royalty for use of brand names, both by Indian and by foreign companies, created

a flutter.

One of the earliest foreign investments in India was the 1982 setting up of Maruti Udyog Limited

(MUL), a joint venture between the Government of India and Suzuki Motor Company of Japan. This

was a revolution in the development of the Indian automobile industry. According to Venlcata Ratnam

(1997) since then, car sales have soared by 16 percent a year, with MUL selling more units in its first

five years of operation than all other domestic manulacturers combined in the previous forty years.

Venkata Ratnam (1997) summarized the structure of MNCs in India as follows:

1. MNCs are interested in capturing the Indian market, but not in building a manufacturing base in

India. Continued import of components is cited as proof of this allegation. Very few Indian

// study o f Management Practices ofM N Cs in India

companies are being developed to source parts from India for the overseas operations of MNCs. Tlie

few exceptions include Sundaram Fasteners, which won a global tender to supply radiator caps for

General Motors, worldwide. Recently, the Korean auto giant, Daewoo, also acquired control over its

Indian operations, increased its stake and set its sights on developing the Indian unit to source auto

components for its world-wide operations.

2. MNCs focus on the short term rather than the long term and MNCs are keen to generate and

repatriate profits quickly.

3. MNCs use India as a dumping ground to bring in technology and products which are being phased

out in their home countries.

4. MNCs use Indian partners to get a foothold in India on a 50/50 o- 40/60 basis, to get approval

quickly and, once established, seek to edge out the Indian partner.

5. MNCs have joint ventures with Indian partners and simultaneously also set up, in competitive

areas, 100 percent subsidiaries without Indian partnership. They thus use the insights obtained

through partnership with Indian companies in joint ventures to secure unfair advantage and allow the

100 percent subsidiary to compete with the joint venture firm.

6. A significant proportion of MNC investment goes into increasing their stake in existing businesses

or, mainly, to supplying second-hand machinery to relocate their obsolete plants from the home/third

country in India. Such MNC investments do not generate many new jobs, and, even if they do,

obsolete plants become the breeding grounds ibr sickness and, therefore, job losses.

7. MNCs land in India like ‘cowboys’. They hastily choose a partner, make mistakes and want to

break the relationship. Alternatively, they get into alliances with different Indian companies for

different product lines. In the telecom sector, all the joint venture partners which bid for cellular

tenders have parted company already. The alliances in the deregulated airlines industry have also

soured.

8. The ghost of the East India Company still haunts the average Indian psyche, it came in to do

business, stayed on to colonize and then de-industrialize the country for over two centuries. This

feeling attaches to MNCs as well, and it is felt they cause de-industrialization. Today, established

Indian brand names are not able to face or hold off foreign competition due to the financkl muscle

and brand image of foreign competitors in the auto (two, three and four wheelers), electronics

(television sets), white goods (refrigerators, for instance) and soft drink sectors.

9. An impression is gaining ground, in the wake o f renegotiation of certain power projects, that

MNCs have a tendency to pitch their investment costs and prices to a higher than necessary level and

thus push prices up. Confessions about huge development costs breed suspicion about comiption. The

Introduction

Secretary-General of a Chamber of Commerce even told a public gathering: “The evil o f licensing of

the past is now replaced by the devil of tendering.”

10. Revelations about foreign exchange irregularities involving ITC-BAT (British American

Tobacco) and the controversy over the control of ITC by its UK partner, BAT, did little to boost the

image of MNCs in India.

11. MNCs are capitalizing on the weaknesses of the traditional and small-scale Indian businesses in

rural areas by quickly patenting herbal products (iieem plant-based), indigenous snacks (Bikaneri

hhujia, for instance) and spreading a feeling of distnist and hatred towards MNCs. The entry of some

MNCs into businesses like salt (the salt satyagraha launched by Mahatma Gandhi in Gujarat was an

emotive movement during the freedom struggle) in border areas of Gujarat, agriculture (the MNC,

Cargill) in Karnataka, ecologically unfriendly chemical projects in Goa (Dupont’s pact with Thapers)

using India as a dumping ground for disposal of dangerous chemicals wastes have rendered MNCs

rather unwelcome in the minds of many Indians.

The entry of MNCs has had a significant impact on employment and wages. Kumar (1986) found

MNCs in Indian manufacturing paid more highly than local counterparts. In a subsequent study,

Kumar (1990) explained this in terms of their tendency to employ personnel qualitatively superior to

those employed by their local counterparts. Markensten’s (1972) study of Swedish MNCs in India

and Davala’s (1996) case studies of six engineering and chemical firms in Mumbai and Bangalore

confirm this, Davala (1996) characterizes MNCs wage policies as: ‘The more you work, the more you

get.’ Compared to their private-sector counterparts, MNCs in India are generally known to adopt a

policy of paying above-average salaries to their workers.

Venkata Ratnam (1997) also reported that most MNCs had resorted to downsizing, euphemistically

called ‘right-sizing’. Delayering and dispensing with designations/redesignating a large section of

work force as supervisory/ managerial was also a common strategy of several MNCs. MNC

management style included reducing employment intensity and increasing technological htensity.

They insisted on cost reduction, competition enhancement strategies by seeking to ‘do more with

less’. The introduction o f attractive ‘golden-handshake’ redundancy packages for voluntary

retirements as part of restructuring plans has resulted in a massive reduction of the work force in

several MNC subsidiaries in India. Hindustan Ciba-Geigy and ITC Ltd have virtually closed their

plants in Mumbai. Sandoz Inc. took just five years to reduce its 1000-strong workforce to less than 70

people. Slu'outi and Nandkumnar (1994) wrote about an MNC that rejected a workers’ productivity

10

A study o f Managemen t Practices o f MNCs in India

plan and introduced cameras and computers on the shop floor, instead, so that top managers could

monitor activities from their cabin.

Venkata Ratnam (1999) pointed out that unionism was veiy strong in both public and private sector

banks in hidia, but not so in MNCs. He quoted examples of large firms, such as Hindustan Lever and

Philips, which have been extremely hostile to attempts even to form unions.

MNCs are found to be law abiding. They provide social security measures mandated by law. Tliese

include provident fund and gratuity, but not pensions. Several MNCs, however, have pension funds

for their senior executives, not for workers. The 1996, International Confederation of Free Trade

Unions ([CFTU)-RTDP ^udy pointed out that 80 percent of the workers in electronic enterprises

located in the Santacruz Export Promotion Zone in Mumbai, were employed by contractors on

temporary contracts, rather than being directly employed by the enterprise. As a result, employers in

such fn-ms are able to avoid giving workers the same legal protection as permanent workers and so

save on social security benefits like maternity, redundancy, etc., even in respect of those who have

been working tor many years. It was also seen fliat public-sector firms offered better social security

benefits, working conditbns, housing and medical care than most MNCs (Venkata Ratnam, 1999).

On human resource development (HRD) Venkata Ratnam (1999) commented that MNCs provided

intensive training and development inputs in aspects concerning immediate job performance while

Inditm public sector fmns are known to provide wider job knowledge. This is one of the reasons why

the Indian public sector is still able to attract and retain talented people in high-tech and highly

competitive areas like electronics despite the fact that the pay scales and benefits are not necessarily

comparable.

With regard to the skills development o f workers, the approach o f Japanese MNCs is considered

different from that of European or North American MNCs. Within European MNCs, the approach of

German companies could be quite different from that of the British. This issue is taken up for

examination later in this study.

A firm-level study (Lawler et a l, 1994; see also; Venkata Ratnam, 1994) in 99 randomly selected

large and mediuinrsized firms in India during 1991-92 indicated that MNCs pay marginally greater

attention than domestic private and public sector companies to the matter of training. Amba-Rao’s

(1994) study included four MNCs in India and she quoted Indian managers as saying that, “The US

management system does not consider the human element, it is aggressively market oriented,

inflexible and impersonal.” In contrast, the European system was seen to adapt more to Indian

conditions. The reference in Amba-Rao’s study was to British MNCs. Due to two centuries o f

11

Introduction

colonizing India, tiie Britisii have periiaps a greater understanding o f the Indian ethos and culture than

the others.

MNCs bring not only capital and technology but also the orientation to quality in products and

processes. They are also known to be strong in establishing networks among suppliers and

distributoi's.

Ill Sum

1. The liberalization of the Indian economy during the 1990s has been instrumental in integrating it

with the global economy. MNC management practices are transplanted to varying degrees and

Venkata Ratnam (1999) remarks that there is a paucity of empirical studies with substantial sample

sizes of MNCs.

2. Given their geographical spread, size of operations and range of experiences in different countries

and cultures, MNCs intend to mange overseas operations in their own ways. Several of the ‘new’

practices are related to structure, managerial style and FIR practices, which seem to come into conflict

with established principles.

3. Though most MNCs pay better than the local competition, managing an organization and its

growth and effectiveness is dependent on various other factors too, such as organizational practices.

4. Being the dominant partner in terms of technology, investment and shares MNCs transplant their

own well-established style of functioning, while execution o f activities is largely based on the fusion

of these transplanted practices with the local culture of the country o f operation.

5. Literature reveals little in-depth work on MNCs operating in India. Most studies have discussed

economic benefits associated with MNCs. For instance Saxena and Srivastava (1999), have discussed

the significance of ‘environmental analysis’ in the host country i.e. India, which may have an impact

on marketing decisions affecting products, price, distribution and promotions. Some authors have also

examined the effectiveness of MNCs operating in India in the organizational context (Tripathi 1990;

Krishna Kumar 1992; Virmani and Guptan 1991) and have pointed out the difference in the

functioning of the public, private and multinational organizations. At the same time, they caution

practitioners and researchers that use of advocated practices, which are not adapted to suit the

expectations of the local people, would sooner or later cause numerous difficulties (Virmani and

Guptan, 1991). These studies proved to be immensely helpful in attempting the present research in tlie

Indian context.

12