colloquium understanding india from a business …€¦ · · 2008-10-01india strategy business...

Understanding India from aBusiness Perspective: Opportunitiesand Challenges for MNCs

L C Jain, Rakesh Makhija, Ajay Mookerjee,Venkatesh Mysore, Achal Raghavan, J Ramachandran,Ashok Rao, Shyamal Roy, Anand Shah,Ravi Viswanathan, and Arun VoraD V R Seshadri (Coordinator)

C O L L O Q U I U M

includes debate bypractitioners and

academicians on acontemporary topic

KEY WORDS

MultinationalCompanies

India Strategy

Business Envrionment

Indian Economy

INTRODUCTION

D V R Seshadri

Visiting Faculty, Marketing AreaIIM Bangalore

India has, over the last decade, achieved a position of pre-eminence in manyspheres of economic activity, most notably in information technology, businessprocess outsourcing, and various other service industries and also increasingly

in manufacturing. At the time when the country was liberalized in the early 90s,nobody thought that such a spectacular performance by the Indian industry wouldbe possible only 15 years later. In fact, during several years immediately followingthe liberalization of the Indian economy, the common refrain of Indian industrialiststo the Government of India was for a ‘level playing field.’ The speed with whichthe Indian industry has adjusted to these cataclysmic changes in the environmentis beyond the wildest expectations of industry watchers and pundits. The Indianindustry has, by and large, shown resilience in standing its own ground. Many Indiancompanies have gone on to take their rightful positions in the world arena. Someof them have even emerged as world leaders in their respective domains. The tideseems to have turned a full circle with many multinational companies (MNCs) withhead offices overseas increasingly looking at setting up local operations in India toharness the value that the country delivers.

What is it about India that makes it so much talked about in global businesscircles? Is it just a flash in the pan or a stroke of good luck for the nation as a whole?Or are there enduring factors and intrinsic aspects in the Indian culture which haveresulted in the growth of Indian businesses that were hitherto tethered? What canexplain the manifestation in full force of the hidden Indian potential once the shackleswere removed through the process of liberalization of the Indian economy?

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Is the rise of India a recent phenomenon that isbarely about a decade old? A walk through history isvery revealing. The common belief is that India has risenfrom nowhere a few years ago to an upcoming leader-ship position in many industries now. A study of historyreveals otherwise.

India’s share of global GDP from 0 AD till about1500AD was the highest among various countries in theworld. The figure for India was between 32 per cent and25 per cent during that period. This was followed byChina which had a share of about 25 per cent duringthe same period. China’s share of world GDP continuedto climb to about 30 per cent by 1850 and, thereafter,there was a steep fall to about 5 per cent by 1950. Since1500 AD, India’s share had beenfalling continuously till about 1973when it reached its nadir of about 2per cent. This is attributable to thewaves of invasion and the Britishrule that the country witnessed. Therecent limelight that these two coun-tries have taken on the global busi-ness arena is hence not happenstance.Instead, it reflects that once thevarious shackles holding them backwere removed, the two countries arerediscovering themselves and racingtowards achieving a pre-eminentposition that they had once occupied(Dahlman and Utz, 2005).

Undoubtedly, the rebounding of India on the globalbusiness map had its origins in the Indian IT industrywhich proved to the world and to other industries inIndia that it is possible for the country to deliver world-class products and services at competitive prices. Interms of the strategic potential of IT and BPO industries,the country still has a long way to go to achieve its fullpotential. While exports in these sectors are currentlyabout $ 30 billion, it is estimated that the figure couldreach $ 150 billion by 2015 which at that time wouldaccount for 10-12 per cent of the country’s GDP. Thestrategic importance of this industry to the nation canbe understood if one looks at oil exports in 2004 fromSaudi Arabia of $ 116 billion and Taiwan’s engineeringand electronics exports in 2004 of $ 53 billion (NASS-COM, 2005).

The usual perception in the minds of many observ-ers both in India and abroad is that India is a low costproducer. This does not explain fully the current interestin India from a global business perspective. Moreover,if it is a pure low cost producer, this advantage is notsustainable in the long haul as many other countries arealso emerging as low cost producers. India stands wayahead of other nations such as Mexico, Ireland, China,Russia, Brazil, Philippines, Israel, Indonesia, Malaysia,and Turkey when one looks at a basket of dimensionssuch as quantity and quality of manpower and peoplestrengths such as productivity, quality, cost, and Englishlanguage skills. (Report by the High Level StrategicGroup, 2003). However, even this does not fully explain

the unfolding Indian phenomenon.What then is the secret? Is it attrib-utable to culture-specific issues thatare unique to India? Is it related towhat the government has uniquelydone in this country? If, in reality,there is a unique value propositionthat the country delivers, then howmay MNCs leverage the India ad-vantage? And, more specifically, howshould an MNC manage its Indianoperations to derive maximum bene-fit? These are some of the questionsthat this colloquium seeks to address.

To understand the various as-pects of the India phenomenon asoutlined above, a panel discussion

comprising of ten distinguished persons representingacademics, captains of industry as well as leaders fromthe social sector was organized in June 2006. These tenexperts were invited to share their views on the driversof the recent success of India in the global arena and wererequested to draw from their experience on what it takesfor an MNC to successfully do business in India. Theaudience for this panel discussion was the top manage-ment of a large MNC (Areva-T&D) which visited Indiato learn about what it means to do business in India.The venue for the colloquium was IIM Bangalore.Additionally, in September 2006, several distinguishedspeakers were invited to IIM Bangalore to talk to thesenior management of another large MNC (TAPI, adivision of Teva group, Israel) that visited India to learnabout the drivers of success of Indian companies. Some

India stands way ahead ofother nations such as

Mexico, Ireland, China,Russia, Brazil, Philippines,

Israel, Indonesia,Malaysia, and Turkeywhen one looks at a

basket of dimensions suchas quantity and quality of

manpower and peoplestrengths such as

productivity, quality, cost,and English language

skills.

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of these eminent speakers also participated in the earlierpanel discussion. The views that these experts presentedin the invited talks in September 2006 helped to amplifythe views that they had earlier presented in the paneldiscussion during June 2006. The panel discussions aswell as the invited talks were video-recorded and theresponses were collated in the form of the followingcolloquium. For the purpose of this colloquium, theviews of 11 experts have been compiled.

The participants in the colloquium (in alphabeticalorder) are as follows:

• Mr L C Jain, Ex-member, Planning Commission andPolitical Reformer, Bangalore

• Mr Rakesh Makhija, Managing Director, SKF India,Bangalore

• Dr Ajay Mookerjee, Entrepreneur in Business An-alytics and Director, Harvard Business School, India,Bangalore

• Mr Venkatesh Mysore, Managing Director, MetLifeIndia Insurance Company Pvt. Ltd., Bangalore

• Mr Achal Raghavan, formerly Executive Vice Presi-dent, Ingersoll-Rand (India) Ltd., Bangalore

• Prof. J Ramachandran, Indian Institute of Manage-ment, Bangalore

• Dr Ashok Rao, Head, Network Project, CEDT, In-dian Institute of Science, Bangalore

• Prof. Shyamal Roy, Indian Institute of Management,Bangalore

• Mr Anand Shah, Executive Director, Indicorps,Ahmedabad

• Mr Ravi Viswanathan, Vice President and Head –Chennai Operations, Tata Consultancy Services Ltd.,Chennai

• Mr Arun Vora, until recently Managing Director ofTata BP Solar India Ltd. and Vice President – MOW(Most of the World) of BP Solar, Bangalore

This colloquium discusses the views, understand-ing, and personal experiences of these distinguishedpersonalities representing industry, academia, and so-cial services sector. The focal theme relates to doingbusiness in India and leveraging her strengths for busi-ness growth. This colloquium has been organized aroundthe following four questions:

1. What are the positive and negative aspects of theIndian economy, culture, people, education system,and infrastructure?

2. Is the country’s political landscape ‘business friend-ly’?

3. How should MNCs implement their India strategy?

4. What challenges do the Indian customers andmarkets throw up for companies attempting to dobusiness in India?

Given the wide-ranging set of issues that this col-loquium seeks to address, it would be difficult to rigidlycompartmentalize the views of the experts into one ofthe above issues. Hence, their views have been presentedin a free-flowing style. It is expected that the colloquiumwould be of significant value to any MNC that seeks tooperate in India. It would also be very useful for apractising Indian manager to reflect on what is drivingthe country. Such reflection may provide ideas forimplementation that could help to further enhance theperformance of his/her organization.

Q. 1. What are the positive and negative aspects of theIndian economy, culture, people, education sys-tem, and infrastructure?

Shyamal Roy: The current state of the capital marketin India is not reflective of the state of the economy. Thepositive features of the Indian economy are that we arenow 15 years old as far as economic reforms are con-cerned. Without doubt, vis-à-vis the average growthduring the pre-liberalization period, post-liberalizationIndia has gone through a tremendous acceleration of theeconomy. In the post-liberalization period, India hasbeen growing at 6 per cent per annum on an averagewhich has increased to 7 per cent per annum during thelast few years. In the 15-year period before liberalization,the average growth rate was about 4 per cent per annum.In the pre-liberalization period, the average populationgrowth was about 2.2 per cent and, post-liberalization,according to the 2006 census, the population growth hasbeen 1.8 per cent. Consequently, the average per capitaincome growth pre-liberalization was 4 per cent withpopulation growth of about 2 per cent and, post-liber-alization, it has increased to 6 per cent with the rate ofgrowth of population being less than 2 per cent. Thisreveals that there has been a doubling in the rate ofgrowth of per capita income.


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The key factor that willdetermine the

sustainability of theeconomic growth rate

depends on how muchthe country is able to

invest in infrastructure.Infrastructure developmentwould require investments

in agriculturalinfrastructure, urbaninfrastructure, ruralinfrastructure, and

industry infrastructure.Such an investment

would have dual benefitsof sustaining the currenteconomic growth rate of

7 per cent per annumand would mitigate

poverty.

There has also been a qualitative improvement inthe nature of this growth. Till about the year 2001-2002,the growth was fuelled by the service sector growthwhich accounted for about half of the Indian economyand still accounts for more than 50 per cent of the economy.With regard to the other half, which was about equallyshared by industry and agriculture, the growth has beenfragile. The industry growth was sluggish and agricul-tural growth continues to be entirely dependent on theweather. Subsequent to 2002, the industry growth hasbeen very robust. Thus, 75 per cent of the Indian econ-omy is likely to have robust growth. However, 25 percent of the Indian economy, which is related to agricul-ture, will be dependent on rainfalland can have a variable growth.

Looking at the future course ofIndia’s economic growth, one candeduce that variations around thelong-term growth would depend ongrowth performance of the agricul-tural sector. If the growth of agricul-ture is facilitated by good rainfall,then the current economic growthrate of 7 per cent to 8 per cent perannum is likely to be maintained,else, the growth rate could take asmall dip.

The present 7 per cent to 8 percent growth in the economy has ad-ditionally been facilitated by a changein the lifestyles of people. This, inturn, has been triggered by the open-ing up of the economy which openedup various avenues of spending.There is also a good potential for thefuture if one looks at the demograph-ic pattern in India where the medianage of an average Indian is about 27 years. These young-er people will have a higher propensity to spend com-pared to the not so young who have a tendency to savemore. Secondly, the existence of young people in thecountry is seen as a source for future capital formation.There will be a lot of supply of young people in Indiabut creating a demand for them will become equallyimportant. The current euphoria that one sees in theIndian economy is a result of the above-mentioned sus-tained growth pattern. The future growth of the econ-

omy will be powered by the preponderance of theseyoung people who will contribute to the future growthof the country. We must also keep in mind that thereis a very active change in the lifestyles of large sectionsof the population the effects of which are yet to fullyplay out on the economy.

Coming to the negative aspects of the growth of theIndian economy, while the overall economic growth hasbeen positive, sector-wise, the growth has been uneven.There is data to suggest that inequality has widened inthe economy. The agricultural sector has been largelyleft out in the growth process. It is to be noted thatalthough agriculture in terms of growth accounts for 25

per cent of the Indian economy, interms of employment, it accounts formore than 60 per cent of the labourforce. Therefore, if the economycannot carry agriculture along in thegrowth process, and if the countryis not able to generate more employ-ment through the growth process,this abundant supply of young peo-ple can become a potential source ofthe problem.

The growth of the Indian indus-try now seems very robust. Its growthhad peaked during 1995-1996 and,subsequently, the growth was slug-gish till 2001-2002. From 2002-2003onwards, the industry has shownsustained growth. This was signifi-cantly facilitated by tremendouseffort on the part of the industry itselfto shape up which yielded a tremen-dous increase in the operational ef-ficiency of some of the companies.This is also reflected in the pattern

of India’s trade with other countries. India’s export basketnow consists of a lot of value- added goods which meansthat the country is becoming more competitive in termsof its industrial products.

As the industry is doing very well today, there islikely to be no setback to the economy’s growth rate of7 per cent to 8 per cent in 2006-2007 and 2007-2008. Thekey factor that will determine the sustainability of thiseconomic growth rate depends on how much the country


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is able to invest in infrastructure. Infrastructure devel-opment would require investments in agricultural infra-structure, urban infrastructure, rural infrastructure, andindustry infrastructure. Such an investment would havedual benefits of sustaining the current economic growthrate of 7 per cent per annum and would mitigate poverty.The poor in this country are predominantly agriculturallabourers and the concentration of these poor people isin those areas where the infrastructure is very poor. Themultiplier effect in terms of employment through invest-ment of infrastructure is manifold compared to any othertype of investment in any other commercial activity.Hence, by investing in infrastructure, the country willbe able to gain advantage on two fronts simultaneously.

Resources to strengthen the in-frastructure could be mobilized fromthree possible sources—the privatesector, the government sector orthrough public-private partnerships.The private sector alone would notcome forward to invest in infrastruc-ture of this kind, not because indus-try policies or monetary policiesinhibit such investments, but becausethere is a certain structural rigidityin the Indian economy that acts as abarrier for private sector investmentin infrastructure. It must be noted,however, that mechanisms to encour-age private sector investment in in-frastructure are being put in place.These barriers could range from theamount of time it takes to get clear-ances from government authoritiesto apprehensions in terms of how tocollect user charges, labour laws, etc.The government alone would not be able to invest ininfrastructure development. One needs to understandthat the government basically has two types of deficits.One kind of deficit arises when the government borrowsmoney to meet its consumption needs. This deficit impactsinterest rates, prices, exchange rates, and tax rates whichis not very conducive for private sector investors. Thesecond deficit arises when the government borrows mo-ney to meet its capital expenditure needs which is mainlyfor infrastructure. Today, over 60 per cent of the moneyborrowed by the Indian government goes towards sat-isfying consumption needs of the government leaving

very little money behind to spend on capital expendi-ture. The Government of India has passed a bill in whichit professes that the amount borrowed for consumptionwill be brought down to zero by the year 2009. Thisseems to be a tall order particularly because 2008 hap-pens to be an election year in the country. However, ifthe government succeeds, then the entire borrowedmoney will be for capital expenditure and the govern-ment will be able to play a major role in infrastructuredevelopment. In the interim period, public-private part-nerships could be galvanized wherein the governmentcould join hands with the private sector to develop thenecessary infrastructure. The concept of public-privatepartnership has already come into existence in many

projects such as building roads, air-ports, seaports, and also in the pow-er sector. This seems to be the onlymodel working successfully for thetime being in India. Wherever thegovernment has shown that it has acommitted capital expenditure, theresponse from the private sector toparticipate in public-private partner-ships has been positive.

In summary, India’s economylooks good for 2006-2007 and 2007-2008. The future sustainability of thiseconomic growth of 8 per cent to 9per cent per annum will dependheavily on what the government iswilling to invest in infrastructurewhich encompasses roads, seaports,airports, power infrastructure, and agood part of rural infrastructure(rural marketing, irrigation, etc.).Given the government’s present fis-

cal deficit, it would be difficult for the government aloneto improve infrastructure and, therefore, the country islooking up to the success of public-private partnershipsto fulfil its infrastructure needs. The bigger challengefor the country is how to speed up this reform process.

Achal Raghavan: The Indian economy is on a roll. Thebroad policy directions are unlikely to change regardlessof which government is in power. Everybody is talkingabout India making a transition to the knowledge eco-nomy by 2020. The country that was known to be anagriculture country has increasingly moved towards

The concept of public-private partnership has

already come intoexistence in many

projects such as buildingroads, airports, seaports,and also in the power

sector. This seems to bethe only model workingsuccessfully for the timebeing in India. Wherever

the government hasshown that it has acommitted capital

expenditure, the responsefrom the private sector to

participate in public-private partnerships has

been positive.


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services and manufacturing and, today, these sectorshave overtaken agriculture.

L C Jain: India attained independence in 1947 and is a60-year old country. The British who ruled the countrywere one day put on a ship and sent back home and soonafter that India was partitioned. With the partition camea lot of unrest and chaos in the country. All agenciesthat governed the country including the Indian Army,Indian Police Force, irrigation system, etc., were parti-tioned. Along with partition, the country witnessedunprecedented communal riots. There was carnage.Overwhelmed by the utter chaos in the country, the thenPrime Minister Jawaharlal Nehru sent a letter to all thechief ministers expressing his appre-hension on the survival of the coun-try. And, it is from such circumstanc-es that India has emerged to whereit is today.

India today has 600 millionvoters and the country has beenthrough a five-yearly round of elec-tions. With a population of one bil-lion, the country harbours enormousdisparities. Close to 40 per cent of thepopulation live below the povertyline and 47 per cent of the childrenin the age group of 0-5 years who livebelow the poverty line suffer frommalnutrition. Scientists confirm thatmalnutrition at a tender age woulddamage the physical stamina andmental faculty of the child for therest of his/her life. India is the larg-est democracy in the world and hasincreasingly moved to coalition pol-itics. Our political and electoral sys-tems are based on adult franchise where every personhas a right to vote irrespective of whether he/she re-ceives education, food or employment. It is a matter ofconcern, disgrace, and shame that over the last 60 years,the country has not been able to find a method to addressthe inequalities and disparities that are pervasive in thesociety. It was assumed that once a stable governmentwould be in place, the weaker sections in the societywould not be neglected. But, now, the country has movedinto an arena of coalition government wherein differentpolitical parties get elected and come together to form

the government. With such coalition governments com-ing into existence, there is a perpetual threat to thestability of the government as the elected parties invar-iably do not work in unison. Agriculture in India absorbstwo-thirds of the country’s labour force. Its share in theGDP used to be roughly 75 per cent which has now fallento 25 per cent. But, the burden on the agricultural sectorof absorbing the labour still remains the same at 65 percent thus reducing the per capita of this sector drasti-cally. Simultaneously, the country’s investment in realterms in agriculture over the last 30 years has declined.While phenomenal development is taking place in India,there is still a very strong need for employment foreverybody. The growth pattern of India’s economy over

the decade has been, what is called,a ‘jobless growth.’ We are very com-petitive, we have very good econom-ic growth but we have not createdjobs for the vast majority of people.Our political reforms have fallenshort of the economy and, unless theymove together, one will hurt the otherand the growth is not sustainable.

In hindsight, we can say thatIndia has been lucky because whenAmerica’s economy grew by leapsand bounds because of industriali-zation, India remained primarily ag-ricultural. Droughts and floods vis-ited these agriculturists but theysurvived all of this by employingone strategy—togetherness. Theyhelped each other in adversity andcontinue to do so even today. Thisculture of togetherness and cooper-ation that is deep-rooted in Indiansis the strength of India today. Let me

narrate a small story that reflects the culture of Indians.There was once a running race organized in a school inone of the tribal areas of India. One boy was far aheadof the pack but when he came close to the finishing linehe did not cross the line. His teachers asked him to crossthe line but he would not. Instead, he kept looking backfeeling sorry for his friends who were very much behind.He waited for them to catch up with him. This storyastounds me because today’s world believes that the oneaspect for taking life forward is competition. And, theremust be truly something in the culture of that boy who

In hindsight, we can saythat India has been luckybecause when America’seconomy grew by leapsand bounds because ofindustrialization, India

remained primarilyagricultural. Droughts and

floods visited theseagriculturists but theysurvived all of this by

employing one strategy—togetherness. They helped

each other in adversityand continue to do so

even today. This cultureof togetherness and

cooperation that is deep-rooted in Indians is thestrength of India today.


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did not want to win the race at any cost. His intentionwas not to win the race alone but for all to win together.This is precisely what Indians want—to win together.This virtue may sound inappropriate in today’s situationwhere the economy and competition are growing. How-ever, I believe that, for a lot of Indians, this value isdeeply ingrained in them.

Education has been a fundamental asset that Indiahas nurtured over the ages. India had its own systemof education called the Gurukul system. Unfortunately,when the British introduced their system of education,the Gurukul system was dismantled. And, the Britishsystem, however good it was, wasnot able to involve the whole of Indiabecause of India’s huge and diversepopulation. Therefore, the local com-munity, local teachers, and local gov-erning systems started to providenecessary access to education. To-day, when some of our youth aregetting the opportunity for studyingin foreign universities, they com-mand attention because the worldassumes that coming from a devel-oping country like India, the youthwould not be conversant with sub-jects like physics, chemistry, nuclearphysics, medicine, etc. But, India hasproved the skeptics wrong. India iscompetitive in this space. Today,while the world acknowledges thatIndians are intelligent, this basic intelligence amongIndians is not an accident. The roots had been laid a longtime ago and the opportunities are opening up now.

With regard to India’s infrastructure, it is beingdeveloped along with India’s growing business. I am ofthe view that it is better that business growth remainsahead of infrastructure development and not vice versa.When industry grows, there arises a need for infrastruc-ture to grow and both must keep pace. But, a view hasbeen developed in India that without developed infra-structure, the country will not grow. If that were to betrue, then there should have been no development inIndia in the last 25 years! But, on the contrary, amazingdevelopment has taken place in the country. If Indiawere to focus on developing infrastructure and thebusiness growth in the country was not very robust, then

what purpose would the infrastructure serve? Now thatthe country’s industry and businesses are booming, thegovernment must ensure creation of proper physicalinfrastructure and increasingly invite private partner-ship in enabling it.

India ranks high on the corruption index. We havenot yet found a way of containing corruption in ourbureaucracy and political system. Corruption in Indiais getting into the civic life as well. People have to paybribes to get water connections, power connections, etc.As an Indian, I cannot promise the rest of the world thatIndia is anywhere near banishing corruption. But, the

public consciousness and awarenessof corruption is rising. The Right toInformation Act passed by the parlia-ment in 2005 is certainly a majordevelopment that has taken place inthe direction of checking corruption.Bureaucrats are now required tomake their activities and decisionspublic within a month. This hasincreased public confidence and inabout four to five years this act willcut into the roots of corruption.

Corporations wanting to dobusiness in India must be aware oftwo dimensions—the ‘internal fac-tor’ and the ‘external factor.’ Theinternal factor involves managing themanufacturing unit, finances, peo-

ple, machinery, etc. in a competitive environment. Themanagement of the enterprise has complete control overthese internal factors. But, this enterprise would alsoneed to operate in an environment over which the man-agement can have little control: these are the externalfactors. Organizations cannot be blind to the externalfactors. They need to know what exactly is happeningin the outside world.

Organizations cannot afford to take anything forgranted be it internal within their own unit or externalto their unit. The burden that the economic disparityamong the Indian population is causing on the nationalsystem has to be a matter of concern for everyone. Thisis a challenge that is ahead for businesses. If an organ-ization does what it has to on the inside to improve itself,it needs to do the same to the outside world as well. It

If India were to focus ondeveloping infrastructureand the business growthin the country was notvery robust, then what

purpose would theinfrastructure serve? Nowthat the country’s industry

and businesses arebooming, the governmentmust ensure creation of

proper physicalinfrastructure and

increasingly invite privatepartnership in enabling it.


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needs to stretch and extend itself. It was not long agothat a well-known MNC was given permission by theIndian government to set up its factory in the country.Once the unit was commissioned, the factory wasteswere being let into a nearby river. The farmers who hadpaddy fields around the river suffered as the water wascontaminated with poisonous chemicals. The companydid not take time to see outside its factory as to whatwas happening. It failed to realize that even the farmersand their cattle had a right to live. Businesses cannotdo this any more. Corporations that come here to set upbusiness must make it hospitable for both themselvesand the country. Secondly, for an organization to assumethat it has now understood Indiawould be ludicrous. It has to wakeup every morning and try to under-stand what India is on that day. Whatwas given as of yesterday, like thepolitical alignments or stability inthe country, can cease to exist thenext day.

Ashok Rao: There is a brighter andbetter side of India that is well knownto the rest of the world. Everyoneknows India for its Hindu religionwhich is a living philosophy ratherthan a dogmatic religion. Well-known companies like Infosys,Wipro, Reliance Industries, and theTatas, to mention a few, have suc-cessfully put India on the global mapand have proved that Indian compa-nies can vie with the world’s bestand win. Renowned educational in-stitutions like the IITs, IISc, IIMs,and several other technical institutesin the country have been spawning the best-of-breedgraduates and managers who have made themselvesand the country proud. India, today, has 400 million-middle class people, a stable socio-political-legal sys-tem, a strong skill base, and unlike China that is alreadyworried of its economic growth rate of 10 per cent (whichhas reached saturation), its economy is yet to grow tothat state.

Indians have a strong spirit of cooperation and Indiais not a competitive country. Indians prefer to cooperateand, I believe, cooperation is superior to competition.

Only weak people compete. Strong people cooperate.Indians are good followers because they have a low egolevel and have extreme levels of patience. I have seenno other culture more patient than that of India. Thecountry does not have drinking water for 40 years andyet the people do not fight for their basic rights. Indiansare highly innovative people which is not very surpris-ing because 90 per cent of our population is unemployedand hence we have to innovate everyday if we have tosurvive. If we have to survive tomorrow, we have toinnovate the previous day; moreover, we cannot repeatthe same thing the next day. We have to find somethingnew to survive. Hence, there is nothing special about

Indians being highly entrepreneur-ial or innovative.

Unlike the well-known Indiathat makes every Indian walk withhis head held high, there is the otherface of India not to be known! Thecountry has a very strong residue ofthe caste system, the negative effectsof which flare up from time to time.There are 400 million people inpoverty and if this figure increasesa little more, our whole socio-eco-nomic system can turn upside down.Close to one billion people have noquality-quantity-reliability of basicsof life like water, electricity, etc. NewDelhi is the best example of this.When the temperature is 47 degreesin the city, there is no electricity toswitch on the air-conditioner or fanbecause the state government issuesan order to cut the supply of electric-ity. Hence, when one needs electric-

ity the most, it is not available. Where it is not needed,it is available in plenty. India has very poor human,gender, and child rights policies. Some of these phenom-ena are very subtle. For instance, the country has a largerate of child abuse in the form of child labour, etc. Thecountry’s ecosystem is rapidly deteriorating. I think thenext interesting business in India will be ecology be-cause we are going to mess up things so badly that Indiawill become a fertile land for companies wanting toaddress the ecology-related issues. They will be able tomake money out of its ecological imbalances. More than80 per cent of India has been neglected by the govern-

Organizations cannotafford to take anything for

granted be it internalwithin their own unit or

external to their unit. Theburden that the economic

disparity among theIndian population is

causing on the nationalsystem has to be a matterof concern for everyone.

This is a challenge that isahead for businesses. If

an organization doeswhat it has to on the

inside to improve itself, itneeds to do the same to

the outside world as well.It needs to stretch and

extend itself.


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ment and it has always been the case even when theBritish ruled this country. This 80 per cent comprises ofwell-behaved, decent people who know how to managethemselves. There are no formal and well-functioninglaw and order systems governing them; yet they havetheir own law and order systems which appear to func-tion well without anyone’s help!

Anand Shah: On the surface of it, India has a strongeducation system and, consequently, one would expectto find a rich talent pool available here. I am of the viewthat businesses are unable to find adequate numbers ofwell-trained manpower because lateral and multi-dis-ciplinary education is not much emphasized. Conse-quently, the number of employable people who couldbe gainfully employed by businessesin the emerging market space isrelatively small in comparison to thenumber of educated people that canbe found in India. Moreover, whileIndia has an enormous pool of peo-ple who have basic education, manyof them may not be necessarily avail-able in the country as large numbersof talented people have historicallymigrated overseas. The second chal-lenge is that these people may not beeducated in the way a corporatewould have liked them to be.

For example, an institution likeThe Times of India cannot hire a jour-nalist who comes out of a journalismschool and on induction expect towrite an article of the quality thatcould get published in The Times ofIndia. Consequently, what The Timesof India had to do was to start its owntraining programme by sendinggraduates out of a journalism schoolto the ‘Times of India University’ fora year. Many of the corporates havehad to do similar things of having to train their newlyinducted fresh employees because the Indian educationsystem has not measured up to the emerging needs ofbusinesses. A company training its own people is a goodthing anyway because investing in its employees couldresult in the employees being committed to the companyover the long-term.

Another aspect about the Indian education systemis that India is known for its many islands of excellence.However, these end up being islands of excellence thatprovide market-driven education (such as the IIMs). InBangalore, for instance, many companies do not insiston necessary academic qualifications. If the individualis found capable of doing the job, he/she gets hired. Suchthings happen in a market-driven education. However,people who have become IAS officers, lawyers, etc., havenot necessarily come through market-driven educationsystems and may not be of the same calibre as graduatesof IITs or IIMs.

A professional approach is lacking in the function-ing of the government at various levels in India. To give

an example, a couple of years ago,when I was working on a programmeaimed to support people wanting toset up businesses, I met the officerwho was in charge of this project andsuggested that there should be a‘single-window’ system that shouldserve as the one-point contact forpeople wanting to invest in small-scale businesses. The officer in-formed me that such a system wasalready in place. And, when I paida visit to see how the system worked,the person at the single-windowsystem handed out a piece of paperto the interested parties which listedthe various ministries and offices theindividual would have to go to inorder to procure necessary forms andclearances. There is a fallacy here,because, a single window would havemeant that an individual could justcome to that place and get every-thing processed at that one place.The single-window system I cameacross simply put information to-gether and essentially required that,

for everything else, the individual would have to getclearances from various other offices. These are the kindof process-related issues that bother anyone trying towork in India.

I would like to cite another example to demonstratethe lack of process orientation that exists in this country.

On the surface of it,India has a strong

education system and,consequently, one would

expect to find a richtalent pool available here.However, businesses areunable to find adequatenumbers of well-trained

manpower because lateraland multi-disciplinaryeducation is not much

emphasized.Consequently, the number

of employable peoplewho could be gainfullyemployed by businessesin the emerging marketspace is relatively small

in comparison to thenumber of educated

people that can be foundin India.


103

Sam Pitroda who runs the Knowledge Commission inIndia once gave me an example of the way India looksat e-governance. About two years ago, the Indian Plan-ning Commission had earmarked Rs.15,000 crore (Rs.150,000 million, equivalent to about $ 3 billion) for e-governance across the country. The mandate was toprovide computers in all government departments andother government offices to facilitate e-governance to acertain level and thereby improve processes. Pitroda’scontention was that merely installing computers toconvert data present in the paper form to an electronicversion would by no means improve or speed up proce-sses. On the contrary, it would makethe governance a lot worse becausethe task would take up more timeand would require more people to dothe data entry using the new ‘elec-tronic system.’ Pitroda expressed tothe authorities in the government thatthe idea of e-governance is to makeprocesses easy and efficient and notto simply make the process electron-ic. This is one illustration of the kindof process barriers that exist in India.

Such process-related issues inIndia can slow things down for in-dividuals and more so for business-es. I was born and brought up inTexas and came to India in 2000 towork in the social services sector. Irun a not-for-profit organizationcalled Indicorps. To get things donein India, I have to take circular routesand do things over and over again.This could be very frustrating toanyone seeking to do business withIndia. In my view, these are theinvisible barriers for doing businessin India.

Companies that want to starttheir businesses in India can be assured of young ta-lented people who have enormous potential and are notbound by constraints in the same way as older gener-ation people were. This is the first generation in Indiathat has been born completely in the post-independenceperiod, and, hence, they do not carry the baggage ofpolitics, freedom struggle, racism, etc.

There is an incredible talent pool of Indians abroadwho are willing to come back to India. They have theirroots in the Indian culture. They could be tapped fordriving the growth of the country further. However, thefirst two to three years of getting things in place can bereally complicated and painful for any foreign companywanting to start up business in India and have thepotential of driving the business out because the foreigncompany may not be able to handle these problems. Ifthe company can get past this start-up period, the coun-try offers phenomenal potential. Every sector that isopening up in the liberalized economy is opening up for

the first time and every sector thathas been opened up has the potentialto absorb best practices from aroundthe world. The ability to bring inthese best practices has the advan-tage of being able to improve thecountry.

The chaotic roads of India arereflective of the country. There areno rules followed on these roads butrules can be made and people can bemade to follow them. There are lotsof different destinations across theworld where a foreign company cango and the opportunity is pheno-menal. India is probably not the idealplace where a company can justdescend and start its business. But,if the company is willing to comehere for the long haul, and is willingto build the business from the groundup, including creating systems, in-ducting the kind of people that itwants working for it, creating its ownwork culture, setting standards forperformance and innovation, thenIndia would prove to be a countryof tremendous potential. There is a

new generation of people who think differently, who arebroad-minded, who are not so price-sensitive, and whoare looking at the world as their playground.

J Ramachandran: India is a dynamic country with adynamic market. There are several challenges one wouldconfront in this market. But I do not see India as anydifferent from Europe or the US. Indeed, it is ironic that

There is an incredibletalent pool of Indians

abroad who are willing tocome back to India. They

have their roots in theIndian culture. Theycould be tapped for

driving the growth of thecountry further. However,

the first two to threeyears of getting things in

place can be reallycomplicated and painfulfor any foreign company

wanting to start upbusiness in India andhave the potential of

driving the business outbecause the foreign

company may not be ableto handle these problems.

If the company can getpast this start-up period,

the country offersphenomenal potential.


104

every time one engages with the issue that India isdifferent and tries to find solutions based on trying tomanage this difference, the solutions that arise are exactlythe same as those applicable in any other country! Man-agerially speaking, these solutions include aligning thepeople in the organisation, executing strategies better,etc. Therefore, my observation is that India is no differ-ent than other countries, when it comes to managingorganizations. Thus, managing a business in India is nodifferent and not any more challenging than managinga business in France, for example. The more the peoplehighlight that India is different, the more I see it iscommon. The challenges and aspirations of Indians areno different from those of people in the Western coun-tries. The manifestations might bedifferent, however. One might seeovert chaos on the outside and un-derlying order in India whereas, insome of the developed nations, onesees order externally and chaos in-ternally! The challenges of manag-ing companies in India, such as howthe organization engages its people,how it appeals to its customers, etc.,are no different in India compared toanywhere else in the world. I onlymake a distinction between goodmanagement and bad management.I see diversity in every country andcommonality across countries. Franceis different being a European coun-try but it is still European. In termsof the challenges a foreign companywould face in how to navigatethrough the seemingly complex sys-tems in India, I believe India is nodifferent. What is different aboutIndia, if at all, is that we Indians arehungry people. Previously, we were physically hungrybut, today, we are hungry for growth, hungry for ourplace in the sun. And, this hunger is making us highlyinnovative and highly adaptable.

After India gained independence in 1947, its en-gagement in the international markets was very limitedand controlled. But, after the liberalization of the econ-omy in 1991, that is, when India got its second independ-ence according to me, there was a remarkable rise inexports. What is interesting about India’s growth in the

last decade is that the share of India’s exports has grownfaster than the growth of the total world’s exports. WhileIndia’s contribution to the global trade is still very small,it has grown in the last five years. The structure of Indianexports has moved from products to services. The shareof services in our exports is increasingly growing. Sec-ondly, within the manufacturing space, our growth hasbeen coming from more value-added products than rawmaterials. Previously, we used to sell iron ore and todaywe export steel. Thirdly, the share of knowledge-inten-sive products going out of India has grown. The inter-esting paradigm of the Indian software industry is thatwhile we talk about globalization of labour, what we seein the software industry is globalization of work instead

of globalization of labour. Finally,increasingly, we are finding Indianfirms acquiring firms international-ly. The Indian industry is no morein a mood to export out of India byconfining itself to the so-called ‘costadvantage’ but is being serious play-er in the global space in select indus-tries.

I do not believe that Indians arenot ‘process-oriented.’ In Bangalore,we find many companies that are SEICMM Level 5 certified which is thehighest level of quality certificationin software services. Indeed Indiahas the largest number of companiesthat are SEI CMM Level 5 certifiedin the software industry worldwide.Indians have been very innovativein how they manage their organiza-tions. Can one imagine an organiza-tion that has grown in scale fromunder 500 to over 50,000 people in

ten years and yet delivering a growth of over 30 per centquarter on quarter for the last ten years? Such a companyexists in Bangalore and this is not an isolated example.

Would one expect to have a world-class companythat is into metal forging in a country like India? Wehave one. India is a great land of opportunity which anycompany must leverage not only from the point of viewof selling its products but also from the point of viewof leveraging the competencies that it possesses. Indiais not a ‘low cost’ country. It is a country that provides

India is probably not theideal place where acompany can just

descend and start itsbusiness. But, if the

company is willing tocome here for the longhaul and is willing to

build the business fromthe ground up, including

creating systems,inducting the kind ofpeople that it wants

working for it, creating itsown work culture, settingstandards for performance

and innovation, thenIndia would prove to bea country of tremendous

potential.


105

high quality at low cost. It is not only a cost competitorbut a quality competitor too. The industry in India haslaid a very strong focus on quality and has competedpowerfully in the global markets despite the handicapsof a not very supportive ecosystem—absence of easyaccess to risk capital being a case in point—and limited,if at all, state support.

I would like to reiterate that Indians are very hungryhighly adaptable, and very intelli-gent people. And what defines Indiatoday is its hunger to succeed. In-dia’s emergence as a global player isnot merely because of India’s costadvantage. We have historically hadlow cost and large talent pool. Theinteresting point that has happenedis, post-1991, the entrepreneurialenergies of our people have beenunleashed. We were restricted for 40years and now have been given aplatform to compete. India and itspeople have a great hunger to suc-ceed and it is for the foreign compa-nies to see how they can harness thishunger and adopt it into their ownagenda to reap benefits.

Given the opportunity, Indianswill leverage their entrepreneurialcapabilities. I strongly believe thatIndia’s growth is self-sustainingbecause the country is now experi-encing a robust domestic demandthat will help sustain growth. And,this is the right time for foreigncompanies to participate in India’s growth. Five to tenyears down the line, they may miss the bus. Not thatit will be too late but the cost of participation and themagnitude of the impact it will have on this country’sgrowth will be greatly different then.

Ravi Viswanathan: Today, India is known outside ofIndia as an IT destination and is admired for its well-educated human capital. Less than 12 years ago, whenI used to make presentations to my customers overseas,I had to begin the presentation by showing them whereIndia was on the world map. Secondly, the perceptionthey had about India was that it was a poor country

frequently visited by floods, drought, and plague be-cause this was the only news about India that would goout or be heard of in other countries. But, today, theinformation technology industry in India has transformedthis perception and brand of India.

The country has always had an enormous pool oftalented engineers. In fact, the first Vice Chairman ofTCS, while delivering a speech at the CII symposium

in 1974 said, “Unfortunately Indiacould never participate in the indus-trial revolution because it lackedfinancial capital. But, 20 years fromnow, there will be a knowledge rev-olution in the world and India willparticipate in it because India hasthe highest knowledge density in theworld and it is for companies toharness this knowledge capital andmake Indians leaders in the knowl-edge revolution.” And, his vision hascome true today. In the late 80s, thestate government of Karnataka de-regulated its higher education sys-tem opening up this sector for pri-vate participation. This resulted in alarge number of engineering colleg-es in the state, especially in the cityof Bangalore. Very soon, other statesfollowed suit with private engineer-ing colleges opening up in cities likeMumbai, Chennai, Hyderabad, NewDelhi, and Pune consequently in-creasing the density of engineeringgraduates in the country. Today, we

have hundreds of engineering colleges in the countrymost of which have great labs and faculty. The supplyof engineers has been beefed up. Although the qualityof some of these graduates may be questionable, thedensity of talent is there in India. Knowledge clusteringhas happened around cities that are rich in universities.Although the country has a rich talent pool, not all ofthem are employable by the industry which means, if100,000 engineers are graduating out of universities everyyear, only about 30 per cent of them are employable bythe industry. Therefore, companies would need to investa lot on training. At TCS, for example, we invest 4 percent of our revenues every year in training. Intensive

India’s emergence as aglobal player is not

merely because of India’scost advantage. We havehistorically had low cost

and large talent pool. Theinteresting point that hashappened is, post-1991,

the entrepreneurialenergies of our people

have been unleashed. Wewere restricted for 40

years and now have beengiven a platform to

compete. India and itspeople have a great

hunger to succeed and itis for the foreign

companies to see howthey can harness this

hunger and adopt it intotheir own agenda to reap

benefits.


106

training is provided especially to thepool of fresh graduates because theyneed to be calibrated to the TCSstandards before they enter into oursoftware development centres. Afresh graduate coming into TCSspends several months in our train-ing school. The issue in India is notabout lack of supply of talentedhuman capital but lack of supply oflarge numbers of talented graduateswho can take up the emerging op-portunities. Companies wanting toset up businesses in India, especiallyin the software industry, must beprepared to make significant invest-ments in training their human re-sources.

Although India has been painted as the IT destina-tion and is home to several software companies, manycities in the country today lack matching public infra-structure. In fact, infrastructure is a bottleneck whichmakes customers, multinationals, and investors whobelieve that India is the right place to set up their businessrethink. All the knowledge cluster capitals like Banga-lore, Chennai, Hyderabad, Delhi, Mumbai, etc. areawfully congested with people and traffic. They havebad roads and power problems. Respective state gov-ernments have made some effortstowards solving this problem bydirecting some of this growth to tier-two cities that are located close to thebig metros thereby accelerating theformation of new clusters thus ena-bling expansion. For example, Ban-galore is looking at clustering withMysore by connecting super-high-ways. Similarly, Chennai is lookingat clustering with Coimbatore, Mum-bai has clustered with Pune, and NewDelhi is clustering with Gurgaon.

Q. 2. Is the country’s political land-scape ‘business friendly’?

Venkatesh Mysore: I have been withMetLife for 20 years and in the lastseven years I have been building the

MetLife business in India. When Icame to India seven years ago, themandate was to understand how tobuild our insurance business in In-dia. At that point in time, the insur-ance market was not open andMetLife had to lobby with the Indiangovernment. A coalition governmentexisted then and putting up MetLife’scase to government policy makerswas a very difficult job. As I am ofIndian origin, the Indian governmentdid not see me as a person represent-ing a foreign company which madeinteractions with them a lot easier.Subsequently, the insurance marketopened up but a regulatory frame-work did not exist. MetLife had theopportunity to actually shape the reg-

ulation. There was a lot of openness on this aspect fromthe government’s side and without trying to make thegovernment feel that MetLife was imposing its agendaon the government, it tried to expose it to various aspectsof regulation which helped craft the policy of the gov-ernment. This was a very specific role that MetLife playedthat is still appreciated by the Indian government.

The political landscape in India is very different.Many MNCs have to interface with the Indian govern-

ment. I remember the chief of IBMonce said to me that everything thathappens in India is despite the gov-ernment and everything that hap-pens in China is because of thegovernment. This is important be-cause the energy, the entrepreneuri-al spirit, and, the will to succeedexist at the grassroots level here inIndia which are the drivers ofprogress. That is why I believe thatthe change that is happening in Indiais truly sustainable and, sooner orlater, the government will have tocatch up to support this progressand enable it. When this enablingdoes happen, India will move to thenext level. The character of the gov-ernment today is such that any ex-

Knowledge clustering hashappened around cities

that are rich inuniversities. Although thecountry has a rich talentpool, not all of them are

employable by theindustry which means, if

100,000 engineers aregraduating out of

universities every year,only about 30 per cent ofthem are employable bythe industry. Therefore,

companies would need toinvest a lot on training.

The issue in India is notabout lack of supply oftalented human capitalbut lack of supply of

large numbers of talentedgraduates who can take

up the emergingopportunities. Companies

wanting to set upbusinesses in India,

especially in the softwareindustry, must beprepared to make

significant investments intraining their human

resources.


107

ecutive decisions or cabinet level decisions can happendespite the coalition nature of the government. Foranything that requires legislation, it is going to be heldback and delayed. Hence, if a business is dependent onsome of the legislative matters to enable the industry,it will need to have a strategy behind it and will haveto be willing to wait it out. And,MetLife has been doing this waiting.Two budgets ago, the finance min-ister announced that foreign owner-ship in insurance companies wouldbe increased from 26 per cent to 49per cent but it has not yet happenedas this requires legislation whereastaking up foreign equity to 74 percent in the telecom sector did notrequire legislation and, therefore, ithappened fast.

Ashok Rao: We have a very confused,diverse, and stagnant political sys-tem. The Left does not know whatthe Right is doing and the Centrenever knows where to stand! Almost80 per cent of India has been neglect-ed due to a series of coalition gov-ernments that have now become thenorm. Most of these areas are re-mote, rural villages with harsh en-vironments (literally deserts with noaccess to water and no rainfall). Theseare villages neglected by the Indiangovernment, by the educated popu-lation in the country, by the WorldBank, and by Indian politicians. Thisis a symbol of true India—utterlyneglected. And, yet, this large sec-tion of the country is functioning wellbased on their own self-reliance andperseverance without anyone’s helpand people assume that the government is doing its jobwell.

Anand Shah: India has about 26 active political partiesin the country. If we take the largest populated statesin the country, the top two political parties are actuallyirrelevant. There are many regional political parties thatare dominant in the country. Interestingly, these partiesdictate who will actually head the government.

Secondly, the way the Indian legislation moves isvery slow. If constitutional amendments are needed,they happen very fast. There have been 99 constitutionalamendments in the last 55 years because if the cabinetapproves the amendment, it goes through. The Indiangovernment is very executive in the way it operates and

not legislative.

The same thing happens at thestate level. People vote for the chiefexecutives of the state and the leg-islators do not carry much clout. Thiskind of work environment slowsdown any business and the peoplewho are interested in starting a busi-ness will have to do a lot of runningaround to get clearances and approv-als. There are a lot of words put intoa policy document. India likesputting a lot of things on paper. Incontrast, a lot of the governance thatcan be seen in the Western countriesis based on decentralization of pow-er. This allows people down theladder take decisions. In India, pol-iticians at the top dictate what hap-pens which means that a businesswill have to work through many morelayers to reach to somebody who canactually take a decision.

Shyamal Roy: Coalition govern-ments can act as big barriers tobusinesses because with a multi-party government that prevails inIndia, the moment one tries to speedup things, there will always be some-body else in the system who will putbrakes to any of the proposed chang-es. This is what is precisely happen-

ing with the functioning of various coalition govern-ments in India. One may ask why the Indian governmentcannot function like that of China or Singapore. I suggestthat it is not appropriate to compare India to thesecountries. It is like comparing apples with oranges. Indiawill not become like China or Singapore. It will moveat its own pace except that its direction is clear. Sincethe direction is clear, it will reach the destination al-though it may take a longer time to reach there.

The political landscape inIndia is very different.Many MNCs have to

interface with the Indiangovernment. The chief of

IBM once said thateverything that happensin India is despite the

government andeverything that happensin China is because ofthe government. This isimportant because the

energy, theentrepreneurial spirit, andthe will to succeed exist

at the grassroots levelhere in India which arethe drivers of progress.That is why the change

that is happening in Indiais truly sustainable and,

sooner or later, thegovernment will have tocatch up to support thisprogress and enable it.

When this enabling doeshappen, India will move

to the next level.


108

Ravi Viswanathan: Despite the joke in the industrycircles that the IT industry in India grew because therewas no government intervention, I honestly believe thatthe IT industry did receive a lot of help from the Indiangovernment. Many of the luminaries in the industry oftoday and yesteryears worked with the Indian govern-ment during the 80s to formulate educational policies.Today, if India has hundreds of engineering colleges,there is no way this would have happened if the gov-ernment did not help. But for proactive measures suchas these, the Indian IT industry could not have becomea $ 30 billion market. One can jokingly say that thegovernment did not do anything and everything hap-pened despite the Indian government but that is not true.The government has indeed created a fairly conducivebusiness environment for softwarecompanies in India.

Q. 3. How should MNCs imple-ment their India strategy?

Achal Raghavan: What the Indiastrategy should be is best left to thebusiness to decide but I would liketo give one tip here. I see a lot ofsimilarity between strategy and theclassical Indian music system calledthe raga. Indian classical music hasa raga, which is a disciplined centraltheme for a tune. Although in themiddle of the raga, one can impro-vise the tune, the musician has toalways ensure that he comes back tothe main theme. When I implement-ed global strategies for large MNCcorporations in India, I ensured that the main strategyor tune or raga is definitely preserved but provided alot of room for improvisations to be introduced. The keyto this approach is that the latitude within which im-provisations can be allowed must be fixed. If the parentorganization expects the local arm of the MNC to stickto the core strategy and does not provide room forimprovisation, there would be a lot of inconveniencecaused because of the peculiar nature of the culture, thecountry, the market, the laws, etc., that are prevalent inIndia. Therefore, the India strategy of the MNC has tobe treated like a raga and has to be implemented in adisciplined way.

A lot of MNCs implement strategy using the ba-

lanced scorecard approach. This framework has fourperspectives, viz., financial, customer, internal business,and learning and growth perspectives. MNCs setting upoperations in India have found that a lot of emphasismust be given to training and motivating employees,doing things in a process-oriented way, and ensuringthat the company is customer-oriented. The customer,in turn, would give more business to the company therebyenhancing its financial performance. This is the essenceof the balanced scorecard approach.

In my experience, maximizing the involvement ofthe parent organization’s executives during strategy for-mulation and project implementation phases works well.But, many a times, owing to scarcity of time and paucityof resources, sufficient deployment of people from the

parent organization is not done. Thisleads to gaps in understanding andimplementation of strategy and inwhat should be achieved vis-à-viswhat is finally achieved. Ideally,people from the parent organizationmust get posted here in India for afew months. This gives rise to a win-win situation because the executiveposted in India learns about theIndian company. For the Indiancompany, this is a very good bridgewith the parent organization. Foreach job function in the local organ-ization, a counterpart in the samefunction needs to be identified in theparent organization. Many of theMNCs in India are virtually 100 per

cent Indian in terms of manpower staffing because par-ent organizations traditionally have had a real hard timetrying to convince their executives to come and workhere in India. But, India is no longer a ‘hardship posting.’Parent organizations must ensure diversity at senior andmiddle levels of management. Creating a two-way traf-fic of people between the Indian company and the globalorganization is a great way to ensure alignment andglobal thinking and leveraging Indian talent globally.

The MNCs must also be prepared to compete fortalent with other companies that operate in India. It istrue that India has a rich pool of talent but every com-pany is looking for competent people with certain skillsand capabilities and, in the next five to ten years, while

A lot of the governancethat can be seen in the

Western countries isbased on decentralization

of power. This allowspeople down the laddertake decisions. In India,

politicians at the topdictate what happenswhich means that a

business will have towork through many more

layers to reach tosomebody who can

actually take a decision.


109

there will be people available withthe required skill-set, there will alsobe competition among companieslooking for them. Today, in India fora company to attract good talent pay-ing handsome salaries is pretty mucha given. However, the two othercriteria to attract and retain the besttalent within the company are: giv-ing responsibility and holding theexecutive accountable for the resultsby giving him/her room to play (im-provise around the raga) while en-suring that he/she stays with themain theme. This kind of semi-au-tonomous working at a senior level,while giving a decent amount ofsalary, and tying responsibility andaccountability to the results, workswell in India. Secondly, Indian man-agers appreciate softer aspects such as ability to learnsomething new while working in the organization. Thesecould be in terms of technology or relate to businessoperations or processes or giving room to be innovative.These factors are becoming more important in attractingand retaining employees for a company. Therefore, op-portunities to learn, work freedom, and accountabilityare what Indian managers treasure, taking for grantedthat the salary paid will be attractive.

I would like to share some of my experiences thatwill help in understanding the Indian organizationculture. Indians are comfortable with clear, well-definedsolid lines and do not function well with dotted lines.I have personally had to wade through matrix globalorganizations for over ten years and it was really dif-ficult. Probably, the Indian joint family patriarchal sys-tem is the reason for Indian employ-ees being more comfortable withclearly defined organization struc-tures. Hence, I believe Indian man-agers appreciate and prefer well-articulated work processes and well-defined reporting structures. Senior-ity still matters especially in the brickand mortar Indian industries al-though this is beginning to changein the sunrise industries. Thirdly,

public ‘face’ is crucial at an individ-ual level for most Indian managers.Having a one-to-one meeting to dis-cuss issues concerning a managerturns out to be more effective ratherthan he/she being told openly aboutit during a meeting attended by peersand superiors, especially when thediscussion relates to lapses or areasof improvement of the individual. Aone-to-one discussion would makethe manager more forthcoming onthe issue and he/she would be will-ing to do something about it quicklyin terms of changing his/her behav-iour.

Venkatesh Mysore: While imple-menting the India strategy, the par-ent organization must be open to thepossibility of doing new things dif-

ferently as may be required in the Indian context. Letme give you the example of how MetLife overcame theforeign ownership barrier that it faced initially whilesetting up its business in India. As one may be aware,every sector that opens up in India to foreign playershas entry barriers. For insurance companies, the issuewas foreign ownership. The Government of India stipu-lated that the foreign entity’s ownership in the companycould be only 26 per cent or less which meant thatMetLife needed to have a joint venture partner in India.It was pretty clear from MetLife’s standpoint that thecompany would come to India only if it had managementcontrol. Therefore, MetLife’s biggest challenge was toget management control in an ownership structure wherethe foreign shareholder could have up to 26 per centshareholding and the Indian shareholding could be 74

per cent or more. To resolve this entrybarrier issue, MetLife came up witha very unique structure of buildinga consortium of Indian shareholderswhere it could break up the 74 percent stake of Indian shareholding.MetLife actually broke up the 74 percent stake four ways, i.e., betweenfour different Indian partners to apoint where MetLife is the largestshareholder with 26 per cent share-

The MNCs must beprepared to compete for

talent with othercompanies that operate inIndia. It is true that Indiahas a rich pool of talent

but every company islooking for competent

people with certain skillsand capabilities and, in

the next five to ten years,while there will be

people available with therequired skill-set, there

will also be competitionamong companies looking

for them.

While implementing theIndia strategy, the parent

organization must beopen to the possibility of

doing new thingsdifferently as may berequired in the Indian

context.


110

holding. It partnered with insurancecompanies who agreed that MetLife’svalue addition to the joint venturewas its management expertise in theinsurance domain and, hence, itought to lead the consortium ofpromoters.

As an employer in India, thecompany has to be able to demon-strate to its executives and managersthat they would be losing somethingif they left the organization. Thisneeds to be done by either movingmanagers on short assignments todifferent parts of the world or pro-viding them job rotation opportuni-ties or job enrichment opportunities in whatever theyare doing. For some managers, short-term postingsoutside the country would be a good motivator to joinand stay with the company. Merely large compensationpackages and golden handcuffs do not work anymore.These only work to a certain extent.

Matrix organizations are a reality in most MNCs.Indian managers are beginning to deal with them quitewell. MetLife too is a heavily matrixed organization withstraight lines and dotted lines crisscrossing everywhere.Although such a structure is difficult to operate in, itis a part of the challenge and the Indian managers havelearnt to deal with it.

It is extremely important for MNCs to be process-oriented, follow the laws of the land, and not look forshort-cuts.

Rakesh Makhija: In giving my view on how an MNCmust implement its India strategy, let me run you throughthe SKF story and what I did when I came in as the CEOin 2004. SKF Bearings was established in 1961 in India.With an annual turnover of Rs. 7,813 million for 2005(about $173 million), the company services four indus-trial segments, viz., automotive, industrial, electrical,and service (after market). SKF,which enjoyed a very strong brandname before the liberalization of theIndian economy, somewhere lost therace when the Indian economyopened up in the early 90s. Conse-quently, the company’s revenues did

not grow during most of the 90s.When I came in as the CEO, I set veryambitious growth goals for the com-pany both in terms of revenue andprofitability growth targets. I alsodeclared to the press that SKF wouldbecome a $ 350 million company by2007. Prior to my debut in SKF, themanagement in India had no powerto do what it felt was right. It gen-erally feared taking risks. Its voicewas never heard and a few expatri-ates from the parent company werethe ones who actually managed theshow in India. However, the Indianmanagement was allowed a lot more

freedom when I came in as the CEO. The managers whogenerally feared taking risks in achieving bold goalswere allowed to take risks which resulted in thembecoming much less risk-averse. They became moreforthcoming in doing the right things that were requiredto reach the goals which were set for the company. Theparent organization, therefore, must empower the Indi-an management and allow the Indian managers to takecalculated risks. A parent MNC organization exercisingtight control on the local company will end up stiflingthe energies of the local management which will hinderthe performance of the local company.

SKF India had close to 3,500 employees. Workerswere paid three times the regular wages paid by otherindustries like Tata Motors, Bajaj Auto, and other manu-facturing companies. Until the late 90s, SKF India hadexpatriates as CEOs. These CEOs came with a verydifferent background as opposed to what was requiredfor doing business in India. Some of them made inap-propriate decisions. From time to time, they came underintense pressures. For instance, they did not know howto deal with the labour unions which were very strongten years ago but much less powerful today. When Icame into SKF India, the company was amidst the process

of reducing the headcount and wagenegotiations were going on. By deal-ing firmly with the union and notsuccumbing to its demands, the SKFmanagement was able to successful-ly draw up a satisfactory wage agree-ment that took care of the interestsof both the workers and the manage-

It is extremely importantfor MNCs to be process-oriented, follow the lawsof the land, and not look

for short-cuts.

The parent organizationmust empower the Indianmanagement and allowthe Indian managers totake calculated risks. A

parent MNC organizationexercising tight control on

the local company willend up stifling the

energies of the localmanagement which will

hinder the performance ofthe local company.


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ment. Through this example, I wouldlike to emphasize that the local com-pany should have expatriates com-ing in from the parent organizationbut they must be people with theright talent. Maintaining industrialrelations is important for an MNC.However, the Indian managementhas to take tough decisions whennecessary.

Secondly, I wanted cross-fertilization of SKF Indiawith other parts of SKF globally. Cross-fertilization isa great way of ensuring alignment and attracting goodtalent into the company. Now, SKF India has less ex-patriates coming into the local organization and a lot ofIndian managers going to SKF’s global organizations.Providing short-term overseas assignments is viewedfavourably by many employees. Global integration isvery important. A company needs good talent but asingle talented person cannot achieve things in isolation.It requires a team of good managers to build a greatorganization. It is necessary to find ways of creatingsynergy in the talent available in the company. Individ-ual value systems need to be integrated into the organ-ization’s value systems and individual abilities to achieveresults have to be leveraged for the good of the totality.Bringing about global integration leads to the organi-zation having the right performance focus, managementfocus, and cultural integration which is very importantfor an MNC operating in India.

Thirdly, I adopted the Six Sigma culture into thecompany. SKF India had too many people doing thesame job for too many years. Six Sigma was aimed tointroduce the culture of continuous improvement whichI strongly feel is a must for an MNC.

The vision of SKF India is to build customer excel-lence and operational excellence, im-plement Six Sigma, drive innovationwithin the company, and successful-ly carry out acquisitions. These in-itiatives are aimed at driving SKFIndia to a state where we can becompetitive and be the best in termsof quality, cost, and customer serv-ice. It is very important for SKF Indiato drive innovation throughout the

organization and have processes tocapture the ideas of the 2,000 em-ployees working in the company toimprove systems and processes.Thus, a focus on operational excel-lence, innovation, customer excel-lence, etc., is important for the localmanagement of an MNC to gaincompetitive edge.

In conclusion, the culture that isbuilt in the local company of an MNC parent is veryimportant. This culture has to be in consonance with thelocal management and the parent company culture.Paying attractive salaries is a given in today’s scenariobut, more importantly, employees at all levels must feelproud to belong to the organization. They must beinvolved with what they are doing. MNCs typically haveconcerns relating to compliance with IPR (intellectualproperty rights) in countries like India and China. Ibelieve that compliance to IPR is improving in India, atleast in the manufacturing business, as compared towhat it was five years ago.

Arun Vora: India is a land of contrasts. When I wasassigned the task of establishing Tata BP Solar in Indiain 1991, I said to myself that I cannot change India butwhat I can do is create an island of excellence. Tata BPSolar is a joint venture between British Petroleum (51%stake in the company) and the Tata Group. The compa-ny’s chief business is solar photovoltaics where solarmodules of different capacities are manufactured thatconvert the sun’s light energy into electricity. Thesesystems find applications in water pumping, villageelectrification, lighting, and other industrial and profes-sional applications. Tata BP Solar is also in the businessof solar thermal where the solar modules manufacturedmake use of the sun’s heat energy. These find applica-

tions in water heating (domestic,commercial, and industrial), air heat-ing, and space heating. With anannual turnover of over $ 100 mil-lion, the company today earns 65 percent of its revenues through exportsmainly to Europe and the US.

The India strategy of Tata BPSolar was to create an organizationfocused on excellence in all that it

The culture that is builtin the local company ofan MNC parent is veryimportant. This culture

has to be in consonancewith the local

management and theparent company culture.

Bringing about globalintegration leads to theorganization having theright performance focus,management focus, and

cultural integration whichis very important for anMNC operating in India.


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did by creating an excellent management team andbuilding leading edge technology. When the companywas started, the technology worldwide was new andevolving. The parent company BP gave Tata BP Solarthe latest technology which was later further improvedupon in-house. In many joint ventures, technologies andequipment that have outlived their lives get dumpedonto the local entity, especially if the subsidiary is ina developing country like India. However, this was notso in our case. Tata BP Solar has been very successfulin creating benchmark technology through on-going in-house R&D starting from the technology that BP gaveto it at the time of setting up the Indian operations. Whilemany other companies in the solarenergy business have invested largesums on technology and R&D, TataBP Solar has been fairly modest in itsR&D spending (in dollar terms) andyet the results have been very good.This was made possible as the com-pany focused on making small im-provements in technology in a sys-tematic way rather than targetingradical breakthroughs backed bylarge budget R&D spending.

The India strategy of Tata BPSolar was a three-pronged strategy.Phase-I of the strategy sought to takethe company to a turnover of $ 25million. Phase-II aimed at making ita $ 100 million company. Phase-IIIseeks to make it a $ 300 millioncompany. The strategy implementa-tion was done with tremendouspassion and dedication by the man-agement of the company. A peoplestrategy was adopted wherein peo-ple who could be moulded to be part of a global companywere recruited at the worker level. At the staff/engi-neer/manager level, above average ‘mouldable’ peoplewere recruited who were systems-oriented. They werepushed into working with global teams.

Leadership in the company was entrepreneurial andhands-on. The organizational structure was made moreor less flat. A few layers did exist but were not hierar-chical. A two-way communication was encouragedbetween management and workers. This helped workers

gain an understanding of what needs to be done, why,and what necessary actions needed to be taken to achievethe desired results. At the working level, teamwork wasencouraged. Monitoring mechanisms were put in placeto ensure result-orientation at all levels. The culture ofcontinually bettering performance at every stage helpedcontain costs and improve profits. Technological im-provisations, unique methods deployed to enhance per-formance orientation, introduction of a performance cul-ture, focused marketing orientation, and customer serv-ice propelled the company towards excellence. The com-pany today manufactures products of first world qualityat third world costs! This has been achieved through

high manufacturing yields, low over-head costs, extreme flexibility (lessautomation), and low capital inten-sity.

I believe that a majority of In-dians are highly creative and inno-vative. At first sight, it appears thatthere is a lot of chaos in the countryif one looks at things like the trafficon the roads in the country. How-ever, even there, one can find someorder in the chaos. Indians are lesssystems-oriented. Huge diversityexists in the minds of the people.They may appear to lack disciplinein doing things day after day andyear after year. However, they arevery passionate about what they doand are emotional people.

Ravi Viswanathan: Companieswanting to set up businesses in In-dia, especially in the IT and softwareservices space, need to primarilygrapple with two variables. The first

is the culture and mindset of the Indian workforce. Forexample, an Indian project manager expects his teammembers to forget everything including his family whenworking on a project to deliver what the customer re-quires. Indians are prepared to work 16 hours in a day.Their deadlines and commitments for project comple-tions would be based on 12-hour working schedules.This is very culture-specific as Indians have it in themto go all the way out and deliver necessary results.

Let us take the illustration of an Indian project

A majority of Indians arehighly creative and

innovative. At first sight,it appears that there is a

lot of chaos in thecountry if one looks atthings like the traffic onthe roads in the country.However, even there, one

can find some order inthe chaos. Indians areless systems-oriented.

Huge diversity exists inthe minds of the people.They may appear to lackdiscipline in doing things

day after day and yearafter year. However, theyare very passionate about

what they do and areemotional people.


113

manager of an Indian software company who is respon-sible for the delivery of a project for a large global client.The project may be done out of China, for instance. Theproject could have teams working out of the softwarecompany’s operations in Brazil, Chile, and China. Thisis very challenging since the project manager would behandling diverse sets of people. The teams in Brazil orChile, for example, would typically come in to work at9 in the morning and leave at 6 in the evening. Expectingthat the team members in these geographies would workbeyond office hours is unrealistic. However, for an Indianproject manager, it is difficult to accept that the softwareengineers in these geographies will only work from 9to 6 for five days a week and no more because for him/her working overtime comes quite naturally. These arecultural issues that must be kept in mind by an MNCthat has footprint in many countries and which also hassignificant Indian operations. As thecompany starts scaling its globaloperations, it naturally has to dealwith culturally very different sets ofpeople who have very different mind-sets. To meet this challenge, thecompany has to be aware of thesecultural differences and managethese differences effectively. Second-ly, Indian managers are adept inmanaging ambiguity. If a customerdescribes to an Indian software com-pany the software program that hasto be made, the Indian firm may noteven ask what the client’s exact re-quirements are. Instead, it may goahead and build the software evenif it involves considerable overtimework. When the software is deliv-ered, the customer firm may comeback and say that what was developed is not what itwanted. The Indian firm may then capture more exactlythe client’s requirements and make necessary changes.In this iterative fashion, the software will get completed.The above may perhaps be an exaggeration but the pointI am trying to make is that Indians are quite comfortablewith ambiguity vis-à-vis many cultures from the devel-oped world. I am not trying to say that Indians are notdisciplined; they need to be taught to adopt a systematicwork approach. Perhaps this explains why Indian soft-ware companies tend to be very process-oriented.

The expectations of the workforce from differentparts of a global organization tend to be quite culture-specific. I am the biggest disbeliever of the concept thatthe ‘world is flat.’ The world is not flat. It has many tallboundaries and is culturally divided. The world mayappear to be flat but there exist cracks which cannot bewished away based on the assumption of homogeneity.Instead, they must be navigated by companies havinga global presence.

Multinationals coming into India also need to havea strategy in place to counter the high attrition levelsthat are not uncommon in India. The problem is perhapsmore acute in the software industry where companiescould lose up to 30 per cent of their people every yearto competitors.

Q. 4. What challenges do the Indian customers andmarkets throw up?

Venkatesh Mysore: The Indian mar-ketplace is very dynamic. For thelocal management of an MNC, tostart business in the country with thegeneral assumption that they knowhow the Indian market works is er-roneous. This is also true if the localmanagement is comprised largely ofIndians posted from the MNCs indifferent countries to manage the In-dian operations of the MNC. The as-sumption on their part that becausethey are Indians they understand theIndian market better is erroneous.The Indian market has changed in avery significant way. It now has ahuge ability to leap-frog. This can beseen in sectors such as telecommu-nications, information technology,

etc. To give a simple anecdote of how the Indian marketis changing, a few years ago, only NRIs (non-residentIndians) would carry bottles of mineral water with themwhen travelling within India, but, today, even auto-rickshaw drivers are seen drinking water out of a brand-ed sachet or bottle. Indian people are buying brandedbottled water everywhere in the country. This is the levelto which retail marketing has been taken to in India.Somebody once told me that the concept of paying fordrinking water would never work in India but it hashappened. This is how the retail market has changed.

The expectations of theworkforce from different

parts of a globalorganization tend to bequite culture-specific...The world is not flat. It

has many tall boundariesand is culturally divided.The world may appear to

be flat but there existcracks which cannot bewished away based on

the assumption ofhomogeneity. Instead,

they must be navigatedby companies having a

global presence.


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This just reminds businesses that the Indian marketcannot be taken for granted. The market keeps changingand is advancing by the day.

Another classic example, to highlight the dynamismin the Indian market, is that of potato chips. In India,people preferred buying hot, fresh potato chips fromsmall shops that would make it right then and there forthe consumer. When Lays wanted to enter the Indianmarket with their bagged potato chips, I thought itwould never work. But, today, when one drives downany small town or village in India, one sees packets ofLays potato chips hanging down every petty retail shop.The buying behaviour and attitude of the Indian con-sumer is changing dramatically.

Insurance was earlier beingbought by the Indian consumer tosave taxes because insurance premi-ums are tax deductible. However,today, this has changed. Car loans,which were impossible to get ten tofifteen years ago, are easily availabletoday in the Indian market. Close to90 per cent of the cars are financedin India. All that a customer needsto do is walk into any finance com-pany and his/her car gets financed.

Rakesh Makhija: India is a marketwhere the customer behaviour ischanging very fast. Businesses haveto be geared to meet these changesquickly. The local entity in Indianeeds to be innovative and agile andmust come up with specific solutionsthat the customer wants and not what the companythinks is best for the customer. Often, businesses forgetthis. Businesses need to be aware of the key concernareas of its customers and demonstrate to them how thecompany’s products could impact these key concernareas of the customer. If a business can do this, then itsvalue proposition gets demonstrated very clearly. Formany years, the various global companies of SKF werecompeting within themselves. Today, the situation haschanged considerably. The management of SKF Indiafinds that some of the Indian companies manufacturingbearings are much more aggressive than what SKF asan MNC is in terms of customer excellence, innovation,and operational excellence. Therefore, India poses to be

a very competitive market and MNCs need to have avery strong customer focus in order to succeed here.

Achal Raghavan: The Indian customer is very muchaware of what is available globally and is very value-conscious. Providing total solutions to customers is theonly way to get out of price wars and discount spirals.It is important that there is no time lag in rolling outglobal technologies. There was a time when an MNCparent organization would introduce a new technology-based product in the developed countries and only fiveyears later would introduce the technology in Indiathrough its local company. But, Indian customers todaydemand sophisticated and latest versions of productsand hence simultaneous roll-out of the new product intothe Indian market by the parent organization is impor-

tant. Designing a product fromscratch for the Indian market usingthe Indian R&D team would often berequired which later can also becomea solution for the Asian and globalmarkets.

Ajay Mookerjee: The reason I wishto bring up the importance of mar-keting to India’s masses is that toknow India, foreign businesses mustunderstand the power of the bottomof the pyramid (BOP) because thesemasses are the clear driving force ofthe markets in India. Before the lib-eralization of the Indian economy,the focus of companies was on theelite markets. In the past, India wasdescribed as a market of only 25

million people who had purchasing power. The netincome of the lower and middle income groups in thecountry became significant over the last several years.Manufacturers for consumer markets have started to feelthat although the poor and the middle income group’sshopping basket is one-fifth or less of the shoppingbasket of the elite markets, yet the number of consumersin the lower and middle income segments are 25 timesor more than elite markets. This constitutes a huge market.Increasingly, companies are turning to these segmentsfor fuelling their future growth. This phenomenon ishappening in many countries such as India, China, andRussia.

In terms of size, the BOP market in India is about

India is a market wherethe customer behaviour is

changing very fast.Businesses have to begeared to meet thesechanges quickly. The

local entity in India needsto be innovative and

agile and must come upwith specific solutions

that the customer wantsand not what the

company thinks is bestfor the customer. Often,businesses forget this.


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$ 10 billion today but is very much under-penetrated.Of this, the rural segment is the most important. RuralIndia has 70 per cent of population that are classifiedas poor. Consumer goods are increasingly penetratinginto these markets. The purchasing power of lower in-come groups is increasing and creating significant de-mand for consumer products both in rural householdsand the urban population. In India, more than half (53%)of FMCG (fast moving consumer goods) products, 40 percent of two-wheelers and 50 per cent of insurance pol-icies of India’s largest insurance company, LIC, are soldto rural markets. Sixty per cent of the households in ruralmarkets have bank accounts. The compounded annualgrowth rate (over a ten-year period)of the Indian rural market is 13 percent as against the 8 per cent of theurban market.

The size of the Indian ruralmarket is roughly 125 million poorhouseholds whose income variesfrom $ 350 a year to $ 3,000 a year.They have a combined consumerspend of $ 375 billion. Although theseincomes are small individually, whenmultiplied with the purchasing pow-er parity of five, as well as the numberof consumers, the resultant marketis huge. In terms of consumption, thelower income households spend asignificant proportion of their incomeon food, clothing, footwear, and ed-ucation. Invariably these householdsown a tractor/motorcycle, black andwhite TV, land, and do not have access to organized fair-priced credit. Most of the money they borrow is frommoneylenders at very high interest rates. Highlightingthe geographic rural spread, there are about 3,700 cities,towns, and feeder towns and about 600,000 villages inthe country. However, the top 15 per cent of these 600,000villages (i.e., about 100,000 villages) account for 50 percent of the rural population and 60 per cent of wealth.This makes the market more manageable. Till date, this

is the segment which has been the real focus of com-panies which have chosen to expand their markets toencompass the rural and BOP markets.

For businesses to capture the rural market in India,things have to be done differently. New business modelsneed to be created. New innovations are needed in themarketing mix. Although the opportunity is massive,marketing in rural India requires a new mindset. Fromthe traditional focus of revenue, businesses need to shifttheir focus to volume maximization. Clearly, this wouldyield lower prices but higher volumes. The focus of thebusiness has to shift from high-value individuals tohigh-volume communities because much of the purchas-

ing in the lower-end market is driv-en by people purchasing in groupsand communities. Innovative busi-ness models need to be created. Whileit is true that there are 25 times moreconsumers in numbers vis-à-vis elitemarkets, prices have to be droppeddrastically to make the products af-fordable to these masses. This willnecessitate product innovations. Thisrequirement of low-priced productswill necessitate tremendous amountof innovation from companies. Animportant feature for the new busi-ness model to be successful in thesemarkets is that it must necessarilyinclude making cheaper productsthat are of simpler designs. The dis-tribution must be direct, relationship-oriented or through third party chan-

nels. Products need to be sold more through promotionsas against branding. Interestingly, because the businesssystem infrastructure is lacking in these geographies (noretailers, distributors, financiers, etc.), companies want-ing to market to these masses must build a businessecosystem from scratch. In doing so, the company wouldalso create a lot of social value as a by-product since alot of economic prosperity gets created resulting in jobcreation for the masses.

For businesses to capturethe rural market in India,things have to be done

differently. New businessmodels need to be

created. New innovationsare needed in the

marketing mix. Althoughthe opportunity is

massive, marketing inrural India requires a new

mindset. From thetraditional focus of

revenue, businesses needto shift their focus tovolume maximization.

CONCLUSIONS

This colloquium focuses on understanding the funda-mental drivers of the success that Indian companies areexperiencing in many industries in the international

arena. India has, in the recent past, been much talkedabout as the emerging economic power-house. All thishas happened in a very short period of less than 15 years


116

since the country’s economic liberalization.

The colloquium seeks to address in broad terms,questions such as: ‘What is the true secret behind theemerging India phenomenon? Are there likely to beshow-stoppers to this juggernaut? How can foreignMNCs that seek to leverage the India advantage succeedin engaging with India? What are the market dynamicsthat foreign companies need to understand if they wishto tap into the Indian market?’

Clearly, while being an important aspect, low costis not the only reason for the recent success of India.There is simultaneous co-existence of cooperation andcompetition in the Indian population which is a major,yet unrecognized culture-specificasset in this growth. Resilience andpatience are virtues that Indians havein great measure. These are assets incoping with today’s turbulent world.The large Indian diaspora that is in-credibly talented and networked ata global level is a huge and as yet notfully tapped strength that the coun-try will leverage in the coming yearsmaking it even more formidable asan economic power. Indians areextremely entrepreneurial, innova-tive, and passionate in what they do.They have a tremendous hunger totake their rightful place under thesun. While all these differences arereal at the ground level, yet, from apanoramic perspective, there is alsoa lot of commonality with othernations. A successful MNC manager has to recognize thecommonalities as well as the differences to be effectivein managing the Indian operations. The fact that muchof what is happening in India is despite the government,while much of what is happening in China is becauseof the government, makes India’s economic growth sus-tainable over the long haul. Inherent order amidst chaos;simultaneous co-existence of opposites, such as seeminglack of discipline, yet willingness to be subjected toprocesses; diversity on a massive scale; etc. are someunique aspects of the country’s culture that contributesignificantly to the current growth spectacle that we arewitnessing.

Is this phenomenon because of the government or

despite the government? Even here one finds the co-existence of opposites. At one level, one comes up againsta callous, self-serving, and downright corrupt govern-ment. Yet, the same governments, both at the federal andstate levels had the vision to create large numbers ofmassive educational institutions which served as knowl-edge hubs that could leverage the opportunities thatemerged as the world increasingly transitioned into theknowledge and service eras. The entire surge of IndianIT industry was facilitated by government’s educationpolicy. Hence, it is uncharitable to deny the govern-ments, both at the federal and state levels, any creditin the prosperity and growth that the country has beenwitnessing over the last decade.

Is the India phenomenon dura-ble? The reality is that there are manyconcern areas. Infrastructure couldpose serious restrictions on the con-tinued growth. However, shouldinfrastructure lead growth or couldthe growth occur first and infrastruc-ture closely follow behind? Indiaseems to be on the latter course.Another big show-stopper, if notaddressed satisfactorily, is the emer-gence of two Indias. There are largesections of the country that are leftout of the current growth. The resil-ience of the Indian population hasenabled the people to patiently en-dure this growing disparity. ‘For howmuch longer?’ is anybody’s guess.The reality of coalition governments,which has become the norm in India

at the federal government level and also at many stategovernment levels, is slowing down the decision-mak-ing progress which could act as a dampener on thegrowth. The paradox of ‘people, people everywhere, butnot very employable people (in comparison to the emerg-ing opportunities)’ is a concern that could also result ina lot of lost opportunities. It will also raise the costs asthe companies employing these people have to incurlarge costs to bring them up to speed.

Companies seeking to do business in India need tomanifest considerable patience. For the first few years,they will have to be prepared to ‘rough it out’ and ‘learnthe ropes.’ There is no magic wand that guarantees

Clearly, while being animportant aspect, low costis not the only reason for

the recent success ofIndia. There is

simultaneous co-existenceof cooperation and

competition in the Indianpopulation which is a

major, yet unrecognizedculture-specific asset inthis growth. Resilience

and patience are virtuesthat Indians have in greatmeasure. These are assets

in coping with today’sturbulent world.


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instant results. Mistakes will be committed but thewinners will be those who quickly learn and move ahead.Less patient companies tend to walk out of the countryin a huff, frustrated in their attempts to operate here.They do so at their own detriment, as they lose the Indianopportunity, both in terms of a supplier of cost-effectiveand highly productive knowledge workers, and also interms of access to the ‘great, big Indian market.’ Hence,the MNC companies entering India need to commit forthe long haul. While managing the internal aspects oftheir businesses, they must also satisfactorily addressexternal aspects as well, addressing the concerns ofvarious external stakeholders besides just shareholders.This includes paying attention to the environment, societyat large, government, etc. The MNCs have to competefor talent. Good salary alone cannot serve as a magnetanymore. Competitive remuneration packages are agiven. Other factors such as giving latitude to the localmanagers, giving them responsibility and a sense of

challenge, making them accountable for performance,appropriate reward mechanisms, etc., are key to attract-ing and retaining talent. Managing in the Indian contextrequires the MNC managers to manifest flexibility intheir approaches to management. Moulding value sys-tems of different individuals into the company’s valuesystem is very crucial for success. In this sense, the MNCmanagers must understand that the world is definitely‘not flat,’ if one factors in culture specificity of employeesand other key stakeholders.

India is a vast, yet dynamic, market-place. One hasto be on the continual learning mode to really under-stand the Indian market. The bottom of the pyramidmarket is a collectively huge yet individually insignif-icant opportunity that cannot be ignored any longer.Harvesting this opportunity requires innovative ap-proaches in marketing to the vast numbers of rural andpoor urban populations who have enormous collectivebuying power.

REFERENCES

Dahlman, Carl and Utz, Anuja (2005). “India and the Know-ledge Economy: Leveraging Strengths and Opportuni-ties, Overview,” WBI Development Studies, Washington,D.C., The World Bank.

NASSCOM Report 2005 Summary, based on the NASSCOM

– McKinsey Report 2005: Outlining a Success Strategy forIndia’s IT-BPO Industries.

Report compiled by the High Level Strategic Group (HLSG),published by the All India Management Associationand the Boston Consulting Group, 2003.

Acknowledgement • The coordinator wishes to sincerelyacknowledge the assistance received from Ms. ShobithaHegde, Research Assistant; Mr. T A Krishnamurthy, Assistant;Areva-T&D (Transmission & Distribution), India for providingan opportunity to organize the panel discussion; Teva ActivePharmaceutical Ingredients (TAPI), a division of Teva Group,Israel, for an opportunity to invite the distinguished speakers;and Indian Institute of Management, Bangalore for hostingthe panel discussion.

About Areva • With manufacturing facilities in 40 countriesand a sales network in more than 100, Areva offerscustomers reliable technological solutions for CO2-free powergeneration and electricity transmission & distribution (T&D).Areva is the world leader in nuclear power and the onlycompany to cover all industrial activities in this field. It’sbusinesses help to meet the 21st century’s greatest challenges:making energy available to all, protecting the planet, and

acting responsibly towards future generations. Areva T&DIndia has eight manufacturing units with more than 3,000employees.

About Teva • Teva Pharmaceutical Industries Ltd. is aglobal pharmaceutical company specializing in thedevelopment, production, and marketing of generic andproprietary branded pharmaceuticals and activepharmaceutical ingredients. With over a century of experiencein the healthcare industry, the company enjoys firmlyestablished international presence operating through astrategic tailored network of worldwide subsidiaries.Headquartered in Israel, Teva has major manufacturing andmarketing facilities in Israel, Europe, and the US. Today,Teva is among the top 20 pharmaceutical companies andamong the largest generic pharmaceutical companies in theworld.

L C Jain was Member, Planning Commission, Governmentof India and a member of various National Expert Committeesto review industrial licensing system, investment planning,import/export control, export trading, agricultural credit,linking the syllabus of Regional Engineering Colleges with

emerging industrial avenues, etc. He served as India’sambassador to South Africa and was Vice Chairman, WorldCommission on Dams. He held Visiting Fellowships at theUniversities of Harvard, Boston, and Oxford.e-mail: [email protected]


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Rakesh Makhija is the Managing Director of SKF India Ltd.He is responsible for the overall business of the companyin India as well as the strategic direction for the company’sgrowth and has led SKF which has maintained its industryleadership and is poised to make the transition to becomea ‘services and solutions’ company. Prior to joining SKF, heheld a number of senior management positions with TataHoneywell and Honeywell International, the global Industrialand Aerospace company.e-mail: [email protected]

Ajay Mookerjee is a seasoned CEO of analytics-driven, e-commerce/direct marketing Personal Financial Servicesgrowth ventures with revenues in excess of $1 billion. Heis also experienced in leading over $1 billion offshoreprocessing and private investment deals and in strategyconsulting. After 15 years in Business Head roles at CapitalOne, AIG, and Booz Allen, he is building his own venture,Offshore Analytics, a $1MM revenue company deliveringmarketing, risk and investments analytics/testing servicesto US/UK clients. He also serves on the boards of ZephyrCapital, India; JM Mutual Funds, and Harvard BusinessSchool, India. He has authored a book, Global ElectronicBanking, with HBS professor, James Cash.e-mail: [email protected]

Venkatesh Mysore was till recently Managing Director,MetLife India Insurance Company Private Limited. He hasalso served on the boards of the National Association of LifeUnderwriters (NALU) and the General Agency ManagersAssociation (GAMA) and been a member of the special taskforce for the Life Underwriters Training Council (LUTC).Recently, he has moved back to the US to take up seniormanagement position in the company.e-mail: [email protected]

Achal Raghavan has worked in various capacities in theautomotive component and engineering industries in Indiafor over 30 years. He has also held board-level positions forover 10 years. Most recently, he was President, HaritaInfoserve—an engineering design firm at Bangalore. Priorto that, he was Executive Vice President and Member of theBoard of Directors at Ingersoll-Rand (India) Limited,Bangalore for about six years. Presently, he offers consultancyservices in strategy and business excellence and is based atBangalore.e-mail: [email protected]

J Ramachandran is BOC Chair Professor of Business Policyat the Indian Institute of Management, Bangalore (IIMB).Prior to joining IIMB, he was Vice President (ManagementServices) at Reliance Industries Limited, one of India’slargest private sector firms. A winner of a number of awardsfor case research and teaching, Business World recently citedhim as a Star Teacher. He is currently engaged in studyingglobalization of firms from emerging markets. He has beenvisiting professor at many prestigious international businessschools. He serves on the boards of many large Indiancompanies and consults extensively to large Indiancorporations spanning a wide range of industries.e-mail:[email protected]

Ashok Rao has a Ph.D. in Electrical Engineering from IITBombay. His areas of interest include: digital signal andimage processing; multi-media; linear algebra andapplications; social, rural and development computing (ICTfor masses); renewable energy and rural-environmentaldevelopment; sustainable-green-clean technology anddevelopment; etc. He has over 70 publications to his credit.He has done pioneering work in renewable energy installation(micro hydro and solar photo voltaics) in many remoteregions of India. He has worked in ICT penetration and usein over 100 villages/primary schools, Gram Panchayats, etc.e-mail: [email protected]

Shyamal Roy is a Professor of Economics and AgriculturalEconomics at the Indian Institute of Management, Bangalore(IIMB). He is also presently the Dean (Academics) at IIMB.Before joining IIMB, he worked in various capacities at theWorld Bank in Washington D.C., FAO in Rome, InternationalFood Policy Research Institute (IFPRI), and the BrookingsInstitution at Washington D.C.e-mail: [email protected]

Anand Shah graduated from Harvard University with adegree in Evolutionary Biology and ventured into manyareas: first at an Internet start-up, then to helping start Mediaand Technology Charter High School in Boston, and finallyhelping form Indicorps where he is currently the ExecutiveDirector. He also serves as the CEO of the Piramal Foundation,an innovative private foundation that aims to encourageyouth to participate in social progress.e-mail: [email protected]

Arun Vora was until very recently the Managing Directorof Tata BP Solar India Ltd. and Vice President— MOW ofBP Solar. He has over 40 years of experience in industryout of which 16 years of experience was in solar industry.He has been the Founder Managing Director of BP Solar’sjoint venture in Bangalore, India ever since its inception in1991. He is a qualified mechanical engineer with post-graduate specialization in industrial engineering from UK.e-mail: [email protected]

Ravi Viswanathan is currently the Vice President, TataConsultancy Services Ltd. He heads the Chennai Operationsand is responsible for customer relationship and servicedelivery of all accounts serviced from Chennai. He has beena member of the TCS Corporate Think Tank since 1999 andis also known as a leader in the telecom space.e-mail: [email protected]

DVR Seshadri is a Visiting Faculty at the Indian Instituteof Management, Bangalore in the Marketing area. He has15 years of experience in the industry in various companiesincluding petroleum refining, pharmaceuticals, compact discmanufacturing, and software. His areas of interest areintrapreneurship, marketing, and strategy. He is activelyinvolved in research and teaching in the various programmesat the institute. He is also a visiting faculty at the IndianInstitute of Management, Ahmedabad.e-mail:[email protected]


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