By Samir Kumar on 05 August, 2016

5 Lessons for Multinational Companies Entering India

By Samir Kumar
Associate, South Asia

India is one of the most promising yet one of the most vexing emerging markets for a multinational company today. For over a decade, multinationals have been talking up the India story and entering, with varying degrees of success. India has since transformed into a unique place for investors with high potential for returns. Multinationals should observe the following five lessons when considering or revising their India strategy.

Lesson 1: Hire the right country leadership

While it may seem obvious, the country manager in India must be one of the, if not the, most talented young leaders in the company. They must be willing to give 110% to the company’s success, and be in win-now mode, even if the company cannot be expected to see the fruits of their labor in the short term. A multinational’s success has to do with how it is perceived by the markets and the regulators. The country manager must be willing to spend time building not only formal partnerships with Indian companies, but informal alliances to internalize lessons about the composition of their target consumers and competitors. It’s also important they have the skills to head off predictable friction with interest groups that are opposed to the practicalities of foreign investors doing well in India.

Lesson 2: The CEO must commit, body and soul, to India

It is essential to make a big splash and get the country on your side. The CEO must put their weight into shaping the narrative in the media, and in the high-powered business circles, around the ways that the company will be beneficial for Indian producers and consumers. Read any business publication in India and you’ll invariably find a country manager or assistant manager promoting their company’s brand in some way or another. But consider the impact of Amazon’s Jeff Bezos riding through New Delhi in a brightly-colored truck in a locally-inspired outfit, giving interviews to every publication he could make time for, and dropping a check for $2 billion to his country manager. Facing intense competition from local rivals Flipkart and Snapdeal, each with their own superstar Indian CEOs, Bezos ensured that Amazon would be in prime position to be the market leader

Lesson 3: Make sense of the regulatory regime

One frequently hears horror stories of retrospective taxation on mergers or new investments, or bureaucratic stonewalling of an investment proposal on the grounds that it doesn’t meet arcane structural requirements. It is easy to interpret this as a hostile “steel frame” out to prey upon unsuspecting foreign companies. But India’s regulations reflect a fine patchwork of conflicting interests, who play out their battle in India’s vibrant democratic system. To fall prey to such regulations is easily avoidable if you make the time to learn the potential impact of your moves. It is critical you invest in a partner firm with top legal expertise to parse out the interests behind the regulations relevant to your company. The winds may shift suddenly, but there is always a fine logic behind it.

Lesson 4: Expect choppy waters before smooth sailing

In a country as vibrant as India, one would expect a smooth transition to be elusive, yet many multinationals approach India with the expectation that their cookie-cutter strategy will work. It is near-impossible to understand your target market and the procurement and regulatory challenges in totality, unless you are perfectly networked. You should enter India with the expectation that your initial capital investments will not see a good rate of return. In fact, they may be subject to controls based on rules you do not entirely understand. But learning comes swiftly as you build more in country relationships, and over time, the people and organizations willing to help you will compound. Expect massive learning in the short term and respectable returns in the medium to long term.

Lesson 5: Brand aggressively

No matter what sort of company you are, business-to-business, or business-to-consumer, you are facing an information environment that is very difficult to control. Advertising channels are crowded, and broadcast familiar themes. If you want to compete in India, you have to act like you are the market leader right now, and promote accordingly. Have your country manager out and about as much as possible, understand the shifting cultural dynamics and market segments, and notice what everyone else is not doing. Something as simple as coloring a billboard ad green when the rest of the ads in the city are blue can win you attention for precious moments. But branding goes beyond mere advertising. Indian consumers are highly attuned to the social meaning of any company of meaningful size, you must be conscious of the implicit story that your business is telling in India. Concrete actions contribute to your brand story: a research and development center in an underutilized industrial complex, a partnership with a university to create jobs, a social responsibility project. If you can get consumers and regulators to trust you, and trust that you will benefit Indian society in even a small way, you will earn the respect to build your company in the most profitable way.

[Image courtesy of Times of India]

Topics: Amazon, Business, Jeff Bezos, Multinational, Pre Planning, Strategic Planning

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