Monday, January 22, 2007

WHY SOME MNCs ARE MORE SUCCESSFUL THAN OTHERS IN INDIA?

International Christian University
Masanori Kondo


Despite India’s rapid economic growth, the amount of investment from Japanese companies remain limited. Many international companies, especially Korean firms, have done so well in the Indian market. What makes them different from unsuccessful Japanese firms?

To find out the answers to these questions, the Japanese Ministry of Economy, Trade, and Industry’s research committee on India-Japan business conducted a study. Provided below is a summary of the article. Readers interested in the comprehensive version can contact info@nihongobashi.com with their specific request.

Massive Initial Investment

Successful examples include Suzuki, Mitsubishi Chemicals, LG & Samsung. Failures include Daewoo Motors & Enron (later bankrupted). However successful forays largely outnumber failed ventures. Common recipe for success amongst all these ventures is the high initial investment.

Introduction of Products Based on Comprehensive Market Surveys

Companies that directly venture into the Indian market have seen more success as the management of the JV partners is not easy.Toyota, LG & Samsung – all tasted success by localizing their approach whilst Daewoo courted failure while attempting a cookie cutter solution! Another study indicated that Japanese electronics companies failed to create a good balance among quality and price to gain market share when compared to similar Korean companies.

Large Scale Advertisement Campaigns

Advertising investment on a large scale is a must and such costs must be treated as “corporate expenses” and must not passed on as a cost to consumers. To enable successful execution of these strategies, expatriate employees must be treated with greatest care and their “home living” conditions must be replicated.

The Existence of “Kirikomi Tai”

Grooming expatriate “Indian experts” is a key strategy. These companies usually have a small number of Japanese staff whom we can call “Kirikomi Tai,” which means “the person who has cut into the market.” Home stay and volunteerism amongst employees is another strategy to cultivate such expertise.

Delegating to the Local Staff and Quick Decision Making

In the case of LG, there were 20 expatriate employees out of a total staff of 4000. For one of Japan’s leading electronics manufacturers, out of 1000 employees 10 were sent from the home office. The local staff is able to help take speedier decisions that help companies succeed in the tough labour market. Using Indian staff for other markets is another successful strategy employed by many MNC’s operating in India.

Expansion of investment into new desirable areas

A recent March study by JETRO revealed that Japanese companies’ Indian operations are in fact on average more profitable than in other Asian countries. If Japanese firms are willing to make a serious commitment to India, the author believes there is plenty of possibility for them to make up for lost time.

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