Trial and error - six multinational companies that tried to crack India
India represents an attractive destination for multinational investment: a population of over 1.3 billion people; English is the main language; and a steadily growing economy and middle class to boot. Faced with the prospect of poor logistics connections, patch internet usage, and competition from Amazon and Flipkart, Chinese ecommerce giant Alibaba has hit an impasse in its expansion plans on the sub-continent.
In light of this, Business Review Australia & Asia takes a look at the successes (and failures) of multinational companies in India – hopefully businesses looking for entry into this potentially very lucrative market will find some valuable lessons.
The Swedish home furnishings and meatball enthusiast is set to open its pioneering store in Hyderabad in 2017; the company is confident of overcoming obstacles other companies have encountered having conducted a survey of 500 homes in the area before committing.
Juvencio Maeztu, Ikea’s India chief executive conducted a said: "We have to lead business with reality. We cannot lead business with only PowerPoints and Excel sheets and documents. We are extremely obsessed in life at home."
Initially McDonalds fell afoul of locals for severely misunderstanding the local market - the cow is sacred in India, and with beef a staple of its menu, it’s not hard to understand where the friction started! This initial mistake led to a number of protests at its stores in 2011 (cow dung was even smeared on one!). The company has redressed this issue and now runs a mainly vegetarian menu, unrecognisable from its Western one.
Another case of not putting in enough initial market research – the company has learned that tea is a very big deal in India and its menu now reflects this. But only after failing in 2007 and waiting another 5 years to have another try at making it work.
The controversial US biotechnology company has had operations in India for the past 40 years and retains around 800 staff in the country but has recently come into conflict with farmers over prices. Monsanto’s local Indian JV company Mahyco Monsanto (India) Biotech (MMB) has announced that local Indian seed companies owe it $65 million in unpaid royalties. The price of cotton seed has grown into a major issue, bringing the government, seed companies and the multinational into conflict.
It’s not all bad news for Monsanto though – it was ranked as the 49th Best Place to Work in India in 2015 and the 3rd Best Place to Work for in the "Biotech & Pharma" Industry in the “Great Place to work” survey.
Walmart’s attempted entry into the Indian market fell afoul of political posturing. According to NBC News, the trade minister at the time Anand Sharma promised to allow foreign supermarkets to set up shop in the country – a commitment that never materialised.
Vodafone is the second largest mobile network operator in India and has market share of around 18 percent. Its success in the country has been propelled by a number of acquisitions, as well as pioneering ‘Angel Stores’ – staffed entirely by women. Its efforts have ensured that its brand is well recognised – it is the 16th most trusted in India.
Read the August issue of Business Review Australia & Asia.
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SOURCES: [NBC News]