INDIANIZATION of MNCs

-- The blog is a short essay about strategic problems and issues faced by typical MNCs, during their teething years, when they set up their first subsidiary or a franchisee in India.

I have worked mostly with MNCs and have observed a few patterns, not only in the firms that I have worked with but also in other similar firms. Many of the observations were experienced first hand.

The MNCs especially the ones which set up subsidiaries or franchisees in India start out with being a 'Small Company', while they test the Indian waters. During this phase, the workforce is mostly ex-patriate, who bring with them the international workplace culture of the MNCs. To name a few such traits:

a) Respect for time.
b) Respect for individuals.
c) Focus on customer relationship.
d) Small and manageable goals.
e) Adoption of One-look, one feel of firm's global standards.
f) Tight coupling of Indian policies with international corporate body.

Many points listed above are common to the "Small Company" concept, except maybe for the last two, since they are relevant mostly for the MNC firms. The priority for most MNCs is to first establish their international brand in India and at this point while they seek to understand the Indian market, they are not very interested in garnering the maximum market share. Thus the focus on the above traits.

The firms realize soon that the Indian markets are unlike most markets in developed nations but most MNC Corporate Centers fail to recognize this aspect in time and tend to treat Indian markets just like any other foreign shore market. For instance, Indians are by far the most 'Price' conscious lot, who want the best 'Quality' but at Indian price points. The day the management in the Indian office of the MNC realizes this difference, there are two occurances:

a) Most ex-patriates are unable to grasp or adopt a localization strategy (especially in case they hail from developed nations)
b) Firms start hiring Indian managers to understand and tackle the localization issues.

It is at this time that certain changes start happening in the organization. Some of these include:

a) Strategies to capture higher market share start taking dominance.
b) Cost cutting and austerity measures start creeping into the firms.
c) Indianization of products/services start taking place - One look, one feel starts Indianizing.
d) Greater autonomy is demanded from the international corporate body to ensure higher flexibility in local decision making.

But the downside of such a localization strategy is that some of these tenents do conflict with the global value system of the MNC. At a more micro level, the strategic changes occuring include:

a) The organization grows in size and the culture becomes less entrepreneurial or "Small Company" or conflicts with the Global values system of MNC.

b) To garner greater market share, new and non-niche sub-segments are explored, thus leading to dilution of global value proposition of the firm (which was in any case an expected fall out of localization).

c) The value system of the organization which should typically accompany such a shift in strategy is usually not done in time due to obvious pressure and lack of support for such a change from the global corporate office.

The fallout of the above three usually leads to a downwards spiral of the firm's Indian presence and performance. The immediate loss is in the brand equity of the Indian arm of the firm, wherein the firm sells to its clients the global value proposition but on the ground executes using the value system as adopted by the Indianized firm. The customer gets a conflicting message through this sales-execution gap and which in turn leads to an erosion in brand equity of the Indian arm of the firm.

I have seen this happening in two firms where I have worked. But having said so, the firms have hope, since I have seen the resurgence too happening. The hope is in form of:

a) Appreciation at corporate level about the uniqueness of Indian markets.

b) Restructuring of value system for the Indian office keeping in mind the Indian realities.

c) Communicating the new value system to its people and ensuring its adherence by one and all.

d) Posting excutives from other developing countries at senior management positions, who have led in such developing markets like India, for the parent MNC.

Changes as discussed above have helped several MNCs to redefine their existence in India and have helped them make India one of the key markets to invest in, making it a win-win strategy for the Global MNC and Indian market place.

In conclusion, Indianization of policies and strategies of MNCs is inevitable, given the nature of Indian markets, which are very different from the markets outside India, especially the markets in the developed nations. But the secret of success for MNCs is to bring about a paradigm shift in the strategic and operational policies at all levels be in the global corporate office of the MNC or among the managerial staff within the Indian office. In fact the purpose of liberalization in India was to ensure that the best practises from outside India are brought to India but unfortunately, many of these best practises are not relevant in India unless they are Indianized.

P.S.: The views are my own and might not be comprehensive. Your critiques, experiences and feedbacks are most welcome.