Before arriving, I had a warped vision of Bangalore, expecting it to be a dirty, poverty stricken, smelly, hot and an unsafe place, being only exposed to photos and TV images of India as to what I would be experiencing. To my surprise – whilst some small parts met these expectations, I found a vibrant, colourful and booming city of contrasts and complexity which I simply loved. As a cricket-loving Aussie, there was plenty of cricket banter also to talk about with the latest “ball tampering” scandal which added to the fun.
I was in Bangalore, the IT capital of India for one week studying as part of my MBA course a module called “Global Rules of the Game”, which looked at conducting businesses in emerging markets. The aim of the course was to show how context, in particular the non-market environment, shapes the rules and strategy of firms looking to participate in these regions. India has many institutional voids – with the institutions being the rules of the game, with the formal rules being prescribed and enforced, whilst the informal rules are the social and cultural norms of the society (Douglass North, 1990).
The Key Themes of India’s non-market environment:
The businesses that we visited during the week ranged from large Indian conglomerates – Tata, Mahindra and Wipr; to the multinationals – Google, Samsung, IBM and Unilever; to emerging Indian companies – InMobi, Shippr, Flipkart and Zeotap; and also social entrepreneurial businesses – Pollinate, GTT Connect and Ashoka. The large conglomerates and multinationals have been the traditional dominant market players, with the conglomerates having strong linkages to the government as these companies usually obtain government contracts having close ties to “individuals” in government.
The multinationals have a strategic purpose in entering India, with most seeking to access the wealth of human capital and cost arbitrage. Entry strategy around emerging markets is shaped generally through adaptation, arbitrage or aggregation with a central challenge being to identify the optimal balance between these three strategies. The key driver of these strategies is the result of many firms reorganising and relocating segments of the value chain to create efficiencies. An amazing site that we visited was Unilever’s global distribution and operational control center in Bangalore. From this centralised control center Unilever are able to track and manage the distribution of every one of its consumer good packages around the world at every point in the distribution chain and send instructions when issues occur.
The emerging Indian companies are the new force of power in India, venturing into new geographies and helping to frame the way Indian business will be conducted in the future, using pricing power along with engineer capability as a competitive advantage. One of the most impressive companies that we visited was advertising business InMobi which is the third largest digital advertiser in the world behind Google and Facebook. Naveen Tewari their Founder and CEO was very generous with his time having a frank discussion with our group about the challenges and opportunities the business faces as a global operation with its base in India.
Social Entrepreneurial firms are very active in India as they attempt to fill the institutional voids that otherwise exist in support of welfare. Ashoka for example is an impressive change maker that helps to solve society’s problem through social entrepreneurship. One of their young fellows, who presented to us, was an 18 year old boy from Bangalore whose teacher had died because of lack of blood donations. So, at the age of 15 the boy decided to launch a program to make blood donations more people friendly, thus making blood collection a team event with a band playing in the corner whilst blood is collected and leveraging off this as a fun group activity. Through his efforts he has already saved 50,000 lives after engaging communities, which is an incredible initiative and achievement for someone so young.
The most controversial business for our class was a company called Pollinate, which was a For Profit Indian company propped up by a non-for profit Australian company. The company sold on microfinance terms solar powered lights to the Indian slums, replacing kerosene lanterns that destroy the lungs of the dwellers. Many in our MBA cohort were not ethically comfortable with the model of profiting off the less fortunate, however I believe it is a way of bringing those with nothing into the formal economy whilst improving their health. Witnessing the Bangalore slums in contrast to the wealthy homes of the neighbouring populace was a confronting experience; however it was uplifting to see the enthusiasm and joy of the youth that lived there.
To bring many of those less fortunate out of the slums and into schools or other places of education will be the key to India’s future growth and success as a nation. Alarming statistics range from 74% literacy rates, to 5% of all children aborted if they are found to be female, to 25% of teachers not turning up each day to work. Resolving these issues and making education a key focus will an important development for India if it is hopes to turn itself into the powerhouse economy that everyone believes it may become in the 21st century.
Whatever its future, India is an incredible country and I personally was blown away by the beauty, colour and charm of its people. However the challenges that the country faces are immense. It is my view that if a business is able to manage the complexities that exist in the country then, partly due to the scale, the opportunities will be enormous. Over the next 10 years India’s population will surpass that of China which will make it a very attractive market to enter. Yet entry to this emerging country from a business perspective will depend upon an express and focused understanding of the non-market environment which will be the difference between success and failure.Back to top of article