Attention multinationals, last flight to India is about to take off
The window of opportunity in India is beginning to close, with limited scope for a new company to make a mark in sectors like telecom and conventional automobiles
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New Delhi: Recent moves in the global automobile industry show how important the India business has been for multinational companies like Suzuki Motor Co. and what an edge their sustained success in the country has given them outside India as well. Toyota Motor Co.’s recent interest in Suzuki culminating in the announcement of a business partnership is premised on the smaller company’s 47% market share in the world’s fastest growing market for automobiles. Similarly, Volkswagen AG, under pressure following the emissions scandal that has already cost it a CEO and considerable loss of reputation, has announced an initial agreement with Indian market laggard Tata Motors. In its sights is the potentially promising domestic market which it has been unable to crack on its own.
It isn’t as if India hasn’t been on the radar of Toyota and Volkswagen earlier. Both have had businesses here for over a decade now, with varying degrees of success. But with projections suggesting the Indian market is red-hot ready for growth, neither of these two global heavyweights find themselves positioned to push for leadership. Hence, the belated moves to look for another route.
Unfortunately, the window of opportunity in India is beginning to close. Already in sectors like telecom, conventional automobiles, information technology and white goods, the scope for a new company to make a mark in India is limited. The early players are now entrenched incumbents.
For every Suzuki, Nestlé SA, Unilever and Siemens that figured years ago that India could be the jewel in its global business, there’s been a string of multinationals that kept waiting for the right timing and didn’t show up until it was too late or if they did come in, they aborted their ventures in India way too early. French car-maker Peugeot, which recently acquired General Motors’ loss-making European brands Opel and Vauxhal, was an early entrant to India’s newly liberalized car sector. But in 1997, Peugeot, which was making 306 sedans in India, decided to stop producing cars and sold its Indian stake to partner Premier Automobiles. A fraction of the £1.9 billion it is spending on the latest acquisition may have won it bragging rights in India.
For inspiration it could have checked the record of The Coca Cola Company following its re-entry into the country. The $60 million the beverage company paid in 1993 to buy Parle Exports’s best selling brands like Thums Up and Limca may well have been its smartest investment in India, killing off its strongest local competitor and also adding a strong local brand to its portfolio. Today Thums Up lords over the Indian market for colas.
Late-comers to the Indian market have also included six-pack companies like Apple Inc. and Wal-Mart Stores Inc. For over 15 years, ever since it embarked on a strategy of going global in 1991, Wal-Mart chose to ignore India, intimidated perhaps by the politics surrounding organized retail in the country. Instead of working with the government to shape policy and its own strategy in the firm belief that one of the world’s youngest populations would also one day become the fastest growing consuming segment, it waited until 2007 to open its first store in the country. With growth prospects in the US quite limited, it has now spent the last 10 years trying to forge a meaningful partnership at a time when the market for organized retail in India is booming. Its six-year-old venture with Bharti Enterprises was dissolved in 2013 with the result that it has little to show for its 10-year sojourn in the country.
Reams have been written about how Apple ignored India for most of the last 14 years before getting serious over the last two years. Given Indians’ appetite for iPhones, 2.5 million of which have been sold here, that should count as a significant opportunity loss. By 1984-85, Apple already had as many as five distributors in India before it appointed Raba Contel in 1985 as its sole distributor. Despite the early start, Apple never really focused on India and will probably need to invest heavily to make a significant dent now.
The sheer size of the market in India, the potential upside in terms of growth as well as the opportunities to experiment that the diversity of consumer experiences present, lend heft to any multinational company’s global operations. But the time to get in is now. Otherwise it may well be too late.