Wednesday, 2 November 2016

Global Indian Enterprises - Missing in Action!

We Indians love to boast about how the stewards at the helm of some of the major global companies are of Indian origin. We fill the town-hall meets and the convention centres in Bangalore and Delhi and Mumbai to hear the sage advice of these sons of the soil who have made it big at the global centre-stage. Everyone dreams of being a Satya Nadella and a Sundar Pichai.

We are indeed proud of them and should be, and I am in no way trying to steal their thunder - but why aren't there that many Indian multinational companies that are household names across the world? Why don't we have Google and Microsoft and Alibaba growing out of our backyards to rule the roost at the global stage? Nor do we have Indian answers to Mc Donalds, Chipotle and the likes, despite the fact that these enterprises are not technology driven. This question becomes all the more relevant when we have a central government that is trying to boost manufacturing through its 'Make in India' initiative. 
Michael Porter, the well-known and highly influential academician and business strategist has said that Indian companies are still far behind from being one of the globally respected brands. He had further gone on to say that, "These companies don't have strategies, they do deals. Indeed, this mentality often leads to a short-term sales focus where results are expected next month." According to Porter, the magic spell that would propel the Indian companies to the top is an "open economy" - which has minimal trade barriers and allows foreign competition to come in, and in the process makes the Indian conglomerates more agile, efficient and competitive; this sort of benchmarking against international standards would hold such companies in good stead across the world. 

But if indeed such was the case then 'the Great Firewall of China' should have crippled its IT industry - instead what we see is China is one of the most advanced Internet societies of the world. It not only has the largest number of internet users in the world, but also one of the most mature digital economies. Today Alipay - an online payments portal has more than 450 million users and has brought more than $89 billion dollars under management in a span of just 10 months; Facebook blindly apes WeChat for its social-content driven commerce where it seamlessly integrates Chatting with ecommerce, and a built-in payments portal; Alibaba has claimed the spot for the Largest Global IPO at $25 billion dollars. So how do they do it? In simple terms, the economic model of China is as follows: the government of China creates highly attractive markets for the local entrepreneurs with huge tax benefits, soft loans and benign regulations - allowing the entrepreneurs to compete against each other, and selecting a champion amongst them. These champions would then be allowed to carve out a monopolistic market in the country catering to such a huge population, and once they have achieved enough size - they would then compete on the global centre-stage, with companies like Xiaomi & Alibaba being the case-in-point. 
India on the other hand, is vitally different from China. Our regulatory laws prevent the creation of monopolies, hence the government cannot be seen favouring any particular company or other. The government doesn't control the way the people live or what they surf on the Internet. Where the government does intervene - it is through public enterprises which are grossly inefficient, even in those we are increasingly divesting off stakes. So private companies like Ola & Flipkart are largely left to fend for themselves. In effect we are following Porter's advise of allowing more foreign competition to build efficiencies in the domestic economy.

But will this lead to the creation of global powerhouses? Only time will tell. 

What are your views on this subject?

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