Failing in India

| By TMA World

Can American CEOs learn anything from General Motor’s experience in India?

General Motors (GM) left India in 1954 then returned during a liberalizing period in 1994.  On May 18, 2017 GM announced that it plans to stop selling cars in India by the end of the year.  It will continue to manufacture cars in India, but for export-only.

Can American CEOs learn anything from GM’s experience in India?  Yes, say Vijay Govindarajan and Gunjan Bagla in the Harvard Business Review. Specifically, they see five lessons:

1. A Business in India Needs Consistent Leadership Over Time

Understanding the complexity of India takes time and continuous focus.  It can take a motivated executive about three years to gain a reasonable understanding of India.  In comparison to General Electric – that had the same American expat in charge of the Indian operation for 14 years – GM had nine different individuals leading the Indian business over 21 years.

2. Local Indian Leaders Need a Great Deal of Autonomy

India’s market structure is radically different from the West’s and extreme customization is needed.  Complicated organizational structures in Western companies can mean international managers must have regular face-to-face meetings at headquarters.  This takes a leader’s time away from dealing with local challenges and opportunities.  As Govindarajan and Bagla say, “To succeed in India, an American company either needs to have robust electronic communication processes at the top management level or must be willing to set its leaders in India free of the bureaucracy at corporate headquarters.

3. Competition is India-Specific, and Your Strategy Needs to Be

American firms entering India face new competitors – local or foreign.  The competitor name might be familiar, but what’s in a name?Suzuki is known in America for its motorcycles, but has 47% market share in India’s car market.  Strategies and products designed for other markets are not sustainable.  Take great care over the partners you choose; a responder to the HBR article said, “In India, consumer[s] have an implicit belief that if x is good then brother of x will also be good or worth [a] try.”

4. Strategy Also Needs to Be Based on Volume and Scale

In India, success for GM means it must focus attention on the middle of the economic pyramid, not just the top.  Building scale and volume would have allowed the company to make better leverage of assets like dealerships.

5. Persistence

Successfully doing business in India requires taking a long-term view like PepsiCo and Boeing.  India will be among the top three car markets along with the United States and China.  Along with a high level of consumption, India is also likely to be a low-cost laboratory for experimentation in areas like electrification, shared ownership, and driverless technology.

It is likely that in this crowded market, the cost of re-entry in the future will be much higher.

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