Surviving in emerging markets: An analysis of foreign firm strategies in India

Abstract

As the developed markets are getting saturated it is becoming increasingly difficult for companies to maintain their competitive advantage. They are therefore looking to expand to emerging markets like India, China and Mexico. However, these emerging markets have their fair share of risks, uncertainties in context of political and economic scenarios. Companies entering into emerging markets have number of challenges to deal with. They have to fight local competition, understand the aspirations of local markets and how to provide them with quality but low cost products. Firms have to decide whether to go for standardization or adopt a decentralized approach. With vast variations across country like India, a decentralized approach will result in managing too much complexity and conflicts. A standardized offering on the other hand will not be sustainable. Local players who have a good understanding of domestic market are able to garner a large share of the market. Nirma is a clear example of how local competition can give a hard time to international players like Unilever. Therefore there is no clear cut methodology of which approach to follow. This point has been mentioned by Ghoshal and Bartlett in designing their strategic framework for international firms. The argument they make is to adopt a transnational structure where the entire world market is considered as one unified market. The task at hand for firms is to how to leverage this ecosystem in bringing capabilities to a particular market. In this report, we’ve identified the attributes which characterizes a transnational firm and how organizations have scored with respect to these attributes. Financial metrics from Capitaline were used for preparing the scorecard to assess the capabilities of firms as a transnational organization. A clear conclusion which followed from this analysis is, in order to make a mark in an emerging market; a firm needs to blend its knowledge, technology and processes across the world to a seamless integrated solution. Firms like Unilever, Bosch and GE have been successful in bringing their expertise along with a commitment to serve the emerging markets. Firms need to be willing to dedicate their resources to make long lasting impact and to create an atmosphere of co-creation. When we compared the performance of Bosch and Unilever then we found that these firms have been able to achieve efficiency in their operations, manage risks and creating new innovative products. This has been possible by incorporating the attributes of transnational organization. Thus the analysis follows the logical conclusion – transnational as the emerging organization model.