Indian companies going global: An exploratory study

Abstract

Instead of being at the mercy of external forces of globalization (or at the mercy of national policies and regulations seeking to contain those forces of globalization), firms from developing countries are becoming the new protagonists of globalization, competing on par with MNCs from developed countries and sometimes even eclipsing them. Developing country firms have succeeded in becoming global lead firms in sectors such as building materials, financial services, steel production, hotels and hospitality, contract manufacturing, and so on. Firms such as Gazprom, Cemex, Samsung, Hyundai, Infosys, CNPC, Lenovo, Mittal, Tata, Flextronics, and so forth are rapidly becoming household names in global industries. Hence is it crucial to understand and analyze the rise of developing country MNCs, its manifestations, its causes, and its implications. India has not been far behind and is is an appropriate place to start.The India story has seen a profound shift in gear and direction during this decade. While in recent years most media references to India’sgrowth have focused on the sub-continent as a destination for outsourcing and investment, this year has seen the arrival of India as a shaping force on global markets. This is particularly evident in the powerful new trend towards overseas acquisitions by Indian companies.Indian firms have chosen to go beyond borders for a variety of reasons, some of them being the intent to capture new markets, expand capabilities and assets, expand product and service portfolio or to combat the domestic pressures of competition.A firm seeking to perform a business function outside its domestic market must choose the best "mode of entry" for the foreign market. The would-be entrant faces a large array of choices, including: a wholly-owned subsidiary, a joint venture (in which the entrant could be majority, equal. or minority partner), or a non-equity arrangement such as licensing or a contractual joint venture. Entry modes differ greatly in their mix of advantagesand drawbacks. Indian Companies have adopted various modes of going global. Based on the analysis of 16 Indian multinationals, it has been concluded that the mode of entry adopted was based on the strategic intent of the company for going global and based on the industry norms, company background and size of company and other factors. Also, companies have followed more than one mode for going global. A combination of economic, political and institutional factors has created a more conducive environment for overseas acquisitions. Some of the factors which have encouraged the globalization of Indian companies are creation of a favourable political and economic environment, improving financing conditions, surging business confidence.While carefully-constructed acquisitions are already creating real value for Indian companies, there are many challenges ahead. There is scope for far greater global growth as more Indian managers are exposed to global operations and gain confidence to make the move themselves. It also essential the top management team to give clear strategic direction to any acquisition and integration process.