Thursday, May 01, 2008

Why MNCs have taken a beating

HBR (March 2008) has an article, "How local companies keep mulitnationals at bay", which explains why MNCs have taken a beating in several emerging markets, including India. I wrote a critique of this paper in my ET column, Keeping MNCs at bay on home turf.

The authors mention six strategies that homegrown companies have used in fending off the MNC challenge:
  • Create customised products or services
  • Develop business models to overcome obstacles (eg. products that are impossible to pirate in a market such as China's where privacy is common)
  • Use the latest technologies: Amul has state of the art technology that enables it to collect 6.5 million litres of milk each day andyet weigh the milk, measure the fat content and pay the farmer in all of five minutes
  • Invest in inhouse training: this happens not just in software companies but also others such as Apollo Hospitals
  • Scale up quickly
  • Invest in talent: local companies have shown impressive managerial and entreprenuerial abilities
I would have liked to know whether the successes are confined to private sector firms or whether state-run companies have also taken on MNCs successfully. China has a car manufacturer, Chery Automobile, that is a leading exporter- it is state-owned. In India, LIC has shown an amazing ability to match international firms in customer service and has clawed back some of the market share it lost initially.

1 comment:

Sapan said...

I tend to agree that MNC are finding arduous to vie competition from local players. Apart from those mentioned, other strategies adopted by local players would include -
- leveraging on internationalization,
- steep experience curve (these local companies tend to learn from MNC more quickly than MNC could adapt themselves to local environment)
- Clustering (a phenomenon not seen few decade before, has started building up)