Brief Story of India
India is the second most populous country in the world, with an estimate population approaching 1.200 million. Has a literacy rate of 65 percent with a great degree or regional variation. Almost 30 percent live in urban areas, with more than 35 cities reaching 1 million people. As a country, India covers an area bigger than Europe with 28 states and 7 union territories franked by the Himalayas Mountains in the north and the Indian Ocean in the south (Urbach Hacker, 2009). Their inhabitants speak a wide range of language and innumerable local dialects and patois, having 16 official languages including the Hindu and English, that is widely used for business and is understood almost everywhere in India (World Business, 2012).
India shows diversity and continuity, it merges a variety of cultures, religions, races and languages which makes it very difficult to generalize conclusions. Its identity and social structure remain protected by a rich cultural heritage that goes back at least 5,000 years, making them one of the oldest civilizations existing (Gorrill, 2007).
The Indian economy has shown a great and fast integration to the world is the last years; one of the main reasons is more than one decade of economic reforms that started in 1991(Kumar, 2007). This liberalization has continued, with Indian´s economy growing at about 9 percent annum GDP in 2011. In this moment they are the third largest economy by GDP Purchasing Power Parity (PPP), and is expected to reach the second place in GDP by PPP within the next 20 years (World Business, 2012). This growth has allowed reducing the poverty levels by about a third, increasing the middle class population. According to a report of the US Department of Commerce suggests that India has 20 million people with incomes per capita greater than 13,000 dollars and 80 million with incomers higher than 3,500 dollars (Kumar, 2007).
By the other hand, their economy is powered by a very strong domestic market that is hold in three major sectors: agriculture, industry and services, were we can highlight the information technology sector that has grown at an impressive rate of 30 percent annually since 2004, with India capturing the 75 percent of the IT services export market (Kumar, 2007).
The continuous liberalization in the Foreign Direct Investment (FDI) policies and simplification of procedures has generated an increasing interest in investing in India. The cumulative FDI equity inflow during the period 1991-2009 has reached the amount of $ 109 billion (Urbach Hacker, 2009) and according to the AT Kearney´s confidence index ranks India as the second most attractive FDI destination, after China (Kumar, 2007).
Business Cultural Insights
India has interesting cultural key concepts, values and norms that drive the behavior of their people. One of the fundamental components of the Indian culture, primary for any business organization succeed, is the understanding of the traditions and ways of communication with others that form the basis of the Indian´s society (Gorrill, 2007). The first important value to consider is the Hinduism and the caste system, in India the religion is a way of living and must be considered with respect in order to have good relationships. Although the caste system has been eliminated, it stills remains determinant in the Indian society, influencing the business and labor relationships by the high hierarchical Indian´s company structure. The second Indian´s value is the fatalism and is one of the most singular characteristic of the spiritual culture of India. The notion of karma and that everything happens for a reason is still significant in the decision making process and influences the notion of time, some business negotiations can take longer than expected (Gorrill, 2007). The third value is collectivism that is strongly immersed in the Indian society; an example is the lack of privacy and a smaller concept of personal space. The sense of community and group oriented leads us again to an extreme level of hierarchical where people have an allotted position which they do not attempt to overturn (World Business, 2012).
Another angle to consider is the behavior of employees, manager s and business people in the companies and business environments in India. The first thing to watch is Indian teams work. A team expects to be given exact and complete instructions by their team leader and then to follow those instructions literally, this means that the boss or team leader takes the complete responsibility for the becoming of the project and has to be in top of progress and looking out for problems (World Business Culture, 2012). This takes us to the other two important issues to consider in work relationships, the micro-management and the high hierarchical system. Indian workers expect to be managed very closely and are used to a system of hierarchy in the work-place, senior colleagues are obeyed and respected and have the final word (Stylus, n.d.).
In the organizational level, the adaptability to the local business has to deal with three key issues: The nature of the top management team, the corporate culture in the local organizations; and a good coordination between the parent company and the subsidiary. It is important to highlight that many Multinational Companies (MNCs), with the exception of US and UK companies, often relied on expatriates managers from their own units back home, this takes us to a key success of foreign companies that is to use local Indian managers or use expatriate managers but with the ability to “think Indian” (Kumar, 2007).
The ABB Case
We are going to review the company ABB and understand why it can be considered a successful enterprise in India. First of all, ABB is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 130,000 people (ABB Web Site, 2012). It is a Swiss-Swedish multinational corporation that is ranked 143th in the 2010 Forbes ranking and reported global revenues of $ 31.6 billion for 2010 (FHS, 2010).
They started operations in India by the year 1967 with their first facility, now they have a global corporate research center (created in 2002) with 14 manufacturing facilities and over 8,000 employees. Customers are served through more than 23 marketing offices, 8 service centers and more than 500 channel partners. Their mission is to leverage the Indian operations for projects, products, services, engineering and R&D (ABB Web Site, 2012).
As we saw in the business cultural analysis, Indian people have concepts, values and norms that are especially difficult to understand and assimilate for the western MNCs expatriates managers. By the other hand, MNCs do not have an easy way in India (Prasso, 2008), the causes are diverse, and we find the entry mode, entry timing, economic distance, firm size, country risk or cultural distance in between others (Jonhson & Tellis, 2008). According to a study conducted by The Boston Consulting Group (2003) the success of European companies in India can be explained by three strong pillars: commitment at the global level, localized product-market business model and empowered local management (BCG, 2003). This last pillar is considered a key factor for success and includes building a long-term relationship with local managers defining a value added role for him and establishing a local team credibility (BCG, 2003).
ABB is recognized as a company that invests in leadership training and development, since their beginnings the company used a unique decentralized management structure, each company subsidiaries were linked to their local customers and labor forces, working like a local company looking for the needs of customers, workforce and culture (FHS, 2011). That is why we cannot be surprised of the success of ABB in India (BCG, 2003), because they used the local team to run the company in the “Indian Way” by Indians.
Urbach Hacker Young International Ltd. (2009). Doing Business in India. Retrieved on April 19, 2012 from http://www.uhy.com/media/PDFs/doing_business_guides/Doing%20Business%20in%20India.pdf
World Business Culture (2012). Business culture in India. Retrieved on April 17, 2012 from http://www.worldbusinessculture.com/Business-in-India.html
Gorrill, J. (2007). Doing business in India. Retrieved on April 17, 2012 from http://www.communicaid.com/cross-cultural-training/culture-for-business-and-management/doing-business-in/Indian_business_culture.php
Kumar, R. (2007). Doing business in India: Caveat venditor. Retrieved on April 15, 2012 from http://www.iveybusinessjournal.com/topics/leadership/doing-business-in-india-caveat-venditor
Stylus Inc. (n.d.). Doing business in India: A cultural perspective. Retrieved on April 18, 2012 from http://www.stylusinc.com/business/india/business_india.html
Foundation of Human Skills-FHS (2011). Leadership Style at ABB. Retrieved on April 19, 2012 from http://www.managementparadise.com/forums/foundation-human-skills-f-h-s/221694-leadership-style-abb.html
ABB Web Site (2012) ABB India Introduction. Retrieved on April 19, 2012 from http://www.abb.co.in/cawp/inabb506/e045ebb7761757c6652571d5003158a4.aspx
Prasso, Sh. (2008). Lessons for the Indian market: legions of bog-name companies have failed in India. Here´s how to avoid joining them. Retrieved on April 15, 2012 from http://findarticles.com
The Boston Consulting Group – BCG (2003). Ten Tips from successful European Companies in India. Retrieved on April 19, 2012 from ftp://ftp.cordis.europa.eu/ pub/ist/docs/international/how-eu-companies -can-be-successful-in-india.pdf
Johnson, J., & Tellis, G. (2008). Drivers of success for market entry into China and India. Retrieved on April 20, 2012 from http://www-bcf.usc.edu/~tellis/ChinaIndia.pdf