MNC DILEMMA: LOCAL vs GLOBAL

Multinational companies (MNCs) are interested in building a substantial business in a growing India.

- R GOPALAKRISHNAN

Multinational companies (MNCs) are interested in building a substantial business in a growing India. This was not so some decades ago, because those who had been present in India found it to be a minuscule contributor, and those who had none found the entry too onerous.

Illustratively, in 1967, Hindustan Lever contributed little to the global profits and market capitalization of parent Unilever. Nowadays, the Indian company now renamed Hindustan Unilever accounts for about 25-30 percent of the group's global profits, and more importantly, 40-50 percent of its global market capitalization. India is a key market for many MNCs like PepsiCo, Coca-Cola, Castrol, Suzuki Motor, and Nestlé.

MNCs face four dilemmas. First, should the business be geography-supreme (local leadership driven) or product-supreme (global leaders driven)? Second, if the subsidiary has Indian shareholding, how should governance be adapted? Third, how can the parent develop a dependable Indian management cadre that delivers its strategies? Fourth, and very importantly, since the parent company is usually a listed entity with performance pressures from an impatient main board, how can a balance be achieved?

During the 1970s, there was much debate about how international operations should be organized. Will an MNC succeed by rapidly transferring a well-established product across geographies (product-supreme), or is success achieved by an adapted product with a focus on local needs (geography-supreme)? Does India merit a structure different from other countries? The answers vary by domain and company.