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MNCs in India have a greater chance of success: Study
By agencies
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Wednesday, 23 March 2005, 20:30 IST
NEW DELHI:Multinational companies entering India with a longer-term stay without the backing of a local partner have a greater chance of success in India, a study by McKinsey has said.
The study said that stand-alone multinational companies who adopt local business and cultural conditions are much better than most foreign companies who have Indian partners.
The study quoted examples Korean behemoths LG Electronics and Hyundai Motors that understood and acted upon local needs and have made it big in the Indian markets. The study also said that of the 25 major joint ventures between MNCs and local partners between 1993-2003, only three have survived.
McKinsey surveyed some 50 companies with revenues of over $100 million and have major presence in the country. It found out that companies like British American Tobacco, Hyundai, Unilever had return on capital employed of around 48 percent, which is much higher than their respective industry averages. About nine companies, with an average revenue of $1.3 billion contributed about 6.5 percent to their parents revenue and 10.6 percent of their after tax revenues.
The report also said that successful companies did not alter existing strategy to the local market and needs but tailored product offers catering to the entire market, from the high-end to the lower-end segment to meet Indian demands. It adds that companies can become more profitable by reengineering their supply chain while at the same time launch superior products.