Entry Strategy of Indian Firms

India’s economic integration with the rest of the world was very limited because of the restrictive economic policies followed until 1991. Indian firms confined themselves, by and large, to the home market. Foreign investment by Indian firms was very insignificant.

With the new economic policy ushered in 1991, there has, however, been a change. Globalization has in fact become a buzz-word with Indian firms now and many are expanding their overseas business by different strategies. Indian industry can move towards globalization by different strategies such as developing exports foreign investments including joint ventures and acquisitions, strategic alliance, licensing and franchising etc.


Exporting is, by far, the most important entry route employed by Indian firms. Because of the inward looking economic policy pursued until 1991, the progress made on the export front was not in general something commendable. With the economic liberalization, an environment for globalization of Indian exports, however, is slowly emerging. In a truly globalize environment, the exports will also be very much global: the sourcing of finance, materials and managerial inputs will be global, based on purely business considerations.

Several Indian companies have entered foreign markets targeting their exports at the ethnic population. West Asia, with a large expatriate Indian population, naturally is the first target in many of these cases.

The Mumbai based American Dry Fruits (ADF) which began selling a range of packaged foods like chutneys, spices, canned vegetables, ready-to-eat pulses etc under different brand names later moved to other countries with large Indian population.

As foreign firms, generally, have neither the expertise nor interest in the ethnic products, Indian firms do not have to face competition from them, making market entry and growth fairly easy.

A firm which makes the ethnic segment of the market its entry point may, in due course, after gaining experience in doing business and establishing a foothold in the foreign market, take up marketing of non-ethnic products and to non-ethnic consumers.

Food products are not only category being targeted at ethnic population. Raymonds and Birla-VXL, for example have a number of showrooms in West Asia top sell their range of textiles items. Shaw Wallace launched a beer brand called Lal Toofan in UK through Shaw Wallace Overseas; the target consumers of this brand sold at the up market Indian restaurants are Indians.

India has potential for significantly increasing the exports of many products if appropriate measures are taken. As a matter of fact, in case of number of products several other developing countries which started their exports later than India have gone much ahead of India while India’s progress has been slow. With the right policy and procedural reforms and institutional support, with technological up-gradation and modernization and enlargement of production facilities, with thrust on quality and value added products, with improvements in infrastructural facilities and with right marketing strategy great strides could be made in the export of a number of products. Broadly there are three strategies to increase the export earnings, viz.,

(i) Increase the average unit value realization.
(ii) Increase the quantity of exports.
(iii) Export new products.

One of the most important considerations in exports should be to achieve maximum unit value realization. Value added exports are a much needed graduation for India to enhance the foreign exchange earnings. A very disquieting fact is that India’s agricultural exports still are mostly commodity exports, i.e. they are exported mostly in bulk form and the progress achieved in value added exports is not anything significant.

Value added exports assume greater significance particularly in view of the stagnation or fall in the exportable surplus of several commodities like pepper, cardamom, Tea, coffee etc.

The major part of India’s manufactured exports end up in the low-price segments of the foreign markets. Quality up-gradation and marketing efforts are needed to reach the upper segments and to achieve enhanced value realization. Technology imports or foreign collaborations are required for this in many cases.

In many cases, what come in the way of increasing exports are the supply constraints. This is true of a number of manufactured products as well as agricultural commodities. Given the constraints for area expansion, increase in agricultural production should come mostly from increase in productivity which is very low in India. In respect of many industrial products, the production capacity is very low and highly fragmented so that there are a large number of cases of Indian firms not being able to accept from abroad for purchase of large quantities of the products which are far beyond the capacity of these firms to supply.