The companies so identified should be in leadership positions in their product categories in the Indian market. Product successes on a global scale have been achieved in developed countries more rapidly and with comparative ease in cases where the home markets in such products were of significant size. Though India does have a large consumer market, disparate State level taxation on almost all products serves to fragment the market to the detriment of large companies having national distribution of their product. It is indeed ironic that India has signed GATT but is still very far from having a common market in its own country! An Indian common market is a ‘must’ for Indian companies to effectively capture synergies in the home market before attempting to position themselves on a global scale. This would not only help the global competitiveness of these companies but would also lower the cost to the Indian consumers – an objective inherent in the liberalization policy. The sooner therefore the States come together, and the tax regime rationalized and harmonized in line with the recommendations of the Chelliah Committee, the greater the chances of India creating its own MNCs.
Build Market Presence Overseas/Acquire Brands and companies:
The one major impediment facing aspiring Indian MNCs would be their ability to penetrate the barriers created by international bands built through massive investment of long years. The only answer lies in a bold and aggressive approach being adopted by potential Indian MNCs in acquiring companies/brands abroad. Such companies would not be large, but would own brands which have reasonable value or be of a size that gives them adequate presence in their markets. None of our Indian companies have the financial resources to adopt his bold approach. Acquisition of brands or companies would only be possible with Government support, by the establishment of either a Brand Acquisition Fund or a Venture Capital Fund. The degree of success in such acquisitions would depend on the extent to which India’s low cost advantage cam be brought into play to expand the acquired brand equity.
The acquisition route is more advocated in preference to the green field route of launching our own Indian brands till a critical size is achieved, since the latter is a much more risky, expensive and long gestating strategy in a situation where we have little time.
Indian companies today are in no position to adopt and achieve global relevance by the year 2000 on their own, without accessing cost effective funds to finance company and brand acquisitions, purchase of technology and investment in product development and R & D. As a consequence, they need to be nurtured till they reach critical size. Japanese and Korean companies could never have reached international eminence without an environment of stability provided by their Governments through their financial institutions and banks.
Nurturing India’s Multinationals:
A scan of the top 50 Fortune Global 500 companies reveals that, baring stray exceptions, most companies have emerged with a shareholding pattern that is widespread and not dominated by an individual. MNCs have emerged with such a shareholding pattern after several decades and today have no worry about loss of control in mobilizing substantial funds needed to achieve growth objectives. Indian companies are not yet in such an enviable position and loss of control s today a crucial issue in the most leading Indian companies having growth aspiration. It is necessary, therefore to bring well positioned Indian companies having ambitions to reach global relevance, on a similar or equivalent platform and enable markets in the same manner as most of the Fortune 500 companies do, without possible loss of control.
The evolution of the German and Japanese global companies was in major part a result of their banks and financial institutions holding substantial equity stakes in such companies on a permanent basis. Such support by banks and institutions in Japanese and German companies exists even today.