Indian market lures the global corporations with promises of rapid expansion and excessive number of new clients. With 1.2 billion people living in India, highly-educated people primarily speak English; the country’s elections tend to be democratic by nature, and the economy is on the steady rise. Sounds like heaven for the foreign enterprises equipped with serious funds. However, judging by the many international companies’ experience, unresolved are some challenges that pose undermining threats to potential success in this demanding market. Over 95% of firms in India experienced frauds, according to PwC survey. Coca-Cola, Nokia, Vodafone, and Parimatch are such businesses that had to learn the hard way.
Despite the tangible interest from the international investors, direct influx of money into the country remains more or less stable, with no signs of growth. According to the state registers, even though around 11000 international businesses entered the Indian market between 2014 and 2021, 2783 of them left or went belly up, which proves there are some impediments to success. Motorola, McDonald’s, Coca-Cola, Nokia, Vodafone, and Walmart faced obstacles, with some even leaving the subcontinent behind.
In the past several years, India lost companies like Abu Dhabi Commercial Bank, the American carmaker Ford, the Swiss cement giant Holcim, and the German retailer Metro, says The Economist. Disney is negotiating the sale the entirety or at least some share of its streaming service. On November 24, Warren Buffet-owned American investment company Berkshire Hathaway worth $780 billion sold its 2.5% stake in Paytm, Indian digital payments service provider.
Parimatch, the established business, found itself pressured beyond reason. The company’s willing to invest many millions, pay taxes, and lower the cost of gambling services in India, which stimulates additional competition. This is a win-win for the country and its population. But the local authorities endorse the domestic gambling service providers, thus making them oppressively dominant in the market, which in turn leads to monopoly and rising prices. Among them are some gaming beasts like Dream11, Nazara Technologies, Paytm, First Games Moonfrog Labs, 99Games, Octro, JetSynthesys, HashCube. They are frequent copycats, emulating the most successful solutions of the American and European colleagues. By the looks of it, India’s authorities are indifferent to their misdeeds. Local politicians and taxmen even endorse this kind of strategies among their domestic entrepreneurs.
So, what urges the foreign businesses exit Indian markets?
Corruption, bribery, fraud
Corruption, bribery, and corporate fraud remain to this day the №1 threat to conducting business in India, and deter the transnational companies that are used to other, law-abiding and transparent corporate culture of the West. This is the reason why India has been embroiled in endless corporate scandals and fraudulent schemes, which affect both ordinary residents and accomplished business people. For example, Dmytro Firtash has been in the crosshairs of the American lawmen for over a decade now for bribing the Indian officials so he could get a hold of the local titanium mines. To this day, he is unable to conduct business affairs properly anywhere, and is Vienna-bound: Firtash must stay on Austrian soil because of the bribery of Indian state officials allegations.
Aside from bribery and corruption, the most common threats to running a business in India are theft of physical assets, internal financial fraud, and information theft, claims Pinkerton. Due to the nature of the said risks, direct investments in India show no signs of improvement.
Regulatory and bureaucratic obstacles
Foreign companies in the markets of India are forced to fight through regulatory and bureaucratic roadblocks. Examples of Ford and Abu Dhabi Commercial Bank, which chose to leave the country, show the existing complicated navigation inside the tangled-up regulatory and administrative fields of India. Oftentimes, the obstacles are premeditated.
In the recent years, Indian authorities doubled down on harassing the foreign businesses with fabricated accusations. Google, Amazon, Nokia, and Samsung were fined for billions of dollars. Xiaomi, OPPO, Vivo, Intel, and Wistron found themselves in troubled waters as well.
Parimatch suffered from copyright violations, counterfeiting of its brand – and the inaction of law enforcement to stop it.
Humongous fines, frozen deposits, and a number of other tools are used by the Indian statesmen to make the working conditions for the international players unbearable. The unnecessary complications may lead to setbacks and delays, growing expenditures and, in the end, re-assessment of business strategies.
Perception of foreign companies
Outside companies are often viewed as external threat to local enterprises and interests, resulting in additional complexities of running a business on Indian soil. Local bureaucrats and forefront entrepreneurs even oppose the new blood from overseas, making up for another set of roadblocks that keep international players from coming in and expanding in the country’s market.
Because of such tactics, the country very much resembles its competitor, China. Multinational companies, run in a very different corporate culture and intellectual property protection, find it next to impossible to strive in the environment where their designs are stolen and sold for pennies.
There are still much more challenges that outside companies have to face in India.
Infrastructural constraints
India’s underdeveloped infrastructure impedes establishment of effective delivery chains and logistics. Crowded roads, unreliable power grids, and lack of contemporary telecommunication networks are a serious problem for businesses, forcing them to shell out their own money to somehow tackle the presented challenges.
Cultural and language differences
To underestimate the cultural and language differences is to invest in breeding miscommunications among the international companies and their Indian clientele, business partners, or consumers. It is indeed of paramount importance to understand the local contexts and required tune-ups of marketing strategies for domestic crowd – those are some musts if you want your business to succeed; should you choose to ignore the culture and the language, well, you’re in for an almost certain loss of your place in the Indian sun.
Competing with the local enterprises
Local businesses, which are better equipped to thrive in the local market and have previously established strong ties with the people, are usually better at beating the international counterparts. This fact alone puts at risk the ability of the foreign enterprises amount to significant profits and market shares.
Conclusion
Foreign business ventures’ experience in India underscores the utmost importance of understanding the local challenges and ability to adapt the preconceived strategies in order to overcome this struggle. Despite the market’s obviously grand potential, to have a run at success is to incorporate strategic planning, patience, and flexibility to take India’s complex conditions in strides. Google, Amazon, Nokia, Parimatch learned this lesson to a tee.
