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Introduction: If companies embrace globalization, they need a presence in India. It offers an educated -- and less expensive -- workforce.
There are some sights on India's commercial landscape that'll make any American feel right at home.
Lehman Brothers (LEH, news, msgs), Goldman Sachs (GS, news, msgs), Electronic Data Systems (EDS, news, msgs) and Microsoft (MSFT, news, msgs) all have recently announced that they are investing in India, joining the rush to take advantage of cheaper costs and an educated workforce. Financial powerhouse Citigroup (C, news, msgs) was one of the first U.S. companies to see the business potential in India.
"I think from an international perspective for Citigroup, India is important from a bottom line point of view, and will become even bigger as you go ahead," says Sanjay Nayar, Citigroup India's chief executive.
With more than 1 billion people and a middle class larger than the population of the United States, India is a market no global company can ignore.
"It has grown by a Brazil in the last 10 years, and will grow by another Brazil in this decade," says Richard Celeste, former U.S. ambassador to India.
For American CEOs trying to build their companies, the issue is whether they embrace globalization. If they do, they must have a presence in India.
Rough going
Early business pioneers often found
rough going in India. Sanitation, water and roads -- bad enough today --
used to be deplorable. Indian markets were strangled with red tape and
protectionism. To a great extent, they still are.
But recent reforms have opened up more opportunities to make money. When India finally let foreign banks open their doors to Indian consumers in the late 1980s, Citigroup was ready.
"We were really the first serious player in the credit card market," says Sarvesh Sarup of Citibank Consumer Services. "When we entered the industry, there were 300,000 cards. Now there are in excess of 7 million."
General Electric (GE, news, msgs) has the largest foreign presence in India. (GE owns CNBC.)
"Right now every one of our manufacturing businesses has a significant engineering operation here," says Scott Bayman, GE India's CEO.
Like Citigroup, GE makes money in India in several ways. It sells products and services. It employs people to do white-collar and back- office work. GE has 22,000 employees in India doing research, manufacturing, running call centers and developing software. They generate roughly $1 billion dollars of revenue annually.
"There isn't a better destination, frankly, than India just because of scale of population and availability of employees," says Pramod Bhasin of GE India.
Four-legged traffic
Still, presence and history alone
don't guarantee success in India. Problems such as a Third World transportation
system, a multitude of languages, four-wheeled and four-legged traffic,
and even the climate, often intervene.
Just ask Nestle. The Swiss food giant has been in India for 90 years, with six manufacturing plants, 3,500 employees and almost $500 million in sales in 2002.
But Nestle had a problem with its trademark candy. In a country where temperatures can reach 120 degrees, chocolate melts. Nestle first gave retailers small coolers to keep the chocolate from melting, but that didn't quite do the trick.
"Electricity costs money and is not provided in a uniform way, so on and off the electricity goes and the product may suffer sometimes," says Carlo Donati, Nestle India's CEO.
So Nestle devised a liquid chocolate in a tube and produced a winner.
It's the kind of adaptation the successful players in India understand and the newcomers must learn.
"Our journey has been full of challenges as well," says Sandeep Kohli, Yum Brands India, a Yum Brands (YUM, news, msgs) unit.
Local toppings
Kohli has helped open 70 Pizza
Hut and KFC restaurants for Yum Brands in India in less than a decade.
He says Yum India has put together a promising recipe for success.
"The pizza base, the cheese and so on will be the same, but local flavors can come from a local cause, local toppings, adding things to it that make it more familiar and acceptable to the Indian consumer," he says.
Experts say there's no way to make a quick buck in India. Deregulated markets have plenty of competitors. Local companies are often strong.
Foreign corporations doing business
in India run the gamut. But one thing all these companies have in common
is that they were quick to realize India's potential. And businesses that
aren't here yet are late.
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