Mantras for foreign businesses to succeed in India: Lessons from Japan and Korea

India has regained its position as fastest growing economy in the world with projected growth of 7.2 percent this year and is expected to emerge as the third largest economy by 2030. With a population of over 1.3 billion people, a middle class of about 600 million- open to try new products and services, India is a country no company which aspires to grow can afford to ignore. Two countries which realized India’s potential early, invested significantly and have reaped rich dividends over the years include Japan and Republic of Korea (referred to as Korea hereinafter). Today, India is home to about 1450 Japanese companies and over 500 companies from Korea.

 The Japanese story

India and Japan have long shared a friendship rooted in spiritual affinity and cultural ties. The economic and political ties however gained momentum in late last century and today Japan shares a special strategic global partnership with India. Japan is the third largest Foreign Direct Investment (FDI) contributor to India with 29.5 Billion USD between 2000 and 2018. Nearly 1450 Japanese companies are operating in India and over 9000 Japanese nationals live in India. They work across varied sectors- including automotive industry, heavy machinery, consumer electronics , imaging industry, telecom and insurance.

Japanese investment into India was intended not only to gain access to a very large market, it was also a strategy in response to yen appreciation, slow domestic growth, high labour costs at home and securing markets.

Maruti Suzuki Industries Limited (MSIL), a subsidiary of Suzuki Motor Corporation (SMC) is one of the most successful foreign investments in India and a stellar example of Make in India. Thirty-six years after it launched the people’s car Maruti, MSIL continues to be the country’s biggest carmaker selling over 1.86 million cars in India (2018-19), far more than it does in Japan and exporting to about 125 countries from India. Toyota Kirloskar Motor Pvt. Ltd. is yet another example of a very successful venture which operates as a subsidiary of Toyota Motor Corporation. It is today, the fourth largest auto company in India. 

 The Korean example

Today over 500 Korean companies operate in India and India is home to over 10,000 Korean Nationals. Several millions of Indian lives are touched every day with products of Korean companies

·      The leading Mobile phone company, Samsung in India is Korean

·      Samsung and LG occupy the top two spots in Consumer Electronics sales in India

·      Hyundai Motors is the second largest Automobile manufacturer and the largest automobile exporter

·      Samsung Electronics sells 70,000 Mobiles/Day and 10,000 Televisions/Day

·      LG Electronics sells 2,500 Air conditioners /Day and 8,000 Refrigerators/Day

·      Hyundai India manufactures 700,000 cars in India and exports more than 150,000 units to more than 87 countries.

 Korea continues to diversify investments in India- from manufacturing mobiles and automobiles (Samsung, Hyundai and Kia Motors) to technical textiles (Hyosung) and the latest addition being confectionery with Lotte confectionery acquiring Havmor ice-cream, a brand popular in Western India.

 Strategies for success

While there are many strategies which contribute to success of foreign businesses, the following  core strategies form the pillars of success of Japanese and Korean companies in India

• ·      Navigating the regulatory frameworks and market structures, over time they have successfully used the parent- subsidiary model in India. Be it the Japanese MSIL, Toyota Kirloskar or Korean Samsung or LG Electronics, they have all kept pace with India’s reforms and leveraged the liberalized investment policies. The model has obviously given the subsidiaries, access to requisite capital, technology, management expertise and skilled manpower and enhanced their success.

·      Understanding the stratified and price sensitive market, market segmentation has been a very important strategy. Maruti today sells 17 models in different variants and at different price levels. Recognizing the layered nature of Indian market, Cannon India has focused on expanding its sales network in Tier III towns by strengthening the small kiosk ‘Cannon Corner’ network in addition to the existing retail platform ‘Canon Image Square’.

·      Companies from both countries have Invested significantly in research and development. The largest software R&D centre of Samsung outside of Korea is situated in Bangalore. LG Soft India, the innovation wing of LG Electronics in Bangalore, is LG Electronics Largest R&D centre outside Korea. Hyundai’s R&D centre in Hyderabad is one of its five hubs. Similarly, MSIL’s R&D centre and test course at Rohtak, Haryana, is a state-of-the art facility, comparable to the best in the world. It is also SMC’s first global R&D centre outside Japan.

·      Willingness to understand and navigate through the differences in work cultures remains vital area for businesses to work on. Be it the Korean habit of following directions unquestioningly, communicating in Korean language or a strict management style. While these have also been a source of tension between Korean managers and Indian workers, understanding these factors and working upon them has been essential for success in India.

·      Finally, credit needs to be given to the embassies, consulates and industry chambers of Japan and Korea which have played a very vital role in establishing their companies in India. These countries, particularly Japan have worked very closely with India and evolved very robust mechanisms at the levels of both central and state governments for resolution of issues of their companies in India. Both countries even have designated Industrial parks/ zones for their companies in some states of India.

Leverage the red carpet

With liberalization of FDI policy, acceleration and deepening of wide-ranging reforms during the last five years, India has fast become an attractive destination for foreign investment as evident from various rankings and actual increase in FDI inflows. Although work-in-progress, the market promises to reward those who resolve to tread here.