How multinationals & global brands can win in India – McKinsey

” Choosing the Right Entry Strategy : “

One of the first and most important issues for a multinational considering doing business in India is ownership structure. Multinationals that enter the country on a stand-alone basis, our experience shows, generally fare better than those that use Indian partners to create joint ventures. Most global companies that opted for them have exited the Indian market, while some have purchased the stakes of their partners or established majority shareholdings.

One global consumer goods company, for example, bought out its Indian partner because of differences over product marketing and brand positioning. The multinational is now doing well in all the segments where it competes.

Multinationals that choose joint ventures as their entry vehicle into India think that a local partner can better navigate the market’s complexities and manage regulatory issues. There is some truth to that idea, but in practice, joint ventures often tend to emphasize short-term performance over long-term goals, long-term commitment, and an alignment between the interests of the global and local partner.

Without management control and a clear path to ownership, global companies may have no alternative but to exit the market. Joint ventures can be beneficial in some cases, but they are not essential if a multinational regards India as a priority market and regulations allow the company to have majority or complete. When joint ventures are necessary, multinationals should ensure that they have real management control and a clear path to ownership should that become necessary.

Partnerships with Indian companies need not be limited to joint ventures— multinationals should also consider strategic alliances with local players. An international technology manufacturer and an Indian company, for example, set up a local manufacturing plant that went on to double its production volumes every 18 months. This achievement set it on the path to becoming the largest of the multinationals’ plants in India, with the world’s lowest costs and high profit margins. From the multinational’s point of view, the success of this strategic alliance moved India from the “nice to have” category into an essential part of its international operations.

A global pharmaceutical company established itself as a stand-alone entity but developed strategic alliances with a local manufacturer in licensing and supplies for the generic and off-patent segments. These agreements helped the multinational to enter India’s fast-growing market for low-cost, easily accessible branded generics and off-patent medicines.

Winning in India requires an intense and concerted effort. The multinationals need top leaders willing to make a commitment to the Indian operation and to localize and empower it. They must adapt to the Indian consumer’s demand for innovative, low-cost delivery systems and high value for money products, as well as identify and implement an appropriate ownership model.

Finally, senior executives of these companies should not neglect the management of local stakeholders, such as regulators and activists. The best efforts to localize an Indian business model will come to naught if these influential groups are overlooked.

Who Is Responsible For Hiring ” Top Leadership Talent ” In Your Company ?

Was your answer HR or the hiring manager ?

When I typically ask this question to CEOs and key executives…The answers are generally either HR or the hiring manager. Both of which I disagree with.

I believe hiring top talent in any organization falls squarely on the CEO’s desk. The CEO is responsible for all activity that takes place in the company. Just ask those CEOs in jail who tried to claim ignorance, or the  “I just didn’t know it was happening” defence. Too bad for them as they should have known. That isn’t to say that CEOs can control every activity. They can’t. Every company has or has had a wild employee that says something stupid or does something stupid, however, the company is still often held accountable for the actions of this one employee.

Remember Management, you can delegate authority but you can’t delegate responsibility. The buck still stops at the CEO’s desk.

This is why I’m rather surprised when CEOs answer this question HR or hiring manager.

They may have the authority for the activity around hiring, but the CEO sets the tone, priorities, importance around hiring, and who will be hired. Like everything else in the company, when the CEO sets high standards of performance the employees tend to accept and even expect that level of performance. This includes hiring.

The CEO has the ability to determine the quality of people that are hired into the company. The CEO can define top talent for the company, departments, or positions. The CEO can make hiring top talent a priority in the company. The CEO sets the tone and importance for hiring in the company. It is the CEO that has the ability to get everyone focused on where hiring falls on the list of priorities. It is the CEO that has the megaphone to drive this point home. It is the CEO that has the ability to hold HR and hiring managers accountable for hiring top talent. It is the CEO that ultimately controls the training budget for hiring, enabling these employees to learn how to make great hires.

So what are some of the practical things a CEO can do to ensure hiring top talent?

  1. First and foremost, build a culture that includes hiring top talent. Do this by re-enforcing it in the values of the company, discussing it at staff meetings, promoting it in the company newsletter, and on a regular basis emphasize how important hiring is to the success of the company. Few companies do all of these on a consistent basis. Many do it once or twice a year, mainly as an after thought. Hiring top talent should never be an after thought.
  2. Train your people in hiring. Most employees, especially in small companies, have never had any training on hiring. They do their best to hire the best, but that doesn’t mean they are skilled at it. In fact, many are intimidated by the hiring process and just as many actually find the hiring process as painful as buying a new car.
  3. Encourage your people to always be looking for top talent. Top talent isn’t always available when you need them. The CEO should encourage all employees to be on the look out for future talent, especially when there isn’t a need.
  4. Incorporate referring and hiring top talent into the performance management system. Set goals for referrals and reward those managers that maintain a queue of potential employees that can be hired.
  5. Build into your hiring manager’s schedule time to meet with potential employees, participation in trade or professional associations, and other community activities. This should be less than 10% of their time.
  6. Build a website that speaks to future employees, the way your current website speaks to customers. The first place candidates go to research a company is the company’s website. Yet few websites really engage future talent. Most are not candidate friendly and less than 1% have any significant “WOW factor” for candidates coming to the company’s site. Add employee testimonials, have the CEO do a 2 minute video talking about the company’s vision, how the CEO values employees, promote your employee friendly culture, the importance of hiring only the very best and the CEO’s personal commitment to all of the employees.

Hiring top talent doesn’t have to be a time consuming effort. It is in most companies because they are only consumed with it when they need to hire someone. It does have to be a consistent effort though that consumes a small percentage of the hiring manager’s time each month.

If the CEO set raises the bar on hiring top talent, the employees will follow and most will jump over the bar.

I welcome your thoughts and comments……

Starbucks brews desi flavour at first Indian outlet – Business Line.

Tata Starbucks launched its first flagship store in Mumbai at Elphinstone Building in Fort on Friday. Two smaller stores are slated to open next week at the Taj Mahal Hotel in Colaba and Oberoi mall in Goregaon in Mumbai.

Addressing a press meet, Howard Schultz, Chairman, President and Chief Executive Officer, Starbucks Coffee Company, said, “India is a complicated and complex market, but we see it as a big opportunity and are here to build a major business. Clearly, it is a large market and we are committed to building a leadership position here with the help of the Tatas.”

“In every market we enter, we have established ourselves as the super premium brand with top-class quality. We want it to be a value proposition in India and accessible to a whole lot of people,”

CUSTOMIZING TO INDIAN TASTE BUDS – 

The store offers a blend of both International and Indian cuisines with items such as Elaichi Mawa Croissant and Tandoori Paneer Roll.

“The food at Starbucks would be skewed towards the Indian palate. The competition is ferocious here, and we would like to be as accessible as possible with our pricing. We think we have an opportunity to present something different to the customer,” added Schultz. Starbucks is also expected to sell the Tatas-owned Himalayan water brand both in India and in the overseas markets through its stores.

In spite of its premium positioning, Starbucks has tried it to give an ‘affordable’ price to Indian consumers. Its coffee prices range from Rs 80 (for a 30 ml Expresso shot) to Rs 200 (for Caramel Coffee), while the Tata Tazo co-branded teas have been priced from Rs 90 to Rs 130. The regular cappuccino and café lattes range from Rs 95 to Rs 135, while brewed coffee would be a relatively cheaper option (ranging from Rs 85 to Rs 105).

Starbucks has entered into a sourcing and roasting arrangement with Tata Coffee and expects to leverage this association in other markets. “I do believe there are opportunities in the future to take branded coffee from India to other parts of the world,” he said.

Watch Out For India’s Consumer Market Pitfalls-Vijay Govindarajan & Gunjan Bagla-HBR

Procter & Gamble’s India sales grew by over 21 percent in the second quarter of this year. India’s largest consumer products company, a unit of Anglo-Dutch Unilever, PLC, reported that its sales were up 9 percent. Michigan’s Amway registered an annual growth rate of 19 percent in India last year.

Enamored by these numbers — and encouraged by a new wave of reforms to retail, airlines, broadcast, and power sectors — executives who previously ignored India are making a dash for it. But many of them will jump headlong into disappointment, if not disaster. Here’s four common mis-perceptions that guarantee failure:

India is a Monolithic Country

Politically, India is a sovereign republic. But it’s composed of 28 states with 23 official languages. As a consumer marketer, you’re much better off thinking of India as a continent, much like Europe.

If you sell skin care products, for example, cool winters in northern states create dry skin conditions that simply don’t exist in humid cities such as Mumbai and Chennai. Skin textures also vary dramatically from Haryana in the northwest to Kerala in the south. So do preferences for fragrance: The largest selling soap in southern India is Santoor (from India’s own Wipro) which uses turmeric and sandal as key ingredients. But Unilever’s Lux and other brands are much more popular in the north and the east.

Furthermore, Indian consumers look at many product categories through the prism of social class. For example, vehicles such as Toyota’s Innova resemble the typical minivan or SUV favored by American moms. But in India they are perceived as commercial vehicles or taxis, and few self-respecting mothers who can afford one would choose to buy it. It’s beneath her class.

Don’t rely on a single India strategy. Understand the enormous differences across the country.

Let’s Leverage What We Learned in China

We commonly see European and American companies assign an India market entry initiative to their Hong Kong, Shanghai or Beijing office. Save yourself some trouble and manage India from India.

India’s business environment has little in common with China’s: India is a democracy with a vocal, vibrant free press and a stock exchange that is over 125 years old. Companies from Colgate Palmolive to Unilever to Procter & Gamble have successfully raised capital locally. Managers first hired in India can go and run marketing for western companies, from Mastercard to Reebok.

Let us also not forget that China is at least ten to fifteen years ahead of India since China liberalized in the late 1970s and India only in the early 1990s. Nor will India follow the same path of economic development as China. India will address its problems under distinct conditions — different infrastructures, geographies, cultures, languages, governments, and so forth.

Let’s Select a Distributor

What could be more reasonable? “We have one distributor in Mexico, another in Brazil, why would India be different?” asked a major home care company executive. After all, it’s a lot easier to manage a single distributor. In India, however, a distributor is often little more than an order taker with a limited rented warehouse. Consider that Unilever works with over 7,000 distributors in India. Very few entrants to India are well-served by having a single company represent them across India’s 28 states with a patchwork of state-level indirect taxes. The primary reach of most re-sellers is limited to a region, and often to certain kinds of retailers within that region.

Even if you’re going to work with joint venture partners, it may make sense to have more than one.McDonald’s boasts over 250 restaurants serving 500,000 customers a day across India. In north and east India, the company has a joint venture partner, Connaught Plaza Restaurants Pvt. Ltd based in Delhi; but for west and south India the company partnered with Hardcastle Restaurants Pvt. Ltd. Both partners are successful and Hardcastle recently bought out McDonald’s share to become a self-standing development licensee. Careful selection of the right number of partners is a key to success for any company entering India.

Jay is From India, Let’s Send Him There

American companies have a tendency to send expat Indians in the US to manage their India operations. This could be a deadly mistake.

Why? Very few of these expats have any experience with the India of 2012, a country and culture vastly different from the one they grew up in. Even if they travel back for holidays, they don’t come into much contact with the world of work in India and particularly with consumer marketing in India. And, an American may have significant international experience whereas an “Indian immigrant in America” may have blind spots on both local and world affairs.

When one of the authors (Gunjan) taught executive workshops at the California Institute of Technology, over a third of the managers attending were of Indian origin. “My boss wants me to travel to Chennai, but I don’t speak Tamil and I’ve never worked in India,” they worried. And rightly so. When Scott Bayman left his position running General Electric’s India business after 14 years, his Indian successor lasted a much shorter time and was eventually replaced by another American.

To summarize:

  • Success in India comes through market segmentation
  • Forget what you learned in China
  • Find more than one partner in India, but do so carefully
  • Don’t limit yourself to leadership with Indian roots, who have been away & not been an active participant of the NEW evolved Indian consumer market. 

Performance reviews re-made – Fortune Tech, By: Michal Lev-Ram

There’s no shortage of HR software to track employee goals. The next step is to get workers to actually follow them.

 

– Stodgy human resources software is getting a reboot.

Over the past year enterprise giants IBM, Oracle and SAP have collectively shelled out some $6 billion to acquire companies that make recruitment and compensation tools. Sales force’s new Work.com product lets managers and employees track their goals. “Most performance-management systems are built around a framework that’s all about HR compliance,” says John Wookey, Sales force’s executive VP of social apps.

“But they haven’t solved how to actually get people to work on the right things.” To fix that, a new generation of software is web-based and, naturally, incorporates social networking. It also rewards employees with prizes both real and virtual. The biggest change? The annual performance review process becomes a year-round activity. (Clients typically pay a monthly subscription for such services, instead of a one-time price.) Whether all the bells and whistles could actually hurt productivity, rather than improve it, remains to be seen.

Old task, new hope: The annual performance review will live on. But managers and employees now have a slew of new tools to chart and reward workers’ progress.

 

Year-round goals: Instead of scrambling to come up with goals at the end of the year, workers can create them with their teams on a rolling basis as projects dictate.

 

Virtual rewards: The adult equivalent of scout merit badges. Managers can create awards such as “most deals closed” or “products shipped,” posting them to an employee’s profile.

 

Quicker feedback: Instead of logging in to cumbersome HR software, users give and receive feedback inside the applications they use every day, like posting a comment on a website.

 

Real rewards: The old spot bonus is being re-imagined. Sales force (CRM), for instance, partners with Amazon (AMZN) to reward high-performing employees with gift cards.

Status updates: Think Facebook’s status updates. But instead of posting daily musings or funny photos, employees can request feedback from their managers and peers