To get a sense of the challenges facing major multinational
corporations in India, just look at the recent headlines about
: "Wal-Mart's troubles continue in India." From
Wall Street Journal
: "Wal-Mart India Head Leaves Company." From
: "Red tape, graft mean India not such a super market for
Ravi Venkatesan understands those challenges. Venkatesan, the
former chairman of
) India and the author of
Conquering the Chaos: Win in India, Win Everywhere
, insists, however, that the opportunities in India are well worth
the struggles. The Fiscal Times spoke to Venkatesan recently about
that "chaos" in India and much more.
The Fiscal Times (TFT):
You dedicate the book to "honest and upright government officials
in all emerging markets for the courage they show every day." Why
is it so hard for them?
Ravi Venkatesan (RV)
The whole system is corrupt. And to be the lone person who resists
it is a big challenge. When you are a junior bureaucrat, all they
do is transfer you to a less inconvenient spot. As you grow senior,
it becomes harder and harder. So when you find an exemplary
official, my respect for them is enormous.
There was a period of great hope that India's political system and
economy were both going to develop...
It's still a great hope. But progress is a muddled one of two steps
forward, one back. We're just in that slight regressive phase; I
hope we again continue to shuffle forward.
Does that apply to the political system as well?
There's a term called punctuated equilibrium in the evolution of
species. It's pretty calm for a long time and then there's some
huge event.... Political things happen in big steps, whereas the
economy is much more vibrant and continuously buzzing along. But
graft, corruption, bureaucracy, [and] chaos are not unique to
India. It's absolutely a distinguishing feature of
all emerging markets
. And the advice I give to companies is learn to thrive on chaos
rather than flee it or wish it away. For the foreseeable future
these markets will have these characteristics. It's unlikely India
or anyone else is going to be dramatically less corrupt in five
How Coke Went From Bad to Good
Does that tie into another theme of the book, thinking long term?
We've seen cases of major multinational companies here that get
caught up trying to get the win quickly and that means playing by
those local rules, even if they're corrupt.
Yes, so it requires great courage - the courage to do what is right
rather than what is expedient and convenient. India and many of
these markets have had colonial rule. Then they have had
experiments with socialism. There's a fundamental distrust of
business and of foreign companies in particular. You need to
operate for the long term. You need to be seen as doing well by
doing good. Give back to society and the development of the
), for instance, got into huge problems repeatedly in the '90s and
early 2000s. It's because they forgot this. They were pumping out
groundwater, which is scarce, bottling it, selling it for a nice
markup, and repatriating profits. So it became the ugly
multinational. Eventually they learned their lesson; they started
doing huge amounts of work to conserve water, install drip
irrigation systems, rainwater harvesting, invested quite a bit in
sustainable practices. Today, for at least a decade, you wouldn't
have heard of any agitation against Coke.
), same thing. They've gone native; they're playing the long game.
) has yet to learn. The companies that are going to succeed are
those that take that 50-year perspective and operate in that
The 50-year perspective? It sounds…
Yeah. For somebody who is in business day to day...
The 50-year perspective - you've got to have your eye on that. But
you need to have at least a 5- to 10-year horizon on your
investments, which is the problem. Look at McDonald's. It took them
nine years to figure out how to make a store profitable and get the
supply chain for potatoes and other things in place. Nine years. In
that period they've invested well over $100 million. Now they're
cranking out stores and each one is profitable within three months.
Because they've got the model…. The problem is that U.S. CEOs'
tenure is down to six years on average. So it's pretty rare that
you find a CEO that says, 'Oh, let me do the hard work and let my
successor collect all the fruits.' It's an extraordinarily rare
one: Sam Palmisano at
(IBM), companies like
(HON). As a CEO, you have to survive the quarter and have your eye
on the short term. But you also get to make one or two long-term
bets. I'm suggesting India is a worthy candidate of being that
long-term roll of the die.
Is that also in large part because of
India's role as a leader
in emerging markets?
I call it the archetype, in its opportunities, the structure of the
market and the challenges. It's the perfect exemplar for all
emerging markets. If you crack it here, you can take the model and
take it elsewhere.
Don't Give Up on the Massive Middle
You say that a multinational can't just take its existing business
model and stamp it on India and everywhere else and expect it to
work. Yet if they're adapting to the Indian market, that may be a
template for how to approach emerging markets?
Exactly. And not just emerging markets - the middle of the pyramid
in all markets. India became famous as the place where single-use
sizes of shampoo and soap were developed. Because people were so
poor, they couldn't afford $4 or something on a bottle that would
last six months. So you had a single-use thing that might cost
$.05. This was wildly popular in the emerging markets. Now,
(UN) says, "Holy cow, in Greece and Spain, people have the same
income compression. They're loving the same thing." So it's not
just emerging markets. It's for the lower middle class in all
countries.... Companies need two models. One for the affluent
segment, and one for these chaotic but aspiring middles.
(AAPL) or perhaps
(TM), companies that you cite as examples that haven't done well in
India - to some extent they would have to shift their business
model, shift their brand. Apple has been the most prominent example
that has been reluctant to do that.
They're dead if they don't. If they don't do it, you've got plenty
of guys like
(OTCMKTS:SSNLF) who are happy to do it and are already doing it and
are running away with the market. Last October
, on the analysts' call, said, "I love India, but this is a
difficult place, and its distribution is massively inefficient; it
is not our belief that we should come up with low-priced versions."
People in India are like people everywhere. They aspire to the same
beautiful products. Samsung gains a massive leadership position in
India, [Cook] retracts it. So they haven't come up with new models,
but they've discounted their pricing by 36%. They've got cash-back
offers, they give you three years interest-free payment mechanisms,
they are investing massively in distribution. They've stopped short
of coming up with models for these markets, a low-cost iPhone, but
they're doing much better. So even proud Apple has gotten off its
This is exactly the risk. Microsoft - I took it to a billion
dollars, which meant that we had captured that top end pretty well.
But then [Steve] Ballmer was unwilling to go down to the middle,
because to go down to the middle, Microsoft has to operate
radically differently. The middle is a mobile phone first market.
It's not a PC first market. Nobody is buying a PC out there.
Shopkeepers, consumers, everyone is bypassing PCs to a post-PC
world, which Ballmer could not accept. We wanted to create a new
model that was completely smartphone centric and using the mobile
Internet, which is what
(GOOG) is doing. So that's the threat for Microsoft: that they're
going to lose this beautiful 15-year lead to Google, which gets it.
Make Sure You Understand Globalization
In your book, are you speaking to the Steve Ballmers and other CEOs
who are making these decisions?
Absolutely, yes. There is a lot at stake. American companies have
this unprecedented opportunity in emerging markets and they're busy
squandering it. That's a problem. It's also a problem for these
countries. India needs these companies to come and bring in
investments, technology, capability, jobs. And we're busy scaring
them away. I want to see if we can at least get people thinking a
little bit differently…. What passes for globalization in emerging
market strategy today is skimming the cream off 100 countries.
That's a great strategy, but one day there's going to be no cream.
And you're going to be really screwed.
What is Google is doing in India? Is it essentially the same
products and service they're promoting here?
They are tailoring it. Google has a couple of huge advantages.
Their pricing model is free, at least to the consumer and the user.
"Free" has enormous appeal in emerging markets. The second thing is
phones. It's Android everywhere. The big issue in India for Google
is that the broadband infrastructure is just pathetic. So they're
doing everything possible to just get broadband going, working with
telecom providers, the regulators and so forth. I think they're a
couple of years away from the big breakthrough. When that happens,
they're going to be an unstoppable force in their business.
Go Up Against Bill Gates … If You Dare
One last thing: We heard you won a bet against Bill Gates?
With Bill, at some point you have to go head to head, toe to toe
with him, and then you get respect. Until then, you're just a
flunky. And most people find that an intimidating experience. So it
was about 2006, Melinda [Gates] had come as well, and we were
flying on his plane from Delhi to Chennai. And it was late at
night, he was tired and irritated, and we got into an argument. I
refused to back down. After about 10 minutes he said, "Well, gee, I
guess you're right." He was beginning to sulk about it a bit, and
then Melinda sort of looks to him and says, "So Bill, what do you
do?" He ignores her. "Bill, what do you do?" And then she passed
him a dollar bill and he wrote on it, "I was wrong - Bill Gates,"
and I framed it. It was a dollar - but it's a valuable dollar.
Editor's Note: This article by Yuval Rosenberg originally
For more from The Fiscal Times:
The Biggest Threat to Apple: Samsung or
Is Google Losing Its Innovative Edge?
India's Economy: On the Cusp of Big Change
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