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1) Indian companies face several challenges when internationalizing including difficulties with foreign regulations, taxation, transportation costs, and staffing international operations.
2) Raising capital internationally is challenging due to India's underdeveloped foreign exchange and bond markets. Managing currency volatility also poses risks.
3) Successfully integrating acquired foreign companies and balancing corporate social responsibility abroad can be difficult due to cultural and market differences.
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Internationalization Challenges for Companies in Emerging Markets.pdf
1) Indian companies face several challenges when internationalizing including difficulties with foreign regulations, taxation, transportation costs, and staffing international operations.
2) Raising capital internationally is challenging due to India's underdeveloped foreign exchange and bond markets. Managing currency volatility also poses risks.
3) Successfully integrating acquired foreign companies and balancing corporate social responsibility abroad can be difficult due to cultural and market differences.
1) Indian companies face several challenges when internationalizing including difficulties with foreign regulations, taxation, transportation costs, and staffing international operations.
2) Raising capital internationally is challenging due to India's underdeveloped foreign exchange and bond markets. Managing currency volatility also poses risks.
3) Successfully integrating acquired foreign companies and balancing corporate social responsibility abroad can be difficult due to cultural and market differences.
Economies International Business Strategy Assignment
SUBMITTED BY: ASHISH JAIN ROLL NO: 7C MBA (IB) 2013-15
India opened up the economy in the early nineties following a major crisis that led by a foreign exchange crunch that dragged the economy close to defaulting on loans. The response was a slew of Domestic and external sector policy measures partly prompted by the immediate needs and partly by the demand of the multilateral organisations. The new policy regime radically pushed forward in favour of a more open and market oriented economy. Indians have been quick learners in internationalization both in scale and speed. With the domestic market fast catching up with the developed market, the learning has had a multiplier effect. With booming local economies, the emerging market multinationals are reaching for the stars. Rapid internationalization of Indian firms: Made in India no longer liability -- increasingly asset Indian firms are moving up the competitive value chain Asia, Europe and the USA equally important regions Increasing internationalisation boosts Indian firms' performance Implications for European companies: Indian competition will increase in Europe, North America and Asia Three Strategies for Indian companies in overseas market: Outsourcing: It is applicable when the domestic market is either very small or unattractive Internationalization: It is applicable when companies are aiming to expand market or balance business downturns and risk of domestic market Multi-nationalization: It is applicable where companies are aiming to create sustainable competitive position in several geographies
One of the core strengths of Indian firms is to extract maximum value from even ailing businesses by applying innovative and cost effective methods that they have developed over the years in an extremely resource constrained and uncertain domestic environment. They have a unique approach to their international growth that is grounded in their Indian heritage and culture. We call it compassionatecapitalismand it manifests in several ways, such as a preference for sustainable growth, long-term commitment to their businesses despite economic turbulences, faith in the management team of the acquired overseas companies and commitment to employees in terms of job security and investment in training. Internationalization Challenges faced by Indian companies: 1) Challenges for companies exporting Indian merchandise and services: Foreign Regulatory Environment Non-Tariff barrier and Phyto-sanitary barriers Foreign Exchange conversion Rates Very high transportation costs Inspection and certification Visa related issues Taxation
2) Debt/Cash management challenges: Raising debt/cash in Indian market is difficult and expensive, because of high interest rates and underdeveloped bond market in India. Underdeveloped Foreign exchange market in India pose another challenge as Indian currency is very volatile and leads to frequent forex losses for Indian firms. Indian Governments foreign exchange laws FEMA, which are not very supportive of Indian firm wanting to business abroad
3) Integration related challenges: Because of cultural difference, it is difficult to integrate acquire firm fully in terms of workforce. Also inexperience of Indian Managers in this area is posing major challenges in fully integrating the facilities abroad and real benefits of acquisition Indian firm had never been leaders in innovation and research, which is challenge to acquire firm which are innovation centric
4) Talent Acquisition and Retention Challenges: Lackofinternationalexperience: Rapid-growth market companies are not confident that their organization has or can build an effective international management team. Top management teams lack awareness of local cultures and understanding of global markets, according to our survey results. Lackofinternationalmanagementpipelineforrecruitment: Companies in rapid-growth markets are building their international management teams through the development of internal pipelines as well as recruitment from other organizations. While building an internal pipeline requires time and investment, the latter can result in high turnover and salary inflation. Inability to retain and reward high performers: Some companies report it can be difficult to appropriately incentivize performance across different markets and cultures. According to our survey results, many companies feel they can improve their approach to retaining high performing global talent.
5) Corporate social responsibility The means by which MNCs may balance their increasingly important role in economic development with their growing responsibilities toward the country in which they operate, is another area that presents potential challenges for emerging market MNEs. As George Kell and John Gerard Ruggie stated (1999, 15), Globalization may be a fact of life, but it remains highly fragile. Embedding global market forces in shared values and institutionalized practices, and bridging the gaps in global governance structures are among the most important challenges faced by policymakers and corporate leaders alike. For the leaders of emerging market MNEs seeking to invest in developed countries, this challenge is potentially even greater. Their ability to adapt to, and successfully negotiate, the cultural references, standards and practices of developed markets is critical to their success in these markets and may ultimately have spillover effects in the home country, leading, in the longer term, to harmonization of standards upwards.
Example: ICICI Bank ICICI Bank is an example of a company that has managed to adapt itself to the liberalization and opening-up of the Indian economy by transforming itself into a fast-moving and customer- driven entity. In this process, ICICI Bank has emerged as the 2nd largest Indian bank with the largest international presence. International expansion: ICICI Bank identified international banking as an important opportunity in 2001 to cater to the cross- border needs of clients by leveraging domestic banking strengths. In 2003, the Bank set up its very first offshore branch in Singapore followed by an office in Dubai, and setting up of the UK and Canada subsidiaries in the same year. Organization Structure: ICICI Bank went through five organizational changes in eight years preceding 2007. There was a lot of resistance in the first year. However, after this initial phase there was a change in attitude and outlook and the way people went about their work. Processes:What sets ICICI Bank apart from its competitors is its superior ability in identifying early trends, developing strategies to take advantage of these trends, and executing the strategy better than others. ICICI Bank has always been competing successfully with the international players in India. ICICI Banks relationships are considered as one of the key strengths enabling the Bank to offer the best of both the worlds i.e. understanding the needs of the Indian consumer and ability to deliver world-class solutions, including leadership in structuring credits and syndicate loans. CulturalDifferences: The Bank has a preference to have locals to take care of the regulatory interface in international locations. Depending on regulatory requirements as well as foreign language requirements, different countries have different mix of locals and Indian nationals. E.g. in Russia, almost 90% of the employees are local Russians. The Bangladesh operations are almost completely run by local Bangladeshis. Key positions in these international locations are however typically staffed by Indian nationals with experience of having worked at the Bank in India.