Introduction

India has emerged as a potential and a diversified market for the Western firms and other foreign
investors. Earlier establishing a business in India was a challenging assignment, but economic
reforms, brought in by different Indian governments over a period of time, have smoothen the
course of entry for Western multinationals and other business magnets. Still it is considered
difficult and a different proposal to do business in or with India, mainly because of its different
business and socio- economic culture. Western multinationals/ investors dealing with India so far
had to adopt major changes in their business style in order to serve effectively to their customers.
This write up examines in detail the prevalent business, socio- economic, and cultural
environments that western multinationals have to face in India, as well the implications of their
adopted major changes in business practices to succeed in India.

Economy Profile of India

About Doing Business in India

The Doing Business project provides objective measures of business regulations and their
enforcement across 190 economies and selected cities at the subnational and regional level.
The Doing Business project, launched in 2002, looks at domestic small and medium-size
companies and measures the regulations applying to them through their life cycle.
Doing Business captures several important dimensions of the regulatory environment as it applies
to local firms. It provides quantitative indicators on regulation for starting a business, dealing
with construction permits, getting electricity, registering property, getting credit, protecting
minority investors, paying taxes, trading across borders, enforcing contracts and resolving

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insolvency. Doing Business also measures features of labor market regulation. Although Doing
Business does not present rankings of economies on the labor market regulation indicators or
include the topic in the aggregate distance to frontier score or ranking on the ease of doing business,
it does present the data for these indicators.
The first Doing Business report, published in 2003, covered 5 indicator sets and 133 economies.
This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case
scenario in the largest business city of each economy, except for 11 economies that have a
population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia,
Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing
Business, also collected data for the second largest business city. The data for these 11 economies
are a population-weighted average for the 2 largest business cities. The project has benefited from
feedback from governments, academics, practitioners and reviewers. The initial goal remains: to
provide an objective basis for understanding and improving the regulatory environment for
business around the world.
The distance to frontier (DTF) measure shows the distance of each economy to the “frontier,”
which represents the best performance observed on each of the indicators across all economies in
the Doing Business sample since 2005. An economy’s distance to frontier is reflected on a scale
from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. The ease
of doing business ranking ranges from 1 to 190. The ranking of 190 economies is determined by
sorting the aggregate distance to frontier scores, rounded to two decimals.

Note: The ranking of economies on the ease of starting a business is determined by sorting their
distance to frontier scores for starting a business. These scores are the simple average of the
distance to frontier scores for each of the component indicators.

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Labor Market Regulation India

Hiring
Q: Fixed-term contracts prohibited for permanent tasks?
Ans: No
Q: Maximum length of a single fixed-term contract (months)
Ans: No Limit
Q: Maximum length of fixed-term contracts, including renewals (months)
Ans: No Limit
Q: Minimum wage applicable to the worker assumed in the case study (US$/month)
Ans: 217.6
Q: Ratio of minimum wage to value added per worker
Ans: 1.0
Q: Maximum length of probationary period (months)
Ans: 3.0

Working hours
Q: Standard workday
Ans: 9.0
Q: Maximum number of working days per week
Ans: 6.0
Q: Premium for overtime work (% of hourly pay)
Ans: 100
Q: Restrictions on night work?
Ans: Yes
Q: Restrictions on weekly holiday?
Ans: Yes
Q: Paid annual leave for a worker with 1 year of tenure (working days)

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 Ans: 15.0

Job quality
Q: Equal remuneration for work of equal value?
Ans: No
Q: Gender nondiscrimination in hiring?
Ans: Yes
Q: Minimum length of maternity leave (calendar days)?
Ans: 182
Q: Receive 100% of wages on maternity leave?
Ans: Yes

Business Reforms in India

In the year ending June 1, 2017, 119 economies implemented 264 total reforms across the different
areas measured by Doing Business. Doing Business has recorded more than 2,900 regulatory
reforms making it easier to do business since 2004. Reforms inspired by Doing Business have been
implemented by economies in all regions. The following are the reforms for India implemented
since Doing Business 2008.

= Doing Business reform making it easier to do business.

= Change making it more difficult to do business.

India made starting a business faster by merging the applications for the Permanent Account
Number (PAN) and the Tax Account Number (TAN), and by improving the online application
system. This reform applies to both Delhi and Mumbai. Mumbai also made starting a business
faster by merging the applications for the value-added tax and the profession tax.
Dealing with Construction Permits:
India made dealing with construction permits less cumbersome by implementing an online system
that has streamlined the process at the Municipality of New Delhi and Municipality of Greater
Mumbai. The online system has streamlined the process of obtaining a building permit, thereby
reducing the number of procedures and time required to obtain a building permit in India.
Getting Credit:

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India strengthened access to credit by amending the rules on priority of secured creditors outside
reorganization proceedings and by adopting a new law on insolvency that provides a time limit
and clear grounds for relief to the automatic stay for secured creditors during reorganization
proceedings. This reform applies to both Delhi and Mumbai.
Protecting Minority Investors:
India strengthened minority investor protections by increasing the remedies available in cases of
prejudicial transactions between interested parties. This reform applies to both Delhi and Mumbai.
Starting a Business:
India eased business start-up by establishing an online VAT registration system and replacing the
physical stamp previously required with an online version.
Paying Taxes:
India reduced the administrative burden of paying taxes by abolishing the fringe benefit tax and
improving electronic payment.
Resolving Insolvency:
India made resolving insolvency easier by increasing the effectiveness of processes and thereby
reducing the time required.
Trading across Borders:
India reduced the time for exporting by implementing an electronic data interchange system.
Getting Credit:
India strengthened its secured transactions system by launching a unified and geographically
centralized collateral registry and started to provide credit information on firms at the private credit
bureau.
Trading across Borders:
India made trading across borders easier by introducing ICEGATE—an electronic data
interchange system making it possible to lodge customs declarations through the internet and
facilitating the operation of a risk management system, an electronic payment system and an
electronic manifest system that allows shipping lines to submit their cargo manifest in advance.
Family Business and non-corporate culture in India
Despite revolutionary changes since independence of India, the basic business style has remained
the same as of family controlled businesses. Leading business families, from Birlas and Tatas to
Reliance, keep total control on business of companies promoted by them. Major management posts
in these business houses are always held by responsible family members. Though joint family
system is slowly disappearing, but still there is a common tendency in Indian families to own a
business.

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Another prominent feature of the Indian economy is that non- corporate sector has the largest share
of the total business of the country. They are the largest employment providers. Growth in non-
corporate sector is much faster than even in the corporate sector. Non- corporate sector is engaged
in wide spread manufacturing and service industries, and these are again mostly family business.
Non corporate sector work according to available conditions and develop their business models
suiting prevalent conditions and systems. This way India is a high powered distant society.
Western businesses will have to accept family authority while negotiating business deals with non-
corporate as well as family controlled corporate sector.
Multi Linguistic and cultural market with political challenges in India
The business language in urban India is local language mixed with English. It is also mixed with
Hindi and state dialects making it difficult for a casual business operator to negotiate. There are
wide ranges of languages spoken in diverse India. Accordingly, perfection in one language by a
Western business negotiator does not mean that he or she can represent his/ her business deals
effectively in all parts of India.
Though middle class rules the roast in India, but this class mostly believes in eastern culture,
making it imperative for Western multinationals to adopt eastern tastes in their goods and services
being marketed in India. At the same time it is difficult for foreign companies to standardize their
products on national basis because of diversity in regional culture; but it may be possible in India
on regional basis. Also foreign MNCs need to find out the consumers' tastes in India before
launching their products or services in Indian markets.
One thing is necessary to understand that economic growth in India has brought up its middle class
to the fore front; and at the same time rural poor are largely isolated from the achievements of
growth. "With a robust and working democratic system, India is a federal republic where bulk of
executive power rests with prime minister and his or her cabinets. As a nation state, India presents
a vast mosaic of hundreds of different ethnic groups, religious sects, and social castes. About one
third of population lives in urban areas; an overwhelming majority of the remainder is engaged in
the agricultural sector."(Michael F. Martin and K.Alan Kronstadt, August 31, 2007) [i] An Indian
is so politically informed or connected that it would not be wrong to say that every Indian treats
himself/ herself as a politician in one sense or the other. With the result every political event in
India has great impact on consumer markets.
Politically there is a relaxed atmosphere at present for foreign direct investments (FDIs). But
businesses often get disturbed with unwanted political rallies and events. Very frequently opposite
national political parties call for nation- wide strikes (called bandh in Indian dialect) on any hot
issue. The entire economic process gets disturbed and with the result corporations and other
businesses suffer huge losses. For example "on July 5, India went on strike. The country closed
down at several places after opposition parties protested an increase in the price of petrol or
gasoline. (In India, the government controls petrol prices). The Associated Chamber of Commerce
and Industry estimated that nationwide strike caused a production loss of US $ 2.8 billion" (Human
Resources, July 29, 2010) [ii].

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Indian economy is also badly bitten by the inflationary bug. Even necessities of life have become
costlier for public at large. Average citizens find it difficult to save something for luxuries. Still
luxuries like cars, foreign tours etc are being sold at rates that envy other economies of the world.
But this is a fact of urban India only, where black marketing and corruption is rampant. Corrupt
politician and business people make ugly display of their wealth.
There is no doubt that Indian economy is growing, but this growth is lopsided. The required growth
in infrastructural sector is lagging behind. This has created a real bottleneck for long term growth
and economic expansion. This information is necessary for Western MNCs to decide about their
target sector as well the type of market available in India for their products and services. India is a
free economy and taking advantage of this, many Western MNCs are also raising part of their
capital investment from India itself.
BPO business brought in by multinationals in India succeeded because the MNCs exploited the
conditions to best of their advantage. The shortage of infrastructure for BPO business was a matter
of concern for MNCs. But MNCs found that building infrastructure in India is much cheaper than
developing the same in western countries. India is a developing country with huge populations.
Naturally the availability of educated labor force at lower prices was a distinct advantage that
MNCs exploited to enhance their overall profitability. Indian young population has proved to be
more hospitable and courteous than their counterparts in Western countries. Educated young
people have a lot of command in English language making it very easy and economical to get the
customer convinced about the product being marketed by BPOs. The result is that BPO business
in India has become not only a profitable for MNCs, but a bread earner for thousands and lakhs of
its staff without pressing government resources.
Changes adopted by international firms to serve customers in India
Adoption with local conditions or changing of business rules provide international business to
grow firmly. Western multinationals have taken many rational and objective decisions keeping in
view marketing and other conditions prevalent in India. Changes in business style are necessary
as the risks in the international business are not the same as in domestic markets. Some of changes
adopted by Western MNCs to serve their Indian customers are discussed hereunder.
Organized Retailing and direct marketing in India
Barring exceptions like Bata stores and few others, retailing in India so far has been fragmented
and not organized. Organized retail stores and trendy chain stores to catch the young customer is
be one of the major changes brought in India by Western MNCs to serve and attract their
customers. Though the trend is same as in western countries, but organization style has changed.
Family owned businesses are being attracted to own retail stores and develop a chain of stores as
franchisee or under other arrangements with MNCs. A few successful examples are McDonalds,
Levis Strauss and others.
Organized retailing is growing in India. With the results manufacturers are losing their positions.
Even local brands like Pantloons and Shoppers Stop are offering competitions to manufacturers'
owned stores. An organized franchisee style of retailing has ushered. It is also seen that family

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owned businesses seek franchisees of western MNCs. Many multinationals are entering Indian
market through partnerships with local giants in the organized retail sector.
Direct marketing is another change brought in by the MNCs. Earlier joint venture technique of
marketing has changed to direct marketing. Products are not being sold on agency basis. Goods
are not manufactured but traded by MNCs in chain stores either owned by them or their
franchisees. Earlier the trend was to find low cost manufacturing location in India for producing
goods in India, and then marketing the goods by entering into joint venture agreements with local
giants. No doubt MNCs are still benefitting from low cost production, but the trend has changed
to offer the products and services directly to customers.
Creating products to serve Indian markets
One of the major changes that western MNCs have made is the introduction of products and
services that suits Indian style of consumption. "This means not only developing affordable
products and services that deliver value to the customer, but also finding right kind of distribution
channels and designing credit systems to permit the access of the poor to financial services."
(Michael John Baker and Susan Hurt, 2007) [iii] In fact MNCs are taking full advantage of
availably of large number of engineers, technicians, and other experts to introduce products as per
Indian tastes of consumptions. Take the case of US Pizza Hut selling pizzas through its outlets in
India. "What they have brought to India is not an American style pizza but a way of serving food
in a nice, clean, bright place at a price an ordinary family can afford. But the food they serve is
what Indians like. In many cities in India, Domino's offers a 100 percent vegetarian pizza, cooked
in a separate kitchen where no meat items are allowed." (Subash C. Jain, 2003) [iv]
In fact marketing style the product has also changed by Western MNCs. For example creating
small packs with simple designs and less volume at affordable prices will not only boost sale but
also create brand awareness among a particular section of consumers. Introduction of financing
schemes with marketing of products create an urge to buy among those who cannot afford the
goods temporarily. This is certainly not unethical if the interest rates are reasonable. This is
because reasonability is the basic rule of marketing.
Another marketing idea floated by MNCs is to provide products and services on rental or lease
basis instead of making a direct sale. This may take shape of hire- purchase sale or simple renting
if the consumer does not want to purchase the product.

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Conclusion
Indian market has peculiar characteristics. Owning family business is still the rage in Indian society
that is multi linguistic with Hindi or English as link language. Inflation is very high and the
conditions in India always remain political charged. Abundant educated labor force is available at
reasonably cheaper wages. Corrupted people flaunt the use of money in an ugly way. Under such
circumstances different democratically elected Indian governments created liberalized conditions
for MNCs and other foreign investors to enter the Indian market. Businesses like BPO units
succeeded immensely in India. Foreign investments also established varied businesses for their
customers in India. For satisfying customers in India, these MNCs made concessions and changes
in their traditional style of operations. Direct marketing and organized retailing are the major
changes brought in by MNCs to satisfy their Indian clientele. Products also changed to suite Indian
tastes of consumptions. Leasing and hire- purchase selling have become style of MNCs to satisfy
their customers in India.

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Reference
1. http://www.doingbusiness.org
2. https://www.ukessays.com/essays/commerce/impact-of-international-business-in-india-
commerce-essay.php
3. http://www.expert-market.com/export-business-ideas-opportunity-scope-in-india-steps-
basics-about-export-business/
4. https://99businessideas.com/top-10-import-export-investment-opportunity-in-india/

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