Content area
Full text
Introduction
India and China are the two fastest growing economies. Even during the economic slowdown of (2009-2011), India has grown at 7.2 per cent vs 2.5 per cent global average and is slated to overtake China by 2030. India’s economy among emerging markets is attracting large multi-national corporations (MNCs) to set up operations, involving large foreign direct investment inflows. According to Khanna et al. (2005), MNCs must invest in emerging markets in order to remain competitive. It thus becomes imperative for managers of these MNCs to understand the business situation and people practices prevailing in India if they are to succeed in doing business here (Budhwar and Varma, 2010).
As MNCs enter India they realize that the key to success is in localizing products and operations to suit Indian requirements, either through wholly owned subsidiaries, or via joint ventures with Indian partners. While commerce, technology and trade practices are breaking down physical barriers, cultural issues are emerging as the new barriers for business. Cultural barriers are like icebergs that can cause collisions during business transactions.
With India’s multicultural, multilinguistic and multireligious mix of human capital, established Western or Eastern management models would not work here effectively without local adaptations. The working language in corporate India is English but that does not presuppose effective communications. English-speaking population does not automatically ensure successful business collaborations. Vast differences in communication styles could create hurdles and resultant business failures.
Given the increasing global importance of Indian markets, the present research was undertaken to explore how MNCs can deal with cross-cultural challenges while doing business in India with special reference to management of human resources (HR).
Challenges of doing business in India for MNCs
A Goldman Sachs report (see Wilson and Purushothaman, 2003) forecasted that by 2050, BRIC economies (Brazil, Russia, India and China) could collectively outgrow economies of G-6 countries (the USA, Japan, the UK, Germany, France and Italy).
India is an emerging market and the challenges that businesses face here are an integral part of any such economy. Khanna and Palepu (2010) in defining emerging markets argue that a high growth rate of a country’s gross domestic product does not make it a developed economy as emerging markets operate differently in comparison to developed ones. Emerging markets have...