Dr Gupta suggests that going for a JV or acquiring an American, European or any other strong foreign brand is one of the best ways to enter China, especially for Indian companies.
Chinese costs are rising for two reasons – a steep hike in wages and a rising currency. Over the next decade or more, I see both trends continuing. As a consequence of the one-child policy, China’s labour pool is shrinking; thus, wages have nowhere to go but up. Similarly, even with a slowdown, I expect China’s economy to keep growing faster in the next decade or more. After the US, Europe and Japan, in the long run, we should also expect China’s currency to get stronger.
Both of the above trends are leading MNCs to shift labour-intensive manufacturing out of China to places such as Vietnam, Bangladesh, Indonesia and India. The speed of shift depends on two factors: how labour intensive the manufacturing is and how much does the MNC depend on the Chinese market. If the Chinese market is important, the MNC is likely to keep manufacturing in China. It may either shift to a lower cost inland location or go heavily for automation.
Large Indian corporates such as the Tata Group, Mahindra, Reliance Industries and others are comfortable in working with Chinese state-owned enterprises (SOEs). It is important to remember that alliances even between two purely private sector companies are always a mixed motive game. There is an element of collaboration but also an element of competition. Thus, even when an Indian company (for instance, Wipro) collaborates with a highly reputed Western company such as GE, one has to watch one’s back.
Just as with any other potential partner, when collaborating with a Chinese SOE, it is critical for the Indian company to understand what’s driving the Chinese company to work on the deal. Chinese partners respect due diligence and pragmatism. So, there is no reason for an Indian company to shy away from asking all relevant questions.
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Dr. Anil K Gupta
Dr. Anil K Gupta outlines how companies can leverage the market and the resource opportunities presented by the China and India phenomenon to achieve global dominance within their particular industries. He also talks about the key questions that business leaders must address in order to develop winning strategies to go global and to transform global presence into global advantage.
Dr. Anil Gupta’s book “Getting China and India Right” is the first strategic guide for multi-national corporations (MNCs) which are interested in expanding into both China and India. Gupta and Wang explain how many MNCs view China and India solely from the lens of off-shoring and cost-reduction, and how they focus their marketing strategies on only the top 5-10% of the population. This is a missed opportunity. China and India are the only two countries that constitute four realities that are strategically crucial for the global enterprises:
* Both are the fastest growing economies in the world. In recent years, China and India have accounted for over 25% of the growth in the world GDP
* Both are two of the world’s lowest cost platforms for both blue and white collar work
* Both are becoming hot beds of innovation to boost a company’s innovation capabilities
* Both are springboards for the emergence of new ambitious and highly capable global competitors (for instance, Tata Motors and Infosys Technologies in India, and BYD Auto and Huawei Technologies in China)