For companies seeking to enter the emerging market it is advisable to assess certain institutional aspects. In particular, the companies intending to establish businesses in foreign countries should look at political and social systems peculiar in the country, the openness of the economy, research product, labor and capital markets. This paper is an attempt to look at of Metro Cash & Carry (MCC) strategy of entering into the Indian market and to compare the actual entry to the entries into Russian and Chinese markets.
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As it follows from the MCC case, the company saw opportunities in China and India. However, to Russia the company came at the invitation of then Moscow mayor. It seems that the company did not see the opportunity in Russia: at least it is not clear whether the company would come to Russia had the Moscow mayor not invited it. The main opportunity which MCC saw in China was the ongoing liberalization of the economy. Among the opportunities found in India were: economic growth, urban migration, improving living standards, and Westernization of certain practices and habits. In Russia the main challenges for the company were distances among major cities, poor infrastructure and projects for the decline of the Russian population. In China the main challenges were: competition with other large international retailers, completely different culture, and increasing land prices. In India the major challenge was negative public perception and competition. It seems that the most successful entry was the entry into the Russian market. The least successful entry was the entry into the Indian market.
The different experiences in Russia, China and India can be explained by differences in political systems and markets. In general China is not considered to be a democracy, and there are a lot of concerns about democracy in Russia. India seems to be, at the first glance, the most democratic among the three countries. Normally, democracy is a positive sign for investors. In Russia MCC did not encounter significant bureaucratic difficulties. In China MCC had to build special relationships with central and local public officers to succeed. However, in India bureaucracy became one of the major challenges at the point of market entry. Thus, the construction of the Golden Quadrilateral Highway was two years behind the schedule due to delays with land authorizations. This example clearly shows that democracy does not necessarily mean less bureaucracy. Therefore, while company enters the emerging market it should look not only to how power is distributed and whether officials are elected, but also properly assess the procedures which should be completed to launch a new enterprise. At this point, we come to the issue of openness. In Russia MCC did not face any restrictions, in terms of its foreign investment. In China, the MCC had to establish a joint venture with a state-owned company. At the first glance, in India there also were no any restrictions in terms of foreign investment. However, there were serious restrictions on the products the company could sell. Thus, MCC could not sell many agricultural products by virtue of local laws and regulations. In a word, among the three countries, India is less open since it imposes vary serious restrictions on trade.
Furthermore, it seems that while assessing product market and labor market the company made certain misjudgments. It is true that MCC expected that there would be some kind of resistance to a “westerner”. However, the company failed to predict the scale of such resistance. In particular, MCC did not give an appropriate consideration to the food delivery traditions in the country. It is the breach of these traditions that caused the outbreak of the campaign against the company. In simple terms MCC failed to see the importance of traditions in Indian society and this failure then lead to company’s incorrect view of the Indian product market. As far as the labor market is concerned, the company relied on the assumption that in India people are doing business in the English language since it one of the official languages. However, at the level of local communities it is not a case. Lack of common language means lack of proper communication. The latter is a serious obstacle in resolving conflict situations. In a word, for its failure to properly assess the product market and labor market MCC had such serious problems in addressing the resistance to its operation.
The analysis of the MCC’s entry into the Indian market shows that the entry strategy had significant drawbacks. As it has been mentioned before, MCC failed to acknowledge the important role of traditions in Indian society. Things could be better if MCC had opened its first store in, an area which is less traditional than Bangalore. For instance, MCC could open its first store in New Delhi or its outskirts. This decision, seems more wise with a view that New Delhi is not only less traditional, but also English language is more in use there than in Bangalore. Finally, New Delhi is close to central authorities, and thus, it would be easier for MCC with the support of central powers to deal with any kind of resistance from the local New Delhi authorities.
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