5.

1 ANALYSIS
5.1.1 Challenges of Doing Business in India for MNCs
India is a developing market, and the problems that firms experience in such a market are a natural part
of the process. In defining emerging markets, Khanna and Palepu (2010) argue that a high GDP growth
rate does not constitute a country a developed economy since emerging markets behave differently
from developed economies. Emerging markets have "institutional gaps," which pose additional obstacles
and result in greater operational and transactional expenses. Institutional voids are defined as the lack
of specialised middlemen that bring a possible buyer and seller together to lower transaction costs.
Although institutional gaps can pose significant challenges for MNCs conducting business in emerging
markets such as India, Khanna et al. (2005) propose that MNCs first assess the “institutional contexts” of
the nations in which they plan to do business before developing strategies.

In developed markets, multinational corporations (MNCs) have a lot of expertise and reputation, but in
developing countries, domestic organisations outperform MNCs because they know the local market
and can recognise opportunities and dangers quickly. Domestic Indian firms, according to Pacek and
Thorniley, are formidable rivals for MNCs because they have bright, well-educated English-speaking
employees and enjoy the same benefits that locals have with government and local authorities (2009).

5.1.2 Cross-Cultural Issues in International Business

An organization's culture is made up of the values, ideas, and assumptions held by its members, and it
describes how they deal with external and internal influences (Schein, 1983; Hofstede, 2000; Kanungo,
2001). According to Soh et al. (2000), culture is the most important predictor of system-specific
modifications. In the context of the socioeconomic reality and culture of the nation in which the
company works, it also determines performance expectations, the prevailing environment, and HR
policies (Tayeb, 1987, 1994; Budhwar and Sparrow, 1997; Davenport, 2000; Kumar and van
Hillegersberg, 2000).

Lees and Khatri (2010) point out that some of these businesses who have created commercial alliances
with Indian organisations have various recurring issues that may be ascribed primarily to crosscultural
variations in business practises, based on their analysis of biotechnology companies (such as long time
spent in building relationships). They both believe that business connections are more essential to
Indians than contracts. Contracts deal with the law, whereas partnerships produce outcomes. When
outsiders focus disproportionately on rules/contracts, an Indian receives a message of lack of confidence
as a result of this attitude.

The current Indian administration, which was founded by the Bharatiya Janata Party in 2014, issued an
official circular in July 2014 from the Prime Minister's Office, requesting that ministers and bureaucrats
"prioritise" communication in Hindi rather than English (Chakraborty, 2014). Other great nations, like as
Russia, Germany, France, China, and Japan, have done similar things with their own national languages.
The adoption of Hindi as the national language may be interpreted as a rebirth of a self-assured India
emerging from its colonial past. This was clearly proved when India's Prime Minister delivered a rousing
speech in Hindi at the 69th United Nations General Assembly in New York City. Because the current BJP-
led government will be in power for a long time, certain multinationals with commercial and trade
interests may find increasing use of Hindi in official communication to be a challenge. MNCs must devise
methods to overcome their language deficits through a variety of mechanisms, as China, Germany, and
other countries have done.

India is a culturally varied country, and even inside its borders, there are huge variances within two
hours of flight time. As a result, any multinational wishing to flourish in India should look for cultural
commonalities in order to make conducting business easier. For example, the bulk of IT/ITES and
automotive manufacturing businesses such as Hyundai, BMW, Mercedes, and others are based in South
India, which has a lower Hindi speaking population. As a result, regional location assessments are critical
for both national and international organisations. People from all levels of IT/ITES businesses travel
internationally to customer sites and company headquarters. When compared to individuals in the
manufacturing sector, where production is comparatively less mobile or regional in character, this
mobility across sites minimises the work-related disparities or problems they face.

5.1.3 India Geographically and Culturally

Foreigners must realise that, while India is geographically a collection of four or five countries, it is
culturally a continent comparable to the European Union. India has evolved its own business practises
over time. In India, there are several challenges, making it necessary to interact with people and adapt.
India's social structure differs substantially from that of Western nations, in that Indian customers are
typically more price aware and want high-quality items.

5.1.4 Expatriate Issues

In comparison to other nations, India is one of the most challenging countries for expatriates and/or
their families to adjust to. According to one expat, Indians have a natural capacity to adjust to new
environments, but Europeans find life in India incredibly difficult. Despite the richness of Indian culture,
expats are hesitant to bring their families since the country is extremely demanding, and only a small
percentage of those who come will stay for more than five years. As a result, companies should only
send executives to India who can stay with their families for a lengthy amount of time. “Expatriates find
it incredibly hard to cope with India,” says Rahul Shinghal, Director, Mobile Business, APAC, Paypal.

5.1.5 Managing HR in A Cross-Cultural Context

How to handle HR in a foreign subsidiary is a big problem for businesses all over the world. According to
research, integrating management techniques from one's home nation in a foreign country is easier if
the two countries' cultural values are comparable, but difficult if they are not (Ramamoorthy and Carroll,
1998). The above analysis illustrates some of the critical cultural factors of conducting business in India
that any MNC should be aware of. According to Aparna Dutt Sharma, CEO of the India Brand Equity
Foundation, India has an abundance of competent individuals.

India has a huge demographic dividend and is on track to become the world's youngest country by 2020,
with 64% of its people in working age (Hindu, 17 April 2013). The country's distinct demographics will
have an impact on all HR procedures, which will need a grasp of Indian culture and the Indian mentality,
as well as the adaptation of Western best practises. Even the most well-known multinational
corporation must present itself as an employer of choice. MNCs must choose the UVP that an employee
would look for in them.
When MNCs come to India to do business, they must have a solid business plan in place, such as
researching talent availability in India in comparison to what they demand. As a result, the HR
department plays a critical role in the development and implementation of company strategy.
Multinationals entering India might use a lean approach to work by outsourcing regular operations such
as payroll and personnel evaluation to cut costs and improve productivity (such services are offered by
graduates from premier Indian institutes).