Strategically Analyzing Why India Has Failed To Produce Global Companies

Strategically Analyzing Why India Has Failed To Produce Global Companies Like Google, Facebook, Twitter, Linkedin And Amazon

The past two decades World has seen a massive technology boom which was further enhanced in the latter period of the last decade when the world saw massive digitization. These two decades gave rise to companies like Google, Facebook, Twitter, LinkedIN, Amazon and several others which have taken over the world by a storm and have become leaders in the business innovation all over the world. All these companies are famous for the business strategies adopted by them.

If we look at the countries where these companies originate from, a trend is very much visible which most of us agree to. Most of the companies which are known for innovative products originate from western nations. Forbes List of World’s Most Innovative Companies also give the similar trend. The summary of the Forbes’ list is given below:

There is a clear business innovation leadership seen in USA followed by Japan. India seems more like a follower from the above stats. Similar trend is also visible in several other reports. For e.g. a research report provided by Business Insider showing the 15 most innovative companies of all times, doesn’t have any company from India. “top100innovators.com” also tells the same story. According to top100innovators.com, there is not even a single Indian company which is there in world’s most innovative category.

Looking at these trends, questions arise –

• “Why there Indian companies are not considered as the most innovative of all?” or
• “Why Indian companies are unable to provide innovative solutions the way companies from Japan and USA are providing?” or
• “Why has India failed to produce companies like Google, Microsoft, Facebook, Twitter, etc.?”

Now all these companies – Google, Microsoft, Facebook and Twitter, which were able to come in the limelight in the last decade, are from United Sates of America. A few other major innovations like WhatsApp Messenger, iPhone, iPod, Kindle, etc, which completely revolutionized the lifestyle of people, also came from USA. All this data is also in sync with the reports of Forbes and other agencies. Going by these trends it seems as if innovative companies are a direct result of the country from which they originate.

But, such kind of direct conclusion just based on the geographical location would be incomplete and will lead us to miss out on a large number of hidden answers. Now to look for those hidden answers a careful analysis needs to be done. For that, let’s look at the comparative study of USA and India.

	USA	India
Population	31,39,00,000	1,23,70,00,000
GDP	$ 1,56,80,00,00,00,000	$ 18,42,00,00,00,000
Per capita GDP	$ 49952.21408	$ 1489.0865

Sources include: United States Census Bureau, World Bank

The above data simply show us that India’s population is almost 4 times as high as that of USA’s population and also that this huge number of citizens can in some way contribute to India’s growth. However, that isn’t happening. The GDP story shows entirely opposite angle. USA’s GDP is almost 8.5 times as high as that of India’s GDP. The result of both these stats has a direct impact on per-capita GDP. USA’s per capita is almost 33.5 times as high as that of India’s per capita GDP.

Just imagine a person who gets around $50000 per annum and another person who gets around $1500 per annum. How different the lifestyle of both these persons is going to be. The income earned by the people is one of the major determinants of the Standard of Living people. Moreover, the number of people living below international poverty line is almost 33% as per the World Bank and almost 67% of India’s population is earning less than $2 per day.

All these factors combined lead to a low level of average standard of Living in India. A number of Indians are working to improve their living standards and some are living just to sustain it. If a person is unable to have a healthy life then it’s difficult for him or her to think of investing his ideas somewhere else. This fact is one of the direct causes leading to a very less number of companies like Facebook to start in India.

The ones, who move ahead of the barrier created by the living conditions, and the ones, who intend to sail past it, find another obstacle which hampers their business plans. According to FindTheBest, the number of procedures required to register a business in USA is 6 as compared to 12 in India. Difficulty in incorporation of company in India is evident from the number of procedures required to register a business. It is almost twice as difficult to register in India as in USA. There is also a dearth of venture capitalists in India who are willing to invest in a risky business as compares to those in USA. Due to lack of funds many wonderful ideas are not able to hatch and stay grounded and die off or are started by someone else in some other country. The overall poor experience to initiate a business has become a major weakness in achieving more number of innovative companies in India.

Nonetheless Indians have been able to achieve ground breaking advancement in the field of IT and Technology. The internet penetration in India is almost 16.7% and that of USA is 65.94%. The percent value seems very less for India but in absolute numbers it’s comparable to that of USA. India internet population is around 200 million whereas USA’s internet population is around 207 million. India is also projected to move ahead of USA in terms of internet population by end of 2014 and reach the number two spot just behind China.

This high number of internet population and trainings in IT led to the rise of Indian IT industry in the last two decades. A number of jobs started pouring in from all over the world to India. This gave rise to Indian software giants like TCS, Infosys and Wipro. TCS and Infosys are two of those three companies which featured in the Forbes list of 100 most innovative companies. According to business analysts, all three of these companies have excellent project management techniques.

A huge number of start ups have been coming up in Indian cities followed by this IT boom. Some of the best examples of such companies are Flipkart, Myntra, Jabong, HomeShop18 and Indiatimes Shopping. A number of business analysts have forecasted these new companies as the future tech giants in India’s digital market. All these companies started their operations by reaping out the benefits provided by the Internet boom in Indian market. The business analysis of a few rising Indian digital companies is given below:

The above chart shows the number of unique visitors to these websites. The year on year rise in these users is also remarkable. Myntra, Indiatimes, Jabong and HomeShop18 have more than 100% increase. Flipkart grew by almost 77% and it has the highest per/user engagement level. On an average a visitor spends 16.2 minutes on Flipkart.com which is much higher than any of the above mentioned sites and even more than Amazon sites. The very next company in the user engagement level is Snapdeal.com which enjoys around 7 minutes per user.

But then a question still remains. If so many start ups are coming up in India then why are they not reaching the top positions similar to that of Tech Giants like Microsoft, Google and Facebook. No wonder these Indian companies have adopted good marketing strategies and have been able to channelize their efforts in the right direction. According to several analysts and consulting firms, many of these Indian companies are replicating entire business process used in the companies in USA. Not just the business idea or objective but entire business strategy and business management techniques have been picked up and implemented directly. Even the knowledge management concept in Indian IT companies came from the overall Information management trend started in USA and Japan.

To answer the above question, let me quote an example of a boy who sells Cream rolls at New Delhi Railway station. Daily this boy goes to a wholesaler near railway station and buys 120 cream rolls at a cost of Rs. 2.50 and sells them outside the rail station at a price of Rs.5.00. Every day he is able to sell just that many cream rolls and earn a decent earning on investment after deducting his daily meal cost and travel costs. But this boy is doing the same thing for the last three years and is not able to scale up his sales nor is he able to start selling something else. Three years back this boy started a very nice initiative which gave him good start profits. This boy has all the required work experience in this domain and has understood all the strengths and weaknesses associated with his work. There could be a reason that he is unable to understand any opportunity to fetch or maybe he is very much afraid by the threats of expanding which has kept him from expanding. If above factors are taken to be true then the SWOT done by the boy is not complete in which he could have missed out on the opportunities outside his own business. One reason behind this slow growth or in fact no growth could be the lack of a sense of urgency in scaling. This lack of urgency to gain as much as possible without getting satisfied in between is missing. The boy got satisfied with his daily earning and hence stopped looking at the opportunities which he could have got by investing in other option. Similar way various start-ups which initially are very aggressive in their growth slowly become stagnant and have a slow global growth.

There is another aspect to the above mentioned points. India has a huge domestic potential which lead to a huge amount of local consumption of goods and services produced by these companies. Due to this huge and at times untapped domestic market various companies have not been looking at the global opportunities. For an instance, when I traveled to markets like Karol Bagh or Lajpat Nagar in Delhi, I could see a lot of businesses which had turnover of more than a million INR but still these businesses have no major innovative aspect associated with them. It’s not that these businesses are not expanding; they are investing and expanding aggressively. However at the same time, India’s internal demand is rising which proves to be a prospective market for these companies. The owners of these shops and businesses are so much involved in the daily operations and increasing demand that all their time gets occupied in that. They hardly get an opportunity to innovate any new thing because they don’t find any reason to do that. They are well established and earning a good amount of money from domestic buyers.

Another reason which is also the one of the most important reason behind the lack of good innovative companies in India lies in the Indian Education System. Indian Education revolves a lot around the theoretical concepts with very less focus on the practical aspects of those concepts. Many theories state that a kid has the most innovative mind and this is the stage when India’s education system comes into play and gradually lead to a slow conversion of that innovative mind to a more mechanical mind. Let’s look at a kid who is studying in 8th standard in a primary school and loves to study science and computers. He doesn’t like other subjects like social science and languages. He won a lot of science competitions and keeps creating technically new things. This boy couldn’t score good marks in social science subject and was failed by the school authorities. He again failed in the 9th for scoring less marks in social science and languages but scored excellent marks in science. This is the stage when the traditional Indian education system doesn’t help out by providing custom courses for students like him in which students could study those subjects in which they are good at and hone their skills. India’s education gives a lot of focus on the marks obtained than the skills gained by a student. It’s almost impossible for a kid to follow his/her passion of doing some other activity in which he/she is really good at rather than studying quant in classes. This situation is almost opposite in the case of USA where a student is helped and mentored in nurturing the skills in which he is good at.

Most Of The Product And Service Trends We See In India Today Have Been Brought In The Western Nations Much Before And Indians Pick Those Trends

Indian market has also been a follower market. It doesn’t mean that Indians by nature are followers but it simply means that most of the product and service trends we see in India today have been brought in the western nations much before and Indians pick those trends which had got famous outside. Indians tend to appreciate a thing once it gets famous internationally. Be it Flipkart or Myntra, both have followed the concept of eCommerce which was introduced internationally much before and excelled by companies like Amazon and eBay.

However, Indian scenario is changing drastically and is accepting the new era of Digitization. Internet penetration is more than 65% and Smartphone penetration is almost 13%. Both these figures are expected to increase at a rapid rate leading to more skilled and smarter citizens.

Conclusion:

The fact that India has not been able to produce companies like Facebook and Google is dependent on a number of factors which range from per-capita income, standard of living and education system to the lack of venture capitalists and the presence of very high number of procedures in business registration. The data analysis shows that the lack of sense of urgency in business scaling and Indian domestic market also plays an important role in that.

In spite of these challenges, Indian IT industry has been able to move out of the shackles and prove itself at a global level. Flipkart is another example which proves the same thing. On an overall scale, we can describe that India has overcome a lot of threats by replicating good business management processes and business strategies from successful US companies and now after achieving an initial success, these companies can avail the benefits of the achieved strengths and look at a lot of opportunities available by exploring and innovative from Indian aspect.

Although, India has not been able to produce companies like Facebook and Google till now, but it’s very likely that in future the trend could be seen to take a different path. The companies which we saw as following the innovative trends could be seen as creating new paths of innovation and leading those paths.

By Tarun Gupta