Pictures Can Be Deceiving: China and India
   2013-03-11 09:27:55      Web Editor: Yang Yang

By Stuart Wiggin

Dr. Anil Gupta, the Michael Dingman Chair in Global Strategy and Entrepreneurship at the Robert Smith School of Business, is widely regarded as one of the world's leading experts on strategy and globalization, and has a unique insight into China and India from an economic perspective. His 2009 publication, co-authored with Haiyan Wang, won the Axiom Book Awards' Silver Prize for Best Book in Globalization/International Business in 2010 and his talks attract a diverse range of professionals who are keen for his authoritative view on China and India as emerging markets. CHINATALKS recently caught up with Dr. Gupta to talk about the possibility of multinationals ignoring emerging markets, such as China and India, and look at the question of whether China and India's political systems help or hinder market access.

India and China, though vastly different in their forms of political systems, are two of the world's leading emerging markets. By the end of this decade, it is believed that India and China will be among the four biggest economies in the world. Dr. Gupta has long stated that companies ignore the emergence of China and India at their peril. However, when speaking to CHINATALKS, Dr. Gupta pointed out that he does not believe that companies truly ignore emerging markets, asserting instead that some companies, for whatever reason, are rather too preoccupied with earlier strategies.

In outlining his thoughts, Dr. Gupta provided an analogy related to Microsoft, stating that the tech giant "was never blind to the internet, but it was so stuck in its earlier strategy of the PC on the desktop that it never really pursued the market opportunities and the market shifts that the internet was bringing, with the same gusto, with the same understanding, with the same insight, with the same commitment. And the same thing I would say is true for a lot of [companies], even the big Western giants, vis-ид-vis emerging markets."

As for why certain companies can be big in the US or Europe, and in contrast have very little market presence in emerging markets such as India or China, Dr. Gupta noted that it also comes down to a question of internal politics within companies; pointing out that power rests with senior executives who possess vastly different backgrounds. Their life backgrounds will ultimately inform their business decisions, which will in turn impact their level of understanding in relation to certain markets. "Are they willing to move to Shanghai or Bangalore and actually live and work out of there?" Dr. Gupta asked, adding, "If they are not, if they say, 'why do I need to move to Hong Kong? I can travel to China many times a year,' but if you live in Hong Kong, how much [one] understands China after two years is going to different than if you travel [back and forth] from Paris." What it all boils down to, according to Dr. Gupta, is the senior executives' depth of insight, "Because if you're trying to manage China or India from 10 thousand miles away, your insights are going to be weak and your actions are going to be weak."

When asked about the impact that the differing political systems have upon the ease of access to markets in China and India, Dr. Gupta affirmed that the political systems themselves do not get in the way all that much, but admitted that the country's individual governments may sometimes have an impact upon the state of the market. "I think it's a question of the governments in China and India; they have made different decisions so far about which sectors of the economy to open up. So, for example, in China, overall China is actually more open to multinationals than India is. But the overall picture can be deceiving."

In an attempt to make sense of such a deceiving picture, Dr. Gupta rightly points out that foreign companies are effectively locked out from competing in the internet services business in China, citing Google, Youtube, Facebook and Twitter as prime examples. In contrast, India's internet services market is open with "virtually no restrictions". Dr. Gupta continued by indicating that, "The retail industry in China is a whole lot more open to multinationals than the retail industry in India. On the other hand, foreign companies cannot have more than 50% ownership in the auto sector in China. In India, you can have 100% ownership." Ultimately, certain industries are more open than others in both countries; a fact that has very little to do with the political system itself.


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