Monday, August 22, 2016

Battle between two MNCs – a result of massive cultural fallout or improper business practices?

Sometimes your legacy just catches up with you and bites you in the back. That’s when you realise how important it is to steep yourself in modern business practices and imbibe progressive thinking and articulation. In India we need to work on both, be it getting rid of unscrupulous work ethics or of a lackadaisical attitude that leads to unusual delays in decision making. Often it gets reflected as our work culture and hence the widespread stereotypes about our work demeanour.

We have been witness to the fallout between Walmart and Bharti Retail, the former from USA, as a result of corrupt practices of senior Indian officials working for the Joint venture. Both the companies are a part of two extremely huge organisations excelling in their respective sectors, Bharti in Telecom and Walmart in Retail.

The ongoing feud between Tata Sons and NTT DoCoMo, is proving to be a matter of serious concern and very soon will be served hot as a case study in business schools across India and Japan.

What went wrong?

Japan is a strategic investor in many Tata firms and in India. In fact it is the fourth largest investor in India and Japanese companies have invested $18.81 billion in India between April 2000 and June 2015. In October 2007 the marriage was sanctified between Tata Teleservices Limited (TTSL) and NTT DoCoMo, with DoCoMo picking up 26.5% for around $ 2.7 billion. By 2013 problems started to surface with TTSL failing to meet performance milestones and thereafter DoCoMo initiated its exit strategy. The safety clause which was a part of the initial contract for DoCoMo was dishonoured by TTSL, with the company’s stating that FEMA (Foreign exchange Management Act) rules had changed. This prompted DoCoMo to file for international arbitration in London Court. The case is now subjudice in Delhi High Court.

Ramifications of the fallout

The battle has gone ugly and very public. Journalists are having a field day reporting about it. Japan has already become wary of investing in India especially via Tata. The recent case of Japanese tech investment behemoth, SoftBank choosing Bharti Airtel over Tata Sons as it’s ally in India proves the point. But worse will be the ramifications on India as a place for MNCs parking themselves and for countries investing their dollars in. Maybe this case too will blow over and remain in business history books as just another JV breakdown, but we know the rot runs deep. And its high time Indian companies stopped procrastinating and worked in the now towards adoption of better management practices so as not to lose billions in settlements and litigations. Remember India still does not allow class action suits against companies. The day that law makes it’s entry, consumers can drag every erring company to court. Ask Volkswagen how much they suffered in USA, all for a small software glitch!

Ms. Monica Mor
Sr. Faculty, INLEAD

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