The MNC dilemma: eastern efficacy vs western efficiency
Illustratively, in 1967, Hindustan Lever contributed little to the global profits and market capitalisation of parent Unilever. Nowadays, the Indian company now renamed Hindustan Unilever accounts for about 25-30 percent of the group's global profits, and more importantly, 40-50 percent of its global market capitalisation. India is a key market for many MNCs like PepsiCo, Coca-Cola, Castrol, Suzuki Motor and Nestlé.
MNCs face four dilemmas. First, should the business be geography-supreme (local leadership driven) or product-supreme (global leaders driven)? Second, if the subsidiary has Indian shareholding, how should governance be adapted? Third, how can the parent develop a dependable Indian management cadre that delivers its strategies? Fourth, and very importantly, since the parent company is usually a listed entity with performance pressures from an impatient main board, how can a balance be achieved?
During the 1970s, there was much debate about how international operations should be organised. Will an MNC succeed by rapidly transferring a well-established product across geographies (product-supreme), or is success achieved by an adapted product with a focus on local needs (geographysupreme)? Does India merit a structure different from other countries? The answers vary by domain and company.
Procter & Gamble was a late globaliser that achieved success by a product-supreme approach. Nestlé's expatriate CEO and global organisation felt challenged by the Maggi noodles crisis until the company was headed by an Indian national. Unilever was an early globaliser and succeeded through a geography-supreme approach.
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