Ford India Ltd managing director David Friedman has said an intimidating image of India among foreign nations blocked the flow of FDI into the country.
Talking on 'Leading an MNC in India' at a forum organised by the Confederation of Indian Industry (Southern Region) in Chennai recently, Friedman said, "The FDI flow into India was affected as the outside world hear more about the persistent challenges to economic progress and modernisation than anything else."
"These challenges act as a deterrent to India's image as a country that welcomes the business community from the outside world," he said.
"Excessive regulation, governance issues and corruption act as obstacles. Inadequate infrastructure, high taxes and unfriendliness to success, and fear of competition prevent many from setting up shop here in India. The insular, inward looking socialist ideology that looks at capitalists as villains, does not attract FDI," Friedman said.
He said it was market potential, availability of skilled and educated workforce flexible production capabilities to meet low breakdown values that made Ford choose India as a production hub.
He said, during its seven years of its operations in India, Ford has learnt that it needed better leadership to overcome logistical and administrative impediments.
"The powers that be can stop any project if they feel so! As a leader, I have learnt that it is better to use third party experts especially in logistics management," he said.
The Ford managing director said the company's entry strategies were short-lived. "As the company adapted certain practices and understood the intricacies of the country, it learnt to say 'no' to corruption, " Friedman said.
"We also learnt to modify our car designs for the Indian roads. We understood that the Indian customer looks for the lowest maintenance cost. That's why both Ikon and Indica, the only two cars designed for the Indian market, are successful," he said.
Indian consumers who are exposed to international standards expect a lot and it makes it absolutely essential for the car manufacturer to upgrade the existing design and bring in new models. "In 2002, the consumers in India expect international standards but they are also very conscious of the affordability factor. This is a major challenge for us," Friedman said.
"As we have no unlimited resources from our parent body, it is a constant challenge to be self sufficient as quickly as possible. So, we have been cutting non-value added fixed costs and overheads, and continuously improving the mindset. We are moving ahead by forming local strategic alliances and bringing in cost- based expertise," he said.
All the multi national companies who made headway to India in the early nineties to lure the "large middle class market" burnt their fingers in no time, as the burgeoning middle class refused to change their cultural preferences and start consuming the western way. Ford also learnt the truth the hard way. Now, it has realised that the company would not survive if it depended only on the Indian domestic market. So, it has changed its corporate strategy to leverage Indian capabilities or the local operations to the advantage of their worldwide operations.
From business processing in 1998 and vehicle exports in kit form in 2000, it moved to software development in 2001 and engineering development in 2002. Now Ford Ikons made in India are exported to countries like South Africa, Mexico etc. The next in the agenda is exporting components in 2003.
