Testing the tenacity of multinationals

What do Citigroup, Harley-Davidson, Ford, General Motors, Vodafone and Walmart have in common? Well, of course, they’re among the top multinational brands that have either broken links with India or have come close to it at some point as the going got tough. While Citi, Harley, Ford and General Motors made an exit from their core businesses in the country, Vodafone and Walmart stayed on despite many challenges. Their journey not only tells a story about multinational companies’ (MNCs’) tightrope walk in India vis-à-vis policies and regulatory environment, but also about each brand’s unique business need and tenacity.

Exiting from India is mostly part of the global strategy of the marquee firms to put their energies into more lucrative projects and deal with easier markets. In that backdrop, what makes some of the least likely names to survive the uncertainties of the India market?          

While announcing Axis Bank’s acquisition of Citi’s consumer business for Rs 12,325 crore recently, the New York-headquartered group said it was exiting the retail business in 13 markets to conserve capital and focus on higher-yielding revenue streams. Citigroup chief executive officer Jane Fraser said in a statement that the bank would focus on four wealth centres—Singapore, Hong Kong, the UAE and London. In the 13 markets that Citi is leaving, Ms Fraser believes the necessary scale required to compete is missing. With that, the bank that claims it never sleeps has largely ended the India story which had begun way back in 1902.

The motown departures—General Motors, Ford and Harley-Davidson, among others—have also been led by global market strategies, but losses and high tax regime in India hastened the exits. Milwaukee-based Harley-Davidson announced a few months after the Covid-19 pandemic struck that it had decided to exit India. It had sold only 100 motorcycles from April to June 2020 in the country, though the slowdown had begun earlier. Having entered India in 2009, the American major left the country in about a decade. Things had turned political towards the end with then US president Donald Trump criticising India’s high import tariff on Harley-Davidson and calling it unacceptable.

However, when the company decided to leave the world’s largest motorcycle market in 2020, Harley-Davidson said it was part of “The Rewire” strategy to focus on the 50 most profitable markets, mainly covering Europe, China and the US. The company cut down its global portfolio by around 30 per cent at the time of exiting India. When Detroit-headquartered General Motors took the stand to exit India after a stint lasting two decades, it was part of a multi-nation strategy as well to get out of non-profitable operations. The decision affected India, Russia and some European regions. Another American auto major, Ford, attributed its decision to leave India to accumulated losses, persistent industry over-capacity and the lack of expected growth. The company’s second coming in India didn’t last very long. In about 25 years, the Dearborn (Michigan)-based car firm called it a day. Dominance of Japanese and Korean car makers is often seen as a reason for other auto majors’ exit from the India market.

Even so, some others have decided to wait it out and that’s not true only for the auto sector. Bentonville-headquartered Walmart is one such example. It entered India in 2007 in the hope of setting up multi-brand stores, but had to settle for cash-and-carry (wholesale) format along with Bharti group as a joint venture (JV) partner due to policy constraints. Even when 51 per cent foreign direct investment (FDI) was permitted subsequently, the company found the policy conditions prohibitive. As the indefinite wait for multi-brand retail proved futile, the JV broke. Yet, Walmart continued on its own as a cash-and-carry player, where 100 per cent FDI is allowed. The big move by Walmart, however, came in 2018 when it acquired a majority in e-commerce major Flipkart in a $16-billion deal. The American retail firm has left many international markets in the last few years, including Japan, Britain, Argentina and South Korea, but waited it out in India, changed streams and also invested heavily in the market. Some foreign retailers, which had come around the same time as Walmart, have left India. French firm Carrefour, for example, while UK’s Tesco has far from a significant presence in India.

Telecom major Vodafone is the latest among MNCs to have been almost written off by industry watchers. The promoters of the Berkshire-headquartered telco had maintained they would not put in good money after bad until the government gives a relief package. Finally, the government did offer a package fearing a duopoly in the telecom market, and the rest, as they say, is history. Vodafone, with challenges ranging from retrospective tax demand raised by the government to accumulated dues linked to adjusted gross revenue in a disrupted market, went almost bankrupt in India. The telco exited other markets including Japan, US, Egypt and New Zealand, while waiting it out in India as it saw good prospects in the country. Like Walmart and many others, despite the odds.