History of India

India is one of the countries in the world that cries of economic inefficiency, due to poor policies. While it is very clear that economic development mostly flourishes in mixed economies, the governments of India have been grappling with the problem of putting into place socialistic economic policies. These policies have affected the economy by hurting the majority of citizens as few individuals in the country benefit. Economic policies that aim at promoting local consumption and production prior to the 1990s have left the economy ailing. International firms were discouraged from getting to establish business in India as the environment was very unfriendly. The government was not in for supporting competition from international companies even as the local companies produced substandard products.

Economic system

Generally, capitalistic economic system is the most business friendly system that provides a good environment; this environment allows various types of business activities to prosper. However, India has adopted a lot of socialism in its economic system that has left multinational companies in very bad conditions. There is more of public ownership of properties in India due to the socialism that has gained root in the country. Most locally based firms are owned by government, leaving very few private owned companies. Multinational companies have to grapple with the tough existing conditions that do favor the local companies over the multinational companies. In order to deal with the economic system in India, Multinational companies have been forced to make strategic decisions that help them to survive. These companies have been forced to tailor their products to be specific to the conditions in India.

Corporate sponsorship is one of the ways that the multinational are using to ensure they remain relevant to the development of the locals in India. Companies like Coca Cola are also undertaking massive training programs to the locals on management and continued in-servicing to ensure that the locals employed in the company are able to stand above the task in providing managerial duties. This is in line with the requirement that the companies must have eighty five percent of their staff being locals. As much there is the existence of mixed economy in India, the private and foreign based companies operate at a disadvantage.

Most multinational companies operating in India do acknowledge that most of India's population is categorized as poor, living below a dollar per day. As such, the companies have to ensure that their products are tailored to meet the purchase power of this type of population. Through strategic management, most of the multinationals such as Coca-cola have been forced to come up with products in the smallest quantities so as to reach to the larger market and make huge profits.

Political System

The political system in India has greatly affected the management of multinationals in the country. The leadership of India has always had socialistic individuals who have been very aggressive in ensuring that their socialistic approach and view is taken up by the rest of the country. This can be traced all the way back from the time of Jawarhlal Nehru, the first Indian Prime Minister. The political class has forced the management of multinationals to be extra sensitive to the peoples demand. The activists and the peaceful demonstrations by Mahatma Gandhi is still ripe in the country and most politicians in the country use this mechanisms to ground operations of multinationals if they feel that these companies are not beneficial to the locals. In bid to avoid such scenarios, the multinationals have developed effective staff relations unit to ensure that workers are well taken care of internally.

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India has two legislative houses, the upper and the lower houses. These houses are very critical to passage of laws that govern the country and business laws are no exception. However, decision-making in India concerning major investments by multinationals must be vetted by both houses. This has created an unnecessary long process that discourages foreign investments. However, the existing multinationals have learned how to cope with this situation. The multinationals have been forced to set up powerful legal advisory department that deals with the legislative issues and facilitate timely initiation of investments proposals.

Social factors

The Karst system has remained to be an issue that has raised a lot of concern to the multinational companies. The karst system is discriminative to the lower classes in India as they are limited to various aspects including taking up of leadership roles in both organizations and politics. This kind of system denies the bigger part of the population to be left out, in form of business, politics and social issues. The large multinational companies such as Coca-Cola Company have tried to put up efforts to help wipe away the Karst system. Strategic management5 requires that objective-specific decisions and policies are taken to be able to boost both internal and external environment of the company. Multinationals such as Coca Cola acknowledge that without the economic development of its staff, service delivery is also affected negatively. As such the multinationals have put up measures that include creating awareness of the need to do aware with extreme socialistic cultures and the Karst system.

As far as strategic management of multinational companies is concerned, there is need for coordination between the various regional branches so as to facilitate minimization of costs and maximization of profits. Most of the multinationals in India find executing this function to be difficult. This is due to the requirement they are to meet of ensuring that majority of those working both at the managerial and subordinate levels are locals. The level of computer literacy and up-take of modern technologies in the country is still low, making the process of finding these personnel to be difficult. This has forced the companies to undertake training so as to have a qualified staff that will facilitate coordination between the various regional branches within and without India.

Legal system

The legal provisions in India are very difficult to work with as they in most cases favor the local based companies leaving the multinationals to be at a disadvantage. Only large corporations with massive financial strength can get into the Indian market and compete favorably with the locally based companies. For an international company to get license to operate in India, there are so many legal procedures that they are to follow which ends up buying time. The operational laws in India are also very unfriendly to the multinationals. The multinationals cannot wind up any time without having the permission from the government. The government will fight to the last man and provide loans to companies that seem to be heading towards collapse so as to keep them running. This is economically misadvised as such companies may not have any better chances of succeeding in the existing environment.

To deal with these legal bottlenecks, multinationals have been forced to come up with ways through which they can minimize the number of employees they have in the company. They also have put in place foresight departments to help them try and predict the future business environment to avoid being found off cuff by economic disasters e.g. high inflation of raw materials.


India is one of the countries in the word that has great potential of becoming an economic power house in the world. This can however be only achieved if the country changes its economic policies and the social set up that is based on the Karst system. The country needs to abolish this discriminative social set up and embrace competitive economic system. With such changes in place, entrepreneurship will be highly encouraged and the economic status of the citizens will be improved.

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