Dr Prem Motwani delivers a speech after receiving the Deming Distinguished Practice Award (courtesy of Usha Jayaraman).
このページを 日本語 で読む
With Japan's domestic market shrinking, Japanese businesses are increasingly looking for opportunities overseas. India, with its large youthful population and strong economic growth in recent years, ought to be on their radar. And it is.
Recent surveys by the Japan Bank for International Cooperation on Overseas Business Operations by Japanese Manufacturing Companies have consistently rated India the "most promising country." Government-to-government ties between India and Japan are extremely cordial.
The Indian government has been working hard on infrastructure development and improving the ease of doing business. It has also set up a large number of Japan Industrial Townships (JITs) throughout India, specifically for the use of Japanese businesses.
Yet, none of this seems to be translating into any real expansion in business ties between India and Japan on the ground. The number of Japanese companies in India is dismally low, at 1,400 as of 2022. There are nearly ten times as many in China.
Dr Prem Motwani has served as a bridge between India and Japan and helped strengthen commercial ties between the two countries for many years. In an interview, he discussed some of the reasons for this poor showing, and whether anything could be done about it.
Excerpts follow.
What are the most typical Japanese companies in India?
The auto industry is the most popular industry for Japanese companies in India. Compared with developed countries, where the car ownership rate is already quite high, the Indian auto market still has significant potential for growth. Some of the earliest Japanese companies to enter the Indian market were automakers. Several of them have been there for decades. Companies such as Suzuki, Toyota, and Honda have a major presence in India and rank among the top-selling car brands in the country.
In recent years, Japanese clothing brands, banking, electronics, construction, infrastructure, and real estate development companies have also entered the Indian market. Other promising areas for Japanese investment in India are food processing, deep freezing, and logistics.
What challenges do Japanese companies face in their Indian operations?
One of the main challenges for Japanese companies in India is ensuring consistent quality. Poor HR practices may be the main reason behind this.
In Japan, job training is valued more than formal education. Companies hire people straight out of school or university, and employees typically start at the lowest level and gradually make their way up. This means that managers have shop-floor experience. Shop-floor workers, for their part, constantly improve themselves in the hope of becoming managers someday.
Quality in Japanese companies is a bottom-up endeavor, with feedback from the shop floor playing an important role. The traditional lifetime employment system in Japan ensures commitment and loyalty from workers. These employees find it worth their while to invest in improving themselves and, thereby, also contributing to the company.
However, in India, Japanese companies typically partner with Indian companies in joint ventures. In such partnerships, the Indian partner is usually entrusted with liaising with the government, marketing, recruitment, and HR. The Japanese partner, meanwhile, retains R&D, product development, manufacturing, and quality control processes.
Lack of Incentive
As a result, Indian hiring and HR practices are adopted, and 80% of workers in manufacturing, especially the automotive sector, are hired on temporary bases as contract workers. When it comes to middle management, lateral hiring and poaching are very common, as is job switching by employees themselves.
This gives companies very little incentive to train their workers. Workers, for their part, do not find it worth their while to contribute to efficiency improvement on the shop floor or to overall organizational quality. While some quality improvement measures, including cleanliness initiatives, are implemented, efforts to foster a culture of small-group activities or peer learning are insufficient.
What can Japanese Companies do to Improve this situation?
Succeeding in India requires a long-term vision and long-term strategies. Japanese companies would do well to follow their time-tested Japanese HR practices in India, hiring a more permanent workforce and investing in training workers.
Some smaller Japanese companies, such as tier 2 and tier 3 vendors to automotive companies, are already doing this. Their results have been promising. The consistent feedback from such companies is that Indian workers are quite sharp and perform well when trained properly.
These days, foreign companies are permitted 100% ownership in India, and the government is actively working to improve the ease of doing business. As a result, Japanese companies no longer need Indian partners. They can afford to retain full ownership and exercise control over all aspects of their business, including HR. Of course, doing business in India still presents some challenges, such as dealing with trade union activism.
What are the differences between the Japanese and Western approaches to India?
India has its strengths and weaknesses. While the weaknesses pose a challenge for foreign businesses, learning to leverage its strengths can present great business opportunities. For instance, India's strength lies in services rather than in manufacturing. Western companies have been quick to catch on to this. Meanwhile, Japanese companies are still interested in India mainly as a market for their locally manufactured products.
For Western companies that operate call centers, IT, accounts, and other functions out of India, the country has been a major offshoring destination. Japanese companies, however, have typically been wary of open innovation and tend to avoid offshoring. Similarly, many leading Western companies have set up R&D, tech, and product development centers in India. However, Japanese companies keep these functions within Japan.
Another difference between Western and Japanese companies is that the former generally hire local talent, including for senior management, while the latter usually have Japanese people in senior management positions. This, combined with the fact that decision-making is quite slow in Japan, puts Japanese companies at a disadvantage in a difficult market like India, as they are unable to respond flexibly.
Vast Potential
It is no secret that India is a challenging country for foreign businesses. However, India's enormous potential as a market is undeniable, and early entrants have a distinct advantage.
About Dr Prem Motwani
Dr Motwani retired as Professor of the Center for Japanese Studies, Jawaharlal Nehru University, New Delhi, in 2019. Recently, he received the Deming Distinguished Practice Award for his decades of work assisting Indian companies in adopting Japanese-style management. The award also recognizes his 2021 book Becoming World-class: Lessons from 'Made in Japan,' which draws on his experience.
Dr Motwani has additionally helped Japanese companies with their operations in India over the years. His contributions include serving as a faculty member of Nikkei BP India and conducting India training for NEC employees.
RELATED:
- Japanese Companies in India Expect Profits After Years of Struggle
- INTERVIEW | India-Japan Relations Now and Moving Forward with Ambassador Sibi George
- The Next India Boom: Is the Third Time a Charm?
Author: Usha Jayaraman
このページを 日本語 で読む
