Partnerships are critical for expansion. In order to expand into different geographies most corporates partner with a local or a regional player. This helps them navigate regional waters more smoothly. Local players are aware about regional dynamics while the foreign partner may bring in strong technical knowhow.
However, partnerships also cause friction. And this is what has been happening as far as partnerships between Indian and foreign corporates are concerned. Take the case of Bharti-Walmart for example. Both have decided to part ways due to growing differences over the way the business needs to be managed. In fact, this is not a one off case. There have been quite a few exits in the past on similar grounds.
Difference of opinion is one reason why exits have happened. But the fact is that trust deficit between partners is also on the rise. From the foreign partner's perspective, doing business in India has become much riskier than ever before. For one, the foreign partner does not control the domestic business. It is generally being done by the local player. Thus, the foreign partner cannot keep an eye on day to day operations. Also, if the domestic player gets involved in any kind of engagement which is unethical, it can impact the foreign parent's brand name.
Take the case of Australia's fastest growing coffee chain, Di Bella. In this case, both the foreign and Indian partners are involved in a legal battle blaming each other for professional and personal misconduct. Further, foreign players are increasingly becoming circumspect of tying up with domestic players because of corporate governance issues.
This again brings to the fore the corruption menace prevalent in India. Further, with rising bureaucratic interference, the ease of doing business in India has also deteriorated. In fact, noted industrialists have been vocal in raising their voice on this matter. Some have also expressed their willingness to move overseas.
This trend of partnership friction has its roots in corruption, inept bureaucracy and poor working environment. If the situation does not improve, more frictions could certainly happen. This will not only lead to withdrawals by foreign partners but will also make others, who are planning to enter into India, more nervous.
Does friction between local and overseas partners on business issues signify that foreign capital will be hard to come by in future?
However, partnerships also cause friction. And this is what has been happening as far as partnerships between Indian and foreign corporates are concerned. Take the case of Bharti-Walmart for example. Both have decided to part ways due to growing differences over the way the business needs to be managed. In fact, this is not a one off case. There have been quite a few exits in the past on similar grounds.
Difference of opinion is one reason why exits have happened. But the fact is that trust deficit between partners is also on the rise. From the foreign partner's perspective, doing business in India has become much riskier than ever before. For one, the foreign partner does not control the domestic business. It is generally being done by the local player. Thus, the foreign partner cannot keep an eye on day to day operations. Also, if the domestic player gets involved in any kind of engagement which is unethical, it can impact the foreign parent's brand name.
Take the case of Australia's fastest growing coffee chain, Di Bella. In this case, both the foreign and Indian partners are involved in a legal battle blaming each other for professional and personal misconduct. Further, foreign players are increasingly becoming circumspect of tying up with domestic players because of corporate governance issues.
This again brings to the fore the corruption menace prevalent in India. Further, with rising bureaucratic interference, the ease of doing business in India has also deteriorated. In fact, noted industrialists have been vocal in raising their voice on this matter. Some have also expressed their willingness to move overseas.
This trend of partnership friction has its roots in corruption, inept bureaucracy and poor working environment. If the situation does not improve, more frictions could certainly happen. This will not only lead to withdrawals by foreign partners but will also make others, who are planning to enter into India, more nervous.
Does friction between local and overseas partners on business issues signify that foreign capital will be hard to come by in future?
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