Business strategy: Srikant Parthasarathy applies Michael Porter's classic "five forces" model of competitive analysis to India's singular business environment.

AuthorParthasarathy, Srikant
PositionTechnical matters

India's cultural and linguistic diversity make the country unique in many ways, so can general management theories be tailored to suit Indian business? I decided to apply the famous "five forces" model, which was designed by Michael Porter, professor of strategy and competitiveness at Harvard University, to give a company insights into the potential profitability of a market and help it form its strategy accordingly.

The first force covered by the analysis framework is the threat of new competition. Unless the barriers to your market are formidable, new players can enter and poach your share of it. If you wish to enter a new market, you want these barriers to be low, of course. If Porter were Indian, he would recognise that factors such as state protectionism and a lack of infrastructure are a greater barrier to entry in India than they are in more developed nations, where market forces are more powerful. This is because governments of emerging economies are usually reluctant to open the doors to new players in many sectors. Even if they do, it's likely that they will adopt more interventionist policies at a later stage. For example, India's airline sector is poised for growth, but the fact that it has recently been deregulated makes it more difficult for competitors to develop long-term strategies, because all such strategies will collapse if the government feels that new entrants are threatening its home market.

One factor that could play a crucial role in India is public opinion, which exerts a considerable influence on the government. A good example of this is the campaign by local retailers, which feel that the arrival of US retail giant Walmart could put them out of business. Walmart has made huge investments in India, but is having to find ways round stringent regulations that prevent it from doing things as basic as putting its brand name on stores.

The psychological profile of stakeholders can be crucial to your competitive strategy, because it means that you have to handle the regulators before you deal with your competitors. This is not so true in developed economies, where regulators are more prepared to let the market prevail. They don't rely entirely on market forces to determine competition, of course, and there can be opposition to takeover bids for household names, which is what happened in the UK when Kraft acquired Cadbury, for example, but developing nations tend to be far more conservative and treat such M&A deals with...

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