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How can the private sector best serve the unmet needs of
India’s people in a sustainable way?
 
Ethics of Indian Business:
Achieving Sustainable
Global Competitiveness
 
   
In the global marketplace, the evolution of power is constant and inevitable. The control and influence of people and resources now takes the form of GDP, currency exchanges and trade deficits. Modern societies develop based on the thought that the open market equalizes and creates justice in our economies. Human desire for power has morphed into a competitive arena of multinational companies, attempting to conquer and survive. Wars no longer have battlegrounds, but exist among systemic competitiveness within the business environment. This competitiveness, the institutions, policies, and factors that determine the level of productivity and market capitalization, sits at the core of prosperity for a society. These sectors affect the growth and sustainability of a nation. Organizations must look beyond macroeconomic data and drill to the core of strategic market drivers. Continuous evolution within the business environment determines the livelihood of a nation’s citizens.

Developing nations face different intrinsic pressures than the developed world. Many emerging markets are economical growth centers with a large population and resource bases. Secondly, many of these markets are generally undergoing economic and political reforms. As quickly growing economies, emerging markets not only contribute to the world economy but are also rising participants in the world’s political and social affairs. Faced with the buckling pressure of growing populations, these economies struggle to align public sector interests with private sector marketplaces. Creating a system that exponentially reduces poverty has proved challenging to emerging market public sectors.

India, more so than any other emerging nation, strongly exhibits all of these characteristics. GDP growth in India has averaged 6.1 percent over the last decade and 9.4 percent between 2006 and 2007. The real GDP growth averaged 8.6 percent since 2003 and is expected to grow by an average of 9 percent a year through 2012.1 As a nation, India is rapidly armoring. Private sector enterprises have successfully identified opportunities on the local and global marketplace. Over the past five years healthcare has seen 20 percent growth a year, due mostly to India’s growing population, but also the advancing quality of life that distills from per capita income increases. Over the past 15 years, Indian companies have established hubs of global services in information technology; this sector contributed 90 percent to Indian GDP growth in 2009. TATA recently began selling a four-passenger car for the equivalent of US$ 2,050, making an economically viable vehicle for India’s growing middle class. General Electric, Microsoft, Oracle and Cisco have all established large research facilities through India during the last three years, taking advantage of the nation’s educational prowess.

The sun certainly shines upon India, but the path to long-term success lacks definition. India’s competitiveness as measured by the World Economic Forum ranked 48th in 2008 and slipped to 51st in 2010.2 Though a broad-spectrum measurement, the indication speaks volumes. It is through the competitiveness of a nation that businesses add value to economies, changing income levels and the quality of life for its people. Creating a competitive business environment is key to meeting the unmet needs of India’s people by strengthening companies, enabling the middle class to expand. As in other emerging markets, India’s public sector size in comparison to the growing population has created a gap that cannot possibly close without the cooperation of the private sector.

The World Economic Forum reports that inadequate supply of infrastructure, corruption, inefficient government bureaucracies, restrictive labor regulations and access to financing are the top five most problematic factors for doing business in India. Of these five factors, corruption is most within reach of the private sector. Vague government policies and lax enforcement create uncompetitive corporate governance systems that are not prepared to deal with globally sophisticated companies.

Indian power dynamics in business emphasize paternalistic management structures as opposed to participatory systems. The Western concept of conflict of interest does not always mesh well with the Indian value of loyalty. Friendships factor into business interactions; these relationships can go as far back as elementary school. Gift giving and reciprocity are natural aspects of the Indian culture that extend from the family into the business environment. Complicated social order often creates an ambivalent concept of ethical behavior.

This ethical infrastructure perpetuates not only the divide between the rich and poor, but also creates companies that are not equipped to expand and compete within the global marketplace. Many Indian companies face enormous pressure to grow in the challenging global economy. In such an environment, Indian enterprises that want to win on the international arena need to have solid ethical governance policies and procedures in place since global customers and partners understand the implications of associating with companies that lack functioning systems designed to protect and promote stakeholder interests. Companies that do not seek to maximize the stakeholder value chain, from populous masses to shareholders and leadership, will find a lack of competitiveness in the evergrowing dichotomy between the emerging and developed world. Without change at the organizational level, the global competitiveness of India will not be able to sustain continued growth.

Globalizing Indian companies have two options. One is to remain local and reactive, waiting for the tightening of regulations and societal norms, thereby remaining uncompetitive and contributing nil to the people’s quality of life. On the contrary, companies can proactively champion an advanced era of business ethics by creating a localized standard worthy of carrying across borders. Strategic ethical optimization is the most sustainable competitive driver an organization can add to its arsenal. Creating an ethical framework for Indian businesses to maximize competitive strength in the multinational marketplace establishes the foundation for the private sector to improve the lives of a growing population by closing the economic divide.

Designing a model to evolve Indian competitiveness requires a delicate acknowledgement of the current business environment along with a positive approach to future development. Businesses must connect the fibers between profit maximization, stakeholder optimization and locally ethical competitiveness in order to create sustainable growth.

1. Realign business priorities with corporate stakeholder responsibility.

- Profit maximization, market leverage and global competitiveness must take an equal precedence with ethical behavior and corporate governance. Corporate stakeholder responsibility is the obligation of decision makers to protect and improve the welfare of societal stakeholders along with the interests of the company.

2. Define a value added role for all stakeholders, local and global.
- Companies must analyze stakeholder priorities to develop a strategy for strengthening competitiveness. Understanding the potential of an organization starts with creating interdependency on economic, environmental and societal levels. Businesses must develop a social contract in order to create longevity in the marketplace; those companies that do not have a system to use power wisely often lose it at some point in time.

3. Formulate bold, long-term targets and create processes that drive ethical decision making and stakeholder maximization.
- Setting short-term and long-term targets for ethical compliance is important because it creates standards that make a company more competitive on the global marketplace. Constantly adjusting these standards will enable a business to enter new markets and improve image as the Indian businesses approach multinational status. Leadership must work with all internal groups to develop an understanding of the factors affecting the organizations’ moral climate: behaviors of superiors, ethical practices of the industry, behavior of peers, formal organizational policy and individual financial needs.

4. Establish credibility through a refined and enforced code of ethics.
- Ethical behavior enhances the image of an organization. Written standards of conduct, training, methods of reporting and disciplinary repercussions lead to long-term and sustainable business practices. Creating a code that defines proper decision making will give all stakeholders a model that is, at best, a path for success and competitiveness, while also shifting power dynamics within an organization. While competitiveness is the responsibility of all stakeholders, ethical behavior starts at the top because enforcement begins and ends there.

5. Exploit ethical differentiation and attack the global market with the leverage of local strengths.
- Seeking ethical interdependency, sustainable operational excellence and market leadership creates disruption within established arenas. Leaders should begin by developing the strengths of an organization to gain competitiveness. Organizations need to use local leverage, capabilities and assets of India in order to succeed in the global marketplace. Using a stakeholder value chain allows innovation to begin locally; market growth leads to global demand and specialization.

This framework creates an interactive relationship among global competitiveness, financial performance, corporate citizenship and image that is stronger than simply aiming to maximize shareholder value. The goal is to create long-term stakeholder value by taking advantage of opportunities and managing risks related to economic, environmental and social developments. Success for all enlightened organizations today includes, among other factors, the ability to build a brand that inspires and breeds trust. Though ethical changes can be difficult to create and instill in an organization, leaders must be cognizant of sustaining a constantly “enhanced” image in the global marketplace. Not only must the company have a strong ethical foundation—that foundation must also be evident. Having ethics codes and policies and implementing them tells customers, vendors, partners, investors and other stakeholders what to expect when interacting and entering into a relationship with the company.

Innovative ethical infrastructure will enable Indian businesses to establish higher levels of global marketplace sophistication. The fusion of business ethics, shifting stakeholder ethics, the rise of corporate governance and compassionate capitalism will reshape the business landscape in India. Corporations are created by the society, not to merely make a profit from it. The DNA of an organization is more important than its profit margin; creating a company that will last hundreds of years will help far more people than a company that only looks at short-term gains. Recreating corporate DNA with a responsible framework allows Indian businesses to maximize competitive strength in the multinational marketplace. Ethical evolution within the business environment creates a sustainable livelihood for India’s citizens by empowering companies to expand into the global marketplace, establishing the foundation for the private sector to tighten the economic divide with job creation and enhanced quality of life.



1 “The Global Competitiveness Report 2010-2011.” Klaus Schwab. World Economic Forum. 2010.
2 “The Global Competitiveness Report 2010-2011.” Klaus Schwab. World Economic Forum. 2010.
 
   
   
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