In this article, we provide a synthesizing framework that we call the “ dynamic trajectories ” framework to study the evolution of multinational enterprises (MNEs) in host countries over time. We argue that a change in the policy environment in a host country presents an MNE with two sets of interrelated decisions. First, the MNE has to decide whether to enter, exit, or stay in the host country at the onset of each policy epoch; second, conditional on the fi rst choice, it has to decide on its local responsiveness strategy at the onset of each policy epoch. India, which experienced two policy shocks — shutting down to MNEs in 1970 and then opening up again in 1991 — offers an interesting laboratory to explore the “ dynamic trajec- tories ” perspective. We collect and analyze a unique dataset of all entry and exit events for Fortune 50 and FTSE 50 fi rms (as of 1991) in India in the period from 1858 to 2013 and, addition- ally, we document detailed case studies of four MNEs (that arguably represent outliers in our sample)
Amul is an Indian dairy cooperative founded in 1947, eight months before India's independence from British rule, and owned by over three million farmers in the state of Gujarat. It is India's largest food product marketing organization, selling 46 products, including pouched milk, cheese, butter, ice cream and infant food through a million retailers across the country, and is the market leader in almost all the categories that it operates in. Amul is well known among Indian consumers for offering high-quality products at reasonable prices, and runs a highly popular advertising campaign that spoofs current events. It offers its farmers 80% of the consumer's dollar for milk, compared with 35%-40% typical in some Western markets. Amul's cooperative dairy model has been replicated across several Indian states, thereby helping increase the incomes of 80-100 million farmer families across the country. However, despite its success, Amul is beginning to come under increasing pressure. Multinationals like Nestlé and Unilever are increasing their presence in India, and competing fiercely with Amul in value-added products like yogurt. The entry of large multi-brand retailers like Walmart and Carrefour in the Indian market threatens to squeeze Amul's margins and undermine its low-cost distribution network. India's large young rural population is shying away from dairy farming in favor of urban jobs, leaving questions about future procurement. Finally, Amul's farmers form a large vote bank in the state of Gujarat, and its cooperative structure risks being compromised by vested political interests. Should Amul continue with the business model that has served it so well for decades, or should it change its strategy in order to keep up with India's changing social, political and economic landscape?
In 2009 the management of Vale, a Brazilian diversified mining company and the largest iron ore producer in the world, was under pressure from at least two fronts. First, the emergence of China as the most important consumer of iron ore in the last few years had changed the pricing system for iron ore from long-term contracts based on negotiated "benchmark prices" to contracts based on spot prices, usually forcing mining companies to pay for shipping. Second, for Brazil's charismatic president, Lula, a former union leader, Vale's layoffs during the global financial crisis and its perceived move away from Brazil (as Vale increased its exports to China and purchased Chinese vessels to ship iron ore to Asia) were reasons to start an open campaign to pressure Vale and Agnelli to invest in integrated steel mills in Brazil. In October of 2009, the CEO of Vale, Roger Agnelli was going to meet with Lula and had to decide what to do to attenuate these political pressures. What could Agnelli do to deal with political pressures at home? Was the purchase of large vessels to ship iron ore to Asia a good decision at a time when the shipping industry had spare capacity?