FDI in a Developing Country Case of British American Tobacco

FDI in a Developing Country Case of British American Tobacco

Globalization is a reality. Partnerships between international companies and international governments are fairly routine in today's marketplace. In many ways, this trend in business began from the ashes of colonization. Amar K.J.R. Nayak's journal article, "FDI in a Developing Country Case of British American Tobacco" demonstrates part of the history of today's global economy by tracing the chronological development of the British American Tobacco (BAT) company's involvement in India.

This article provides a comprehensive overview of BAT's history, which is heavily rooted in the development of the international tobacco and cigarette industry. The company's initial expansion from Britain to India occurred in the early part of the 20th century during the epoch in which the British colonized the latter country. This development would ultimately prove to tremendously benefit BAT, as its developments in India greatly assisted the British company in acquiring additional markets such as the tourist industry (primarily in the form of hotels) retail, as well as international exports. Not coincidentally, the company's involvement in India helped to facilitate a level of growth and profitability that more than likely would not have occurred had it soley remained on its native British soil.

The British company's involvement with its Indian expansion was not entirely seamless. BAT had to demonstrate a cultural sensitivity to the needs of its Indian counterparts by slowly, systematically removing the majority of its employees from the Indian branches of its business. Eventually this move would pay off, as BAT was able to greatly increase its profits by diversifying the company into its subsidiary, ITC. Actually, the relationship between BAT and ITC was somewhat symbiotic in the sense that it allowed for greater business diversification and entry into more markets for BAT, and enabled India to modernize and to industrialize in a way that would not have been possible without some form of outside assistance.

It is quite clear that the primary boon of BAT's involvement in India was the legacy of companies it engendered, some of the most lucrative of which it is a mere partner in. Yet one particular aspect o the history of BAT that the author of this article alluded to, yet did not specifically address has to do with the issue of ownership of the conglomeration that BAT spawned through its activity on India's soil. Nayak's article takes great pains to emphasize BAT's dominance over its subsidiaries, which lasted until the middle of the 20th century. Yet the author offers relatively no explanation for the transition of ownership from BAT to ITC that was solidified in 1975. He simply states that this occurrence happened, leaving the reader curious as to what was responsible for such a significant transition.