When government fails, business opportunities abound, says Bertrand Guillotin

In March 2007, I had the opportunity to participate in an MBA study tour of India. 

Our group included 17 Duke University graduate students, a colleague specialized in social entrepreneurship, and Prof. Pranab Majumder.

We discovered a beautiful, fascinating country full of contrasts where business opportunities abound.  In Mumbai, you can

see slums where seven million people "reside" as well as the 311-foot yacht of billionaire Vijay Mallya called the Indian Empress (valued at US$120 million).  No one seems to be bothered by these extremes and passivity remains a virtue in the land of the Taj Mahal. 

Our trip concluded a six-week course led by Prof. Majumder and was aimed at visiting world-class Indian companies such as Ranbaxy Laboratories, the largest pharmaceutical company in India.  It is located in Gurgaon, near New Delhi, and went public in 1973.  During a meeting with their CIO and VP of International Marketing Development, we learned that their drive to help the poor has also helped them grow their business.  This growth has taken place not only in India but also in overseas markets (which account for 75% of their revenues).  Today, Ranbaxy is among the top 10 makers of generic drugs in the world.  It has a strong sense of Corporate Social Responsibility (CSR) and even a Science Foundation.  With the growing cost of healthcare, many Americans sometimes have to choose between brand name drugs and food.  Companies like Ranbaxy are making a difference by making affordable, generic drugs available.

To further our understanding of the healthcare industry, we also visited one of the Yashoda Hospitals in Hyderabad.  With Yashoda Group's founder and General Manager, Mr. G. Ravinder Rao, we held a press conference, sharing our observations and reflecting on the role of business to improve global healthcare.  Our hospital tour clearly demonstrated that the Yashoda Group serves all patients regardless of financial standing in a country where government-provided healthcare is very limited.  Yashoda offers different levels of service from the general ward (US$10/day) to private suites (US$100/day), with amenities including television and leather furniture.  Their booming market segment is international medical tourists looking to escape waiting lists in Canada or save money (sometimes 70% when compared to medical costs in the US).  The Indian doctors who care for all of these patients were often trained in North America or Europe and joined the trend of Indians who are going back home.  The medical equipment we saw was world-class and imported from the US or Germany.  They also have a mobile hospital/bus equipped with lab, x-ray machines, and all the required equipment to bring the hospital to the poor in rural India.  It is not surprising that the Yashoda Group is building a 1,000-bed hospital.

We also visited a village outside Sangareddy (1.5-hour drive from Hyderabad) where SKS Microfinance has been providing microlending services.  With small loans (US$100 or less), otherwise out of reach, SKS serves groups of women.  These women have created small businesses and have drastically improved their living standards and those of their communities at large.  Today, SKS is the largest for-profit microfinance institution worldwide. 

As a reminder, it is 2006 Nobel Peace Prize winner, Dr. Muhammad Yunus, who started this industry in 1976 in Bangladesh by founding the Grameen bank.  In 30 years, this bank has granted loans for a total of US$6 billion to seven million borrowers (source: Wikipedia).  The repayment is based on solidarity among members organized in a small group.  These members work together, support each other, and act as co-guarantors.  The default rate on these loans is practically 0% -- something that large banks like Citibank, Deutsche Bank, and HSBC have finally noticed. 

On our trip, we also met with cooperatives where Marketplace/SHARE has been helping low-income Indian women market their textiles and handicraft through mail-order catalogs.  These cooperatives and microfinance as a whole have lifted millions of people out of poverty.  The government could not meet their needs and the typical banks would not give them loans due to lack of financial collateral.  These women were unable to help themselves. However, the private sector with leadership from Mr. Vikram Akula (SKS founder and one of Time magazine's 100 most influential people in 2006) and the two sisters who established Marketplace/SHARE in 1980 could offer some help, as even small loans can break the vicious cycle of abject poverty, one small group and one village at a time. 

The values of these companies, their focus on CSR - at a time when late Nobel laureate in economics Milton Friedman criticized it strongly - or their empowerment or women to help eradicate poverty have yielded unprecedented dividends.  In a country like India where a baby is born very 2 seconds, the government cannot be expected to meet the needs of more than a billion people with limited resources (only 2% of Indians pay income taxes).  The invisible hand, described by economist Adam Smith in the 18th century, relies on business to improve society.  Since 1991, the Indian government has greatly facilitated this improvement and its track record is undisputed.  While many still criticize the government of the largest democracy on Earth, one can see that India is making a lot of progress.   

Many of the people leading the organizations we visited either have an MBA or are advised by people who do.  While learning business skills on the job is possible (but potentially very costly since it requires trial and error), a well-balanced MBA program allows business leaders to see the critical big picture.  It helps managers create their visions carefully before executing a strategy flawlessly.  It is inspiring to see that MBA holders like Mr. Malvinder Mohan Singh (Ranbaxy) do well by doing good. 

An MBA can provide the sharp business skills required to reach lofty goals. With any luck, business managers can also have a very positive impact on the world we all live in. 

Bertrand Guillotin is Director of the International Center at Duke University: The Fuqua School of Business in Durham, North Carolina, USA