Doing Business in India - Wastewater Treatment
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  • 1. Running head: DOING BUSINESS IN INDIA Doing Business in India – a Blueprint for the Wastewater Industry Benjamin S. Cheeks International School of Management, Paris Author Note This paper was submitted to fulfill the requirements of Indian Doing Business in India, DBII 7016. I would like to thank all of the faculty and staff at Amity University, Noida, for their support and dedication to make the first ISM – Amity Seminar a success. Correspondence concerning this paper should be addressed to Benjamin S. Cheeks. Email: bencheeks@hotmail.com
  • 2. DOING BUSINESS IN INDIA 2 Abstract In a recent speech at the Inaugural Function of India Water Week by the Prime Minister of India, Dr. Manmohan Singh (2012) stated “With around 17% of the world’s population but only 4% of its usable fresh water, India has a scarcity of water. Rapid economic growth and urbanization are widening the demand supply gap”. A report by Saraswathi Gomathinayagam (2013) finds that the wastewater market earned revenues of over 6.3 billion Rupees (ca. $114 million US) in 2011 and estimates this to reach 102.34 billion Rupees ($1.8 billion US) in 2016. Doing business in India is not easy and before entering the market, a thorough analysis should be conducted. A PESTEL analysis shows that the wastewater market in India is primed for growth. Due to on-going deadlock and disagreement within the political environment, it is recommended that companies focus on the industrial wastewater market rather than the government (municipal) market. It is also recommended that companies find an Indian joint-venture partner with strong brand name and knowledge of the local market to help manage Indian bureaucracy and regulatory environment. Keywords: wastewater, PESTEL analysis, doing business in India
  • 3. DOING BUSINESS IN INDIA 3 Doing Business in India – a Blueprint for the Wastewater Industry The wastewater industry provides water treatment services to residential, commercial, industrial, and government (municipal) sectors of the economy. Water treatment includes collection of wastewater, separation of solids and other impurities, cleaning or treatment of the water, and regulating the return of the water to the environment. India has 4% of the world’s freshwater, but 17% of the world’s population. The Government of India is aware of the problem and is beginning to take measures to address the problem. In April, India proclaimed 2013 the year of water conservation. In a speech at Water Week 2012, Prime Minister Singh (2012) said “Our water bodies are getting increasingly polluted by untreated industrial effluents and sewage”. This awareness and attention will create incredible business opportunities for multinational companies in the water industry within India. This paper lays out a high-level blue print for a company in the wastewater industry to follow before doing business in India. Framework In order to create the blueprint, this paper will analyze India from the perspective of the overall environment for doing business, the current wastewater market in India, the entry strategies and options available to multinational corporations currently in India. Information from the analysis is then reviewed to formulate a high-level blue print for an organization to enter the wastewater treatment market in India. Analysis of the Environment An understanding of the environment in which the firm plans to operate is an essential stage of the strategic management process (Hitt and Ireland, 2000). An excellent method of doing this is with a PESTEL analysis. PESTEL analysis stands for Political, Economic, Social, and Technological, Environmental and Legal analysis. It assists when doing strategic
  • 4. DOING BUSINESS IN INDIA 4 analysis or market research by providing an overview of the different macro-environmental factors prevailing in a particular industry. This paper will utilize a PESTEL analysis created by MarketLine as a framework for developing opportunities and risks specifically related to the wastewater industry. Each section will have an overview of the PESTEL analysis and how it relates to the wastewater industry. The opportunities and risks are identified and discussed. Political. Business cannot afford to ignore the actions and decisions (or indecisions) of government. The policy of both the state and national government can have dramatic effects on the business environment. In addition, international relationships can also affect the business environment. Key political issues to consider in a PESTEL analysis are political stability, legislation on taxation and employment, alignment of state and national governments, and key policy initiatives. Table 1 Analysis of the Indian Political Landscape Current strengths Current challenges  Strong democratic setup  Allegations of corruption  Improved relations with Europe and  Lack of comprehensive peace deal with North America Pakistan  Future prospects Terrorism Future risks  The new finance minister is expected to  Emergence of strong regional parties bring in economic reform   Social and communal tensions Improved accountability of the  Politics of fasts
  • 5. DOING BUSINESS IN INDIA 5 government Source: MarketLine (2012) Application to the water industry. The political environment in India is primed for the wastewater management industry. Governments around the world realize that in order to have sustained development, access to a sufficient and uninterrupted supply of clean water is of utmost importance. The awareness of the Government of India to is apparent from numerous recent initiatives. Year of Water Conservation - 2013. A press release on May 9, 2013, announced the Union Cabinet declared the year 2013 as “Water Conservation Year – 2013” (Press Information Bureau, Government of India, 2013). Several mass awareness activities are planned to make the masses aware of water related issues and encourage conservation. National Water Policy (2012). A press release on December 28, 2012, announced that despite apprehensions from some of the state governments, the National Water Resource Council had adopted the National Water Policy (Press Information Bureau, Government of India, 2012). The Policy seeks to address issues such as the scarcity of water, inequities in its distribution and the lack of a unified perspective in planning, management and use of water resources. India Water Week. In April of 2012, Prime Minister Singh delivered a speech at the inaugural ceremony of India Water Week. In this speech he stated: With around 17% of the world’s population but only 4% of its usable fresh water, India has a scarcity of water. Rapid economic growth and urbanization are widening the demand supply gap. Climate change could further aggravate the availability of water in the country as it threatens the water cycle. Our water bodies are getting increasingly polluted by untreated industrial effluents and sewage. Groundwater
  • 6. DOING BUSINESS IN INDIA 6 levels are falling in many parts due to excess drawals leading to contamination with fluoride, arsenic and other chemicals. (Singh, 2012) Draft Twelfth Five Year Plan. The Draft Twelfth Five Year Plan acknowledges India’s challenge and encourages industry to improve water-use efficiency by reducing water consumption as well as reusing and recycling wastewater (Planning Commission, Government of India, 2013). It proposes for industries to perform and publish regular water audits as well as their water footprint. In 2011, the Economist reported that Tension between India, Pakistan and China over the region’s rivers has been increasing over the past few years (2011). Pakistan fears that India will build dams on key rivers and limit the supply of water to Pakistan. India has a similar concern with China; most notably, one of India’s largest rivers, the Brahmaputra, flows from China and many in India fear damming or diversion of the river. Opportunities. There are many opportunities that companies within the wastewater industry could capitalize on due to the political environment in India. Public Private Partnerships. Areas that were previously the exclusive domain of the public sector, such as infrastructure, are opening up to Public Private Partnerships (PPP) in India. There are several recently concluded projects that leveraged the PPP model. Some key projects include:  Management contract of Jamshedpur water supply by JUSCO.  Provision of clean drinking water on Build, Own, Operate and Transfer (BOOT) basis by Doshion at Shivpuri, Madhya Pradesh. Industrial Wastewater. Industry and its water requirement will continue to grow. Key industries such as power generation, refineries, pharmaceuticals, and the food and beverage industries create great opportunities for wastewater equipment. As these industries
  • 7. DOING BUSINESS IN INDIA 7 grow, so does their demand for wastewater treatment. Even the notorious political stalemate creates an opportunity in the industrial wastewater industry. Governmental delays in addressing the problems will force industry to look for their own solutions. Risks. Companies in the wastewater industry will have many threats to deal with when entering India Conflicts Between the States and GoI. The Indian constitution grants the states exclusive power to regulate water supplies, irrigation and canals, drainage and embankments, water storage, hydropower and fisheries. However, the federal government is entitled to legislate on issues related to the use of inter-state rivers, shipping and navigation on national waterways, and the use of tidal and territorial waters. It is unclear going forward which group will take the lead in developing various water-related regulations. Government Corruption. Transparency International (2012), a non-governmental organization that monitors and publicizes corporate and political corruption in international development, gives India a score of 36 on its corruption-perception index; a ranking of 94 out of 176 countries. This level of corruption creates uncertainty when the government is awarding contracts for municipal wastewater and water management projects. Tax Surprises. Foreign buyers of Indian companies are vulnerable to tax surprises and other regulatory and judicial challenges by different government bodies than those involved with the actual investment approval process. In addition, as Vodaphone can attest, these tax surprises can include retroactive taxes. Economic. Economic considerations for doing business in India include GDP growth rate and trends, inflation, interest rates, currency exchange rate and fluctuations, monetary and fiscal policies, and input costs such as energy, transport, and raw materials. Table 2
  • 8. DOING BUSINESS IN INDIA 8 Analysis of the Indian Economy Current strengths Current challenges  Inherent Strength of the economy  Unemployment  Second largest working age population  Energy constraints and overdependence pool in the world  Highly favored FDI destination on oil imports  Imbalanced regional development and widening economic disparities  High inflation Future prospects Future risks  Manufacturing hub  Poor infrastructure  Expanding domestic market  High fiscal debt and public debt  Elevated current account deficit  Spillover risks from advanced economies Source: MarketLine (2012) Application to the water industry. Despite the recent slowdown in GDP, the Indian economy has grown over 8% on average for the past eight years. The CIA world fact book (2013) estimates the Indian economy at US $1.95 trillion, making it the world's seventh largest economy. Purchasing Power Parity of 4.8 trillion making it the world's third largest behind only the US and China. This strong economic growth has made it a favored destination for foreign direct investment (FDI). A survey by The United Nations Conference on Trade and Development (2012) ranked India number three of the top prospective economies for FDI. In addition, the Ernst & Young Attractiveness Survey for 2012 shows 73% of business leaders are keen to invest in India in the near future (Ernst and Young,
  • 9. DOING BUSINESS IN INDIA 9 2012). Opportunities. Poor infrastructure. India's weak power, transport and communications infrastructure is increasingly seen to be a constraint on economic growth. However, from a water management perspective, this is an opportunity as industries and consumers look for more effective methods of conserving, reusing, and treating their water. A 2013 sustainability survey by Ernst & Young ranked water as the number one cause for concern for global executives among “resources most at risk” Ernst and Young (2013). Manufacturing hub. India offers potential for equipment manufactures in the wastewater management industry as a manufacturing hub due to low labor costs. According to the United States Bureau of Labor Statistics, labor costs were just below $1 per hour, including taxes and social security (Sincavage, Haub, & Sharma, 2010). The government unveiled a new manufacturing strategy in November 2011, which aims to increase the share of manufacturing to GDP to 25% within the next decade. High fiscal and public debt. The high fiscal and public debt will force the government to look for Public Private Partnerships to fund municipal wastewater projects in the future. Likewise, it will put more responsibility onto the industrial sector to manage their own wastewater. Risks. Global slowdown. A key risk when doing business in India is that the slowdown in developed economies will spillover into India. Exchange rate. The Indian Rupee has fallen considerably since 2009 and as of June 2013 is trading near an all-time low against the dollar. This could make import materials more expensive as well as depress profit in US dollar terms. However, the depreciated Indian
  • 10. DOING BUSINESS IN INDIA 10 currency will also make labor costs cheaper and could spur exports. Social. The current social situation in India is important to consider when preparing to do business there. Key issues to consider from the social standpoint are changes in population and demographics, employment patterns, popular social issues (i.e. green issues such as global warming), values, education and health. Table 3 Analysis of the Indian Social System Current strengths Current challenges  Growing proportion of young people  Healthcare remains a major concern  Rapid urbanizations  Weak social security system  Poor literacy rate  Low HDI rank Future prospects Future risks  Employment guarantee scheme  Government’s authority challenged  Rising life expectancy  Inability to control birth and utility rate Source: MarketLine (2012) Application to the water industry. India is the second most populous country in the world with a population in excess of 1.2 billion people. This large and growing population creates a variety of domestic water issues that Indian society is facing. A key concern is healthcare. A study by UNICEF (UNICEF, 2004) estimates that in India, water-borne diseases cost an annual $600 million in lost production and medical treatment. The cost of ineffective wastewater processing is being pushed onto the population in the form of shortages and poor water quality resulting in illness, health or by increasing house-hold spending money to buy devices and technology to clean the water. In addition to the health
  • 11. DOING BUSINESS IN INDIA 11 concerns, there are also increasing conflicts across competing users of water. Joy, Gujja, Paranjape, Goude, & Vispute, (2009). highlight 63 case studies of water conflicts of different types across the country. Opportunities. Rapid urbanization. Rapid urbanization and increased life expectancy will continue to put pressure on the current urban infrastructure. The government must act quickly to meet the needs of the increasing urban population. Water treatment facilities will be a key part of this infrastructure. Corporate Social Responsibility (CSR). The concept of Corporate Social Responsibility (CSR) is gaining popularity in India. Corporations realize that initiatives towards environmental conservation are an effective means of advertising their good deeds to society. Many firms in India are weaving CSR initiatives into their business strategy (Kanchan, 2010). This focus by industry on CSR will make water conservation and treatment a key point of their CSR agendas. Risks. A technology to clean dirty water should face little threat from the social environment. However, for a foreign company entering the Indian market, there is a threat of localization or the preference given the local companies. In a recent interview, Arvind Subramanian, an Indian born economist, stated anecdotally that India has recently embarked on a localization spree, in a number of sectors, saying local-input providers should be favored (Peterson Perspectives Interviews on Current Issues, 2013). Technological. From a technical perspective, a firm considering doing business in India should consider local research initiatives, speed of change and adoption of new technologies, product substitutions, and the level of expenditure in research and development. Table 4
  • 12. DOING BUSINESS IN INDIA 12 Analysis of the Indian Technological Landscape Current strengths  Strong knowledge base  Cost advantage  Strong English-language skills Current challenges  Gross expenditure on R&D remains below 1% of GDP  The talent pool requires further vocational training Future prospects  Government policies promoting research and development  Future risks  Low proportion of high-technology exports Significant competitive advantage in biotechnology research Source: MarketLine (2012) Application to the water industry. Each year, India graduates more Engineers than any country other than China. The fact that most Indian graduates speak English provides it a boost over China when it comes to research and development outsourcing. This has led several companies from Shell to Groupon to Microsoft to develop innovation centers in India. Opportunities. Research and development. Research talent in India is available at a much lower cost in comparison with developed countries. According to MarketLine (2012), the average salary of a researcher in India is $11,526, which is around 15% of a researcher’s salary in the United States. This coupled with the strong English-language skills make India an excellent choice for a global research and development hub. Risks. Talent pool unprepared for industry. Due to the fact that many technical institutes
  • 13. DOING BUSINESS IN INDIA 13 within India have a strong emphasis on theory, it is believed that many of the technical graduates are not prepared to enter the workforce. Environmental. Environmental issues to consider are changing weather patterns, disposal of waste, and industrial effluents. Table 5 Analysis of the Indian Environmental Landscape Current strengths Current challenges  Biodiversity  Air pollution  Right to information  Depleted water resources  Comprehensive environmental-policy  Poor performance on environmental framework indicators  Dependence on fossil fuels for energy requirements Future prospects  Reduction of carbon footprint  Future risks Public-private partnership and ecotourism   The adverse impact of economic growth  Enforcement deterrents Increased activism Source: MarketLine (2012) Application to the water industry. For companies in the wastewater industry, the environment landscape in India presents the best argument for entering the market. India faces environmental issues from air pollution to depleted and polluted water resources. However, these challenges present a great opportunity in the wastewater industry as its products and services offer solutions to help address water-resource issues. In addition,
  • 14. DOING BUSINESS IN INDIA 14 comprehensive environmental policies and increased activism will help provide the impetus toward change. Risks. Enforcement deterrents. Weak enforcement of clean-water regulations could delay the adoption of wastewater technology by industry as they find it cheaper to pay fines or to avoid accountability completely. Legal. From a legal perspective, firms should consider current law and government policies. Table 6 Analysis of the Indian Legal Landscape Current strengths Current challenges  Comprehensive legal framework for  Corporate governance business entities   Weak implementation of intellectual Taxation policy driving foreign investment  property laws  Judicial delays Implementation of VAT Future prospects Future risks  Tax reforms  Implementation of regulations  Good prospects in legal process  Lack of a single financial market outsourcing regulator Source: MarketLine (2012) Application to the water industry. The legal system of India is based upon English Common Law. It has a comprehensive legal framework for both business entities. It also contains a comprehensive framework related to water policy.
  • 15. DOING BUSINESS IN INDIA 15 Indian constitution. The Indian constitution grants the states exclusive power to regulate water supplies, irrigation and canals, drainage and embankments, water storage, hydropower and fisheries. However, the federal government is entitled to legislate on issues related to the use of inter-state rivers, shipping and navigation on national waterways, and the use of tidal and territorial waters. The Constitution also provides that the Union can legislate with regard to the adjudication of inter-state water disputes. Water prevention and control of pollution act of 1974. The Water Prevention and Control of Pollution Act of 1974 seeks to prevent and control water pollution and maintain and restore the wholesomeness of water. It gives power to water boards to set standards and regulations for prevention and control of pollution. Water prevention and control of pollution cess act of 1977. This act allows state boards to levy taxes on water extracted for industrial use. Environmental protection act of 1986. The Environmental Protection Act (1986) created a nationwide program for the prevention, control, and moderation of environmental pollution. It grants the government power to inspect any premises to gauge compliance of established norms. Opportunities. Investment in Indian companies. Favorable policies on foreign investment have made India a preferred place for foreign investment. This presents an opportunity to invest in Indian companies in the wastewater industries. Risks. The legal environment in India presents some of the greatest threats to industries looking to enter the Indian wastewater market. Multiple layers of regulation. Strong disagreements between the states and GoI on who has authority over certain water issues could lead to varying legislation across the
  • 16. DOING BUSINESS IN INDIA 16 country making it more difficult to specify equipment requirements. Weak intellectual property laws. International Property Rights Index (2012) ranked India 62 out of 130 countries in the protection of Intellectual Property. Delays. The Indian judicial system is notorious for its delays. Therefore, any legal issues could take considerable time to resolve. Contract enforcement. According to the World Bank (2013), India ranks low in the enforcement of contracts. A key input to this is related to the delays in the legal system. Analysis of the Wastewater Treatment Market in India Understanding the nature of the industry and where the firm fits into the current industry environment is an important next step in laying out a blue print. This analysis will consider the size of the industry, the key players, and key partnerships that exist today. Shay & Rothaermel (1999) show that businesses benefit from understanding the competitive environment from multiple perspectives. According to a report by Avalon Global Research, 2011, the water and wastewater treatment market in India is fragmented with about 15 large players accounting for approximately 30% market share.
  • 17. DOING BUSINESS IN INDIA 17 Figure 1. Indian market analysis by tier. Source: Avalon Global Research, 2011 The top eight players in the market hold approximately 25% of the total market. Most of these eight also have global alliances. Table 7 Top Companies in the Indian Wastewater Market Estimated Company Market Global Alliances Share Ion Exchange 5.3% Joint Venture with Degremont, France VA tech Wabag 3.7% Wabag Germany Thermax 3.0% Wehrie Unwelt Gmbh and GE Water Doshi Ion 3.7% Joint Venture with Veolia Solutions, France and Tie up with Kinetico Inc USA HDO/IVRCL 2.8% Degremont 2.3% Driplex 2.3% Triveni Partnership with Best Water Group Austria and Lanxess, Germany 1.4% Source: Avalon Global Resource, 2011 Entry Options for the Indian Market There are multiple ways to enter the Indian Market. The most common ways for nonresidents to invest in India are Foreign Direct Investment, Foreign Institutional Investment, and Technology and Trademark License Agreements. The Government of India updates the foreign direct investment (FDI) policy each year
  • 18. DOING BUSINESS IN INDIA 18 under in “Consolidated FDI Policy”. Currently FDI is allowed to some degree in most industries. If FDI is allowed, it can go through the automatic route or the prior approval route. As the policy is updated yearly, experts on FDI should be consulted before any investment is made. Foreign Institutional Investments (FII) can be made under the portfolio investment scheme. Most FII are made through the Indian Stock market through the purchase of equity stakes in public companies. A small part of a FII is in company bonds. Technology and trademark license agreements give an entity in India the right to use a patent or trademark creating a revenue stream for the licensor. Entry Options for Foreign Investors. Foreign entities have the right to setup as incorporated or unincorporated entities. Incorporated entities must either enter through a joint venture or wholly owned subsidiary. Common unincorporated entities consist of liaison office, branch office, and project office. Table 8 Incorporated Entities Type of Definition of entity incorporated entity Joint Venture Joint Venture (JV) is defined as a contractual agreement formed between two or more parties, with each party contributing their equity share, in order to undertake an economic activity which is subjected to joint control. Wholly Owned Wholly Owned Subsidiary (WOS) is defined as an entity 100% owned by Subsidiary a foreign corporate body. Source: business.gov.in - http://business.gov.in/manage_business/joint_ventures.php
  • 19. DOING BUSINESS IN INDIA 19 Table 9 Unincorporated Entities Unincorporated Definition of entity entity Liaison Office A place of business to act as a channel of communication between the principal place of business or head office and entities in India but which does not undertake any commercial / trading / industrial activity, directly or indirectly. A liaison office is not permitted to undertake any business activity in India and cannot earn any income in India and therefore is required to maintain itself out of inward remittances received from the head office outside India. Branch Office A branch office is permitted to carry on activities, which are wider in scope as compared to the activities permitted by a liaison office. The profits of a branch office are permitted to be remitted outside India subject to the payment of applicable Indian taxes. A branch office is not permitted to engage in any manufacturing or processing activities in India directly or indirectly. Project Office A place of business established to represent the interests of a foreign company executing a project in India. Such offices are prohibited from undertaking or carrying on any activity other than the activity relating and incidental to the execution of the project for which such office is established. In order to set up a project office, a foreign company has to secure a contract to execute a project in India from an Indian company. Source: J. Sagar Associates, 2012
  • 20. DOING BUSINESS IN INDIA 20 Recommendation The wastewater market offers incredible business opportunities that companies cannot afford to ignore. In a recent interview with the New York Times (Timmons, 2013), Ravi Venkatesan, Former Chairman of Microsoft India said, “Right now, multinational corporations have two choices. They can either not grow, or they can embrace the chaos of emerging markets. If you think you can escape chaos, you’re sadly mistaken.” The PESTEL analysis revealed opportunities in the municipal sector through Public Private Partnerships with the government as well as opportunities within the industrial sector. Although the government works to remove barriers to investing in infrastructure and municipal waste water, corruption, delays, and growing disputes between the states and the government of India create huge uncertainties when working with the government. However, regardless of the politics, industry will continue to be pressured by the government to reduce their production of wastewater. Government delays and inaction will force industry to take matters into their own hands to ensure they have sufficient water resources of the proper quality in order to run their business. Therefore, the recommendation is to enter the market with primary focus on the industrial sector. It is recommended that the market be entered through a joint venture with a local Indian firm. Many of the key players have joint ventures or licensing agreements with large multinationals, but there still remain many qualified India companies with which to work. A joint venture offers many advantages and helps to mitigate some of the risks high-lighted during the PESTEL analysis. The can also help with the Indian cultural framework. Some additional advantages of a joint venture include:  Government and industry connections to help navigate bureaucracy, regulations, tax systems, and tariffs.
  • 21. DOING BUSINESS IN INDIA  Existing relationships with customers, raw material suppliers, and banks.  Exiting distribution network.  21 Source of labor and professional talent required for project execution and ongoing technical support.  Knowledge about local market, competition, and general market conditions.  Risk sharing. When selecting a joint-venture partner one should consider the following:  The value each participant is bringing to the relationship.  Shared values, business and social values.  Creditworthiness of counterparty. A good joint-venture agreement will include:  Shareholders rights.  IP protection and licensing.  Non-compete agreements.  Contribution of capital and capital calls.  Exit provision and buy-out rights for deadlock of key management decisions. When negotiating the contract, it is important to take cultural considerations into account. A few key things to remember are that Indians do not always see the final goal of negotiations as a contract. Salacuse (2004) found that while 74 percent of the Spanish respondents claimed their goal in a negotiation was a contract, only 33 percent of the Indian executives had a similar view. Indians tend to view contracts as agreements and guidelines for future acts. Also Indians are less sensitive to time. Salacuse (2004) found that among the twelve nationalities surveyed, Indians had the largest percentage of persons who considered they have a low sensitivity to time. There are also differences in the degree of trust going
  • 22. DOING BUSINESS IN INDIA 22 into the negotiation. Sycara, Gelfand, & Abbe (2009) showed that negotiators in the United States trust until the other party proves to be untrustworthy. However, Indian negotiators appear to embrace the opposite assumption, distrusting until the other party proves trustworthy. Keeping these key differences in mind, patience is the key when negotiating with an Indian company. In a recent speech at TED-x, Ravi Venkatesan (2012) listed out some key success factors when doing business in India. Ravi is someone who warrants listening to as the former Chairman of Microsoft India and Head of Cummins in India; he knows what it takes to be successful there. His key success factors include:  Commitment – the CEO must make a visceral commitment to India. The CEO must make more than yearly status trips.  Move from control to accountability – in order to react to changing market conditions, you must trust the local Indian management team to make the right decisions for the company and not have every decision go back to corporate for approval.  Build India-specific products – Just because your product is successful in other markets, does not mean it will be successful in India. Companies should see India as a market for innovation.  Have a higher ambition – His motto is, “If it's good for India, it's good for us.” Limitations of Analysis This paper was written as part of the requirements for DBII 7016 Doing Business in India. The primary purpose of the analysis was to gain a greater understanding of the business environment in India. Therefore there was much more focus on this aspect rather than the industry analysis. A more thorough analysis of the industry should be conducted using a framework such as Porter’s Five Forces to gain a better understanding of the overall
  • 23. DOING BUSINESS IN INDIA 23 business environment. In addition, a VRIO (value, rarity, imitability, and organization) model of the investing firm’s internal environment to uncover additional opportunities and gaps. Also to uncover strengths and weaknesses that will help the organization to gain a sustained competitive advantage. Conclusion Doing business in India is not easy. Some of the key risks include corruption, governmental stalemates due to strong regional parties, high public debt, and a high current account deficit. However, as Arvind Subramanian said in a recent interview (Peterson Perspectives Interviews on Current Issues, 2013), “If you don’t lump it and start getting in despite all the problems, you will be excluded from the market”. The India market is primed for new entrants in the wastewater industry. Initially focusing on industrial wastewater management will mitigate many risks of working with the Indian Government on municipal projects. The wastewater industry is fragmented with over 800 players. The largest is Ion Exchange and they have less than 6% market share. Many of the larger players already have licensing agreements or joint ventures with multinationals. However, there are many quality Indian companies available to form joint ventures. Finding the right joint-venture partner and negotiating a solid joint-venture agreement are keys to success.
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