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Unit 2 Unit 2 Presentation Transcript

  • Meghe Group of InstitutionsDepartmentforTechnology Enhanced Learning1
  • MBA DepartmentII SEMBUSINESS ENVIRONMENTUNIT- IIGlobalisation and BusinessEnvironment2DTEL
  • Syllabus : Unit 2• Globalization-Meaning, Scope, Phases,Indicators, Economic reforms and competitiveenvironment; Business Environment and• Sector wise analysis-Telecom, InformationTechnology, Insurance, Banking Finance, FMCGTextiles, Agriculture, Automobile, Chemical ,Pharmaceuticals– ( Market Structure,International Scenario, RecentDevelopments and SWOC Analysis)3
  • Learning Objective• To understand Globalisation• Sectoral Analysis vis-a-vis competitiveenvironment4
  • Globalisation: Meaning• Process of transition from a closedeconomy to an open economy.• It is a process of global integration of– Products– Technology– Labour– Investment– Information– Culture(many times , not always)5
  • Globalisation: Meaning• It tends to narrow down Internationaldifferences in– Prices– Wage Rates– Interest Rates6
  • Globalisation: Meaning• Globalisation basically takes place through– International Trade– Foreign Investment– Joint Ventures– International Licensing– Franchising and Sub-Contracting– Strategic Alliances7
  • Globalisation Indicators• Economic– Exports + imports of goods & services,– % of world GDP• Financial– Daily currency exchange turnover, % of world GDP– Cross-border bank loan stock, % of world GDP– Cross-border bank claims stock, % of world GDP• Internet– User %, World Population– Developed Countries, % of Population– Developing Countries, % of Population8
  • Globalisation Indicators• Demographics– Stock of International Migrants,– % of World Population– Refugee Population, % of World Population9
  • Globalisation Indicators• Political– International organizations number– Intergovernmental and Nongovernmental• Social and Culture– International Tourists;% of world population– International calls ; minutes/capita10
  • Sectoral Analysis :Telecom• The telecom industry is one of the fastest growingindustries in India.• India has nearly 200 million telephone lines makingit the third largest network in the world after Chinaand USA.• With a growth rate of 45%, Indian telecom industryhas the highest growth rate in the world.• History of Indian Telecommunications started in1851 when the first operational land lines were laidby the government near Calcutta (seat of Britishpower).11
  • Sectoral Analysis :Telecom• Telephone services were introduced in India in1881.• In 1883 telephone services were merged with thepostal system.• Indian Radio Telegraph Company (IRT) was formedin 1923. After independence in 1947, all the foreigntelecommunication companies were nationalizedto form the Posts, Telephone and Telegraph (PTT), amonopoly run by the governments Ministry ofCommunications. Telecom sector was consideredas a strategic service and the governmentconsidered it best to bring under states control.12
  • Sectoral Analysis :Telecom• The first wind of reforms in telecommunicationssector began to flow in 1980s when the privatesector was allowed in telecommunicationsequipment manufacturing.• In 1985, Department of Telecommunications(DOT) was established.• It was an exclusive provider of domestic andlong-distance service that would be its ownregulator (separate from the postal system).13
  • Sectoral Analysis :Telecom• In 1986, two wholly government-ownedcompanies were created: the VideshSanchar Nigam Limited (VSNL) forinternational telecommunications andMahanagar Telephone Nigam Limited(MTNL) for service in metropolitan areas.14
  • Sectoral Analysis :Telecom• In 1990s, telecommunications sector benefitedfrom the general opening up of the economy.Also, examples of telecom revolution in manyother countries, which resulted in better qualityof service and lower tariffs, led Indian policymakers to initiate a change process finallyresulting in opening up of telecom servicessector for the private sector.• National Telecom Policy (NTP) 1994 was the firstattempt to give a comprehensive roadmap forthe Indian telecommunications sector.15
  • Sectoral Analysis :Telecom• In 1997, Telecom Regulatory Authority ofIndia (TRAI) was created. TRAI was formedto act as a regulator to facilitate the growthof the telecom sector. New NationalTelecom Policy was adopted in 1999 andcellular services were also launched in thesame year.16
  • Sectoral Analysis :Telecom• Telecommunication sector in India can bedivided into two segments:– Fixed Service Provider (FSPs)– Cellular Services.17
  • Sectoral Analysis :Telecom• Fixed line services consist of basic services, nationalor domestic long distance and international longdistance services.• The state operators (BSNL and MTNL), account foralmost 90 per cent of revenues from basic services.18
  • Sectoral Analysis :Telecom• Private sector services are presently available inselective urban areas, and collectively account forless than 5 per cent of subscriptions.• However, private services focus on thebusiness/corporate sector, and offer reliable, high-end services, such as leased lines, ISDN, closed usergroup and videoconferencing.19
  • Sectoral Analysis :Telecom• Cellular services can be further divided into twocategories:– Global System for Mobile Communications (GSM)– Code Division Multiple Access (CDMA).• The GSM sector is dominated by Airtel,Vodafone, and Idea Cellular, while the CDMAsector is dominated by Reliance and TataIndicom.• Opening up of international and domestic longdistance telephony services are the majorgrowth drivers for cellular industry.20
  • Sectoral Analysis :Telecom• Cellular operators get substantial revenuefrom these services, and compensate themfor reduction in tariffs on airtime, whichalong with rental was the main source ofrevenue. The reduction in tariffs forairtime, national longdistance, international long distance, andhandset prices has driven demand.21
  • Telecom Sector :Restraints• Sluggish pace of reform process.• Lack of infrastructure in semi-rural and ruralareas, which makes it difficult to makeinroads into this market segment as serviceproviders have to incur a huge initial fixedcost.• Limited spectrum availability.22
  • Telecom Sector : SWOC Analysis• S(strengths):– Huge customer base• W(weaknesses)– Lack of infrastructure in semi-urban and rural areas• O(opportunities)– Value added Services• C(challenges)– Limited spectrum availability23
  • Sectoral Analysis :IT• Information Technology (IT) industry in India isone of the fastest growing industries.• Indian IT industry has built up valuable brandequity for itself in the global markets.• IT industry in India comprises of– Software industry– Information technology enabled services (ITES)– Business Process Outsourcing (BPO) industry.India is considered as a pioneer in softwaredevelopment and a favorite destination for IT-enabledservices.24
  • Sectoral Analysis :IT• The origin of IT industry in India can be tracedto 1974, when the mainframe manufacturer,Burroughs, asked its India sales agent, TataConsultancy Services (TCS), to exportprogrammers for installing system software fora U.S. client.• The IT industry originated under unfavorableconditions.• Local markets were absent and governmentpolicy toward private enterprise was hostile.25
  • Sectoral Analysis :IT• The industry was begun by Bombay-basedconglomerates which entered the businessby supplying programmers to global ITfirms located overseas.26
  • Sectoral Analysis :IT• During that time Indian economy was state-controlled and the state remained hostile tothe software industry through the 1970s.• Import tariffs were high– 135% on hardware– 100% on software• Software was not considered an "industry",so that exporters were ineligible for bankfinance.27
  • Sectoral Analysis :IT• Government policy towards IT sector changedwhen Rajiv Gandhi became Prime Minister in 1984.• New Computer Policy (NCP-1984) consisted of– a package of reduced import tariffs on hardware andsoftware (reduced to 60%),– recognition of software exports as a "delicensedindustry", i.e., henceforth eligible for bank finance andfreed from license-permit raj– permission for foreign firms to set up wholly-owned, export-dedicated units and a project to set up achain of software parks that would offer infrastructure atbelow-market costs.28
  • Sectoral Analysis :IT• These policies laid the foundation for thedevelopment of a world class IT industry inIndia.• Today, Indian IT companies such as– Tata Consultancy Services (TCS),– Wipro,– Infosys,– HCLet al are renowned in the global market for their ITprowess.29
  • IT: SWOC Analysis• S:– Indian Education System– High number of English speaking people• W:– Clustered growth• O:– G2G and G2C services• C:– Absence of Generic Software30
  • Sectoral Analysis :Insurance• Insurance sector in India is one of the boomingsectors of the economy and is growing at the rateof 15-20 per cent annum.• Together with banking services, it contributes toabout 7 per cent to the countrys GDP.• Insurance is a federal subject in India and Insuranceindustry in India is governed by Insurance Act,1938, the Life Insurance Corporation Act, 1956 andGeneral Insurance Business (Nationalisation) Act,1972, Insurance Regulatory and DevelopmentAuthority (IRDA) Act, 1999 and other related Acts.31
  • Sectoral Analysis :Insurance• The origin of life insurance in India can betraced back to 1818 with the establishmentof the Oriental Life Insurance Company inCalcutta. It was conceived as a means toprovide for English Widows.• In those days a higher premium wascharged for Indian lives than the non-Indianlives as Indian lives were considered riskierfor coverage.32
  • Sectoral Analysis :Insurance• The Bombay Mutual Life Insurance Societythat started its business in 1870 was thefirst company to charge same premium forboth Indian and non-Indian lives.• In 1912, insurance regulation formallybegan with the passing of Life InsuranceCompanies Act and the Provident Fund Act.33
  • Sectoral Analysis :Insurance• By 1938, there were 176 insurancecompanies in India. But a number of fraudsduring 1920s and 1930s tainted the imageof insurance industry in India. In 1938, thefirst comprehensive legislation regardinginsurance was introduced with the passingof Insurance Act of 1938 that providedstrict State Control over insurance business.34
  • Sectoral Analysis :Insurance• Insurance sector in India grew at a fasterpace after independence. In 1956,Government of India brought together 245Indian and foreign insurers and providentsocieties under one nationalised monopolycorporation and formed Life InsuranceCorporation (LIC) by an Act of Parliament,viz. LIC Act, 1956, with a capitalcontribution of Rs.5 crore.35
  • Sectoral Analysis :Insurance• The (non-life) insurance business/generalinsurance remained with the private sector till1972.• There were 107 private companies involved inthe business of general operations and theiroperations were restricted to organized tradeand industry in large cities.• The General Insurance Business(Nationalisation) Act, 1972 nationalised thegeneral insurance business in India with effectfrom January 1, 1973.36
  • Sectoral Analysis :Insurance• The 107 private insurance companies wereamalgamated and grouped into fourcompanies:– National Insurance Company,– New India Assurance Company,– Oriental Insurance Company and– United India Insurance Company.• These were subsidiaries of the GeneralInsurance Company (GIC).37
  • RN Malhotra Committee• In 1993, the first step towards insurancesector reforms was initiated with theformation of Malhotra Committee, headedby former Finance Secretary and RBIGovernor R.N. Malhotra. The committeewas formed to evaluate the Indianinsurance industry and recommend itsfuture direction with the objective ofcomplementing the reforms initiated in thefinancial sector. 38
  • Key Recommendations• Structure– Government stake in the insurance Companies tobe brought down to 50%.– Government should take over the holdings of GICand its subsidiaries so that these subsidiaries canact as independent corporations.– All the insurance companies should be givengreater freedom to operate.39
  • Key Recommendations• Competition– Private Companies with a minimum paid up capital ofRs.1billion should be allowed to enter the industry.– No Company should deal in both Life and GeneralInsurance through a single Entity.– Foreign companies may be allowed to enter theindustry in collaboration with the domesticcompanies.– Postal Life Insurance should be allowed to operate inthe rural market.40
  • Key Recommendations• Regulatory Body– The Insurance Act should be changed.– An Insurance Regulatory body should be set up.– Controller of Insurance should be madeindependent.41
  • Key Recommendations• Investments– Mandatory Investments of LIC Life Fund in governmentsecurities to be reduced from 75% to 50%.– GIC and its subsidiaries are not to hold more than 5% inany company.• Insurance sector in India was liberalized in March2000 with the passage of the Insurance Regulatoryand Development Authority (IRDA) Bill, lifting allentry restrictions for private players and allowingforeign players to enter the market with somelimits on direct foreign ownership.42
  • Insurance: SWOC Analysis• S:• W:• O:• C:•Assignment.• Visit http://www.irda.gov.in43
  • Sectoral Analysis :Textiles• Textile Industry in India is the second largestemployment generator after agriculture.• It holds significant status in India as it providesone of the most fundamental necessities of thepeople.• Textile industry was one of the earliestindustries to come into existence in India and itaccounts for more than 30% of the totalexports. In fact Indian textile industry is thesecond largest in the world, second only toChina.44
  • Sectoral Analysis :Textiles• Textile Industry is unique in the terms that it isan independent industry, from the basicrequirement of raw materials to the finalproducts, with huge value-addition at everystage of processing.• Textile industry in India has vast potential forcreation of employment opportunities in theagricultural, industrial, organised anddecentralised sectors & rural and urban areas,particularly for women and the disadvantaged.45
  • Sectoral Analysis :Textiles• Indian textile industry is constituted of thefollowing segments:– Readymade Garments– Cotton Textiles including Handlooms– Man-made Textiles– Silk Textiles– Woolen Textiles– Handicrafts– Coir– Jute46
  • Sectoral Analysis :Textiles• Till the year 1985, development of textilesector in India took place in terms ofgeneral policies.• In 1985, for the first time the importance oftextile sector was recognized and aseparate policy statement was announcedwith regard to development of textilesector.47
  • Sectoral Analysis :Textiles• In the year 2000, National Textile Policy was announced.• Its main objective was:– to provide cloth of acceptable quality at reasonable prices forthe vast majority of the population of the country, toincreasingly contribute to the provision of sustainableemployment and the economic growth of the nation; and tocompete with confidence for an increasing share of the globalmarket.• The policy also aimed at achieving the target of textileand apparel exports of US $ 50 billion by 2010 of whichthe share of garments will be US $ 25 billion.48
  • Strengths of Indian Textile Industry• India has rich resources of raw materials of textile industry. Itis one of the largest producers of cotton in the world and isalso rich in resources of fibers like polyester, silk, viscose etc.• India is rich in highly trained manpower. The country has ahuge advantage due to lower wage rates. Because of lowlabor rates the manufacturing cost in textile automaticallycomes down to very reasonable rates.• India is highly competitive in spinning sector and has presencein almost all processes of the value chain.• Indian garment industry is very diverse in size, manufacturingfacility, type of apparel produced, quantity and quality ofoutput, cost, requirement for fabric etc. It comprises suppliersof ready-made garments for both, domestic or exportmarkets.49
  • Weaknesses of Indian Textile Industry• Indian textile industry is highly fragmentedin industry structure, and is led by smallscale companies.• The reservation of production for very smallcompanies that was imposed with theintention to help out small scale companiesacross the country, led substantialfragmentation that distorted thecompetitiveness of industry.50
  • Weaknesses of Indian Textile Industry• Smaller companies do not have the fiscalresources to enhance technology or invest inthe high-end engineering of processes. Hencethey lose in productivity.• Indian labour laws are relatively unfavorable tothe trades and there is an urgent need forlabour reforms in India.• India seriously lacks in trade pact memberships,which leads to restricted access to the othermajor markets.51
  • Opportunities and Challengesfor Indian Textile Industry• The outlook for textile industry in India is veryoptimistic.• It is expected that Indian textile industry wouldcontinue to grow at an impressive rate.• Textile industry is being modernized by anexclusive scheme, which has set aside $5bn forinvestment in improvisation of machinery.• India can also grab opportunities in the exportmarket. The textile industry is anticipated togenerate 12mn new jobs in various sectors.52
  • Sectoral Analysis :Agriculture• Agriculture in India is one of the mostimportant sectors of its economy.• It is the means of livelihood of almost twothirds of the work force in the country andaccording to the economic data for thefinancial year 2006-07, agriculture accountsfor 18% of Indias GDP.• About 43 % of Indias geographical area isused for agricultural activity.53
  • Sectoral Analysis :Agriculture• Though the share of Indian agriculture inthe GDP has steadily declined, it is still thesingle largest contributor to the GDP andplays a vital role in the overall socio-economic development of India.54
  • Sectoral Analysis :Agriculture• One of the biggest success stories of independent India isthe rapid strides made in the field of agriculture.• From a nation dependent on food imports to feed itspopulation, India today is not only self-sufficient in grainproduction but also has substantial reserves.• Dependence of India on agricultural imports and thecrises of food shortage encountered in 1960s convincedplanners that Indias growing population, as well asconcerns about national independence, security, andpolitical stability, required self-sufficiency in foodproduction.55
  • Sectoral Analysis :Agriculture• This perception led to a program of agriculturalimprovement called the Green Revolution.• It involved– bringing additional area under cultivation– extension of irrigation facilities– use of improved high-yielding variety of seeds– better techniques evolved through agriculturalresearch– water management– plant protection through judicious use of fertilizers,pesticides and cropping practices.56
  • Sectoral Analysis :Agriculture• All these measures had a salutary effect andthe production of wheat and rice witnessedquantum leap.57
  • Sectoral Analysis :Agriculture• To carry improved technologies to farmers and toreplicate the success achieved in the production of wheatand rice a National Pulse Development Programme,covering 13 states, was launched in 1986.• Similarly, a Technology Mission on Oilseeds was launchedin 1986 to increase production of oilseeds in the countryand attain self-sufficiency.• Pulses were brought under the Technology Mission in1990.• After the setting up of the Technology Mission, there hasbeen consistent improvement in the production ofoilseeds.58
  • Sectoral Analysis :Agriculture• A new seeds policy has been adopted toprovide access to high-quality seeds and plantmaterial for vegetables, fruit, flowers, oilseedsand pulses, without in any way compromisingquarantine conditions.• To give fillip to the agriculture and make it moreprofitable, Ministry of Food ProcessingIndustries was set up in July 1988.• Government has also taken initiatives toencourage private sector investment in the foodprocessing industry.59
  • Agriculture: SWOC Analysis• S:– Growing rate of irrigated area– HYV seeds– Increasing access to institutional finances• W:– Heavy dependence on monsoons– Unbalanced fertilizer use60
  • Agriculture: SWOC Analysis• O:– water management, rain water harvesting andwatershed development– Diversifying into high value outputs fruits, vegetables,flowers, herbs and spices, medicinal plants, bamboo,bio-diesel, but with adequate measures to ensurefood security• C:– Reclaiming degraded land and focusing on soil quality– Bridging the knowledge gap through effectiveextension services61
  • Sectoral Analysis : Automobile• The automobile industry comprises of:– Heavy vehicles• (trucks, buses, tempos, tractors)– Passenger cars– Two-wheelers– Ancillary industries62
  • Major Characteristics• Second largest two-wheeler market in theworld.• Fourth largest commercial vehicle market in theworld.• 11th largest passenger car market in the world• Expected to become the worlds third largestautomobile market by 2030, behind only Chinaand the US.63
  • Automobile : SWOC Analysis• S:– Rapid economic growth– Higher disposable income of population• W:– Acute competition– Innovation ; R & D• O:– Become a outsourcing hub for worldwide automobilecompanies• C:– Rising prices of steel– Labour problems64
  • Sectoral Analysis :Chemical• A key constituent of the Indian economy thataccounts for about five percent of the GDP.• The Indian chemical industry has vital associationswith several other industries such as– Automotives– Consumer durables– Food processing– Iron and steel– Textiles– Paper– Engineering65
  • Sectoral Analysis :Chemical• The industry is a multi-product and multi-faceted one that comprises– basic chemicals– pharmaceuticals– Petrochemicals– specialty chemicals– agrochemicals– biotechnology66
  • Sectoral Analysis :Chemical• Within the sub segments, thepetrochemicals industry is growing thefastest, with a rate of around 15 percentannually.67
  • Sectoral Analysis :Chemical• http://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_chem0203.pdf• Please refer above mentioned URL fordetailed information and make a SWOCanalysis.68
  • Sectoral Analysis :Pharmaceutical• Indian Pharma Industry is playing a key role inpromoting and sustaining development in thevital field of medicines.• Around 70% of the countrys demand for– bulk drugs– drug intermediates– pharmaceutical formulations– Chemicals– tablets, capsules,– orals and vaccinesis met by Indian pharmaceutical industry.69
  • Sectoral Analysis :Pharmaceutical• Indian Pharmaceutical sector is highlyfragmented with more than 20,000registered units and is very top heavy.• The leading 250 pharmaceutical companiescontrol 70% of the market with marketleader holding nearly 7% of the marketshare.• There are also 5 Central Public Sector Unitsthat manufacture drugs.70
  • Sectoral Analysis :Pharmaceutical• These units produce complete range ofpharmaceuticals, which include medicinesready for consumption by patients and about350 bulk drugs, i.e., chemicals havingtherapeutic value and used for production ofpharmaceutical formulations.• India is largely self-sufficient in case offormulations. More than 85% of theformulations produced in the country are soldin the domestic market.71
  • Sectoral Analysis :Pharmaceutical• Some life saving, new generation under-patent formulations are imported, byMNCs, which they market in India.• Over 60% of Indias bulk drug production isexported. The balance is sold locally toother formulators.72
  • Sectoral Analysis :Pharmaceutical• Pharmaceutical Industry in India has beende-licensed and industrial licensing for mostof the drugs and pharmaceutical productshas been done away with.• Manufacturers are now free to produce anydrug duly approved by the Drug ControlAuthority.73
  • Sectoral Analysis :Pharmaceutical• Indian pharmaceutical industry got a majorboost with the signing of GeneralAgreement on Tariffs and Trade in January2005 with which India began recognisingglobal patents.• After recognizing the global patent regimethe Indian pharma market became a soughtafter destination for foreign players.74
  • Pharmaceutical: SWOC Analysis• S:– Holds major share in worlds contract researchbusiness– Huge cost advantage over clinical trials• W:– Less emphasis on development of cost effectiveand generic drugs75
  • Pharmaceutical: SWOC Analysis• O:– Acquiring global footprint by way of mergers andacquisitions.• Recently Ranbaxy acquired Romania’s Terapia• Dr.Reddy’s Lab acquired German drug makerBetapharm• C:– Obtaining patents– Successfully defending pending legislations indifferent courts of world.76
  • SUMMARYWe have taken a birds eye review forunderstanding the process of globalisation.We also saw different sectors and nuancestheir nitty gritty.Also we learnt the process of SWOCanalysis and difference between SWOC andSWOT analysis.77
  • Citations/References• Business Environment.• AC Fernando (1st Ed; Pearson Publishers)• www.indiabudget.nic.in• www.planningcommission.nic.in• www.irda.gov.in• www.trai.gov.inUNIT I 78
  • ASSIGNMENT• Banking and Finance• FMCGWhy these two as assignment?– Because two are most diversified sectors andtouches our daily life ;also easy to gatherinformation– You may form suitable groups and the informationcan be shared and synergy of understanding beachieved.79
  • THANK YOU…!!!80