Grow global: building business in BRIC nations

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This report highlights the opportunities and risks that UK businesses face when expanding in the BRIC countries.

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Grow global: building business in BRIC nations

  1. 1. Grow global:building business inBRIC nations
  2. 2. ContentsIntroduction 3BRICS in brief 4BRIC economies today 6Key issues facing UK businesseswhen expanding into theBRIC nations 8Geography and infrastructure 9Culture and language 11Business practices 12Resources 13Expert insights intoBRIC expansion 14Brazil 14Russia 15India 16China 17
  3. 3. IntroductionAssessing the opportunitiesand threats offered by theworld’s four leading emergingeconomiesThe BRIC countries are a vast opportunity for UK business. Brazil, Russia, India andChina are enormous markets that are rich in resources, but they pose significant andspecific risks. Understanding those risks is key to unlocking their potential and tappinginto the growth of their markets.This report reveals those risks and opportunities. At a roundtable event, our experts ineach BRIC nation answered real questions from UK businesses interested in dealingwith these countries, and businesses planning to expand to BRICs in the future. Theresult is an insightful background into working with the BRIC countries today. Real-world expertise and insights will give you the best chance to succeed in these nations.BRIC economies today Key issues facing UK businesses when Expert insights into BRIC expansionOur report will give you a solid expanding into the BRIC nations Our regional experts give solutions tooverview of conditions in the BRIC After outlining the hard data and the problems that are worrying today’seconomies today. While the surging overall trends, we consider the real BRIC players – and the businesses thatgrowth of the 2000s has slowed in the issues that affect businesses in BRIC plan to reach out to BRICs tomorrow.BRICs, they still offer many businesses countries. Areas of analysis includean opportunity when compared to the geography, infrastructure, language andsluggish home markets. Even though business practices. We consulted ourlabour costs are rising in some, and experts on each country, and broughtfiscal policies in others might reduce in the comprehensive view from Nicktheir competitiveness, there are still Earlam, founder and chairman of Plexuscompelling reasons like language, Cotton. Having worked across theculture, and a will to work with UK BRICs over a period of decades, Earlambusinesses that rebalance the is well positioned to reveal operationalBRIC offering. insights on the key topics. Grow global • building business in BRIC nations 3
  4. 4. The BRICs in brief We highlight the key findings of this report; socio-economic, geographical and environmental characteristics that UK businesses should take into account when expanding into the BRIC nations. Brazil • A geographical asset is time zoning – for half of the year Brazil is in the closest time zone to GMT. Flight time to Rio is the same from the UK as it is from New York • With a population of 192 million from incredibly diverse backgrounds of race, culture and class, the thing that unifies Brazilian culture is an effusive confidence, something that carries into their business culture • There is concern that Brazil is already an expensive country and manufacturing is not Russia competitive; however, manufacturing is still crucial as Brazil develops. High operational • As the centre of the former Soviet Union, costs are countered by the ease of working Russia still holds a very significant role among there and the willingness of Brazil to open up the Commonwealth of Independent States to investment (CIS) surrounding it, with Russian spoken • After suffering from hyperinflation in the 1970s across the Caucasus and Central Asia and 1980s, Brazil now has a very sophisticated • Despite Russia’s abundant resources, there banking system with higher liquidity has been a historic concern in the UK that it is a difficult place to do business. With the Eurozone stalled, Russia’s ongoing economic growth and large consumer base should encourage UK businesses to reassess their risk and reward opportunities • Russia has declared its appetite for new foreign investors to help to develop high-tech businesses, modernise the economy and create an international financial centre in Moscow, presenting real opportunities for UK businesses • Natural resources continue to be a prime theme in the economy. Infrastructure replacement and retrofitting may be a gold mine for British engineering firms, financial and legal advisers who are experienced in project finance • Russia is the key regional hub in Eastern Europe, pushing for its CIS neighbours to trade more and become more user-friendly, including the use of the Customs Union with Belarus and Kazakhstan. Wider access to the CIS can be launched from any of these three countries4 Grow global • building business in BRIC nations
  5. 5. China • There has been significant government investment in infrastructure, including transport, telecommunications and utilities • As the economy of China shifts from an agrarian to industrial base, natural resources are key, and the subject of much protective feeling among the Chinese • Although Hong Kong is not the automatic choice it was a few years ago, it is still a good location for setting up offices, tax-efficient, and a very easy place to do business, with excellent transport links • As China looks to move up the value chain to a more consumption-driven economy, it is becoming ever more interested in consumer brands and in the service sector. This brings fantastic opportunities for UK businesses • Finding the right partners who you can trust to help you find your way into the market is anIndia important first step. Real knowledge of China and good local connections are crucial• The linguistic legacy has been paramount for India in competing with other developing economies. English is rooted deep in India’s working culture, along with many British business practices and shared legal heritage• One major investment advantage of India over China is its governance, legal system and a stock market that is aligned with that of the United Kingdom. Indian capital and equities markets are also far more mature than China and its other BRIC counterparts• India is rich in resources, but although a major producer of minerals and potentially of fossil fuels, it faces many challenges in its exploitation of this wealth• Indian companies tend to be much more hierarchical in structure and culture than UK companies, with great importance placed on the position you hold• One of the sectors where India enjoys an upper hand over China is the IT/BPO industry. India’s earnings from the BPO sector alone in 2010 were USD 49.7 billion Grow global • building business in BRIC nations 5
  6. 6. Analysis Key issues facing UK businesses when expanding into the BRIC nations Dealing with BRIC countries requires very specific insights in terms of geography, culture, business practices and resources, and understanding each in turn is essential to build up a successful strategy for growth. Changing to fit the BRIC challenges Part of that learning process is about how to change as a business to suit these challenges. “The economic outlook is blurring in a world where, until recently, mature economies looked to emerging markets to tap into dizzying growth patterns as a matter of course, becoming swollen and complex businesses as a result”, says Robert Fuller, UK International Business Centre Director at Grant Thornton UK LLP. “Size and strength are no longer advantages. Speed and agility are what you now need to make rapid decisions,” he says. “The Arab Spring, IMF leadership change, the deaths of Bin Laden and Steve Jobs, even the royal wedding has affected supply chains and increased volatility. But even in this more challenging environment, there is more cross-border business going on.”8 Grow global • building business in BRIC nations
  7. 7. Geography and USD 1 per day. However, China had though many businesses might initially already started its gradual economic believe that Brazil is a natural partnerinfrastructure reforms whereas India embarked on its for US companies, its location is equally economic liberalisation a decade later convenient for the British.UK investment into China has in 1991. While both economies have As the centre of the formertraditionally been in the heavily shown similar successful trends in GDP Soviet Union, Russia still holdsurbanised eastern coastal region. growth rate, the performance gap in a very significant role among theHowever, as China looks to increase the last three decades has been huge. Commonwealth of Independent Statesurbanisation and reduce the disparity of China’s GDP (USD 7.23 trillion) is 4.35 surrounding it. This is reflected in thewealth between rural and urban areas, times bigger than Indian GDP (USD fact that Russian is spoken across muchthere has been significant government 1.67 trillion) and has grown at 10% of the wider region of the Caucasus andinvestment in infrastructure, including per annum for the last three decades Central Asia. There is new momentumtransport, telecommunications and compared to 6% for India. in the Customs Union with neighboursutilities. The rate of high-speed rail China has followed the traditional Belarus and Kazakhstan, althoughbuilding alone is impressively fast. This development model, whereas India Ukraine is seeking a separate tradecreates potential new opportunities for tried to jump from an agriculture- arrangement directly with the EU.UK businesses in the less developed based economy to a service Russia’s recent entry into the Worldwestern parts of China, where costs dependent economy, resulting in low Trade Organisation (WTO) is likely toare lower, incentives generally better, manufacturing and infrastructure give a new boost to the UK’s insurance,and Western companies may have a growth. Unlike India, China is still banking and telecom industry leaders,competitive advantage. investing vast amounts in manpower which will then enjoy much better “China is investing huge sums in development and strengthening of market access to Russia.infrastructure – just look at some of infrastructure.the airports being built in second-tier A growth comparison of Chinesecities, which would put the UK airport and Indian infrastructure is worthnetwork to shame. This is opening up making before any business considersthe vast hinterland areas, and giving their decision, see page overleaf (10).China a real competitive edge over the When comparing BRIC nations,other BRIC economies – it is just easier another key geographical asset is timeto get around,” says Nick Farr, Head of zoning. Surprisingly, while manyChina Britain Services Group at businesses cite Russia’s proximity to theGrant Thornton UK LLP. UK as a benefit, for half the year Brazil In the 1980s both China and India is in the closest time zone to GMT.were very poor economies with India Flight time to Rio is the same from theleading China in per capita GDP by UK as it is from New York, so even Grow global • building business in BRIC nations 9
  8. 8. A comparison of Chinese and Indian infrastructure Power Railways Ports India has a total installed capacity of Indian Railways cover a total track of India has 12 major ports and 200 non- around 200 GW, as against 1000 GW 65,000 km, against 91,000 km in China. major ports (minor and intermediate in China. Though India’s installed As of 2007, India had 225,000 freight ports) spread across nine coastal maritime capacity has increased by 40% in the wagons, 45,000 passenger coaches and states. The capacity of major ports has last four years, India’s overstressed 8,300 locomotives, whereas Chinese increased to 532.07 million tonnes per power grid is one of the most obvious Railways owned about 578,000 freight annum (MTPA) in 2007-08 (555.67 MTPA signs of their lagging infrastructure wagons, 44,000 coaches and 18,300 by 2008-09 – provisional) and the traffic development. It takes five to six years in locomotives. India moved 750 million during the same period touched 519.3 India to build a thermal power plant, as MT of freight while China moved 4.5 million tones, running at 97.6% of the total against two to three years in China and times that of India, at 3,300 million capacity. around four years in other countries. MT. Indian railways moved 6.2 billion China on the other hand has become This is attributable to delays in passengers while China moved 1.4 one of the world’s most dynamic shipping acquiring sites and obtaining approvals, billion passengers. Despite the Indian markets, with ocean shipping handling shortage of equipments and EPC lead in passenger numbers, the quality 95% of the country’s foreign trade. Driven bottlenecks. India, however, is the only of passenger travel in the Chinese by higher exports and import of raw BRIC country to have Power Trading Railway is far superior, and China has materials. Exchanges. express trains with speeds of 300 kmh. China has also shifted its focus The maximum speed of a passenger Telecommunication to increasing renewable sources in train in India is about half that of China has around 700,000 3G mobile its energy mix. It has led the way by Chinese Railways at 160 kmh. towers in comparison to India which has occupying a 43% share of global wind around 350,000 2G mobile towers as of capacity installed in 2011 as against Civil Aviation 2011. India also has the world’s second India’s 7% share. Global wind power India has 128 airports, including 15 largest mobile phone user base, with over growth looks very strong and is on international airports that handled 143.4 919 million users as of March 2012. This a continued rise, largely because of million passengers in 2010-11. China compares to 1,020 million users in China, China’s incredible level of investment. has around 500 airports of all types now the world’s largest mobile phone user and sizes and passenger throughputs base. India has over 121 million internet Roads reached 486 million. The trips per capita users whereas China has over 450 million The Indian road network stands at 4.32 in India still remain very low (0.04) internet users as of December 2011. Indian million km, with density of 0.66 km per by the standards of other emerging telecom sector has however become the square km of land. This is much greater markets, including China, which is at world’s most competitive and in spite of than China, with 0.16 km per square 0.15. China’s domestic traffic is five this, India is one of the fastest growing km. In fact, the road network in China times the size of traffic in India, despite telecom markets with a growth rate of still ranks among the sparsest in the having a population just 15% larger. over 26%. world relative to geographic area and This is reflected in the fact that India population. However, most of the roads has one aircraft for every 2.89 million IT/BPO in India are congested and narrow with people, miniscule in comparison to 1.14 One of the sectors where India enjoys an poor surface quality. million in China. upper hand over China is the IT/BPO industry. India’s earnings from the BPO sector alone in 2010 were USD 49.7 billion, while China earned USD 35.76 billion. Seven Indian cites are ranked as the world’s top ten BPOs, while only one city from China features on the list.10 Grow global • building business in BRIC nations
  9. 9. Culture and languageLocation is not all that makes Brazil soconvenient, “People often think that it’sjust for the Spanish or Portuguese tocarve out markets in Latin America, butthey’re forgetting that there’s already alot of history between the British andBrazil,” says Colin Johnson, Director atGrant Thornton UK LLP. “A Braziliancontact once explained to me thatthey just like dealing with the British,because we respect contracts. Such insights reflect a truth aboutBRIC nations: despite many peoplethinking these economies are newand modern, they are often ancientand struggling under third-worldinefficiencies. The key to goodoperation is to start slow, find the rightpeople and build trust.”English as a business language English teaching in schools across theLanguage is perhaps the biggest country, looking to tap into a growingfactor that can be overlooked when international outsourcing and IT “Such insights reflect adealing with China. While they are market. truth about BRICa dizzying cultural mix of Daoism, The subtleties of Chinese culture areConfucianism, Buddhism, Marxism and a far cry from the fun and adventurous nations: despite manySocialism – with a generous tradition spirit of the Brazilians, explains Nick people thinking theseof superstition over things such as Earlam, founder and chairman ofnumbers and colours thrown in – it is Plexus Cotton: “It’s my favourite place economies are new andwith language that many businesses fall to do business in the BRIC countries, modern, they are oftendown. “It’s not a literal language: your but risk-taking is a given there.” Withtranslator doesn’t just need to know a population of 192 million from ancient and strugglingEnglish, he must be able to convey incredibly diverse backgrounds of under third-worldthe exact meaning of your thoughts in race, culture and class, the thing thatChinese, which is so much more,” says unifies Brazilian culture is this effusive inefficiencies. The key toNick Farr. confidence, something that carries into good operation is to start Contrast this with working in India, their business culture too.where English is the business language. slow, find the rightRooted deep in their working culture,along with many British business people and build trust.”practices and a shared legal heritage, it Colin Johnsonbecomes a significant advantage. The Director, Grant Thornton UK LLPlinguistic legacy has been paramountfor India in competing with otherdeveloping economies. However,Chinese authorities are ramping up Grow global • building business in BRIC nations 11
  10. 10. Business practices When dealing with Brazilians, says The importance of transparency Earlam, you must have simpatico. Despite the distance, business in India Getting cross or confrontational won’t is comparatively open and transparent, work – your partners have to want operating much along British lines. to work with you. “It requires good Many find they have the same thought relations with everyone, partners and processes as us. Their bureaucracy, employees. You have to make your however, is still a concern, according to interest their interest.” It is a marked Anuj Chande, Head of the South Asia contrast to his views on Russian Group at Grant Thornton UK LLP. practices, however. In China the risks are real for those Earlam is not enthused by the who do not appreciate the differences prospect of working in a culture where in business practice. “China certainly he believes nothing is sacrosanct. has a very different business culture “Though for some the opportunities to the Anglo-Saxon world, but the outweigh the risks, the problem is that differences are not as extreme as some “China certainly has a I believe if you are successful in Russia, commentators would lead you to someone else can come along and take it believe. The key is to be prepared, and very different business from you to own themselves.” invest the time and effort to understand culture to the Anglo- One major investment advantage the market properly” says Nick Farr, of India over China is its governance, Head of China Britain Services Group Saxon world, but the legal system and a stock market that at Grant Thornton UK LLP. Industry is aligned with that of the United and trading require real knowledge differences are not as Kingdom. While India’s well-developed of China and having good local extreme as some legal system is based on British legal connections are important, both in roots, China has legal problems business and, in some cases, political commentators would lead surrounding issues such as the low links. But for businesses that invest you to believe. The key is enforcement of IP protection. This is properly in China, the opportunities perhaps illustrated by the competitive can be huge. to be prepared, and invest strategies in China and India. Domestic There is, some believe, a deficit of the time and effort to Indian firms have been quicker than the understanding. One important principle Chinese counterparts to internationalise to remember is that the short-term understand the market their businesses. profit motive is a significantly lower properly.” Indian capital and equities markets priority for the Chinese, dwarfed by the are also far more mature than China importance of status, of a desire to build Nick Farr and its other BRIC counterparts. The long-term relationships and a real focus Head of China Britain Services Group, Chinese capital market lags behind that on building a strong balance sheet, Grant Thornton UK LLP of India both in terms of predictability be it through acquisition of strong and transparency. While the Indian global brands, cutting-edge intellectual stock market is based on international property or of natural resources. There guidelines, in China it is more has been a real focus in recent years dependent on rules and regulations of on accessing resources, which western the government, which is the majority governments ignore at their cost. stakeholder in listed State-owned companies.12 Grow global • building business in BRIC nations
  11. 11. ResourcesAs the economy of China shifts from and create an international financialan agrarian to industrial base, natural centre in Moscow, all of which shouldresources are key, and the subject of represent real opportunities for the UKmuch protective feeling among the and other countries.Chinese. One only needs to look at Russia has built up reserves ofthe markets for rare earth metals to USD 145 billion in its Reserve andunderstand that the Chinese are playing Welfare funds from oil and gas profits.a long game with their resources, while So far, USD 40 billion has beenthey simultaneously build strong links allocated to shore up the economy ifwith resource-rich developing nations. the eurozone crisis deepens and oil“The Chinese have this long-term view prices fail to support the State budget –of resources,” Earlam says. “There is which breaks even at USD 117 a barrel.a resource war being fought out there Even with rebalancing efforts, naturalthat they really understand – while resources will continue to be a primeChina is the great new challenge of our theme in the economy and there is alsotime, it is only a challenge that realists significant infrastructure replacement Despite Russia’scan handle, people who can see the and retrofitting due in Russia and across abundant resources, thereworld in the way that they can.” the region. This may be a gold mine for With the discovery of major oil British engineering firms, financial and has been a historicreserves in Brazil, some fear that legal advisers who are experienced in concern in the UK that itmanufacturing competitiveness will project finance.decline. There is concern that Brazil In India, multi-layered regulatory is a difficult place to dois already an expensive country and approvals and overlapping jurisdictions business. With themanufacturing is not competitive; new of states and central government meanoil reserves will add to currency and that coal projects can take 8-12 years to Eurozone stalled, Russia’s commission, compared to 5-6 years incost pressures. While the Brazilian ongoing economicgovernment has worked to reduce other countries.the Real exchange rate, exporting There is also a lack of transparency growth and large in the allocation of concessions,large goods from Brazil may not be with priority given to public sector consumer base shouldcompetitive enough, as has already beenseen with car exports to Mexico. companies, and inadequate mineral encourage UK businesses Despite Russia’s abundant resources, concession databases. Lastly, India lacks local risk capital for exploration to reassess their risk andthere has been a historic concern inthe UK that it is a difficult place to do companies, which already operate in a reward opportunities.business. With the Eurozone stalled, high risk and capital-intensive business.Russia’s ongoing economic growth and While the majors tend to focus onlarge consumer base should encourage exploring late stage developmentUK businesses to reassess their risk and projects, it is these capital-poor juniorreward opportunities. While the WTO miners who have traditionally takenrules should ensure a more transparent up grassroots exploration. India’sand level playing field, Russia has also mineral wealth is there, and waiting fordeclared its appetite for new foreign conditions to improve with investment:investors to help to develop high-tech once these problems are overcome thebusinesses, to modernise the economy gates are open. Grow global • building business in BRIC nations 13
  12. 12. Conclusions Expert insight into the BRIC expansion We ask our regional experts to answer real questions from businesses aiming to maximise their BRIC strategies Brazil Q How does the banking system make changes in the economy, manufacturing foreign investment more challenging? is still crucial as Brazil develops. A First, you have to understand that Relatively high operating costs are Colin Johnson there is no country like it in Europe. countered by the ease of working there Colin Johnson has over They have different standards and and the willingness of Brazil to open up twenty years’ experience expectations, and that carries over into to investment. of investment in emerging the banking system. In fact they have a very sophisticated banking system, and Q What are the challenges for UK markets, especially in with higher liquidity. After suffering companies working within the Brazilian relation to Latin America from hyperinflation in the 1970s and tax system, and what would be the where he has acted as 1980s, they have this in place to counter it. simplest ways to work around these problems? an investment manager, A The taxes on imports of both goods lender and advisor. He Q Is manufacturing competitiveness and services are substantial. There are is Chairman of the Brazil declining in Brazil? some ways around this, at least in part, A One thing to remember is that your but care needs to be taken in structuring and the Latin America competitors are already there, from business. Some companies have, for Groups for CityUK and French and Canadians to the Dutch. instance, started working on part- Brazil Financial Services They’ve all seen the opportunity. completed imports, but again careful Despite the oil rush that may drive fast structuring is needed. Champion for UKTI. He also leads Grant Thornton Q Brazil is often referred to as being a International’s energy high cost country to operate within – is this still accurate, and if so what are the sector. benefits that outweigh these costs? A Brazil is still high cost, but it is a very substantial market in its own right. It is still expected to see significant growth (though not at Chinese rates) and is also a substantial part of the Mercosur and Latin American marketplaces. So although it is high cost, it is often still cheaper than seeking to import items especially after taxation is taken into account.14 Grow global • building business in BRIC nations
  13. 13. Russia Q How do you leverage Russia as for growth are real, not just in Moscow a hub to drive business across the but in many other major cities. Both the municipalities and citizens have moneyNigel Davies Commonwealth of Independent States (CIS)? to pay for the right goods and services.Nigel works within A Finding a regional team or advice The strategy to diversify the RussianGrant Thornton from inside each country is key to economy into hi-tech and financialInternational to assist with managing the commercial, tax and legislative challenges in new markets. services is a real opportunity for growth for agile UK players. If you have a no-cross border corporate Some UK businesses have the advantage compromise policy from the beginningand project finance that their primary customers have you can manage any corruption risks.opportunities for clients already expanded across the region Teaming with or hiring people with local so they can follow in their footsteps, experience should reduce any surprisesacross the 27 member reducing the risks. Others may need to behind import, distribution, plant, staff,firms present in Central build up more organically and will need and tax issues which will be less familiarand South Eastern Europe careful research into potential markets, to a UK HQ team. local management and any JV partners.and the Commonwealth of While Russia is not a member of the EU, Q Are there alternative safeguards toIndependent states where they are the key regional CIS hub with finding local partners?he has previously lived strong existing distribution links. The A Foreign investment is always influenced by government strategyand worked for 10 years. mechanism of the Customs Union with Belarus and Kazakhstan allows wider and market developments in the targetHe has built close links to access to the CIS from any of these three country. Foreign Direct Investmentthe international financial countries. Do not overlook the skilled (FDI) in Ukraine is falling at presentinstitutions and other key and competitively priced workforce in Central and South East Europe, which because of uncertainty around government strategy but the basis forstakeholders active in the may be a key component in many CIS strong commercial expansion is stillregion. supply chains. there. Russia is doing fairly well by comparison because economic growth Q What is the best way to secure growth and scale look more secure. However, in Russia? seeking co-financing from some of A There are many examples of Western the international financial institutions businesses who are achieving double on the ground may reduce your risks. digit revenue and bottom line growth in Embassies and trade associations are also Russia, much stronger than in their home a good source of information and advice, markets. Starting a business from scratch which can help you make informed may be a little challenging but once you decisions. have broken through, the opportunities Grow global • building business in BRIC nations 15
  14. 14. India Q What are the key drivers that make members working in the business India attractive right now? are awarded a significant degree of A India already has booming importance and respect. In terms of Anuj Chande industries, they are in the process of people management, it’s more about Anuj Chande has a broad deregulation and they already operate who is managing whom. Overall it is a range of experience from within similar structures to us. In those less inclusive and consultative approach than in the UK. performing strategic and terms it’s a familiar and secure place to operate, and getting better as time organisational reviews, goes on and implementation of modern Q How easy is it to set up in India as grooming for IPO and practices expands. a British business, and what types of raising funding both debt Q What are the main risks to operating partnership are most common between UK and Indian businesses? and equity, to M&A advice in India? A Setting up in India is relatively easy. and disposals. Anuj is Head A Despite the attraction for outsiders Investors have two choices which need of the South Asia Group at of being a growth economy, there are to be carefully evaluated. They can set aspects of operation that you ignore at up as a foreign entity through a branch Grant Thornton UK LLP. your peril. Taxes are one such worry or project office, or as an Indian entity today. When you do the sums, it’s which is either wholly owned or a joint frightening how fast costs can stack up, venture with a local partner, depending especially since state taxes often come on the sector the company is in. on top of indirect taxes and local taxes from trading internally. Q How do Indian companies compare to British ones in terms of people management, and what changes should UK companies be prepared to make to meet their expectations? A Indian companies tend to be much more hierarchical in structure and culture than UK companies, with great importance placed on the position you hold. In addition, a significant proportion of Indian companies – including public ones – are family promoted and controlled. Family16 Grow global • building business in BRIC nations
  15. 15. China Q Is Hong Kong still a good location acknowledged that the UK has many for setting up offices? leading brands, and that the UK is the A It’s still an important gateway for second largest service exporter in theNick Farr a number of reasons. Firstly, it acts as world. This is generating significantNick Farr specialises in a bridge between east and west, with activity, both in the form of acquisitioninternational tax, with a a Mandarin and Cantonese-speaking of leading UK brands such as Gieves & Hawkes and Weetabix, as well asparticular focus on cross- Chinese community, but with extensive English-speaking and institutions built significant investment by UK serviceborder structuring. With on the British model. Secondly, it is sector clients in China. It is importantover 15 years’ experience, an easy place to do business, and very for the UK to continue to capitalise onhe has worked with a tax-efficient, with excellent transport links. Recent structural changes may these opportunities.range of clients, from mean Hong Kong is not the automatic Q How can a business put theentrepreneurial start-ups to choice it was a few years ago, but it operating risks of China into context? A Nobody can deny that there islarge listed multi-nationals. still presents a strong case for many businesses investing in the region. real opportunity in China, the world’sHe has particular expertise If you want to focus on the Chinese fastest growing economy. The key isadvising companies mainland markets, it has great links, realising that it is not one market butexpanding into China and better than Singapore, but if you want many. The question is how best to access to, say, India, then Hong Kong access this large and disparate market,Asia. Nick is Head of China will not be your first choice. especially in the face of hurdles likeBritain Services Group at bureaucracy and concerns about IPGrant Thornton UK LLP. Q Is Germany becoming a better protection. Finding the right partners trading partner for China than the UK? who you can trust to help you find A China historically saw Germany as your way into the market is an its first choice as an investment partner, important first step. And doing your especially given their economic strength homework thoroughly is essential – for and large manufacturing base. However businesses that are properly prepared, there are signs that this is changing. the operating risks should be fully Recent eurozone woes mean the UK manageable. currently offers more stability. More importantly, as China looks to move up the value chain to a more consumption- driven economy, it is becoming ever more interested in consumer brands and in the service sector. China has openly Grow global • building business in BRIC nations 17
  16. 16. Contacts For further information on any of the issues explored in this report contact: Colin Johnson Nigel Davies Anuj Chande Nick Farr Director (Brazil expert) Associate Director (Russia expert) Partner (India expert) Partner (China expert) T 020 7728 2103 T 020 7728 3126 T 020 728 2133 T 020 7728 2691 E colin.johnson@uk.gt.com E nigel.davies@uk.gt.com E anuj.j.chande@uk.gt.com E nick.farr@uk.gt.com Robert Fuller Astrid Castro UK IBC Director Marketing - Emerging Markets T 0118 955 9146 T 020 7728 2839 E robert.fuller@uk.gt.com E astrid.castro@uk.gt.com For other queries please contact your local Grant Thornton office: Belfast Gatwick Liverpool Norwich T 028 9067 7000 T 01293 554130 T 0151 224 7200 T 01603 620481 Birmingham Glasgow London Sheffield T 0121 212 4000 T 0141 223 0000 T 020 7383 5100 T 0114 255 3371 Bristol Ipswich Manchester Southampton T 0117 305 7600 T 01473 221491 T 0161 953 6900 T 023 8038 1100 Cambridge Kettering Milton Keynes Thames Valley T 01223 225600 T 01536 310000 T 01908 660666 Oxford T 01865 799899 Cardiff Leeds Newcastle Reading IQ T 029 2023 5591 T 0113 245 5514 T 0191 261 2631 T 0118 955 9100 Edinburgh Leicester Northampton Reading (Pinnacle Building) T 0131 229 9181 T 0116 247 1234 T 01604 826650 T 0118 983 960018 Grow global • building business in BRIC nations
  17. 17. © 2012 Grant Thornton UK LLP. All rights reserved.‘Grant Thornton’ means Grant Thornton UK LLP, a limitedliability partnership.Grant Thornton is a member firm of Grant Thornton International Ltd(Grant Thornton International). References to ‘Grant Thornton’ are to thebrand under which the Grant Thornton member firms operate and referto one or more member firms, as the context requires. Grant ThorntonInternational and the member firms are not a worldwide partnership.Services are delivered independently by member firms, which are notresponsible for the services or activities of one another. Grant ThorntonInternational does not provide services to clients.This publication has been prepared only as a guide.No responsibility can be accepted by us for loss occasionedto any person acting or refraining from acting as a result ofany material in this publication.grant-thornton.co.ukV22002

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