Conducting successful business_india_new_020508

Conducting Successful Business in India.
PAVANKUMAR.M
B.B.A(1ST YEAR)
(DEPARTMENT
OF
MANAGEMENT STUDIES)

CONTENT
India – A Fast Emerging Business Destination
What makes India a Fast Emerging Business Destination?
How to do Business in India?
Challenges Faced by MNCs in India

Estimated to become the fifth
largest consumer market by 2025
(MGI)
Most preferable destination
for Services sector (AT
Kearney, 2007)
Top destination in the AT
Kearney Global Retail
Development Index (2007)
Third largest economy–
GDP in terms of PPP
(2007)
Stable 8–9 percent annual
GDP growth rate in the past
2–3 years
Ranks first in the availability
of qualified engineers in the
labor market (IMD, 2006)
India ranks high on many macro-economic indicators as compared to other emerging nations
India is the second-
fastest growing
economy in the world.

4,222
3,134 2,634
3,755
5,546
15,730
11,141
0
4,500
9,000
13,500
18,000
2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08
(Apr–Nov)
USDMillion
185 percent
Increase
 FDI inflows increased by 185
percent from 2005–06 to 2006–07.
 Electronics, manufacturing and
telecom were the sectors that
witnessed significant FDI inflow.
 Total PE and VC investments
increased from USD 1.1 billion in
2004 to USD 14 billion in 2007,
with maximum PE and VC
investments going into banking and
financial services, telecom and
manufacturing sectors.
 The total value of M&A deals
increased by more than 151
percent from 2006 to 2007.
High growth in FDI inflows in the past 2–3 years
FDI Inflow – India (2001–07)
Private Equity and Venture Capital
Investments in India in (USD million) - Amount
Invested and Number of Deals
1,050
2,200
7,500
14,234
71
146
299
387
0
70
140
210
280
350
420
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2004 2005 2006 2007
No.ofDeals
PE&VCInvestments(in
USDmn)
Value of Deals Number of Deals

Presentation Plan
India – A Fast Emerging Business Destination
How to do Business in India?
Challenges Faced by MNCs in India

Special incentives provided by the government to attract investments
Less time and few procedures required to start a business
Growing potential of Tier II and Tier III cities
Easy availability of skilled talent pool
Emerging middle class
Increasing disposable income
Number of emerging sectors witnessing growth

Special incentives provided by the government to attract investments
The government of India offers a number of incentives to encourage investments in India
 Liberal FDI norms: As much as 98 percent of the Indian economy is open to FDI through the automatic route.
 Special Economic Zones (SEZs), Electronic Hardware Technology Parks (EHTPs) and Software Technology Parks
(STPs): They offer incentives, such as tax exemptions, duty-free imports and low-cost power supply.
 Compliance with Trade-Related Aspects of Intellectual Property Rights (TRIPS) (since 2005): This has led to an
increase in the number of R&D centres set up by MNCs in the country.
 Reduction of custom duty: In the Budget for 2008–09, the Government has reduced the custom duty on projects imports
from 7.5 percent to 5 percent.
 Industry associations promoting India: Industry associations such as, CII, ASSOCHAM, and NASSCOM have been set
up to promote India as an investment destination.

Less time and few procedures required to start a business
India’s attractiveness as compared to other emerging economies
Starting a Business–Time Required
22
28
35
35
152
0 20 40 60 80 100 120 140 160
Korea, Reb. Of
Russia
India
China
Brazil
Time (Days)
Starting a Business–No. of Procedures Required
7
11
12
13
17
0 2 4 6 8 10 12 14 16 18
Russia
India
Korea, Reb. Of
China
Brazil
Number of Procedures
The time required to start a business
in India is the same as that in China
and lower than that in Brazil
The number of business procedures
required to start a business in India
are less compared to most of the
emerging nations

Growing potential of Tier II and Tier III cities
 Tier I—Cities such as Delhi and Mumbai—offer developed infrastructure, ease of accessibility and availability of talent pool
but includes high costs
 Tier II—Emerging cities, such as Pune, Hyderabad and Chennai
 Tier III—Potential cities, such as Nagpur, Ahmedabad, and Chandigarh
Potential of the tier II and tier III cities
Advantages
of tier II and
tier III cities:
Availability of talent pool
(presence of academic
institutions)
Growing infrastructure
Cost advantage (lower labor
and real estate costs)
Lower attrition rates

Easy availability of skilled talent pool
 India ranks first in the availability of qualified engineers in the labour market.*
 The country adds about 69,000 engineers and science graduates every year.1
 India has world-class institutes, such as Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs) and
Indian Institute of Sciences (IISc).
Availability of skilled talent pool and strong academic infrastructure
“India is a developing country but it is a developed country as far as its intellectual infrastructure is concerned. We
get the highest intellectual capital per dollar here.
John Welch, Former CEO GE
“
Young population – A Demographic Dividend
Population 2001 2006 2011 2016
Total (Million) 1,027 1,114 1,194 1,268
Age Group (Years) Population Percentage
0–14 35.6% 32.5% 29.7% 27.1%
15–59 58.2% 60.4% 62.5% 64.0%
60+ 6.2% 7.1% 7.8% 8.9%
India’s demographic mix is
shifting towards the 15–59
years age group
*Institute for Management Development (IMD) World Competitiveness Year Book 2006
1Source: Nasscom

Emerging middle class – Creates opportunity for companies to tap the changing lifestyles of
Indian consumers
Deprived
Aspirers
Seekers
Strivers
Globals
101.1
91.3
10.9
2.4
1.2
74.1
106
55.1
5.5
3.3
49.9
93.1
94.9
33.1
9.5
Deprived
Aspirers
Seekers
Strivers
Globals
11.4
5.4
3.1
1.6
2
3.8
14.6
15.2
3.8
6.3
2.6
13.7
30.6
20.9
21.7
Household
income
brackets
2005 E 2015 F 2025 F
Number of Households, (in million)
Aggregate disposable income–2000 (in INR trillion)
Definition of household income brackets based on annual household income: Globals (more than INR 1,000,000), Strivers (INR 500,000 to 1,000,000), Seekers (200,000 to 500,000), Aspirers
(90,000 to 200,000), Deprived (less than 90,000)
Source: MGI
Middle Class

Increasing disposable income
 The per-capita income has grown at a CAGR of 7.24 percent from INR 20,996 in 2002–03 to INR 29,786 in 2007–08.
 The per capita consumption has grown at a CAGR of 5.1 percent from INR 13,352 in 2002–03 to INR 17,145 in 2007–08.
 Over the next 20 years, India’s middle class is expected grow from about 5 percent of the population to more than 40
percent, creating the world’s fifth-largest consumer market.
Increase in per capita income and consumption
Per-Capita Income and Consumption
13,352 13,918 14,413 15,422 16,279 17,145
20,996
22,413
23,890
25,696
27,784
29,786
0
4,500
9,000
13,500
18,000
22,500
27,000
31,500
2002–03 2003–04 2004–05 2005–06 2006–07 2007–08
Year
INR

1Gartner
Number of emerging sectors witnessing growth
Key sectors witnessing growth
 The Indian IT sector witnessed a growth of 30.7 percent in 2006–07 and accounted for 65–70 percent
of the global off-shoring market.
 India is among the top 30 countries with regard to parameters supporting IT services.1
IT
 India is the fastest growing telecommunications market in the world.
 It has the world’s lowest call rates (2–3 US cents) and fastest growing subscriber rates (15.31
million in just four months in 2007).
 Leading global telecom equipment manufacturers, such as Nokia, Samsung, Motorola and Sony
Ericsson, are setting up their bases in the country.
Telecommunications
 The Indian health care sector is valued at USD 34 billion.
 The sector attracted 6.3 percent of the total PE investment in India in 2006, amounting to USD 379
million.
Health Care

Penetrating domestic markets and leveraging India presence
domestic market opportunity and off-shoring opportunity for MNCs
Business Opportunity in India
Domestic Market Opportunity Off-shoring Opportunity Sourcing Opportunity
 Vast population
 Increasing purchasing
Power
 Growing size of middle
and higher consumer
class
 Availability of skilled
talent pool
 Cost Savings
 Knowledge/R&D hub
 Availability of raw
materials
 Presence of strong
industry infrastructure
 Developed technology
 Cost savings

Case Study – Domestic Market Opportunity
 Steps taken by McDonald’s:
→ Menu customised to Indian taste – McAloo Tikki, Paneer
Salsa Wrap, Chicken Maharaja Mac and Veg McCurry
Pan.
→ Advertisements that appeal to Indian customers.
→ Menu priced to suit Indian pockets with burger price as
low as INR 20.
 Success in India:
→ Made its debut by opening two restaurants in Delhi and
Mumbai in 1996.
→ Currently, the company has around 132 restaurants in
India.
→ Planning to increase the number of outlets to about 220
by the end of 2008.
McDonald’s is one of the world’s leading fast food restaurant chain.

Case Study – Off-shoring Opportunity
 IBM India, a subsidiary of IBM Inc., was set up in September
1999.
 Steps taken by IBM
→ IBM expanded its BPO operations with the acquisition of
Daksh, the third largest BPO outfit in India.
→ Set up operations in all the sectors of its businesses in
the country.
→ Reduced the prices of specific products making them
more competitive in the market.
 Success in India
→ Operates almost all its businesses in India.
→ Has its second highest number of employees in India
(73,000 employees as of December 2007)
IBM entered the Indian market in 1992 through a joint venture with Tata group.

Case Study – Sourcing Opportunity
 Steps taken by Piaggio:
→ Localized 100 percent of its 3-wheeler product in India in
order to compete effectively
→ Set up a predominant Indian management team for India
operations
→ Setting up of R&D operations in India
→ Introduced, new 3- and 4- wheeler models, superior
engine technology, and innovative customised solutions
in India.
 Leveraging India:
→ Planning to make India a global hub for 3-wheeler
manufacturing and export products components to the
EU
Piaggio is an Italy-based company that specialises in the design and manufacture of
two-wheel motor vehicles.

Case Study – Penetrating domestic markets and leveraging its India presence for exporting to
other countries
 Steps taken by Cadbury:
→ Tailored products to suit Indian consumers (almonds are
more preferred in India as compared to peanuts).
→ Innovative distribution strategy and advertisements that
appeal to Indian consumers.
→ Products sold at lower margins as the company believes
high penetration compensates for the reduced margins.
→ A predominant Indian management team for India
operations.
→ Leads the chocolate and confectionary market in India.
 Leveraging India:
→ Exports finished goods and innovative concepts to its
other branches around the world.
Cadbury is one of the world’s leading confectionery and non-alcoholic beverage
companies.
.

Challenges Faced by MNCs
→ Distinct taste and habits from rest of the world and variations
within India–McDonalds solved this problem by bringing out
customized menu for the Indian market.
→ Large variation in Paying capacity–Phillips addressed the
problem by using the right value proposition. It cut the prices of its
acclaimed Compact Fluorescent Lamps.
→ Reaching target customers in a cost effective way–Companies,
such as Allianz-Bajaj, GSK, and Danfoss, follow partnership models
with local organisations to increase their reach
→ Large number of supply chain intermediaries–Piaggio
addressed the problem by localising 100 percent of its 3-wheeler
products in India.

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