International Business in India
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This project focuses on the power sector in India, provide an analysis of the market opportunities and market challenges
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International Business in India
- 1. Enron Corp Experiences in India Chiang Peter (N1102788K) He Jialing (U1010785J) Hoon Wan Chin Lauren (U1010089E) Koh Ming Chong Brian (U1011103L) Koh Yang Lin (U1010520K)
- 3. Agenda Introduction Market Analysis Market Opportunities Market Challenges Risks Political Legal Economic Social Recommendation Non- Competitive Competitive Strategies Strategies Conclusion
- 4. INTRODUCTION INDIA’S POWER SECTOR
- 9. TREND Potential in India’s Energy provision industry Private Sector increasingly gaining importance Mission 2012: “Power for All” • 8% GDP growth rate • Reliability of power • Quality • Optimization of power cost • Commercial viability of the power industry Renewable sources of energy more attractive Fear of gas shortage Government of India decided not support on new projects that rely on this resource
- 10. MARKET ANALYSIS MARKET INVESTMENT MARKET OPPORTUNITIES POTENTIAL CHALLENGES
- 11. MARKET OPPORTUNITIES Transmission, Distribution & Rural Electrification Addition of Generation Capacity Availability & Quality of Resources Renewable Energy
- 12. MARKET OPPORTUNITIES Transmission, Distribution & Infrastructure in India is not Rural Electrification extensive Current installed transmission capacity only at 13% of the total Addition of Generation installed generation capacity Capacity Huge market for the transmission of electricity Availability & Quality of National Power Grid 2012 Resources Subsidy of USD 6.88 billion for providing electricity connections and Renewable associated infrastructure to 120,000 rural villages by 2012. Energy
- 13. MARKET OPPORTUNITIES Transmission, Distribution & Lack of power in India requires huge Rural Electrification amount of resource and capital Ultra Mega Power Projects (UMPP) to Addition of Generation boost the total output throughout the Capacity country Availability & Quality of Foreign power generation companies to Resources take a slice of the pie in the developing economy. Renewable Energy
- 14. MARKET OPPORTUNITIES Transmission, Distribution & Lack of readily available coal Rural Electrification Coal to remain as the main source of fuel Addition of Generation Capacity Good opportunity for foreign companies to supply India with coal Availability & Quality of Resources Renewable Energy
- 15. MARKET OPPORTUNITIES Transmission, Distribution & With high demand of resources, India is looking into renewable projects Rural Electrification Eco-friendly and self-reliant Addition of Generation Capacity Funds (USD16.5billion) have been set aside to develop this industry. Availability & Quality of Resources Renewable Energy
- 16. INVESTMENT POTENTIAL Past Present Poor support from the governing Neutral parties for advice (Central bodies and irregular terms for foreign Electricity Authority) investors. Investors have to comply with new policies set (e.g. Electricity Act) Urgent investment would require Urgent investment does not require multiparty agreements and this multiparty consensus minimizes the chances of political disruption. Emphasizes on clean energy and Focus on electricity power shortage efficiency
- 17. MARKET CHALLENGES Fuel Availability Poor Infrastructure Manpower Shortages
- 18. RISK EVIRONMENTS Political & Legal Risks Economic Risks Social Risks
- 19. POLITICAL & LEGAL RISKS Political System Legal System Corruption
- 20. POLITICAL & LEGAL RISKS Varying political cultures and Political System regulations across states - difficult to expand across states Possibility of power shifts between Legal System political parties - change in regulatory processes = delay business Corruption Government decisions lack accountability - ad-hoc agricultural subsidies placing power sector at a disadvantage
- 21. POLITICAL & LEGAL RISKS Weak and inefficient Political System - slow in processing cases, legal disputes take very long to be settled Lack of legal action against coal Legal System mafia -limited supply of coal available in the open market Corruption -↑cost of production (bribe coal mafia/import coal)
- 22. POLITICAL & LEGAL RISKS • Widespread especially in the public Political System sector - politicians place personal gains over nation welfare Legal System •Anti-corruption efforts lack effectiveness - certain sectors like infrastructure & Corruption public utilities are especially affected Corruption will be a cost that needs to be factored in the cost of doing business
- 23. ECONOMIC RISKS Dampens investment confidence Inflation - domestic cost not aligned with that of abroad Difficult for the company to plan ahead Increases cost of production - cost of raw material - increasing demand for higher wages
- 24. SOCIAL RISKS Industry strikes are common Social Unrest occurrences - disrupts business operations - forces company to give better benefits • Terrorist attacks -dampens economy growth - disrupts business operations - power sector potential target for terrorist attacks - spike in security regulations hindering business processes
- 25. RECOMMENDATIONS Competitive Non-Competitive Strategies Strategies Start Up Strategies Operational Strategies Political Set Up Renewable Carry Out the Project in Energy Project Phases Legal Joint Venture with a Fixed Costs through Local Stakeholder Long-term Contracts Social Comprehensive HR Planning
- 26. RECOMMENDATIONS Issue: Coal Availability Set Up Renewable Energy Project Reduce the reliance on coal Competitive Strategies India Government Promotes Investment for Renewable Energy Set Up Renewable Energy Project Project -Subsidies and resources are given to investors Align with environmental standards -environmentally-friendly energy resources
- 27. RECOMMENDATIONS Issue: Different Business Joint Venture with a Local Culture Stakeholder Shared Responsibility India Partner: Operational Aspects Competitive Strategies Chinese MNC: Strategic Direction Joint Venture with a Local Stakeholder Build credibility and garner support from locals Outsource to Local Suppliers - Bring revenue to them and facilitate the local economy
- 28. RECOMMENDATIONS Issue: Business Risk & Carry Out the Project in Phases Uncertainties Market Test - Better financial plans Competitive Strategies - Measure the ultimate effectiveness of Carry Out the Project in power plant Phases Obtain feedback based on the previous phases for improvement Enlist more support for the next phase
- 29. RECOMMENDATIONS Fixed Costs through Long-term Issue: Inflation Contracts Workers Fix the wages rate Competitive Strategies Fixed Costs through Suppliers Long-term Contracts Reduce the risk of rising cost of raw materials. Easier to predict the cost of manufacturing and producing power
- 30. RECOMMENDATIONS Issue: Manpower Shortage Comprehensive HR Planning Collaboration with recruitment agencies or manpower consultants in India Competitive Strategies e.g. M.M. Enterprises Comprehensive HR Proper projection, allocation and Planning examination of resources Recruit over 70% of experienced workers with the remaining 30% being fresher. e.g. Intelenet Tapping onto the pool of talents in their home countries. Foreign talents: Higher skilled level of jobs Local workers: Lower skilled level of jobs Trainings and guidance will be provided
- 31. RECOMMENDATIONS Issues: Political Instabilities & Political Corruptions Work closely with the Embassy of the People's Republic of China in India Non- Competitive Strategies Seek reference from other Chinese MNC in Political similar industries Refrain from partaking in related Corruption activities Company's discretion - The Naïve Immoralist - Righteous Moralist
- 32. RECOMMENDATIONS Issues: Complex Legal Legal Structure Comply with local laws and regulations across all states of India Non- Competitive Strategies - Prevent any possible breach of law Legal Nullify the validity of prior contracts - Approach the Central government to seek advice - Ensure agreements signed are legally binding. Contract to be signed contains - Specific details in the event of breach of contract - Clause for international treaty
- 33. RECOMMENDATIONS Issues: Social Unrest & Social Labour Strike Long term Employment Contract - Provide job security to Indian workers Non- Competitive Strategies -Reduce the turnover rates Social Health care package -Keep employee satisfied -Increase production efficiency Secure through Insurance - e.g. Lloyd’s market -Coverage ranges from strike damages to terrorism and political violence to energy business interruption - Prevent future financial losses due to uninsured unfortunate events.
- 34. CONCLUSIONS Challenges Opportunities
- 35. CONCLUSIONS Start Up Strategies Operational Strategies • Joint Venture with a Local • Start Project in Phases Stakeholder • Long-term Contracts fix costs • India Partner: Operational • Comprehensive HR Planning Success • China Power MNC: Strategic - M.M. Enterprises • Renewable Energy Project Political Legal Strategies Social Strategies Strategies • Ensure agreements • Long Term Employment • Work closely with signed are legally binding contracts + healthcare Embassy • Specific details in contract packages Success – events of breach • Secure through Insurance company - Lloyd’s market
- 36. THANK YOU FOR YOUR KIND ATTENTION! The QUESTION and ANSWER will commence shortly …
Editor's Notes
- GMR Group, Jaiprakash Power, Larsen&Toubro, National Thermal Power Corporation (NTPC), Reliance Power and Adani Power
- optimum utilization of generating resources, conservation of an eco-sensitive right of way and the flexibility to accommodate the uncertainty of generation plans.
- Change in regulatory process = disrupt businessdelay in government decisions = unplanned-for delays and exceeding budget.
- Slow in processing 27 million cases backlog- ↑cost of production because have to bribe or import coalover 10,000 groups of mafias operating within the state-owned monopoly of Coal India Limited’s collieries, stealing at least 5 - 6 million tonnes of coal per year.
- Better benefts= wages,
- Build credibility and garner support from its locals as the India counterpart would will fight for the benefits of its own people and would not only take advantage or make use of India's resources. AES, another player in the power industry who could not understand the local dynamics of the business, had poor management and eventually withdrew from the industry. outsourcing some of its required services to local suppliers so that it would not appear that the company is just making money from the people but they are bringing money to them and facilitating the economy.
- The country's industrial parks are now set to be brought into line with environmental standards - with more efficient energy usage, a switch to renewable resources and environmentally-friendly waste management systems.
- To save guard the Chinese MNC, it is recommended to fix the wages rate of workers by signing long term contracts where possible. As for suppliers, having forward and long term contracts with local industries may reduce the risk of rising cost of raw materials. With these measures in place, it will be easier to predict the cost of manufacturing and producing power for the term stated in the contracts.
- Manpower shortages problems in India’s power generation sectors are real and solving them requires some fresh approaches. To meet these manpower challenges in India, it is imperative for Chinese MNC to engage in comprehensive Human Resource planning and develop strategies to address projected manpower needs. Such shortage situations can also be amended through collaboration with recruitment agencies or manpower consultants in India. For instance, M.M. Enterprises is a leading and professional manpower consultancy firm in India. They provide a complete platform for recruitment and staffing needs in large scale projects in thermal power and hydro electric sector. A detailed study will be undertaken by the recruitment agency to understand the staffing requirements, the type of business and the nature of projects before embarking the projects. As such, working with domestic recruitment agencies is proven to bring qualified workers to match Chinese MNC’s business requirements. Proper projection, allocation and examination of resources are crucial. The Chinese MNC is recommended to recruit over 70% of experienced workers with the remaining 30% being fresher. The less experienced would be given trainings to meet the company’s long term needs for skill level. This approach is similar to Intelenet, an Indian IT firm’s strategies in dealing with the threat of skilled manpower shortage looming over the IT sectors. Alternatively, Chinese MNC can make strategic adjustment in talent allocation by tapping onto the pool of talents in their home countries. Companies can use talents from their home countries to perform management or higher skilled level of jobs while provide trainings and guidance to local workers.MM Enterprises. (n.d.). The leading recruitment agency in india. a complete station for recruitment and staffing needs.. Retrieved from http://www.mmenterprises.co.in/recruitment_staffing.phpKurup , R. (2005, December 28). It firms brace to face skilled manpower shortage. Retrieved from http://www.rediff.com/money/2005/dec/28it.htmManpower shortages problems in India’s power generation sectors are real and solving them requires some fresh approaches. To meet these manpower challenges in India, it is imperative for Chinese MNC to engage in comprehensive Human Resource planning and develop strategies to address projected manpower needs. Such shortage situations can also be amended through collaboration with recruitment agencies or manpower consultants in India. For instance, M.M. Enterprises is a leading and professional manpower consultancy firm in India. They provide a complete platform for recruitment and staffing needs in large scale projects in thermal power and hydro electric sector. A detailed study will be undertaken by the recruitment agency to understand the staffing requirements, the type of business and the nature of projects before embarking the projects. As such, working with domestic recruitment agencies is proven to bring qualified workers to match Chinese MNC’s business requirements. Proper projection, allocation and examination of resources are crucial. The Chinese MNC is recommended to recruit over 70% of experienced workers with the remaining 30% being fresher. The less experienced would be given trainings to meet the company’s long term needs for skill level. This approach is similar to Intelenet, an Indian IT firm’s strategies in dealing with the threat of skilled manpower shortage looming over the IT sectors. Alternatively, Chinese MNC can make strategic adjustment in talent allocation by tapping onto the pool of talents in their home countries. Companies can use talents from their home countries to perform management or higher skilled level of jobs while provide trainings and guidance to local workers.MM Enterprises. (n.d.). The leading recruitment agency in india. a complete station for recruitment and staffing needs.. Retrieved from http://www.mmenterprises.co.in/recruitment_staffing.phpKurup , R. (2005, December 28). It firms brace to face skilled manpower shortage. Retrieved from http://www.rediff.com/money/2005/dec/28it.htm
- They can provide advises of how to maintain business processes during political instability. The close relationship also ensures that the company is adequately protected under their home country's interest. However, such decisions are based on the company's values and if the situation arises, it is at the company's discretion whether they should adopt the approach of The Naïve Immoralist and do what the other companies are doing or that of a Righteous Moralist and follow what they would do in the home country.
- Comply with local laws and regulations across all states of India and prevent any possible breach of lawNullify the validity of prior contracts in all aspects of their business process, from labour contracts to purchase of raw materials, Contract to be signed contains specific details in the event of breach of contract by their business partners, thoroughly protecting their company's interest. In the event that conflicts cannot besolved by the Indian government, external parties like the International Court of Justice can be involved to ensure a fair solution for all parties.
- A low labour turnover rate reduces the costs for employee search and training and with the power sector facing a shortage of skilled labor, Although the amount spent on insurance will not bear any possible financial returns, it will prove to be worthy in the long run in preventing future financial losses due to uninsured unfortunate events.