india a strategic overview

8/3/2019 INDIA a Strategic Overview

1/46

INDIAA Strategic Overview


2/46

Overview

Organizing Framework

External Factors

Firm Level Factors

Key Strategic Choices


3/46

Organizing Framework

Country

Environment Govt. Policy

Competitor

Capabilities

Market

Driven

Value

Proposition

Resources &

Capabilities

Objectives &

Motivations

External Factors Firm Level Factors

Firm

Driven

Key Strategic Choices?


4/46

External Factors

Country

EnvironmentGovt. Policy

Competitor

Capabilities


5/46

I. Country EnvironmentEco no mic Sta ts - Sn ap shot

Source: http://investmentcommission.in

Sound economic fundamentals Healthy average GDP growth of above 8% since 2003 Savings rate 32.4% in 2005-06 has been increasing at 7% CAGR since 2002 Forex reserves increasing at 30% CAGR since 2002 Interest rates high and stable at ~ 11.5% suggested strong demand for credit Inflation rates below compared to other emerging economies however recent

spikes (6.6%) are a huge cause of concern.

Rising income levels have led to increased consumer spending power

6.6%5.0%Inflation

-$640Per Capita

$9.2B$15.7BFDI Inflow

$18B$6.7BFII Inflow

$276B$199BForex reserves

-9.4%GDP Growth

Current FiscalEnded 2007
http://investmentcommission.in/http://investmentcommission.in/


6/46

I. Country EnvironmentEc ono mic S ta ts - GD P

Source: MOSPI Statistics

105 105 135 145

103 125

204 231191

237

398453

0

100

200

300

400

500

600

700

800

900

1999-00 2002-03 2005-06 2006-07

USD

Billion

Agriculture Industry Services

India's GDP at Current Prices: 2002-07

469556

638737

830

477

0

100200

300

400

500

600

700

800

900

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

(H1)

USD

Billion

- Indias GDP has witnessed high growth and was

the 2nd fastest growing GDP after China in 2006-07

- $1 Trillion GDP (PPP)

GDP Contributors (2006-07)

Industry: 26% ($138B) growing at 16.2%

Services: 55% (269B) growing at 16.3%

Agriculture: 19% (73B) growing at 10.2%

Huge Services contribution is a characteristic of adeveloped economy


7/46

I. Country Environment

Source: World Economic Outlook IMF 2005,www.photius.com

Ec ono mic S ta ts - GD P

12th largest economy based on real GDP

4th largest based on PPP
http://www.photius.com/http://www.photius.com/http://www.photius.com/


8/46


Gros s Dome stic Sav ings

Source: Central Statistical Organization

Gross D ome stic Inve stments

-Very high Private sector savings mainly contributed by households

-Increase in Gross Domestic Investment over Gross Domestic Savings a good sign


9/46

I. Country EnvironmentEc ono mic S ta ts - Per Capi ta In com e & Cons ump tion

Source: http://indiabudget.nic.in,http://investmentcommission.in

-Strong growth in per capita Income & Consumption; signaling economic prosperity

-Boom in consumer spending Over 380M Indians (72M households) with annual income > $10,000 Fast growing disposable incomes, increased availability of credit cards and consumer finance Affinity towards western/ global brands Huge market especially for retail, telecom, automobiles, textiles, electrical appliances etc.
http://indiabudget.nic.in/http://investmentcommission.in/http://investmentcommission.in/http://investmentcommission.in/http://indiabudget.nic.in/


10/46

I. Country EnvironmentEc ono mic S ta ts FD I & FII

Net FII into India: 2001-07

1.8

0.6

10.0 10.2 9.4

6.7

18.0

02

4

6

810

12

14

1618

20

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

(till 14

January)

USD

Billion

FDI Inflow - India: 2001-07

4,2223,134 2,634

3,755

5,546

15,730

9,277

0

4,500

9,000

13,500

18,000

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

(till

October)

USD

Million

185 percent

Increase

Source: DIPP (October Report),SEBI

-With improved performance on PE ratio and ROE, Indian markets have attracted large

investments-India ranked 2nd in AT Kearneys FDI confidence index (2007)

-FDI inflow in 2006-07 grew by 185% over 2005-06

-Large FII activity has led to an upsurge in the Sensex
http://dipp.nic.in/fdi_statistics/india_fdi_index.htmhttp://dipp.nic.in/fdi_statistics/india_fdi_index.htmhttp://www.sebi.gov.in/Index.jsp?contentDisp=FIITrendshttp://www.sebi.gov.in/Index.jsp?contentDisp=FIITrendshttp://dipp.nic.in/fdi_statistics/india_fdi_index.htm


11/46

I. Country EnvironmentEc ono mic S ta ts Fo rex & Deb t R atio

Source: RBI Statistics

India's Forex Reserves: 2001-08 (Till 28 December 2007)

5475

112

141 152

199

276

0

50

100

150

200

250

300

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

(Till28

December)

USD

Billion

External Debt-to-GDP Ratio

21.120.4

17.8

17.3

15.816.4

10

13

16

19

22

2 001 -0 2 2 00 2-03 20 03 -0 4 2 00 4-05 2 005 -0 6 2 00 6-0 7

Ratio

- Increased investor confidence in Indiancompanies has increased cross borderborrowing by corporate houses

- 2007-08 Forex reserves already 39% above2006-07

- Steadily increasing Forex offer securityagainst possible currency crisis or monetaryinstability

- Forex reserves are in excess of external debtindicating a strong economic platform


12/46


Source: AT Kearney, Outlook Business,http://domain-b.com

-Major sectors attracting FDI in 2007-08 are Services, Telecom,Electrical equipments, Real estate and Transportation

-Mumbai, Delhi, Bangalore, Chennai and Hyderabad bring in nearly

66% of total FDI inflows

-Top corporate investors: Vodafone ($800M), Matsushita ($340M)

-Top holdings investors: GA Global Investments ($258M)EMAAR Holdings, Mauritius ($200M)LB India Holdings, Mauritius ($120M)
http://domain-b.com/http://domain-b.com/http://domain-b.com/http://domain-b.com/


13/46

I. Country EnvironmentEcono mi c St ats - Im ports & Ex por ts

India's Imports: 2002-08

6278

112

150

191

130

0

50

100

150

200

250

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

(April-

October)*

USD

Billion

India's Exports: 2002-08

5364

84

103

126

86

0

20

40

60

80

100

120

140

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08(April-

October)*

USD

Billion

Petroleum products are the major contributors towardsIndias growing imports

-Quality and cost advantage are the two importantparameters leveraged by the Indian producers toincrease exports

-Services sector has been a major contributor toincreased exports

Source: Ministry of Finance (November Report)
http://finmin.nic.in/stats_data/monthly_economic_report/index.htmlhttp://finmin.nic.in/stats_data/monthly_economic_report/index.html


14/46

I. Country EnvironmentInvestment Routes

Source: Invest Commission of India

-Strategically important sectors are excluded from Foreign investment

-E.g. Railways, Atomic Energy, Postal Service, agriculture

Prior Permission

General Rule-No prior permission required-100% equity

By Exception-Prior Govt. approval needed-Equity Cap depending on sectorand market conditions

Automatic Route

Investing in India


15/46



FDI Cap in Manufacturing

0%

20%

40%

60%

80%

100%

Steel/

Aluminium

Textiles

Electronics

Hardware

Chemicals

Automobiles

Auto

components

Gems

Defense

Equipment

Mining

genera

l

Atomic

Minerals

Coal/

Diamond

Industry

F

oreign

EquityCap

Domestic Equity

Foreign Equity

-100% Foreign equity in most cases

-Manufacturing in defense, cigarettes, brewing, industrial explosives etc. subject toequity cap


16/46



Infrastructure FDI Cap

0%

20%

40%

60%

80%

100%

Powe

r

Telecom

Roads

Ports

Aviation&

Airports

Petroleum

Urban

Infrastructure

Industry

FDICap Domestic Equity

Foreign Equity

-100% Foreign equity permitted in power, roads, petroleum, urban infrastructure

-Equity cap in Telecom, Aviation & airports


17/46



Services FDI Cap

0%

20%

40%

60%

80%

100%

Banking&

Financail

Services

Insurance

Retail

RealEstate&

Construction

Tourism/

Hotels

Entertainment

IT/ITeS

Business

Services

Venture

Capital

Industry

FDICap

Domestic Equity

Foreign Equity

-100% Foreign equity permitted in IT & ITeS, Real estate construction, hotels, tourism,films, business services & consulting, venture capital etc.

-Equity cap in banking, financial services, insurance, retail etc.

-Retail being one of the biggest and most promising industries is most hurt by the cap.


18/46


Source: http:ibef.org

RetailRetail growth

$330

$427

$637

$13.20

$93.94

$223

$0

$100

$200

$300

$400

$500

$600

$700

2007 2010 2015

inb

illions

Indian Retail

Organized Retail

-Contributes 10% to GDP, 8% of employment-Expected CAGR at 20-25% until 2016

-$47B in 2007 revenues, 30% growth-68% revenue from exports growing at 35%

IT/ I Te S


19/46

I. Country EnvironmentTelecom

-Revenues 2006 $20B, CAGR 21%-160M subscribers increasing at CAGR 38%-Staged to become the 2nd largest telecom network in2008 behind China-Worlds lowest call rates (2 cents/ min)-Thriving private sector-2nd highest FDI attractor

-$7.7B market size, CAGR 19%, 2010 target $19B-Major growth in Television and Film segments

Revenue growth20

15

1110

9

0

5

10

15

20

2002 2003 2004 2005 2006

$Billi

CAGR - 21%

353402

473562

686837

0

200

400

600

800

1000

2005E 2006F 2007F 2008F 2009F 2010F

INR

Billion CAGR 19%


Medi a & En ter ta inm en t


20/46

I. Country EnvironmentAutomobiles

-$34B market growing at 14%; 2nd largest 2 wheelermarket, 4th largest commercial vehicle market-$10M size in 2006, growing at 17%

-$16B market, CAGR 30%-5% of GDP-Growth driven by IT/ ITeS, foreign businesses, risingincomes, consumer finance, organized retail etc.

Size of Component Industry (US$ mn)

3849 39654470

5430

6730

8700

10000

FY00 FY01 FY02 FY03 FY04 FY05 FY 06


Real E stat e


21/46

I. Country EnvironmentPharmaceuticals

-$8.7B market, 1.4% of GDP, CAGR 7%-4th largest market in world by volume, 13th largest byvalue-Currently only 30% of population tapped for modernmedicine-Huge base of talented scientists and medical experts-Local companies have 70% market share

-$2B market, CAGR 37%-Exports of $760M-Bio-pharma is the biggest segment but agri-biotech andbio-services fast increasing


Biotech

8.2 8.79.4

10.1

10.811.6

0

2

4

6

8

10

12

2004 2005 2006 2007 2008 2009

Projected Pharmaceutical market, 2004-2005

0.50.7

1

5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2002-03 2003-04 2004-05 2009-10

Indian Biotech Market projected Size

i


22/46


Human Capital: critical mass of skilled manpower English speaking population Cost competitive labor Indigenous availability of raw materials Technology superpower

- Software services grew at 50% CAGR over past decade- 65% of worlds CMMI level 5 cos. in India- Over 100 MNCs with R&D labs

Entrepreneurial culture and abundant SMEs- Open to collaboration

Large domestic market allowing scale economies- Growing youth segment with increased spending power ($42B/ yr)*- 300M middle consumer class expected to grow @ 8 %

Fact or Advant age & M arke t Con di tion s

C i


23/46


Severe bottlenecks in road, airport, power, transportation Govt. commitment to ramp development

-$13 B Golden Quadrilateral, $22 B Sagar Mala projects-$1.5 B investment in Mumbai-Delhi high speed freight corridor-New and modernized international airports in Mumbai and Delhi

-Mobile telephony deregulated and showing vigorous growth-Electricity Act, 2003 passed, $75 B to be spent in 5 years

Modern financial systems-ICT, Basel II compliance, RBI regulation-Retail banking, credit systems, microfinance increasing consumer finance

Mature capital markets-SEBI regulations acquired international credibility-NSE 3rd largest in the world, BSE $640B market cap, Mutual funds $82B as of 2007-Private Equity $2.3B in investments; set to touch $25B by 2012

Infr astruct ure

I C E i


24/46

I. Country EnvironmentTo p citi es

Kolkata

Hyderabad

Chennai

Bangalore

Pune

Mumbai

Surat

AhmedabadDelhi

Pop: 12.8MGDP: $40B growing at 8.4%FDI: $7.6B (23% of total)

Ind: Telecom, IT, Hotels, Banking,Tourism, Retail , Manufacturing,Construction

Pop: 3.8MGDP: $8.8B growing at 10.1%FDI: $1B (3% of total)

Ind: Textiles, Petrochemicals,Pharma, IT, chemicals

Pop: 3.2MGDP: $7.5B growing at 11.5%FDI: Included in AhmedabadInd: Gems, Textiles, Chemicals

Pop: 16.4MGDP: $50B growing at 8.5%FDI: $8B (25% of total)Ind: Films, Financial Services,Media & Entertainment,Textiles, Seaport, IT, engineering,Diamond polishing, Healthcare

Pop: 3.2MGDP: $12B growing at 7.4%FDI: Included in MumbaiInd: IT, Engineering, Mfg,Automobiles

Pop: 6.8MGDP: $14.7B growing at 10.3%FDI: $2.3B (6.8% of total)

Ind: Electronics & Telecom, IT,Biotech, Auto, Apparel, Real estate

Pop: 13.2MGDP: $25B growing at 6.3%FDI: $0.4B (1% of total)Ind: Financial Services, , IT

Pop: 3.6MGDP: $10.7B growing at 7.8%FDI: $1.3B (4% of total)Ind: IT, Pharma, Services,Real Estate

Pop: 6.4MGDP: $15.8B growing at 6.2%

FDI: $2.5B (7.5% of total)Ind: Automobiles, IT, Hardware Mfg,

Healthcare, financial services

Source: http://dipp.nic.in, compiled internet sources,http://mapsofindia.com

I C E i
http://dipp.nic.in/http://dipp.nic.in/http://mapsofindia.com/http://mapsofindia.com/http://mapsofindia.com/http://mapsofindia.com/http://dipp.nic.in/


25/46


High foreign trade barriers: high corporate tax, complexindirect taxes, high tariffs, foreign equity cap etc. Stringent Labor Laws Corruption, bureaucracy Regulatory uncertainties in many sectors Strong IPR, enforceable laws, freedom of press,

independent legal system

Coalition govt. risky but fairly stable in terms ofsustained economic reforms

Non- ma rket fo rc es

E l F


26/46

External Factors

Country


Competitor

Capabilities

II G P li


27/46

II. Govt. Policy

Openness to foreign investments and operations-Sustained economic liberalization across all sectors-Increasing FDI limits except in strategically sensitive sectors-Continued reduction in foreign imports and tariffs

Commitment to intl trade-Active participation in GATT & WTO negotiations

Proactive regulations & legislations to enhance business

environment-IPR legislations, RBI/ SEBI monetary & financial policies

FDI & fin anc ia l p ol ici es refor ms

II G t P li


28/46

II. Govt. PolicyEn abl ing Comp eti tion & C omp etit ivene ss

Pa rtial / f ul l d is inve stment pr ospe ctsIndo Wagon Engg. Ltd.27%72%Heavy

EngineeringJessop & Co. Ltd.

Sterlite Industries50%26%MetalsHindustan Zinc

TCS-100%ITCMC

Group of auction buyers-90%TourismIndia Tourism Development Corp.

54% Suzuki, rest IPO-100%AutomotivesMaruti Udyog Ltd.

Reliance Petro Investments34%26%Oil & GasIndian Petrochemicals Ltd

45% Tata Group26%25%TelecomVidesh Sanchar Nigam Ltd.

Sterlite Industries49%51%MetalsBharat Aluminum Company

Bidder/ buyerStakeresidualStake soldSectorPrivatized/ DisinvestedCompanies

II G t P li
http://images.google.com/imgres?imgurl=http://www.gtforum.com/SponsorImages/nalco%2520blue%2520logo%252011aug04.jpg&imgrefurl=http://www.gtforum.com/agenda/detail.asp%3Fagenda_id%3D108&h=125&w=448&sz=10&hl=en&start=7&sig2=e5sqW9I8fUYiGji_i40eCg&tbnid=yH6El2WGtL6c0M:&tbnh=35&tbnw=127&ei=a6cJSKH5CZnihQOc3JnDAw&prev=/images%3Fq%3Dlogo%2Bnalco%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.melcocastings.com/images/logo_ntpc.gif&imgrefurl=http://www.melcocastings.com/client.html&h=73&w=87&sz=4&hl=en&start=1&sig2=-svCkZ47DefHgmjeyQawNg&tbnid=gW5NAXg8YtLXgM:&tbnh=65&tbnw=77&ei=KacJSNayBY68gQPehtXJAw&prev=/images%3Fq%3Dlogo%2Bntpc%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.tiedubai.org/admin/imgdb/Indian%2520Airlines%2520logo1.jpg&imgrefurl=http://www.tiedubai.org/fullevent.asp%3FNewsID%3D44&h=449&w=2669&sz=97&hl=en&start=1&sig2=pr6icZpLowVGY59dLPog_w&tbnid=G02fB-TTpNbFTM:&tbnh=25&tbnw=150&ei=DqcJSJf-C6P2hQO9huDCAw&prev=/images%3Fq%3Dlogo%2Bindian%2Bairlines%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.gemofnet.com/images/clients_logo/gail.jpg&imgrefurl=http://www.gemofnet.com/clients.htm&h=35&w=75&sz=14&hl=en&start=16&sig2=eMnaCCEX_GoD1o8rg5DxTQ&tbnid=09o15rvdtaLpQM:&tbnh=33&tbnw=71&ei=zqYJSK7pKI68gQPahtXJAw&prev=/images%3Fq%3Dlogo%2Bgas%2Bauthority%2Bof%2Bindia%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.qbtpl.net/AISRA/sail_logo.jpg&imgrefurl=http://www.allindiasteelra.com/section/tech_news&h=66&w=174&sz=6&hl=en&start=12&sig2=tC87wuTUMc8VZo-7kFL1zw&tbnid=eqeYrUx2bw7AcM:&tbnh=38&tbnw=100&ei=zqYJSK7pKI68gQPahtXJAw&prev=/images%3Fq%3Dlogo%2Bgas%2Bauthority%2Bof%2Bindia%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.siliconeer.com/past_issues/2005/February2005-Files/IT-LOGO-MTNL.jpg&imgrefurl=http://www.siliconeer.com/past_issues/2005/february2005.html&h=99&w=300&sz=5&hl=en&start=5&sig2=7IlV70hsI7CQR4mfiUiosw&tbnid=KqcCbQQ3RPBpDM:&tbnh=38&tbnw=116&ei=cKYJSKyZIo-ugQPS7tTCAw&prev=/images%3Fq%3Dlogo%2BMTNL%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.flyoft.com/images/air-india-logo.gif&imgrefurl=http://www.flyoft.com/&h=44&w=201&sz=2&hl=en&start=7&sig2=Z0jDR03Lrm-FHcdrUsBYxA&tbnid=G5GQdchwpennfM:&tbnh=23&tbnw=104&ei=VKYJSL2LMIKGgQOm2I3DAw&prev=/images%3Fq%3Dlogo%2BAir%2Bindia%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.nlgi-india.org/images/small_logo.gif&imgrefurl=http://www.nlgi-india.org/aboutus.htm&h=84&w=68&sz=2&hl=en&start=11&sig2=qkmHnvNE9Vdl2ZslbeHRqQ&tbnid=Nr20TR5tBzuapM:&tbnh=76&tbnw=62&ei=OKYJSNSXOIemgQPU8oDDAw&prev=/images%3Fq%3Dlogo%2Bindian%2Boil%2Bcorporation%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.indianionexchange.com/images/logo_ongc.jpg&imgrefurl=http://www.indianionexchange.com/clients.html&h=50&w=100&sz=10&hl=en&start=9&sig2=c5AVm4RIXEWqP4ZbbPq5NA&tbnid=Mt3Zu4ckrwzCTM:&tbnh=41&tbnw=82&ei=CKYJSL-LI5bKgQPm6tXDAw&prev=/images%3Fq%3Dlogo%2BONGC%26gbv%3D2%26hl%3Den


29/46

II. Govt. Policy

Special Economic Zones (SEZ)- SEZs offering tax holidays, no import/ export tariffs- Along with physical infrastructure development could boost manufacturing

capabilities

Distortions in market processes- Purchase preference to public enterprises anti-competitive (concrete sleepers forrailways)- Deliberate interconnectivity issues between private telecom operators and BSNL

Anti-competitive policies

- Trade Policy: Anti-dumping measures, Inverted duty structures- Labor Policy: Exit difficult, Inspection regime creates high entry barriers- Frequent price regulations in commodities like oil, grains, coal

En abl ing Comp eti tion & C omp etit ivene ss

E t l F t


30/46

External Factors

Country


Competitor

Capabilities

III C tit C biliti


31/46

III. Competitor Capabilities

Innovative & Creativity-Knowledge of domestic needs & quick product roll out-Asian Paints, Tata Motors, Godrej refrigerators, Bajaj Auto, Amul

Access to technology becoming flat-Mainly through JVs and collaboration: MUL-Suzuki, Reliance-Dow Chemicals,

Hero-Honda, GSK-Ranbaxy-Global acquisitions: Tata-Corus, Tata-Jaguar, ONGC, ICICI Bank, Infosys, Aditya

Birla group

Access to global markets- Exports & Operations: IT, Pharma, FMCG, Textiles, Gems, Auto

Strong domestic penetration-Monopolies in many manufacturing sectors: Reliance 54%, Grasim 91%, Exide

Batteries 62%-Access to bottom of pyramid in the rural areas

Local Firms

III C tit C biliti


32/46

III. Competitor CapabilitiesMajor de als by Indi a In c. ab road

Other Major Acquirers

Acq. Corus Plc for $12BAcq. Jaguar &Land Rover for $2.3B

Acq. Novelis Inc. for $6B

Acq. REpower for $1.6BAcq. Whyte &

Mackay for $1.1B

Acq. Algoma Steel for $1.6B

E t l A l i
http://www.bigbase.in/images/logo-godrej.jpghttp://images.google.com/imgres?imgurl=http://www.cartype.com/images/page/mahindra_logo.jpg&imgrefurl=http://www.cartype.com/page.cfm%3Fid%3D1393%26alph%3DAll%26dec%3DAll&h=133&w=223&sz=52&hl=en&start=1&sig2=C6krNHZRqnGIZ5gtkLa2cQ&um=1&tbnid=wHHBE-nisJdZFM:&tbnh=64&tbnw=107&ei=3fv3R63KApTopgSowKmYAQ&prev=/images%3Fq%3Dmahindra%2Band%2Bmahindra%2Blogo%26um%3D1%26hl%3Den%26rlz%3D1G1GGLQ_ENUS240http://www.indiaprwire.com/downloads/611.jpghttp://images.google.com/imgres?imgurl=http://bp0.blogger.com/_1pKvii0Z9Cs/RfvYUUHiqeI/AAAAAAAAAfE/JDREwCr0GvA/s200/asian_paints_31082006_8.jpg&imgrefurl=http://marketingpractice.blogspot.com/2007/03/asian-paints-every-color-tells-story.html&h=143&w=200&sz=7&hl=en&start=4&sig2=ZVMJdJXVFW4x1kj_p7VsvA&um=1&tbnid=Aian9nXBWVuISM:&tbnh=74&tbnw=104&ei=gvv3R9veG6mMpwTPsuCUAQ&prev=/images%3Fq%3DAsian%2Bpaints%2Blogo%26um%3D1%26hl%3Den%26rlz%3D1G1GGLQ_ENUS240http://www.bg-india.com/media/images/150_ongc.jpghttp://trak.in/wp-content/uploads/2007/09/wipro-logo.pnghttp://images.google.com/imgres?imgurl=http://www.areasq.co.uk/images/events/infosys_logo_3.jpg&imgrefurl=http://www.areasq.co.uk/casestudies/index.php&h=437&w=1119&sz=159&hl=en&start=1&sig2=APDpEQhs9RlxStJmJ5IdZg&um=1&tbnid=aMhk48hLmn9fHM:&tbnh=59&tbnw=150&ei=Fvv3R9fyG5aypgTtxM2WAQ&prev=/images%3Fq%3Dinfosys%2Blogo%26um%3D1%26hl%3Den%26rlz%3D1G1GGLQ_ENUS240%26sa%3DXhttp://www.sixsigmadss.com/images/Bharat%20Forge.gif


33/46

External Analysis

Huge market potential, Value conscious consumers demandingbest quality for lowest prices, high cultural sensitivity Heterogeneous market, mostly fragmented few concentrated 3rd party distributors critical in supply chain to cover markets

Global emergence of local players reducing leveling the MNCadvantage Unavoidable destination for IT, Biotech and Retail Monopolies, Collusion and Price rigging exist in some sectors

-Pharma, Cement, Transportation, Petrochemicals

Nationally strategic industries dominated by state entities Fairly stable economic policies

Conclusions

Fi L l F t


34/46

Firm Level Factors

Value Proposition Resources &

Capabilities

Objectives &

Motivations

I C t E i t


35/46

I. Country EnvironmentMajor MNC s

I C t E i t


36/46

I. Country EnvironmentMajor MNC s

I V l P iti


37/46

I. Value Proposition

Western brands but at value for money-Winners: LG, Samsung, Unilever, Reebok-Losers: Sony, Apple, Tang, Levis, Nike

Customized and localized brands for the taste conscious- Winners: McDonalds, Unilever, Nestle* (Maggi), LG, Samsung, Nokia- Losers: Kelloggs, GM, KFC, Thompson, Philips, FIAT, Dominos

Tight product positioning and customer segmentation-Winners: Parker, Mont Blanc, LG, Lee, Arrow-Losers: Pierre Cardin, Sony, Lacoste, Levis, GM, Ford

Super accessibility to untapped segments- Winners: Gillette, ITC Ltd., Unilever, Nokia, Coke

Sense dynamic local needs and innovate-Winners: Tata Motors, Godrej Appliances, ICICI Bank Ltd., Nokia-Losers: Citigroup, Standard Chartered, Motorola, Siemens

Firm Le el Factors


38/46

Firm Level Factors


Capabilities

Objectives &

Motivations

III Resources & Capabilities


39/46

III. Resources & Capabilities

Brand power-Penetration among youth and upper class (Lee, Reebok, L'Oreal)-Ability to lure local firms into collaboration (Suzuki, Honda, Wal-Mart, Dow

chemicals)

Deep pockets-Heavy investments in marketing & advertisements (P&G, Unilever, Pepsi,Vodafone, New York Life Insurance, Skoda, L'Oreal)

-Ability to sustain long trial periods (Coke, GM, Sony)

Unique aspects-Finance: Posco, Vodafone, Citigroup, Goldman Sachs

-Technology: IBM, Coke, Sony, Apple, RIM, SAS, SAP

-Operational: Toyota, GE

Global experience-Knowledge economies out of learning from other markets: Org designs, local mgmt,

localization techniques, local sourcing, govt./ local partnerships (J&J, IBM, LG, GE)-Ability to exploit scale economies (Hyundai, PC manufacturers)

MNCs

Firm Level Factors


40/46

Firm Level Factors


Capabilities

Objectives &

Motivations

III Objectives & Motivations


41/46

III. Objectives & Motivations

Access to large and growing emerging market-Tap 300M strong middle class with spending power e.g. Levis, Nike, MTV,McDonalds, Yum!, Pepsi, Nokia-Tap other regional markets through India as a strategic hub e.g. Hyundai, IBM

Access to low cost sourcing, investor pressure-Product sourcing: Walmart, Tesco, Marks & Spencer, Adidas

-Material sourcing: Cummins, Hyundai, GE, Suzuki, IKEA, Ford-Offshore services: GE, GSK, Pfizer-Manufacturing base mainly for low end generic products

Access to global intellect-MNC R&D investments-Local talent: GE, ABB, Volvo

Learnings from China-To make early investments-Hedge against excessive reliance on China and other countries

Conclusions Firm Level Analysis


42/46

Conclusions - Firm Level Analysis

Consider how India fits the global strategy-Is it to grow, to preempt competition, to strategically strengthen domestic/ other

markets, reap economies of scale/ scope, low cost sourcing?

Is there a substantial value proposition you can offer?-Consumer tastes are diverse form those of developed or other emerging countries

Evaluate resources vis--vis the strengths/ weaknesses ofcompetitors

-Will you compete on cost basis or through differentiation?-Do you have the required resources that will be required?-The required capabilities to execute?



43/46


Greenfield-If focus is more on global markets and cost reduction through sourcing-If focus is use as regional hub e.g. GE, IBM-Exceptions if absolutely confident about local market Hyundai, Unilever, Nokia

Acquisitions-Acquisition has had a bad record of legal issues including licenses, visa etc.

JVs/ Partnerships-If focus is on domestic market, most sought after mode of entry-Tie up with local partner to mitigate non market forces (GSK with Ranbaxy)

Mode of Entry

Commitment of senior management and selection of local partners withcomplementary interests is crucial.



44/46


Decentralization preferable to Global strategy-Local CEOs (Pepsi, Hutch, Unilever),-If expat CEO, then strong local No. 2 (Hyundai, LG, GE)

Understand Indian market & consumer needs-Hire local staff in key areas of marketing and operations (HLL, LG, Nokia, GE)

-Make customer a part of product development (Schiller Healthcare)

Comparative Performance Hyundai vs. GM/ Daewoo,

McDonalds vs. KFC

Localization & Adaptation



45/46

Key Strategic ChoicesInnovation in logistics to cover markets

Dispersed population, 70% in rural areas

12 million retail outlets, underdeveloped transportation

Many companies work with ~ 500 distributors, in addition to

wholesalers and franchised outlets (LG, HLL)

Direct sourcing from village farmers eliminating middleman

(Nestle, PepsiCo, ITC, Reliance Retail)

Retain Local Talent

Most talent migrates to developed countries of the West forhigher wages and opportunities

High Turnover rate especially in IT

Create best possible incentives for employees

Overview


46/46

Overview

Organizing Framework External Factors

Firm Level Factors


india a strategic overview

Documents