INTERNATIONAL BUSINESS Creating an Indian MNC

An Interim Project Report onCREATING AN INDIAN MNC LOGISTIK INDIA PRIVATE LIMITED

FOCUS AREA:Providing Logistic Services

COUNTRY CHOSEN:Germany

Table of Contents

INTRODUCTION:4Vision:4Mission:4Values:4Benefits to Customers:5PRODUCT / SERVICE PROFILE:6PROFILE OF SELECTED COUNTRY GERMANY:8Geographical:8Political:8Economical:9Cultural:9FDI POLICY FRAMEWORK:11FDI Policy in Germany:11Why to invest in Germany:11Current Trend:13BLUEPRINT OF LOGISTIK IN GERMANY:15BIBLIOGRAPHY19

INTRODUCTION:Logistik India Private Limited is an Indian based Global Logistics provider covering all aspects of the Supply Chain from Ocean / Air Freight forwarding, Warehousing, Trucking and 3PL. Manufacturers require completely dependable sources of supply. Retailers need adaptable connections to suppliers with minimal effort generation. These suppliers are frequently located in remote areas. In the meantime, retailers need fast conveyance channels for a constantly growing distribution network of purchasers.At the same time, thriving flourishing and heightening rivalry for new markets is putting more weight on supply chain administrators to take care of business and discover game changer. Thus, the need for logistics service providers became vital and to be successful worldwide supply chain enabler, ability to provide the expertise, reach, reliability and flexibility has to be delivered depending upon the need.The company will strive hard to provide customers with the most comprehensive set of solutions available for all their logistics needs. The Company's goal is to keep conveying innovative, customized and top notch services, for which it will stick to the built roadmaps of the current solutions and in addition at the same time investigating the chances to give clients extra value in new regions. Leveraging internal strength and long-standing network relationships, the company will enter an era of striving excellence, becoming the strongest player, providing full-featured logistics solution on a single point of contact.Vision:To be an innovative service provider of logistics solutions that provides strategic value to customers.Mission:To be the one-stop shop for all logistics requirements and to make positive contribution to the world.Values:Integrity, Quality, Customer Service, Team work, Continuous LearningBenefits to Customers: Extensive range of solutions to meet the requirements of the complete supply chain. A commitment to innovation for matching the globalization concept. Greater network support across various locations in various countries. A strong partner with long-term strategy for growth.Logistik aims to become the first choice of customers in global commerce & industry for devising & expediting reliable and satisfactory integrated transportation services. This could be achieved by highly skilled and dedicated work force and a commitment to the progressive use of information technology. Partnering to have an extensive network throughout the world with whom the company look forward is the key for being of service to the customers as a global freight and logistics service provider. (Shang, 2014)European countries, which have always had significantly more cross-border traffic, have relied more on outsourcing than Americans, especially since World War II. Over the last few years nearly every company in Europe has been able to take some advantage of the free movement of goods across borders. This shift has been good for the large European 3PLs, but cultural differences still prevent centralization of operations at U.S. levels. Most 3PL operations in Europe still have to be designed on a country by country basis to be effective.

PRODUCT / SERVICE PROFILE:Logistik India provides logistics capabilities that encompasses right from planning stage to the delivery of goods. The company will engage professional expertise to gather customer requirements, convert the requirements into metrics & specifications and create a model to operate upon and achieve excellence in that domain. It includes planning, optimization of transportation model, choosing carriers fulfilling the objective of optimizing costs, domestic transportation, risk management, warehouse & distribution and country-specific import & export activities.AIR FREIGHT: Air freight provides solutions to fast and reliable delivery across the globe at competitive prices. Logistik provides real-time, global tracking as part of standard capabilities, to provide customers the information of where-about of their goods in transit.

OCEAN FREIGHT: It provides a new standard of shipping for a new global environment. The services include shipment pre-planning, point-to-point delivery based on customer needs and shipment of dangerous goods deriving the benefits of flexible schedules, optimized transit times and competitive pricing. GROUND TRANSPORT: Logistiks ground transport achieves door-to-door service to the customer either independent or intermodal freight service coupled with efficiency in cost and time. It is managed through GPS systems to achieve excellenceWAREHOUSING & DISTRIBUTION: Logistik owns/rents warehousing space across operational centers that cater customers from simple storage and inventory management to packing and distribution. These warehouses are specially equipped to handle various types and sizes of cargo and provide complete security to your Inventory from threats like fire, pilferage, damage, etc.

VALUE ADDED SERVICES: Logistik believes that deploying technology and upgrading services conforming to the technology life-cycle helps organization provide best service, providing customers the innovative solutions. It is now possible to get information about the real-time status of the goods-in-transit from anywhere across the globe. Services that are offered include: Providing cross-border links Temperature Controlled Storage & Delivery Supply Chain / Inventory Management Warehousing & Distribution JIT Logistics Pick & Packing Documentation Tracking Facilities

PROFILE OF SELECTED COUNTRY GERMANY:Geographical:Germany is afederalparliamentary republicinwestern-central Europe. It consists of 16 constituent states, which retain limited sovereignty, and covers an area of 357,021 square kilometers and with a population of 82,652,256 people (as of 2014). Its capitalandlargest cityis Berlin. Germany is a major economic and political powerand traditionally a leader in many cultural, theoretical and technical fields. Germany is inWesternand Central Europe, withDenmark bordering to the north, Poland and theCzech Republicto the east, Austria and Switzerland to the south, France and Luxembourgto the southwest, and Belgium and the Netherlandsto the northwest.Political:Germany is afederalparliamentaryrepublic, and federallegislative poweris vested in theBundestag(the parliament of Germany) and the Bundesrat(the representative body in Germany's regional states). There is a multi-party system that, since 1949, has been dominated by theChristian Democratic Union(CDU) and theSocial Democratic Party of Germany(SPD).Legislation - Bicameral system: In addition to the Bundestag the Bundesrat, consisting of delegates of the state governments to uphold the interests of the states, participates in legislationState structure - Germany is a federation consisting of 16 federal states, each with its own constitution, parliament and government. The highest state authority is exercised by the federal government. Through the agency of the Bundesrat, the states are represented at the federal level and participate in federal legislation. (Union, 2015)Suffrage - Universal, equal and secret suffrage as of 18 years of age (in the case of municipal elections in part as of 16), elections to the Bundestag are held every four years.Party system - Multi-party system, parties have a special constitutional status, receive state financial support, and can only be prohibited by the Federal Constitutional CourtLegal system - Germany is a social constitutional state. It is based on the principle of a division of powers and the lawful administration. All organs of state are subject to the constitutional order. The Basic Law guarantees every individual citizen basic and human rights. The Federal Constitutional Court watches over adherence to the Basic Law. All the other organs of state are bound to uphold its rulings.Economical:Germanyis the largest national economy inEurope, thefourth-largest by nominal GDP ($3.747 trillion)in the world, andfifth by GDP ($3.325 trillion - PPP). Since the age ofindustrializationand beyond, the country has been a driver, innovator, and beneficiary of an ever more globalized economy. Germany's economic policy is based on the concept of thesocial market economy. The country is a founding member of theEuropean Unionand theEurozone.Germanyis thethird largest exporter in the worldwith $1.816 trillion exported in 2014.Exports account for more than one-third of national output.In 2014, Germany recorded the highest trade surplus in the world worth $320 billion,making it the biggest capital exporter globally.Theservice sectorcontributes around 70% of the total GDP, industry 29.1%, and agriculture 0.9%. Most of the country's products are in engineering, especially in automobiles, machinery, metals, and chemical goods. Of the world's 500 largest stock market listed companies measured byrevenue, theFortune Global 500, 37 are headquartered in Germany. In 2014 the ten largest wereVolkswagen,Allianz,E.ON,Daimler,Siemens,Metro,Deutsche Telekom,Munich Re,BASF, andBMW.In the international arena German companies have an excellent reputation. They represent Made in Germany, known as a seal of quality the world over. They represent innovation, quality and cutting-edge technology. Yet the worlds fourth largest economy does not consist solely of global players, but also of many world market leaders who are actually small and medium-sized enterprises, the powerhouse of the German economy. They all benefit from the sound economic conditions, not to mention the excellent qualifications of the workforce. Foreign investors also value this.Cultural:There are many sides to cultural life in Germany: From North to South there are around 300 theaters and 130 professional orchestras. The museum world is of quite unparalleled quality featuring 630 art museums with diverse internationally renowned collections. Young German painting is equally vibrant, and is long since part of the international scene. And Germany is one of the major book nations, with around 94,000 new books and re-editions each year. The 350 dailies and thousands of magazines go to show how lively the German media world is. Moreover, German films are once again a great success at home and abroad.Cars are a symbol of national pride and social status. Certainly manufacturers such as Audi, BMW, Mercedes, Porsche and Volkswagen (VW) are world famous for their quality, safety and style. This quality is matched by Germany's excellent network of roadways including the renownedAutobahnnetwork, which has many sections without speed limits that attract speed hungry drivers.

FDI POLICY FRAMEWORK:Germany has an open and welcoming attitude towards foreign direct investment (FDI). The legal framework for FDI in Germany favors the principle of freedom of foreign trade and payment transaction as laid down in the Foreign Trade and Payments Act. The Foreign Trade and Payments Act allows the imposition of restrictions on inward and outward FDI for reasons of foreign policy, foreign exchange, or national security. However, in practice, such restrictions are seldom imposed. There is no broad authority to review foreign direct investmentFDI Policy in Germany: The German Government is keen to attract foreign investment in the country. The Federal Government of Germany grants attractive tax subsidy to all foreign investors investing in Germany to acquire new movable and buildings for a period of 1 year. The tax subsidy at the rate of 25% to 27.5% is applicable to all small and medium sized companies (SMEs) that employ about 250 employees. The Germany government grants special financial grants for foreign investors for conducting Research and Development. The financial aids are provided in the form of low interest rate loans. The interest rates are particularly low for SMEs. Foreign investment investing in certain sectors in Germany can avail grants up to 50% of the eligible costs.Why to invest in Germany:

Strong Points: Germany has a huge resource of developed infrastructure that is easily accessible for foreign investors. Germany has a strategically planned and well laid out transportation systems in place, the well-connected rail and roadways connect every nook and corner of the country and it is an important gateway to all of European Union. Germany is one of the most technologically advanced countries not only in European Union but also in the world; as a result foreign investors investing in diverse sectors of Germany can get the benefit of the most developed scientifically advanced technological assistance. (Santander, 2014) Germany has a huge labor force which is highly educated and technically qualified. Majority of the work force speak English, the global languages. So there is no communication barrier between the investors and the local work force. Germany is a huge country and it offers a huge market base for foreign investors. In a bid to attract foreign investment, the German Government has made it a mandatory rule as to not to discriminate between the local investors and foreign investors. Foreign investors can all avail all the benefits granted to local investors. The countrys strategic geographic location of Germany, it is situated in the center of European continent provides foreign investors to easy access to the rest of European Union. (Machlup, 2013) Another significant advantage of investing in Germany is that the taxation policy of Germany is liberal and highly competitive. This gives the country an edge over other countries in the EU for foreign investment. The corruption levels in the country is extremely low, this greatly augments the interest of foreign investors.

Weak Points:Public finances are structurally highly in deficit. The eastern part of the country is struggling to catch up in many fields. The ageing population weighs heavily on growth. The unemployment rate poses a real challenge for the development of the country and its future influence.Govt. measures to motivate / restrict FDI: Financing by the European Union and/or by German federal entities Aid aimed especially at the initial investment phase but also at the operational phase of the project Eventually, Germany provides favorable incentives for investments into research and development.Current Trend:Germany ranks seventh in the world as a recipient of foreign direct investment, according to the United Nations Conference on Trade and Development (UNCTAD). Every year more and more companies discover Germany as a secure and rewarding investment location. In the last ten years, Germany's FDI stocks doubled to reach an amount of almost EUR 870 billion in 2014. Around 62,000 foreign companies are already operating in Germany, employing almost three million people. (Nunnenkamp, 2012)

Special incentives provided by German government to foreign investors:The Government of Germany has laid out a statutory rule that all foreign investors are granted free access to investment in all sectors and are eligible to enjoy 100% ownership of the business even in recognized sectors that are under public domain. Foreign investors are allowed to invest in national bodies such as mail, telecommunication and other such sectors.

BLUEPRINT OF LOGISTIK IN GERMANY:

Company: Logistik InternationalCoverage: GlobalAssets: 15,000 employees; 120 warehousesInformation Systems: SAPServices: Air & Ocean freight forwarding, Ground Transport, Value-Added Warehousing & Distribution, Transportation Management, Supply Chain ManagementIndustry Focus: Automotive, Computers & Electronics, Consumer Goods, HealthcareKey Customers: BMW, Daimler Chrysler, Subaru, IBM, Intel, Procter & Gamble

Opportunity Identified: Germanys largest manufacturers and retailers have solidly adopted the logistics outsourcing concept, and they prefer to do business with other larger companies, including their 3PLs. While more and more manufacturing, sourcing and other supply chain activities are happening in Germany, required logistics capabilities often do not yet exist in this region. The Global 1000 companies operating in this market want global logistics providers that can expand operations wherever they are needed and move from region to region as manufacturing sources change. To quickly grow in size, capability and geographic reach, global 3PLs must expand by acquisition. The big 3Pls that intend to be among the handful of truly global players are under great pressure to eat or be eaten by their competition.

Organization Structure:Logistik International comprises of the most typical logistics organizational structure and it consists of the shareholder, board of directors, the sales supervisor, logistics manager, customs supervisor, merchandiser supervisor, materials manager,purchasing manager, trading manager, merchandiser manager, warehouse manager, distribution manager, customs specialist, documentation specialist, shipping specialist, courier , warehouse stock management and employees.In the SAP system, these have to be mapped in a client to optimize business processes. The company, warehousing units, shipping point and sub-divisions are given unique codes for easy identification and routing.

Cost Structure & Revenue Steams: The pricing of the services offered will be the important factor in customer opting the service and thereby providing a competitive edge to the company. (Long, 2005) The objective while determining price has to be: getting the right goods to the right places at the right tie for the least cost. It is essential to understand the following cost structure in each possible system:T = F + FW + VW + Swhere,T Total logistics cost of the proposed systemF Total freight cost of the proposed systemFW Total fixed warehouse cost of the proposed systemVW Total variable warehouse cost\S Total cost due to average delivery delayMarketing Strategy: Industrial Market Segmentation where the customers are segmented based upon various logistic needs and geographies, in order to cater 5Ps successfully. Target Market where the segmented customer base is split as per profit pools & concentrate on key areas that provide huge revenue. (Robinson, 2013) Positioning of services provided in order to have a differentiation & uniqueness from local/global competitors in terms of transport management system, warehouse management system. Advertising resources for Logistik International will be professional networks, consulting firms, trade association, conferences, trade journal article and vendor advertising. Reaching customers via the logistics community, social media and effective participation in conferences, cool-chain & controlled room temperature logistics annually. Continuous improvement, operational excellence, strategic alliance with other customers, service level provided will play a vital role in customer retention strategy of the existing customer base.Operational Strategy: Deciding on companys value proposition to the customers depending upon the size & complexity of project.What on-time delivery standard should be offered?What levels should company attain in ordering and billing accuracy? Deciding on the best channel design and network strategy for reaching the customers.Should the company serve as single modal system?How many warehouses should be deployed and where to locate them? Developing operational excellence in transportation, warehouse management and materials management. (Rousseau, 2012) Implementing the solution with the best information systems, equipment, policies and procedures.

BIBLIOGRAPHY

Long, W. (2005). The Role of Transportation in Logistics Chain. Proceedings of the Eastern Asia Society for Transportation Studies, 1657-1672.Machlup, F. (2013). The Policies of England, France and Germany as Recipients of FDI. Urbana: National Bureau of Economic Research.Nunnenkamp, P. (2012). Foreign Direct Investment in Developing Countries. Jaipur: Centre for International Trade, Economics & Environment.Robinson, A. (2013, June 18). Cerasis. Retrieved from Marketing in Logistics: 4 Elements of the Market Research Phase: http://cerasis.com/2013/06/18/marketing-in-logistics/Rousseau, F. (2012). Challenges and Winning Models in Logistics. Boston: Bain & Company.Santander, B. (2014, December 25). Santander Trade. Retrieved from Germany: Foreign Investment: https://en.santandertrade.com/establish-overseas/germany/foreign-investmentShang, C. (2014). The Effects of Logistics Measurement Capability on Performance. Asia Pacific Management Review, 671-687.Union, E. (2015, January 28). European Union. Retrieved from Germany: http://europa.eu/about-eu/countries/member-countries/germany/index_en.htm