Registration Number : EMSC-SM-20-15-105

Student Name : Hewage Nuwan Sampath Pushpakumara

Module Title : International Business

Study Centre : Cambridge College of Business and Management

DECLARATION BY STUDENT

I certify that this assignment is my own work and is in my own words. All sources have been acknowledged and
the content has not been previously submitted for assessment to Asia e University or elsewhere. I also confirm that
I have kept a copy of this assignment.

Signed: _____________________________

EMSC-SM-20-15-105 Page 1
Contents
Abbreviations...................................................................................................................................3

Question: 01.....................................................................................................................................4

A new Supermarket venture in India...............................................................................................4

External Macro Environment..........................................................................................................4

Opportunities...................................................................................................................................4

Threats driving from the macro environment..................................................................................5

PESTLE -Analysis...........................................................................................................................5

Political........................................................................................................................................5

Economical..................................................................................................................................5

Social...........................................................................................................................................6

Technology..................................................................................................................................7

Legal............................................................................................................................................7

Environmental..............................................................................................................................8

Question:02......................................................................................................................................9

Entry methods for proposed supermarket........................................................................................9

Keells as a new entrant into Indian market (FDI)........................................................................9

Partnership.................................................................................................................................11

Joint Venture..............................................................................................................................12

A similar Success story..............................................................................................................13

Recommendation...........................................................................................................................13

Conclusion.....................................................................................................................................14

Bibliography..................................................................................................................................15

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Abbreviations

Keells – Chosen company of choice.

FDI – Foreign Direct Investment
KPI -Key Performance Indicators
FMCG – Fast Moving Consumer Goods
GDP – Gross Domestic product
IMF – International Monitory Fund
GST – Goods and Services Tax
FEMA – Foreign Exchange Management Act
CSR – Corporate Social Responsibility

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Question: 01.
A new Supermarket venture in India

With a view to increasing revenue and profitability of Keells company of supermarkets, a market
expansion to a foreign country is considered as a viable option in this feasibility study. As we are
a leading supermarket chain with a bigger share/strong presence in Srilanka, will be the first to
venture out into a foreign market. India is considered as the foreign geographical location due to
doing business favorable factors that appear promising in the future, a vast country neighboring
Srilanka as a fast-growing economic giant in the region.

External Macro Environment

India gaining much needed political stability, central for attracting foreign investment. With a
pro-business attitude, External Macro Environment factors are healthy, as examined briefly and
deeply below.

Opportunities

India the world’s largest democracy, appears and claims the second fastest growing economy
globally. Business friendly bilateral agreements have a positive impact for dealing with many
partners. In recent times, infrastructure facilities in the field of health, roads, and living standards
have improved creating a conducive backdrop for investors. Skilled work force, competitive tax
system, well managed and regulated financial system, with a strong legal system coupled with
good business ethics give India a competitive edge for investors. Furthermore, being the second
largest country with a population of 13,602 million, coupled with increased disposable income
are all factors of opportunities (Mukherjee, 2012)
In this strong backdrop, carrying out due diligence for a stronger position for Keells, for market
expansion and revenue generation is followed.

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Threats driving from the macro environment.

India is culturally a hotbed that requires building relationships for running a smooth business, an
area worth doing some level of due diligence by an investor beforehand. India’s hostile
relationship with Pakistan and complex relationship with China are factors to consider that could
have an impact in running a business. Business and human rights is a key aspect of conflict in the
country sparking many civil protests that could happen often if discreet sensitivity is not
practiced and observed. Bribery and corruption undermine the democracy impacting the
sustained economic growth despite the massive potential of the country for business. Organized
crimes and terrorist threats too could be a hindrance to business (Trade, 2017)

PESTLE -Analysis
Political
Political environment at present in India takes a mixed notion as various political parties having
opposing views that could have an impact for economic growth in the country. However, the
current government of India has made many changes and reforms in the policy framework to
present India as an attractive investment destination. As a result, many areas of concerns are
being addressed such as inefficiencies, poor management, non-competitiveness, incentives to
foreign investors, excessive reservations, and high cost, for creating a business-friendly
environment for boosting foreign direct investment -FDI (Giri, 2016)
This will be a healthy backdrop to venture the expansion of Keells into the Indian market with
favorable political factors. Importantly, Srilanka as a SAARK member, will stand at an
advantage as an FDI project, currently encouraged in India.

Economical
With a view to attracting FDI’s, India has taken many reforms in improving the economic
environment for foreign investment, becoming the world’s fifth biggest economy, as per
nominal GDP as recorded by IMF, in the past decade achieving an annual growth rate of
between 6-7 per cent. Specially, in the field of Fast-Moving Consumer Goods (FMCG) sector,
which is the fourth largest segment in India is expected to reach an estimated Us 1.1 trillion by

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2020. The urbanization and advancement in technology has contributed to the country’s
productivity and efficiency for strengthening economic activities. However the country’s
challenges facing, with regards to access to development, infrastructure, reforms cannot be
discounted towards which the political will is focused to lead the economy forward. (Myers,
2020)
Among the economic measures initiated to boost foreign investment,
 Allowing 100 per cent foreign FDI investment in single-brand stores.
 51% FDI in multi-brand retail.
 Changing lifestyles with improved disposable income
 Employment opportunities along with FDI ventures
 The goods and services tax (GST) beneficial to FMCG industries (Anon., 2020)
These are factors that can impact, profit margins, sales volumes, product range, customer
segment etc. in our propose Keells supermarket business. India as a giant emerging market with
a promising environment, it is a favorable time for fast action.

Social
India has a diverse culture with a high sensitivity. Being respectful towards cultural traditions is
a pre-requisite for business. A country with a second largest population, being most ethnically
diverse, with over 200 ethnicities officially recognized, gives emphasis for a foreign business
venture to be highly concerned with caution. As local people will be very conscious about- how
they will be treated by business visitors, it is highly relevant for Keells to pay attention for all
cultural differences for a better understanding for easy adaptation (Anon., 2013)
Srilanka being a very close neighbor, with Indian influence for many years with close ties
between the countries bear many similarities culturally. This knowledge too will be an advantage
for fast adaptation for Keells in this propose business venture.

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Technology
Indian consumers are very tech savvy and have embraced technology making the country one of
the largest and rapidly improving market for digital usage in business. The companies that opt to
adopt digital innovation will be better placed to reap the advantageous of well digitally
connected markets. Private sector innovations in digitalization has enabled internet-services to
wider consumer market while public sector has been a strong catalyst in the process. This is a
positive factor for doing business (Noshir Kaka, 2019)
These are positive contributions for starting the propose business venture as with the use of
technology, businesses could be efficiently managed with operational cost benefits.

Legal
Foreign investment businesses in India or invest in Indian businesses need to abide by certain
Indian laws. Some of the key areas of concern to be aware of are,
 Foreign Exchange Management Act – FEMA
 Tax payments based on post earnings from business activities
 FDI private limited requires no central government permission, that is fastest and
cheapest for foreign businesses to enter the market.
 Registration of private limited companies
 Certificate of incorporation
 Post Registration acquaintances
 Accounts of foreign company
 Penalty of Contravention (Prajapati, 2018)
It is recommended, to seek expertise advise from a local business lawyer for clarity of business
rules and regulatory requirements for setting up the proposed business venture.

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Environmental
Currently, India is saddled with many environmental issues such as, air and water pollution,
plastic and solid waste management, deforestation, and ground water extraction to mention a
few. There are many strict laws with fines being imposed for irresponsible acts that impact the
environment. To give a measure of the concern, Delhi alone produces 14,00 tons of solid waste
daily (INdia, 2018)
This will be a strong position for Keells, as we are an eco- friendly supermarket chain, with a
strategy based on ‘Triple Bottom Line’ of economic, environmental, and social performance for
social responsibility strengthening our sustainability. Our CSR arm with a vision of Empowering
the Nation Tomorrow’ are currently involved in many CSR projects for enriching the lives of the
communities and preservation of the environment. Keells ability to foster values with such
programs at the onset would be a great strength (Abeysekara, 2017)
Few examples Keels to considered,
 Not using plastic bags
 Increase of biodegradable wraps and bags, cups, and containers.
 Displays and posters for showing sensitivity to environment.
 Join hands with voluntary work with local entities for environment preservation activities
whenever possible
Factors that could boost the image of Keells for its brand visibility as being socially responsible
that could help win customer loyalty for Keells.

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Question:02
Entry methods for proposed supermarket

Keells as a new entrant into Indian market (FDI)

At present India’s business environment for foreign direct investments (FDI) is very healthy with
the government backing, with many incentives on offer in a business-friendly backdrop. India
allows 100 per cent FDI business projects as a measure of attracting much needed foreign
investment for stimulating its economy, for creation of jobs and other direct and indirect
economic benefits that could bring as a result. This is a business opportunity for Keells to expand
its market share in India as a new foreign entrant (Katherine, 2020)
Keells will be a new entrant as an independent foreign company, without any partnership
involved, a model which will have its own advantages and disadvantages.
Managing Keells with the ease of decision-making, implementing rules and regulations and
strategy will be time efficient due to not having any other partner for discussion or approvals
having authority vested upon Keells management. Focusing on entering the new market using
existing products of Keells will not be too difficult due to the simple reason that consumer
behavior in the new markets does not deviate too far from that of consumers in our existing
market (AnsoffMatrix, 2020). To establish and progress in the new market, Keells will need to
focus on a competitive business strategy. Though it is a challenge as Keells is venturing into a
foreign market expansion catering to a different customer segment in a massive domestic market
in India, the market potential is very promising with increased disposable incomes of consumers
in India. For capturing a sizable share of the new market, Keells will have to focus on
competitive pricing for attracting new customers, increasing promotion campaigns at the start,
with introductory prices for new products. These measures will enhance Keells opportunity to
penetrate the new market organically and steadily. In this endeavor, Keells business goal will be
to measure business progress using KPI’s such as, sales volume and revenue generated, customer
feedback on compliments and compliant, profits derived, as such indicators that would help
understand insightful business progress (Hussain, 2013)

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 Figure 1: Ansoff Matrix

However, the drawbacks of Keells entering to Indian market as a new entrant with no partnership
should be well focused to understand the viability for deciding the best option that will place
Keells at a stronger position for business survival in the new market.
Keells as a FDI project in a foreign land, will have considerable liability unlike in a partnership
venture where a business would be better able to mitigate. Most importantly the investment
capital required would be high with limited scope withing Keells ability to raise funds required
for the venture. Keells will not have the expertise firsthand experience operating in India to know
well, the likes and dislikes of the new consumer segment, behavior/buying patterns, preferences,
etc. further the cost of operation would be high, Keells as a foreign company establishing the
operation with logistics, staff requirements and the requirements in a foreign land without the
local expertise knowledge. Due the competitive nature of the business Keells intends to operate
being retail supermarket mainly in FMCGS' it is important manage all aspects of keeping the
costs down for viability of the venture. Keells will not be able to enjoy the sharing of tax with no
partner except for benefits given on FDI projects (Chief, 2016)

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Partnership
Keells will benefit having additional strength and access for capital with more financial power
with a business partner venture. Going into partnership can give new legal advantages, that could
help mitigate many risks. Joining hands with a strong part will give additional clout to Keells
with the partners brand image/ business stature. As this is a new venture, Keells will have access
to the much-needed local business expertise, vital business knowledge Keells should acquire for
business continuity. Keells as a chain of supermarkets in Srilanka, with the hands-on expertise
knowledge they already have will be able to strengthen that expertise in to an invaluable
synergetic knowledge coupled with the business partners knowledge adding value and insight to
the business. The process of problem solving would be faster, it will allow well founded
decisions with the contribution of the partners. Working with partners also could boost efficiency
as work can be delegated and coordinated better with access to more resources. Partnership for
Keells would be cost effective and will be a strength to have someone equally accountable for
business success. This could open doors for Keells for wider business networks for distribution
and wider market share, purchasing, supplying etc. with partner’s mutual support. Partnership for
Keells will be time saving and fun establishing new social contacts in business, allowing better
management of this new project. This will enhance Keells ability to manage the busines with
more accountability, in a time efficient cost-effective manner using the local partners expertise
for catering to a new market segment increasing the sales volume.
However, on the flipside it is important to consider the disadvantages of partnership business for
weighing the plusses and minuses for arriving at decision for a best option (InfiniteKnowledge,
2016)
Among the concerns, having to agree with your business partner can lower your autonomy. If the
partner chosen is not sound in finance this could have a negative impact on the partnership. In
one aspect, having to discuss and debate every decision Keells make with the partner could slow
down the process of decision making, which could lead to timely execution of business activities.
It is possible, disputes to arise due to difference of opinions that could lead to conflicts that
Keells will need to remain cautious. A mistake on the part of the partner can equally reflect on
you. A strong entrepreneur like Keells at times could feel constrained without really being able
to unleash creativity and Keells unique individuality. If both partners are natural leaders, it is
possible to face inevitable clashes of personality both wanting to be in charge of the other. As

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such choosing a partner wisely becomes an utmost important aspect of this business venture for
much deliberated decision.

Joint Venture
Joint venture business too, can be an arrangement in getting about expanding Keells market
share and business presence in India. Joint Venture business concept though quite similar in
nature to partnership, which is a common misconception, it is not the same. A joint venture
agreement can involve two or more individuals or companies. The distinct difference is that,
each individual in a joint venture agreement will maintain their separate business as a distinct
legal entity (Channon, 2015)

As Keells would be entering India for the first time they would be quite inexperienced with
Indian about the needs and wants of customers but If Keells were to enter the Indian market in
the form of a joint venture this would help Keells the time to get acquainted to the Indian ways
with the help of other venturists and would be able to make sure its competency with other local
supermarkets as Keells would have the aid of its partners. Further, by been in a temporary
agreement Keells would be able to obtain further advantages such as its financial risk would be
divided. Hence if Keells expansion to India backfires, the negative impact on the company would
not be imminent. In lament terms, Keells would be able to access a wide scope of markets with
the additional financial strength and its many other advantages (Channon, 2015)

However, on the side of disadvantages, dealing with workplace culture and management styles in
a different working set up, making poor tactical decisions which may affect the expected
outcome of the business by either party, are concerns Keells management will need to be
cautious as they are similar concerns in a partnership as well. However, joint venture parties
could lack the required commitment to the business which can pause a bigger threat to Keells for
managing the business as a foreign joint venture partner.

Finally, in comparison, the main difference between Joint venture and Partnership, being that the
parties in a joint venture have teamed up together for a specific purpose or project while each
member retaining the ownership of his or her properties, as oppose to parties in a partnership
have teamed up to run a business in common, will enable Keells management to weigh and
consider the pros and cons of for a sound decision.

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A similar Success story.

A similar successful business investment breaks through by Tesco Plc, the UK’s largest food
chain, is a remarkable foot achieved entering into India’s retail market through a wholesale
business and a tie-up partnering with the country’s largest Tata group of companies. Tesco
before entering into Indian market carried out their due diligence over a span of three years
probing the Indian market trends and following growing interest in India among other foreign
retailers. They also entered into a franchise agreement to help Trent Group, a retail arm of the
Tata group, for developing the concept of Star Bazaa hypermarket business. The wholesale
business of Tesco will supply merchandise to Star Bazaar, complimenting benefits for both
companies from the development of the supply chain. This venture has enabled both companies
to reach out to wider market network globally through the supply chain capability in this synergy
(Sharma, 2015)
PESTLE analysis for India was carried out clearing all doubts for Tesco’s position in India. All
imperative external conditions were thoroughly examined for improving the performance of
Tesco India.

Recommendation

After vigilant evaluation of options above, the best option of recommendation is given
considering the salient factors in this business feasibility study for choosing the most feasible
approach for success in this business endeavor.
Entering Indian market with a partnership is recommended based on the well-founded facts
presented in this report for Keells supermarkets.
A partnership will enable stronger financial power with access to capital, while giving more
strength for risks mitigation for Keells. Further a partnership will give Keells access to a wider
network of distribution for capturing an expanded market share using resources of the partners,
an additional benefit. Managing of business will be time efficient and cost effective as business
partners commitment is given with accountability for maximizing the mutual benefits. Specially
in India, diversity of culture being rich with a massive market potential for growth with a
business-friendly environment backed by government, Keells will lack the business acumen to

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understand the uniqueness of doing business in India. Further, it is restricted to only 51 percent
for multi-brand retail businesses and there are already international partnership ventures in
operation reaping the benefits (Sampathkumar, 2020). Finally, presently India remains a fast-
developing giant economy in the region with international eyes being focused as a potential
business destination for investors. In this backdrop, a partnership business venture is
recommended for Keells Pvt for proposed market expansion to India for its business success.

Conclusion

In conclusion, from the given research and after heavy analysis I believe Keells decision to
expand into India would be a feasible decision for the above said reasons as it will help the
company to obtain a larger market share and expand its horizons. Finally, would help cater to a
global demand and obtain a global competitive advantage with a parallel increase in sales and
revenue generated.

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