Conducting Successful Business in India

- A Perspective

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Presentation Plan

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

Slide 2
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Presentation Plan

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

Slide 3
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India ranks high on many macro-economic indicators as compared
to other emerging nations

Top destination in the AT Third largest economy–

Kearney Global Retail GDP in terms of PPP
Development Index (2007) (2007)

Most preferable destination Stable 8–9 percent annual

for Services sector (AT India is the second- GDP growth rate in the past
Kearney, 2007) fastest growing 2–3 years
economy in the world.

Ranks first in the availability

Estimated to become the fifth
of qualified engineers in the
largest consumer market by
labor market (IMD, 2006)
2025 (MGI)

Slide 4
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 High growth in FDI inflows in the past 2–3 years
FDI Inflow – India (2001–07)

18,000 15,730
 FDI inflows increased by 185
percent from 2005–06 to 2006–07.
USD Million

13,500 185 percent 11,141

Increase

9,000  Electronics, manufacturing and

5,546
4,222 3,755
telecom were the sectors that
4,500 3,134 2,634
witnessed significant FDI inflow.
0
2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08
 Total PE and VC investments
(Apr–No v)
increased from USD 1.1 billion in
2004 to USD 14 billion in 2007,
Private Equity and Venture Capital with maximum PE and VC
Investments in India in (USD million) - Amount investments going into banking and
Invested and Number of Deals financial services, telecom and
16,000
14,234 manufacturing sectors.
PE & VC Investments (in

387 420
14,000
12,000 299 350  The total value of M&A deals
USD mn)

10,000 280
increased by more than 151
No. of Deals

7,500
8,000 210
6,000
146
percent from 2006 to 2007.
140
4,000 71 2,200
2,000 1,050 70
0 0
2004 2005 2006 2007
Value o f Deals Number o f Deals

Slide 5
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Presentation Plan

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

Slide 6
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What makes India a Fast Emerging Business Destination?

Special incentives provided by the government to attract investments

Special incentives provided by the government to attract investments

Less time and few procedures required to start a business

Less time and few procedures required to start a business

Growing potential of Tier II and Tier III cities

Growing potential of Tier II and Tier III cities

Easy availability of skilled talent pool

Easy availability of skilled talent pool

Emerging middle class

Emerging middle class

Increasing disposable income

Increasing disposable income

Number of emerging sectors witnessing growth

Number of emerging sectors witnessing growth

Slide 7
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Special incentives provided by the government to attract
investments
The government of India offers a number of incentives to encourage investments in India

 Liberal
LiberalFDI
FDInorms:
norms:As
Asmuch
muchas
as98
98percent
percentof
ofthe
theIndian
Indianeconomy
economyisisopen
opento
toFDI
FDIthrough
throughthe
theautomatic
automaticroute.
route.

 Special
SpecialEconomic
EconomicZones
Zones(SEZs),
(SEZs),Electronic
ElectronicHardware
HardwareTechnology
TechnologyParksParks(EHTPs)
(EHTPs)and
andSoftware
SoftwareTechnology
Technology
Parks (STPs): They offer incentives, such as tax exemptions, duty-free imports and low-cost power supply.
Parks (STPs): They offer incentives, such as tax exemptions, duty-free imports and low-cost power supply.

 Compliance
CompliancewithwithTrade-Related
Trade-RelatedAspects
Aspectsof ofIntellectual
IntellectualProperty
PropertyRights
Rights(TRIPS)
(TRIPS)(since
(since2005):
2005):This
Thishas
hasled
ledto
toan
an
increase in the number of R&D centres set up by MNCs in the country.
increase in the number of R&D centres set up by MNCs in the country.

 Reduction
Reductionof ofcustom
customduty:
duty:InInthe
theBudget
Budgetfor
for2008–09,
2008–09,the
theGovernment
Governmenthas
hasreduced
reducedthe
thecustom
customduty
dutyon
onprojects
projects
imports from 7.5 percent to 5 percent.
imports from 7.5 percent to 5 percent.

 Industry
Industryassociations
associationspromoting
promotingIndia:
India:Industry
Industryassociations
associationssuch
suchas,
as,CII,
CII,ASSOCHAM,
ASSOCHAM,and
andNASSCOM
NASSCOMhave
havebeen
been
set up to promote India as an investment destination.
set up to promote India as an investment destination.

Slide 8
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Less time and few procedures required to start a business
India’s attractiveness as compared to other emerging economies

Starting a Business–Time Required

Brazil 152

China 35
The
The time
time required
required toto start
start aa
India 35 business
business in India is the same
in India is the same asas
Russia 28 that
that in China and lower than that
in China and lower than that in
in
Brazil
Brazil
Korea, Reb. Of 22

0 20 40 60 80 100 120 140 160

Time (Days)

Starting a Business–No. of Procedures Required

Brazil 17
The China
The number
number ofof business
13
business
procedures
procedures required to
required to start
start aa Korea, Reb. Of 12
business in India are less
business in India are less India 11
compared
compared toto most
most of
of the
the emerging
emerging Russia 7
nations
nations
0 2 4 6 8 10 12 14 16 18
Number of Procedures

Slide 9
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Growing potential of Tier II and Tier III cities
Potential of the tier II and tier III cities

 Tier
TierI—Cities
I—Citiessuch
suchasasDelhi
Delhiand
andMumbai—offer
Mumbai—offerdeveloped
developedinfrastructure,
infrastructure,ease
easeof
ofaccessibility
accessibilityand
andavailability
availabilityof
oftalent
talent
pool
poolbut
butincludes
includeshigh
highcosts
costs

 Tier
TierII—Emerging
II—Emergingcities,
cities,such
suchas
asPune,
Pune,Hyderabad
Hyderabadand
andChennai
Chennai

 Tier
TierIII—Potential
III—Potentialcities,
cities,such
suchas
asNagpur,
Nagpur,Ahmedabad,
Ahmedabad,and
andChandigarh
Chandigarh

Availability of talent pool Cost advantage (lower labor

(presence of academic and real estate costs)
institutions)
Advantages
of tier II and
tier III cities:

Growing infrastructure Lower attrition rates

Slide 10
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Easy availability of skilled talent pool
Availability of skilled talent pool and strong academic infrastructure

 India
Indiaranks
ranksfirst
firstininthe
theavailability
availabilityof
ofqualified
qualifiedengineers
engineersininthe
thelabour
labourmarket.*
market.*

 The
Thecountry
countryadds
addsabout
about69,000
69,000engineers
engineersand
andscience
sciencegraduates
graduatesevery
everyyear.
1
year. 1

 India
Indiahas
hasworld-class
world-classinstitutes,
institutes,such
suchas
asIndian
IndianInstitutes
Institutesof
ofTechnology
Technology(IITs),
(IITs),Indian
IndianInstitutes
Institutesof
ofManagement
Management(IIMs)
(IIMs)and
and
Indian Institute of Sciences (IISc).
Indian Institute of Sciences (IISc). “
“ 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
India’s
India’s demographic
demographic mix
mix is
is
0–14 35.6% 32.5% 29.7% 27.1% shifting towards the 15–59
shifting towards the 15–59
15–59 58.2% 60.4% 62.5% 64.0% years
years age
age group
group
60+ 6.2% 7.1% 7.8% 8.9%
*Institute for Management Development (IMD) World Competitiveness Year Book 2006
1
Source: Nasscom

Slide 11
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Emerging middle class – Creates opportunity for companies to tap
the changing lifestyles of Indian consumers
Household 2005 E 2015 F 2025 F
income
brackets Number of Households, (in million)

Globals 1.2 3.3 9.5

Strivers 2.4 5.5 33.1

Seekers 10.9 55.1 94.9

Aspirers 91.3 106 93.1

Deprived 101.1 74.1 49.9

Aggregate disposable income–2000 (in INR trillion)

Globals 2 6.3 21.7

Strivers 1.6 3.8 20.9

Seekers 3.1 15.2 30.6

Aspirers 11.4 14.6 13.7

Deprived 5.4 3.8 2.6

Middle Class
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
Slide 12
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Increasing disposable income
Increase in per capita income and consumption

Per-Capita Income and Consumption

31,500 29,786
27,784
25,696
27,000 23,890
22,413
20,996
22,500
INR
16,279 17,145
18,000 14,413 15,422
13,352 13,918
13,500

9,000

4,500

0
2002–03 2003–04 2004–05 2005–06 2006–07 2007–08
Year

 The
Theper-capita
per-capitaincome
incomehas
hasgrown
grownat
ataaCAGR
CAGRof
of7.24
7.24percent
percentfrom
fromINR
INR20,996
20,996inin2002–03
2002–03to
toINR
INR29,786
29,786inin2007–08.
2007–08.

 The
Theper
percapita
capitaconsumption
consumptionhas
hasgrown
grownat
ataaCAGR
CAGRof
of5.1
5.1percent
percentfrom
fromINR
INR13,352
13,352inin2002–03
2002–03to
toINR
INR17,145
17,145inin2007–08.
2007–08.

 Over
Overthe
thenext
next2020years,
years,India’s
India’smiddle
middleclass
classisisexpected
expectedgrow
growfrom
fromabout
about55percent
percentof
ofthe
thepopulation
populationto
tomore
morethan
than40
40
percent, creating the world’s fifth-largest consumer market.
percent, creating the world’s fifth-largest consumer market.

Slide 13
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Number of emerging sectors witnessing growth
Key sectors witnessing growth

IT

 The Indian IT sector witnessed a growth of 30.7 percent in 2006–07 and accounted for 65–70
The Indian

percent of theITglobal
sectoroff-shoring
witnessedmarket.
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
 India is among the top 30 countries with regard to parameters supporting IT services. 1

Telecommunications

 India is the fastest growing telecommunications market in the world.

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
 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).
million in just four months in 2007).
 Leading global telecom equipment manufacturers, such as Nokia, Samsung, Motorola and Sony
 Leading global telecom equipment manufacturers, such as Nokia, Samsung, Motorola and Sony
Ericsson, are setting up their bases in the country.
Ericsson, are setting up their bases in the country.

Health Care

 The Indian health care sector is valued at USD 34 billion.

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
 The sector attracted 6.3 percent of the total PE investment in India in 2006, amounting to USD 379
million.
million.

1
Gartner

Slide 14
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Presentation Plan

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

Slide 15
© Evalueserve, 2008. All Rights Reserved - Privileged and Confidential
India offers both domestic market opportunity and off-shoring
opportunity for MNCs
Business Opportunity in India

Domestic Market Opportunity Off-shoring Opportunity Sourcing Opportunity

 Vast
Vastpopulation
population
 Availability
Availabilityof
ofskilled
skilled
 Availability
Availabilityof
ofraw
raw
talent pool
talent pool materials
materials
 Increasing
Increasingpurchasing
purchasing
Power
Power
 Cost
CostSavings
Savings
 Presence
Presenceof ofstrong
strong
Growing industry
industryinfrastructure
infrastructure
Growingsize
sizeof
ofmiddle Knowledge/R&D
Knowledge/R&Dhub
 
middle hub
and higher consumer
and higher consumer
 Developed
Developedtechnology
technology
class
class Cost
Costsavings

savings

Penetrating domestic markets and leveraging India presence

Slide 16
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Case Study – Domestic Market Opportunity

McDonald’s is one of the world’s leading fast food restaurant chain.

 Steps taken by McDonald’s:

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

Slide 17
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Case Study – Off-shoring Opportunity

IBM entered the Indian market in 1992 through a joint venture with Tata group.

 IBM India, a subsidiary of IBM Inc., was set up in September

IBM India, a subsidiary of IBM Inc., was set up in September
1999.
1999.
 Steps taken by IBM
 Steps taken by IBM
→ IBM expanded its BPO operations with the acquisition of
→ IBM expanded its BPO operations with the acquisition of
Daksh, the third largest BPO outfit in India.
Daksh, the third largest BPO outfit in India.
→ Set up operations in all the sectors of its businesses in
→ Set up operations in all the sectors of its businesses in
the country.
the country.
→ Reduced the prices of specific products making them
→ Reduced the prices of specific products making them
more competitive in the market.
more competitive in the market.
 Success in India
 Success in India
→ Operates almost all its businesses in India.
→ Operates almost all its businesses in India.
→ Has its second highest number of employees in India
→ Has its second highest number of employees in India
(73,000 employees as of December 2007)
(73,000 employees as of December 2007)

Slide 18
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Case Study – Sourcing Opportunity

Piaggio is an Italy-based company that specialises in the design and manufacture of

two-wheel motor vehicles.

 Steps taken by Piaggio:

Steps taken by Piaggio:

→ Localized 100 percent of its 3-wheeler product in India in
→ Localized 100 percent of its 3-wheeler product in India in
order to compete effectively
order to compete effectively
→ Set up a predominant Indian management team for India
→ Set up a predominant Indian management team for India
operations
operations
→ Setting up of R&D operations in India
→ Setting up of R&D operations in India
 Success in India:
 Success in India:
→ Introduced, new 3- and 4- wheeler models, superior
→ Introduced, new 3- and 4- wheeler models, superior
engine technology, and innovative customised solutions
inengine
India. technology, and innovative customised solutions
in India.
 Leveraging India:
 Leveraging India:
→ Planning to make India a global hub for 3-wheeler
→ Planning to make India a global hub for 3-wheeler
manufacturing and export products components to the
EUmanufacturing and export products components to the
EU

Slide 19
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Case Study – Penetrating domestic markets and leveraging its
India presence for exporting to other countries

Cadbury is one of the world’s leading confectionery and non-alcoholic beverage

companies.
.  Steps taken by Cadbury:
 Steps taken by Cadbury:
→ Tailored products to suit Indian consumers (almonds are
→ Tailored products to suit Indian consumers (almonds are
more preferred in India as compared to peanuts).
more preferred in India as compared to peanuts).
→ Innovative distribution strategy and advertisements that
→ Innovative distribution strategy and advertisements that
appeal to Indian consumers.
appeal to Indian consumers.
→ Products sold at lower margins as the company believes
→ Products sold at lower margins as the company believes
high penetration compensates for the reduced margins.
high penetration compensates for the reduced margins.
→ A predominant Indian management team for India
→ A predominant Indian management team for India
operations.
operations.
 Success in India:
 Success in India:
→ Leads the chocolate and confectionary market in India.
→ Leads the chocolate and confectionary market in India.
 Leveraging India:
 Leveraging India:
→ Exports finished goods and innovative concepts to its
→ Exports finished goods and innovative concepts to its
other branches around the world.
other branches around the world.

Slide 20
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Presentation Plan

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

Slide 21
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Challenges Faced by MNCs

→
→
Distinct taste and habits from rest of the world and variations
Distinct taste and habits fromthis
rest of the world and variations
within India–McDonalds solved problem by bringing out
within India–McDonalds solved this
customized menu for the Indian market. problem by bringing out
customized menu for the Indian market.

→
→
Large variation in Paying capacity–Phillips addressed the
Large variation in Paying capacity–Phillips addressed theof its
problem by using the right value proposition. It cut the prices
problem by using the right value proposition.
acclaimed Compact Fluorescent Lamps. It cut the prices of its
acclaimed Compact Fluorescent Lamps.

→
→
Reaching target customers in a cost effective way–Companies,
Reaching target customers
such as Allianz-Bajaj, GSK, andinDanfoss,
a cost effective way–Companies,
follow partnership models
such
with as organisations
local Allianz-Bajaj, GSK, and Danfoss,
to increase follow partnership models
their reach
with local organisations to increase their reach

→
→
Large number of supply chain intermediaries–Piaggio
Large number of supply chain intermediaries–Piaggio
addressed the problem by localising 100 percent of its 3-wheeler
addressed
products the problem by localising 100 percent of its 3-wheeler
in India.
products in India.

Slide 22
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