India as a Target Market for Fast Eddys - Case Study Example

Country Report: India Name Professor Institution Course Date Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 Country Profile 4 2.1 Geographic 4 2.2 Demographic 4 2.3 Political systems 5 2.4 Legal systems 6 2.5 Economic systems 7 3.0 Economy 8 4.0 Cross-Cultural, Ethics and CSR 9 4.1 Culture 9 4.2 Ethics 10 4.3 Corporate social responsibility 11 5.0 International trade picture 11 6.0 Foreign Direct Investment 12 7.0 Foreign exchanges. 12 8.0Recommendations 13 8.1 Hiring and Training technology experts 13 8.2 Training on culture diversity 13 8.3 Polycentric Staffing 14 9.0 Conclusion 14 10. References 15 11.0 Appendix 17 1.0 Introduction A realistic challenge and risks which firms face in the consistently inter-reliant global markets is the capability to operate and perform efficiently across the cultural borders (Caligiuri, Lepak & Bonache 2010, p. 37). As opposed to serving entirely in the background or site where they were created, managers and employees are now compelled to look for new markets to expand their operations, product awareness and customer base so as increase their revenues and market share. According to Ernst &Young (2010, p.20) Australian companies have been carrying businesses in Indian market for quite sometimes since Australia have been having diplomatic ties in Indian capital, New Delhi since 1943, four years prior to India’s independence. However, over the years, relationship lacked substance as it could not prevent various risks (HSBC Business 2012, p.34). It is a confirmation that expansion into new markets is full of risks such as political, cultural, technological, economic, managerial, human resource management, legal systems, ethical practices differences which could hinder operations leading to failure. In reaction to such concern, management experts have always recommended market research before making an entry to foreign markets. HSBC Business (2012, p.54) stated that the economic and other changes have taken place in India, presenting business with numerous new opportunities. In this report, the business development executive from Fast Eddys and tasked by the CEO will conduct a market research into Indian market to present differences and opportunities by analyzing economic prospects, culture, legal systems, ethical practices, investment environment and stability. Fast Eddys is restaurant in Australia dealing in Fast food such as hamburger, fried and roasted chicken, dessert, wraps, salad, milkshakes, French fries, coffee, and Steak and Cheese. The reports indicate that, fast food lifestyle is turning out to be a trend and is penetrated in the suburban areas and cities of in India. This provides an opportunity for Fast Eddys to exploit. 2.0 Country Profile 2.1 Geographic India is a state located in South Asia where it borders Pakistan, Burma, Bay of Bengal and Arabian Sea (Bose & Jalal 2011). The fact that India is near the Arabian Sea makes it ideal for tourism activities. Mumbai, the largest Indian city boarders Arabian Sea and attracts large number of tourists both local and international. Tourists have no time to cook for themselves, and prefers fast foods provided by the local companies. Fast Eddys can target tourist or local so as to increase its profits. The company can also benefit from foreign currency brought by foreigners, especially the international tourists. Mumbai also has the leading number of billionaires and millionaires meaning it are highly growly. This is an indication that in few years, many people living in this city will mostly belong to middle class level hence high disposable income to buy luxury product and services offered by fast food outlets like Fast Eddys. Other cities near are Chennai and Bengaluru which host several tourism activities. This to Fast Eddys company is low risk to its business as tourists from various parts of the world form a great segment of its customers who will greatly contribute to its market share and establishment. 2.2 Demographic India is ranked as the 7th largest nation by area and the second leading populous state in the world with more than 1.25 billion individuals (Clémentin-Ojha 2014) (see figure 1). Most people in India are in the age of 35 since the country has an average life expectancy of 68 percent. The population has grown tremendously between 2010 and 2015 at the rate of 1.3% annually and the trend is expected to continue up through to 2020 (The World Factbook 2015). The population favour Fast Eddys which is still in the process of acquiring customer base. The country uses Hindi as the official language while English as the commercial language. With increase of business activities in the country, many people are trying to learn English to facilitate easy communication with foreign investors. Shira (2012, p.43) claimed that, today, English is widely spoken in commercial cities such as New Delhi, Mumbai, Bangalore and Hyderabad. As a new company which comes from British colony, English makes it easy for Fast Eddys management to communicate with customers. Therefore, Fast Eddys company has no high risk of failing to establish in India as the population is high hence high number of customers and varying customer segments. 2.3 Political systems India is regarded as the leading democracy in the world with citizen allowed to freely elect their leaders. On cultural perspective, India has diversities in language, customs and religion. The economy of India has highly grown in the last decade making irresistible to many foreign investors (PricewaterhouseCoopers 2011). Indian constitution defines India as a sovereign, secular, socialist and democratic republic. The democracy in government has attracted foreign investors because it paints an image of a country which is free and fair both in political, economic and social activities. KPMG (2014) claimed that the government has also moved to open the Indian economy for businessmen to invest and improve the growth of the GDP. The opening of the India Market to foreign investment can be exploited by Fast Eddys before other fast food joints start cropping in. The stability of the government contributed by culture of democracy has led economic growth and investment friendly environment which effectively promote healthy business between local and foreign companies. However, Fast Eddys will have to contend with several taxes imposed by the government to increase revenues. Fast Eddys company will face low political risks due to political stability in India. 2.4 Legal systems Researches reveal that starting a business venture in India needs completion of various legal processes. Permits or approvals connected to land purchase, construction permit, power connection and site safety permits are some of top hurdles in establishing a business within India. A study into the legal system of India in relation to business has also established that Indian tax regime especially direct tax is not favourable in promoting growth since it is too high and scare most of foreign investors. Experts believe that the situation slows down growth hence should be reduced. Dumping of low quality products are on the increase as more counterfeits are no traded in countries across the globe. To reduce unfairness by the act, India has enacted various anti-dumping laws. MRTP Act of 1970 is one such law which was enforced to curb restrictive and monopolistic practices (KPMG 2014). The act was replaced by the Competition Act of 2002 and was enforced to prevent actions which had serious impact on competition particularly India (Dev & Rao 2009). The act has since been amended in 2006, 2007 and 2009 to make it more effective. Anti-dumping duty set by the government often applies to the particular products imported from particular nations and is aimed at curbing harm to local sectors. Fast Eddy must understand that anti-dumping duty is levied on the imported product just as equals to the excise duty of locally manufactured products. In addition, countervailing duty could charged at a rate of 1- 4 percent of BCD. This standard takes effect to every foreign product which is sold to India. The practice means that if Fast Eddys is expanding into India with an aim of dumping their products might incur several losses which might just mark the start failure of the business. India also has several forms of taxes which Fast Eddys must comply with. Some of the form of taxes in India includes income tax, corporate tax, wealth tax, gift tax, service Tax, customs, and central excise (Behera 2011). Failure to remit these taxes will automatically lead Fast Eddy to prosecution hence maybe a high risk towards its business establishment. 2.5 Economic systems Today, Indian economy ranks as the 7th largest economy in the world based on the nominal GDP (Rkca 2013). The country also ranks third leading economy based on the purchasing power parity. The economic growth is a factor to consider by foreign companies. The economic growth of India has made it to be regarded as a newly industrialized nation. India’s economic growth has rapidly increased plus the per capita incomes. The fact that India is economically growing especially in cities like New Delhi and Mumbai is indication that country will soon have high number of income earners. Fast food outlets like Fast Eddys normally target high income owners like the middle class and upper to increase their profits. This is because middle class people normally have high disposable income to spend on luxury products, and outings which are offered by Fast Eddys. KPMG (2014, p.63) claimed that in the year 1991, the country introduced principled free market and its economy was broadened internationally and was managed by Manmohan Singh who was the former finance minister. Free economy is an encouragement to Fast Eddys to target India market because of reduced conditions in market entry hence a low risk towards it failure to establish and thrive. Rkca (2013) posited that the economy of India is majorly rely on service sector accounting for 58.1 percent of Gross Domestic Product, while the manufacturing industry accounts for 29.0% and agriculture accounts for 14.1% (see figure 3). The situation depicts how service sector has grown and become a significant industry in India. Fast Eddys partly belong to service sector and growth of such industry depict an opportunity which the can exploit to increase its image and brand awareness in Asia. However, it will be advisable for Fast Eddys not to invest in rural India, because the up-country still experiences challenges and high risks such as poverty, public healthcare and malnutrition hence fast food might not be a priority to the people. 3.0 Economy The World Factbook (2015) claimed that India’s economy is considered as the tenth-largest worldwide in terms of its nominal GDP and also in its purchasing power parity it is the third largest. Also, it has a membership from BRICS and is majorly among the G-20 economies (Heine & Viswanathanm 2011). In 2014 fiscal year, there has been a rise of GDP in India averagely by 7.3 percent (The World Factbook 2015) (see figure 2). The country is ranked as the ninths largest in exportation and tenth largest importer worldwide. Its good relationship with foreign countries especially Australia based on exportation and importation is a positive statement for Fast Eddys because it will makes its operation free of political and foreign relations interference. In the fiscal year of 2012 to 2013 the economy decreased to 5.0 percent as compared to the other fiscal year which was 6.2 percent (KPMG 2014). Corruption is still the major problem in India (PricewaterhouseCoopers 2011). According to the Transparency International’s Corruption Perceptions Index, the country is position eighty four out of one hundred and eighty (Rkca 2013). Corruption has negative on a business as it encourages unfair competition in the market hence maybe a high risk to Fast Eddys company. 4.0 Cross-Cultural, Ethics and CSR 4.1 Culture The common language used in India is English as compared to other developed nations. Since the language was introduced by the Old British Empire, English has become the common language used in businesses and for tourism (Narayan 2015, p.307). India and Australia both were colonized by Britain’s, even though Britain has different interests on both countries. However, the two countries have its diversity based on religion, race and human resource practices (Bose & Jalal 2011). Population and their characteristics are very important for a business because it one of the features Fast Eddys considers in targeting a particular market. According Clémentin-Ojha (2014) India has been ranked as the second most populated nation with over 1.2 billion individuals has can form a large customer base. Currently, the population has majority of young people (KPMG 2014). The condition is an indication that the demographic is majorly Y generation who is obsessed with fast food. A research conducted by Narayan (2015, p.56) on India population trends has shown that by 2020, India’s average age could be 29, when compared to 48 of Japan and 46 of Western Europe hence more people embracing fast food culture which is a low risk as there is higher acceptance of Fast Eddys company food. Bose & Jalal (2011) stated that India has sports and movie culture. India is leading country in Cricket, and the sport is also adored by most people. Most fans like fast foods when on their way to stadiums. Fans can form a key target market in India. Similarly, India also has a leading movie culture, and bollywood is one the largest movie industries in the world (Bose & Jalal 2011). Movie fans spend their time out at the cinemas with their families or friends so they favor fast foods served at the outlets in town or take away. The growth the movie culture is likely to create a target market for Fast Eddys. Therefore, there is low risk of multinational companies to establish due the cultural aspects in India which do not limit other cultures from being embraced in the country. Hence, Fast Eddys company can be able to establish and thrive easily within India. 4.2 Ethics Ethics plays a critical role in the success of a business. Some of the ethical values Fast Eddys should look for when starting include the trends of confidentiality, conflict of interest, corruption, insider trading, gift, protection of environment, reporting, human rights, honesty, whistle blowing, and engagement of political activities by companies (Bailey & Spicer 2007, p. 1465). The report has established is corruption is rampant in India hence it could lead to unfair business. Corruption might give competitor advantage in the market hence making Fast Eddys less competitive and attractive. Furthermore, the report has also discovered that business ethics differ due to diverse culture between India and Australia. In Australia, giving a gift particular occasion when it is attached to business is offensive as it is regarded as favor and corruption in nature (Samovar, Porter & McDaniel 2010, p.256). Good thing about expansion is that Fast Eddys is targeting Indian market which is a high-context culture, and giving of gift is vital for business negotiation and relationship. The situation means Fast Eddys will have to also use gifts to build good relations with customers. This brings around high risks of being entangled in some unethical behavior of bribery due to rampant corruption in India for Fast Eddys company. 4.3 Corporate social responsibility India is regarded as one of the country with oldest culture of corporate social responsibility. However, the practice is not intensely adopted by most companies particularly the local ones because it is not cultural or emotionally attached to traditions of India. India, it is mostly the multinational companies which put high regard to CSR hence Fast Eddys ought to use the strategy to increase its competitive advantage making it a low risk to its business. According to Gajare (2014, p.153) the debate of CSR in India has been settled by adoption Companies Act of 2013, which require companies worth 500 million rupees has its turnover to use 2 percent of previous 3 years net profits to conduct corporate social responsibility activities. Fast Eddys can take of the advantage and position itself as an environmental friendly company by taking up CRS activities such as forest conservation hence reducing risks to business. 5.0 International trade picture India economy stalled and lagged behind for many years as a result of protectionist measures adopted by the government (HSBC Business 2012). Post independent era saw the adoption of open economy with few regulations. The situation encouraged international trade and foreign investment as the company export product and also imports others. Today, India exports refined petroleum, packaged medicaments, Jewelry, rice and cars. According to KPMG (2014) the increase of exports market make India 17th leading exporter in the world. On the other hand, India also import numerous products such as crude petroleum, gold, Coal Briquettes, petroleum gas and diamonds. Some of the Singapore top import destinations consist of Singapore, UAE, UK, China, US and Australia (Dev & Rao 2009). Similarly, Indian tourism has also grown significantly in the period between 2011-2015 as more people visit destinations such as Mumbai, Maharashtra, Tamil Nadu and Kerala. Tourism and increase of business activities have enhanced business in the fast food sector as more people now prefer ready made foods. The increase of foreign direct investment and fast food culture paint a low risk and potential picture of growth which Fast Eddys can exploit. 6.0 Foreign Direct Investment HSBC Business (2012) asserted that globally, India is positioned as the third most attractive destinations for Foreign Direct Investment. There has been an increase and a slight decrease in number of foreign investment in India as portrayed in figure 4. The country has a favorable, robust and transparent financial market that has changed gradually from being a system that was controlled to a free one. It also has various credit markets which have several financial companies like NBFCs, regional rural banks, commercial banks and cooperative banks (KPMG 2014). Money market is commonly known as the marketplace for short term funds. It consists of financial maturity products varying all night to a year. It also has a stable, liquid and efficient money market making it low risk region for business establishment. India’s new money market was approximated to an averagely daily turnover of INR2244.4 billion in the financial year of 2009 (KPMG 2014). 7.0 Foreign exchanges. The Indian currency market has been unstable in the recent past hence affecting the balance of trade (Behera 2011). However, generally, Indian rupees have been weak compared to Australian dollars over the years. The situation may affect the profits of Fast Eddys in its early years in the market. However, with increase of customers’ base, Fast Eddy’s is likely to get more customers from other countries with strong currency hence increasing its profits. Several presence of currency exchange Bureau in Mumbai markets it ideal for foreign business like Fast Eddys which depends heavily on currency exchanges. Today, Mumbai has foreign exchange institutions such as National Stock Exchange and Mumbai Stock Exchange (HSBC Business 2012). 8.0 Recommendations The report has highlighted opportunities in fast food market particular the ease of starting business, population growth, political stability and economic growth. However, the report has also identified concerns especially corruption, tax, cultural differences and technology. Base on the research, the report therefore recommends the following; 8.1 Hiring and Training technology experts The world businesses are embracing technology therefore, hiring many Indians can prove to be ineffective bearing in mind that Indian are less techno-savvy people. This means, Fast Eddys will require hiring technology experts from Australia to work in their branches in India. While at it, Fast Eddys will require need to invest in more training of employees about technology. 8.2 Training on culture diversity The report has established cultural differences between India and Australia in terms of religion and HRM. Fast Eddys therefore needs to train employees on cultural intelligence as a way of making them global citizens. In so doing, the employees will drop cultural difference and focus on corporate culture. 8.3 Polycentric Staffing Another best option is to hire nationals from host-nation (India) for lower positions to the high top level managers with only a few slots for Australians. Since Fast Eddys will operate in India, the company will have reduced the effects of cultural difference. 9.0 Conclusion Globalization is quickly increasing changing the business environment and more companies are looking for new markets to invest and expand their operation. In this report, India has been identified by Fast Eddys as a target market due to increase of attractiveness. The growth of India economy, tourist and movie culture present a positive outlook for Fast Eddys to invest. Positive economic growth means high disposable income to increase purchase of luxury products. Increase of tourism culture implies increase in foreign exchange which Fast Eddys can tap to increase its revenues. The report advises Fast Eddys management carry continue with their plans of expanding into Indian market but must consider the provided recommendations if they are to remain effective. 10. References Bailey, W & Spicer, A 2007, When does national identity matter? Convergence and divergence in international business ethics, Academy of Management Journal, Vol.50, No.6, pp.1462–1480 Behera, L. K 2011, Budgeting for India's Defence: An Analysis of Defence Budget 2011–2012, Institute for Defence Studies and Analyses Bose, S & Jalal, A 2011, Modern South Asia: History, Culture, Political Economy (3rd ed.), Routledge Caligiuri, P, Lepak, D & Bonache, J 2010, Managing the global workforce, Wiley- Blackwell, Chichester Clémentin-Ojha, C 2014, India, that is Bhara: One Country, Two Names, South Asia Multidisciplinary Academic Journal, Vol.10, No.3, pp.34-46 Dev, S.M & Rao, N.C 2009, India: Perspectives on Equitable Development, Academic Foundation\ Ernst &Young 2010, Doing business in India, Ernst &Young India, p.13-264 Gajare, R.S 2014, A conceptual study of CSR development in India, In D.B. Patil & D.D. Bhakkad, Redefining Management Practices and Marketing in Modern Age Dhule, India, Atharva Publications, pp. 152-154 Heine, J & Viswanathanm, R 2011, The Other BRIC in Latin America: India, Americas Quarterly HSBC Business 2012, Doing business in India, HSBC Business KPMG 2014, Ease of doing business in India, KPMG Narayan, S.S 2015, Globalization and Television: A Study of the Indian Experience, 1990-2010, Oxford University Press PricewaterhouseCoopers 2011, The World in 2050: The Accelerating Shift of Global Economic Power: Challenges and Opportunities, PricewaterhouseCoopers, viewed 4th October 2015 https://www.pwc.com/gx/en/psrc/pdf/world_in_2050_jan2011.pdf Rkca, E 2013, Doing Business in India, Tulsiani Chamber Samovar, L.A., Porter, R.E., & McDaniel, E.R. (2010). Nonverbal communication: the messages of action, space, time, and silence. In Samovar, L.A., Porter, R.E. and McDaniel, E.R. (Eds) Communication between cultures. Cengage Learning: Stamford. 243–284. Shira, D 2012, Doing Business in India, Springer Berlin Heidelberg, Berlin The World Factbook 2015, India, viewed 4th October 2015 https://www.cia.gov/library/publications/the-world-factbook/geos/in.html 11.0 Appendix Figure 1: Population distribution and growth Source: (Clémentin-Ojha 2014) Figure 2: Economy in Summary Source: The World Factbook 2015 Figure 3: Economic change from agriculture to service sector Source: (Rkca 2013) Figure 4: Trend of Foreign direct investment in India Source: (HSBC Business 2012) Figure 5: Financial market of India Source: (HSBC Business 2012) Read More