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INDIA SHAKES OFF ITS SHACKLES

1) An analysis of the opportunities and threats for foreign investors in India. When entering a new market in a new country it can be important to analyse the external factors of a country. Looking at the tremendous changes India have been going through within the last ten years one experience that India is facing a new "era". India has gone from being very socialist-oriented towards market-oriented capitalism. The introduced market reforms are beginning to take off due to a politically consensus across the political spectrum. India is becoming politically at ease meaning being more open-minded towards foreign products. The bureaucracy is slowly falling apart and it is becoming more easy to import foreign products. A co-operation between Western countries and India is beginning to develop. Politicians from the Western world are offering their support in development programs and India is willing to accept it. The industrial output is rising 8% annually as well as the economic growth will reach 7% (1995). Foreign investment is exploding especially concerning the construction of new power plants, telecommunication, the auto industry, banking, and insurance. Indian émigrés are also getting interested in investing money in the country where they were born. Some of them have been very successful and have gained enough capital to start up new businesses and investments in India. Another fact that can be a valuable consideration when entering a new country is what comes under demographic. India consist of 900 million people and has a middle class of 300 million people which creates a potential market. All these people speak English fluently and this fact makes it much more easier for other English speaking people to do business with them. Although there is a lot of opportunities for businesses that wish to enter the Indian market, there are also threats that follows. Due to new developed technology and increased efficiency in almost every sector many people especially farmers and factory workers are loosing their jobs. This leads to unemployment and poverty. It can also create political instability and riots. When a lot of people lose their job it also leads to demonstrations and strikes which then can "hurt" companies. With unemployment follows the need for social well-fare and India is also using a lot of money to support farmers. This has increased the budget deficit and it is expected to grow in the following years. The infrastructure of India is also in poor condition as well as the electricity supply and telecommunications. In India there is only one telephone line per 9 people and seaports do not meet Western standards. India has also faced a high rate of inflation and the price of daily food has gone up. 2) Possible entry barriers faced by western companies. Entry barriers is often experienced when companies wish to enter a new market. When entering a country I would say there is two categories of entry barriers one can look into. The cultural differences and the legislation of the country. What India is known for is the Bureaucratic Red Tape, meaning if you don’t have the right connections you will be faced by what you might call regulatory obstructionism. When entering India it is import to have patience, have the right local partner, and aware of the cultural differences. Regarding legislation India maintains, as also mentioned in the article, a variety of tariffs and duties on imported goods and services. Some of these being border tax adjustments (countervailing duties). These taxes are sometimes extremely high and a great surprise for investors. For instance the countervailing tax on print film increased from 10 to 15 percent in the 1996/97 budget and the 1997/98 budget recommends an increase to 18 %. To mention other kinds of rates it is interesting to see that higher 1996/97 effective rates also affect chocolate and confectionery products (40 percent); raisin (130 percent); mayonnaise, corn oil, and peanut butter (50 percent); appliances (25-30 percent); and toys and sporting goods (30 percent) When examining the cultural differences you will find that India has a different time perception. It’s called polychronic and graphically one could look at it as a circle. People in polychronic countries put less emphasis on punctuality and are not particular focused on deadlines. So, when you are in a business meeting you have to be prepared for interruptions and that the person you are doing business with will have more than one meeting going at the same time. The relationship business-people have in India comes before the task and the consequent of this means that meetings will take longer. Another thing to keep in mind is that the perception of time can also vary within a country from city to city. Having the right local partner will reduce the bureaucratic red tape, but there is lots of other cultural barriers to beware of. Communication is one of them. India has more than 300 different languages, but luckily English is spoken by everybody. It the language of international business. You just have to know that there is a difference between Indian English and the English we know. Some words or terms sounds like English but they are Indian-English and that gives them a different meaning. Take for instance what sounds as "a lack of rupees" could mean "lakh of rupees..." meaning 100.000 of them. Another aspect of communication is the non-verbal communication. If a country has a particular way of greeting each other or a particular custom they perform before eating it can be essential to know this. Facial expressions are also part of communication, so finding out the importance of this - for the country you are entering - is beneficial. Furthermore it is also worthy to study the basic values of the country when you want to enter it. India is a traditional society with an agricultural history. The family structure of India is very important. Indians are collectivistic people and women have a clearly defined role. They look after the interest of the in-group. You are born into an extended family who will care for you until you die. Old people are treated with respect and authority and it is expected that young people differ from elders. Also the question about status is so to speak considered through whether you have white hair or not. Another thing is that is very different from the Western way of thinking is that you cannot climb the ladder by getting a Ph.D. or becoming a millionaire. You are born into a caste and you stay there. Besides the above, India is also a relationship-focus culture. Like in China it pays-off to know your counterpart good before doing business with him. This can be a long process because Indians are very closed to outsiders. You have to approach them in an indirect way and slowly build up and maintain a strong personal relationship, so you later on can begin to do business with them. It is also good thing to beware of the fact that if you decide to make a contract with some supplier, the contract may be subject to re-negotiation after signing. These are just some of the entry barriers investors can be faced by when enter India. There are many more and I have just chosen to mention a few of them. A conclusion to the above would be to study and learn about the country you are about to enter. The more you know the more easier you will do business. The more you can adapt the other culture the easier it is for the other person to be around you. This doesn’t mean that you should just take whatever comes along, but you should have the ability to respect and tolerate other cultures. It is not always easy and you will experience both funny and unsuitable situations when entering a new market. You just have to keep on going.
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