GO / NO GO DECISION
GO/ NO GO DECISION
Ihighly recommend that the corporation operate a manufacturingfacility in India due to favorable economic, social-cultural, andpolitical factors.
Indiahas a favorable external environment that is characterized by thecontinued moderate world inflation, stable economic growth, lowinterest rates, and increasing trade openness, as well as, financialintegration. The growing importance of trade openness has beenrecognized in the Indian economy, leading to the changes in tradepolicy regimes of the country. Trade openness in this environment isthe driving force of economic activities, thus, increasinginterdependent global network of technology, investment andproduction (Fernando, p.116).
Tariffsare major indicators that reflect greater impediments to foreigntrade in India. As observed, the trade barriers imposed in Indiaincludes both tariff and nontariff barriers. According to Hajra (63)trade barriers have been removed as Indian’s customs tariff rateshave been lowered since the initiation of economic reforms in 1991. Anumber of empirical studies suggest that a more open trade regimeaccelerates technological progress and economic growth (Dinello andShaoguang, 119). Dinello and Shaoguang add that the policy makers areusually told that open trade encourages firms to modernize theirtechniques by adopting new technologies, and reducing costs so as tocompete with foreign producers.
Indiaand various countries in Asia have been economic vibrant in the worldtoday, having achieved and maintained economic growth in the recentdecades. According to Falola and Achberger (p.73), agricultureoccupies a place of pivotal importance in India’s economy as itprovides a livelihood to about 70% of its population and contributingto about 50% of the national incomes. In most cases, the success ofthe economy and efforts of economic development are known to dependon the performance of the country’s rural sector. Therefore, thecurrent economic growth indicates that the region stands a goodchance of alleviating poverty and dealing with unemployment.
TheIndian economic environment has had remarkable changes since1991especially in the country’s policy framework. According toKumar (102), population growth in India accelerated at a high rateafter the sixties, and continues to accelerate at 2 per cent perannum. This natural rate of population growth is known to affect thelabor supply, leading to a relative bulge in working group populationof 15-59 years (Kumar 102).
Culturalfactors of any business environment should be taken intoconsideration while scanning the business environment. Some of thecommon cultural practices in Indian that should be taken into accountinclude social and religious practices, knowledge, education, ruralcommunity norms, and beliefs (Shaikh, 4). It is possible thatcommerce and international business can be affected by cultural andreligious beliefs in many ways, as religion provides foundation ofculture. For instance, some Indian religions prohibit people inengaging in non vegetarian food and leather businesses due tocultural beliefs. The impacts of these cultures affect commerce andbusiness operations religious minded and they tend to promotespiritualism more than businesses.
Culture,traditions, customs and beliefs in India affects influences theinteractions of buyers and sellers, as well as, customer preferences(Goyal, 366). In a country like India, there is a vast culturaldifference in the way business is run, since the society isconceptualized as quite traditional and conservative. However, thepast years have seen significant changes because India has continuedto experience increased use of technology, education, technology andincreased literacy. Along with the increasing urbanization, Indiahas a stable democratic government that allows media freedom, leadingto changes in Indian lifestyle.
Roy(114) points out that India is rich in labor and poor in capital.Excess labor in the country has increased poverty and unemployment,making them the foremost social problems in Indian and many Asiancountries. Since Indian economy is mainly based on agriculture, morethan 70 percent of the population is engaged in it directly andindirectly. More so, agriculture is common in most rural areas, as itis the major source of livelihood since requires both skilled andunskilled labor. Therefore, the increasing population requiresadditional job opportunities that cannot be provided by the capitalintensive industries only but labor intensive.
Dueto the wide pool of labor in the country, it is said that there is acomparative advantage in cheap labor whose wages are low (Venugopal.323). However, looking in the context of low productivity this laborcannot be exploited since it is unskilled labor. However, there havebeen claims that in India, labor is considerably cheap because of theabuse of immigrants and cases of forced labor (OECD, 213). However,the abundance of labor has made Indian labor market casualties inmost sectors, as most regular jobs are not permanent.
Politicaland economic factors
Inthe past, importation of various products in India was a contentiousissue. Although the government was in support open trade, it stronglyopposed the dairy trade and established policies that restrictedthese imports. The entry of imports was governed by tariff ratequotas and high tariff affected international trade. However, theself-sufficiency of various products was not met by growing demandand population. This situation brought concern to the policy makersand the government policies allowed commercial importation, whichincreased substantially by 1990s (Fuhrman and Schuman, 129). Today,the government views exports and imports as the vehicle for ruraldevelopment and as the best way of promoting employment. Establishinga manufacturing firm in the country requires that every business meetgovernment requirements on food safety. Policy makers haveestablished policies allow continued functioning of these markets byemphasizing on improved quality of products and food safety.
Competitionand business environment
Whenentering into these new markets, every company is likely to encounterstiff competition from the local manufacturers and existingorganizations. According to The World Bank report, 2001, the rapidgrowth of globalization, changes in incentives and reduced marketbarriers is likely to increase stiff competition between new entrantsand existing companies. It is crucial for the manufacturing firm toimprove on marketing strategies such as pricing, consumerpreferences, advertising as well as public relations.
Inconclusion, there has been a tremendous growth and development inIndia. This has increased need to expand to the international market,which is currently driven by globalization, as well as,liberalization. Although this is accompanied by both threats andopportunities, it is essential for manufacturers to establish ways inwhich they can utilize opportunities, overcome barriers and operatein this lucrative market.
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