© Evalueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful...

22
ueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful Business in India - A Perspective

Transcript of © Evalueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful...

Page 1: © Evalueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful Business in India - A Perspective.

© Evalueserve, 2008. All Rights Reserved - Privileged and Confidential

Conducting Successful Business in India- A Perspective

Page 2: © Evalueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful Business in India - A Perspective.

© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 2

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

Page 3: © Evalueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful Business in India - A Perspective.

© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 3

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

Page 4: © Evalueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful Business in India - A Perspective.

© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 4

Estimated to become the fifth largest consumer market by 2025 (MGI)

Most preferable destination for Services sector (AT Kearney, 2007)

Top destination in the AT Kearney Global Retail Development Index (2007)

Third largest economy–GDP in terms of PPP (2007)

Stable 8–9 percent annual GDP growth rate in the past 2–3 years

Ranks first in the availability of qualified engineers in the labor market (IMD, 2006)

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

India is the second-fastest growing

economy in the world.

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 5

4,2223,134 2,634

3,7555,546

15,730

11,141

0

4,500

9,000

13,500

18,000

2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08(Apr–Nov)

US

D M

illion 185 percent

Increase

FDI inflows increased by 185 percent from 2005–06 to 2006–07.

Electronics, manufacturing and telecom were the sectors that witnessed significant FDI inflow.

Total PE and VC investments increased from USD 1.1 billion in 2004 to USD 14 billion in 2007, with maximum PE and VC investments going into banking and financial services, telecom and manufacturing sectors.

The total value of M&A deals increased by more than 151 percent from 2006 to 2007.

High growth in FDI inflows in the past 2–3 years

FDI Inflow – India (2001–07)

Private Equity and Venture Capital Investments in India in (USD million) - Amount

Invested and Number of Deals

1,0502,200

7,500

14,234

71

146

299

387

0

70

140

210

280

350

420

02,0004,0006,0008,000

10,00012,00014,00016,000

2004 2005 2006 2007

No

. of D

eals

PE

& V

C In

vest

men

ts (i

n

US

D m

n)

Value o f Deals Number o f Deals

Page 6: © Evalueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful Business in India - A Perspective.

© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 6

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

Page 7: © Evalueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful Business in India - A Perspective.

© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 7

What makes India a Fast Emerging Business Destination?

Special incentives provided by the government to attract investmentsSpecial incentives provided by the government to attract investments

Less time and few procedures required to start a businessLess time and few procedures required to start a business

Growing potential of Tier II and Tier III citiesGrowing potential of Tier II and Tier III cities

Easy availability of skilled talent poolEasy availability of skilled talent pool

Emerging middle classEmerging middle class

Increasing disposable incomeIncreasing disposable income

Number of emerging sectors witnessing growthNumber of emerging sectors witnessing growth

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 8

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

Liberal FDI norms: As much as 98 percent of the Indian economy is open to FDI through the automatic route.

Special Economic Zones (SEZs), Electronic Hardware Technology Parks (EHTPs) and Software Technology Parks (STPs): They offer incentives, such as tax exemptions, duty-free imports and low-cost power supply.

Compliance with Trade-Related Aspects of Intellectual Property Rights (TRIPS) (since 2005) : This has led to an increase in the number of R&D centres set up by MNCs in the country.

Reduction of custom duty: In the Budget for 2008–09, the Government has reduced the custom duty on projects imports from 7.5 percent to 5 percent.

Industry associations promoting India: Industry associations such as, CII, ASSOCHAM, and NASSCOM have been set up to promote India as an investment destination.

Liberal FDI norms: As much as 98 percent of the Indian economy is open to FDI through the automatic route.

Special Economic Zones (SEZs), Electronic Hardware Technology Parks (EHTPs) and Software Technology Parks (STPs): They offer incentives, such as tax exemptions, duty-free imports and low-cost power supply.

Compliance with Trade-Related Aspects of Intellectual Property Rights (TRIPS) (since 2005) : This has led to an increase in the number of R&D centres set up by MNCs in the country.

Reduction of custom duty: In the Budget for 2008–09, the Government has reduced the custom duty on projects imports from 7.5 percent to 5 percent.

Industry associations promoting India: Industry associations such as, CII, ASSOCHAM, and NASSCOM have been set up to promote India as an investment destination.

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 9

Less time and few procedures required to start a business

India’s attractiveness as compared to other emerging economies

Starting a Business–Time Required

22

28

35

35

152

0 20 40 60 80 100 120 140 160

Korea, Reb. Of

Russia

India

China

Brazil

Time (Days)

Starting a Business–No. of Procedures Required

7

11

12

13

17

0 2 4 6 8 10 12 14 16 18

Russia

India

Korea, Reb. Of

China

Brazil

Number of Procedures

The time required to start a business in India is the same as that in China and lower than that in Brazil

The time required to start a business in India is the same as that in China and lower than that in Brazil

The number of business procedures required to start a business in India are less compared to most of the emerging nations

The number of business procedures required to start a business in India are less compared to most of the emerging nations

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 10

Growing potential of Tier II and Tier III cities

Tier I—Cities such as Delhi and Mumbai—offer developed infrastructure, ease of accessibility and availability of talent pool but includes high costs

Tier II—Emerging cities, such as Pune, Hyderabad and Chennai

Tier III—Potential cities, such as Nagpur, Ahmedabad, and Chandigarh

Tier I—Cities such as Delhi and Mumbai—offer developed infrastructure, ease of accessibility and availability of talent pool but includes high costs

Tier II—Emerging cities, such as Pune, Hyderabad and Chennai

Tier III—Potential cities, such as Nagpur, Ahmedabad, and Chandigarh

Potential of the tier II and tier III cities

Advantages of tier II and tier III cities:

Availability of talent pool (presence of academic institutions)

Growing infrastructure

Cost advantage (lower labor and real estate costs)

Lower attrition rates

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 11

Easy availability of skilled talent pool

India ranks first in the availability of qualified engineers in the labour market.*

The country adds about 69,000 engineers and science graduates every year.1

India has world-class institutes, such as Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs) and Indian Institute of Sciences (IISc).

India ranks first in the availability of qualified engineers in the labour market.*

The country adds about 69,000 engineers and science graduates every year.1

India has world-class institutes, such as Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs) and Indian Institute of Sciences (IISc).

Availability of skilled talent pool and strong academic infrastructure

“ 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

0–14 35.6% 32.5% 29.7% 27.1%

15–59 58.2% 60.4% 62.5% 64.0%

60+ 6.2% 7.1% 7.8% 8.9%

India’s demographic mix is shifting towards the 15–59 years age group

India’s demographic mix is shifting towards the 15–59 years age group

*Institute for Management Development (IMD) World Competitiveness Year Book 20061Source: Nasscom

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 12

Emerging middle class – Creates opportunity for companies to tap the changing lifestyles of Indian consumers

Deprived

Aspirers

Seekers

Strivers

Globals

101.1

91.3

10.9

2.4

1.2

74.1

106

55.1

5.5

3.3

49.9

93.1

94.9

33.1

9.5

Deprived

Aspirers

Seekers

Strivers

Globals

11.4

5.4

3.1

1.6

2

3.8

14.6

15.2

3.8

6.3

2.6

13.7

30.6

20.9

21.7

Household income brackets

2005 E 2015 F 2025 F

Number of Households, (in million)

Aggregate disposable income–2000 (in INR trillion)

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

Middle Class

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 13

Increasing disposable income

The per-capita income has grown at a CAGR of 7.24 percent from INR 20,996 in 2002–03 to INR 29,786 in 2007–08.

The per capita consumption has grown at a CAGR of 5.1 percent from INR 13,352 in 2002–03 to INR 17,145 in 2007–08.

Over the next 20 years, India’s middle class is expected grow from about 5 percent of the population to more than 40 percent, creating the world’s fifth-largest consumer market.

The per-capita income has grown at a CAGR of 7.24 percent from INR 20,996 in 2002–03 to INR 29,786 in 2007–08.

The per capita consumption has grown at a CAGR of 5.1 percent from INR 13,352 in 2002–03 to INR 17,145 in 2007–08.

Over the next 20 years, India’s middle class is expected grow from about 5 percent of the population to more than 40 percent, creating the world’s fifth-largest consumer market.

Increase in per capita income and consumption

Per-Capita Income and Consumption

13,352 13,918 14,413 15,422 16,279 17,145

20,99622,413

23,89025,696

27,78429,786

0

4,500

9,000

13,500

18,000

22,500

27,000

31,500

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

Year

INR

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 14

1Gartner

Number of emerging sectors witnessing growth

Key sectors witnessing growth

The Indian IT sector witnessed 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

The Indian IT sector witnessed 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

IT

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 million in just four months in 2007).

Leading global telecom equipment manufacturers, such as Nokia, Samsung, Motorola and Sony Ericsson, are setting up their bases in the country.

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 million in just four months in 2007).

Leading global telecom equipment manufacturers, such as Nokia, Samsung, Motorola and Sony Ericsson, are setting up their bases in the country.

Telecommunications

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 million.

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 million.

Health Care

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 15

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

Page 16: © Evalueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful Business in India - A Perspective.

© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 16

Penetrating domestic markets and leveraging India presence

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 population

Increasing purchasing Power

Growing size of middle and higher consumer class

Vast population

Increasing purchasing Power

Growing size of middle and higher consumer class

Availability of skilled talent pool

Cost Savings

Knowledge/R&D hub

Availability of skilled talent pool

Cost Savings

Knowledge/R&D hub

Availability of raw materials

Presence of strong industry infrastructure

Developed technology

Cost savings

Availability of raw materials

Presence of strong industry infrastructure

Developed technology

Cost savings

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 17

Case Study – Domestic Market Opportunity

Steps taken by McDonald’s:

→ Menu customised to Indian taste – McAloo Tikki, Paneer Salsa Wrap, Chicken Maharaja Mac and Veg McCurry Pan.

→ Advertisements that appeal to Indian customers.

→ Menu priced to suit Indian pockets with burger price as low as INR 20.

Success in India:

→ Made its debut by opening two restaurants in Delhi and Mumbai in 1996.

→ Currently, the company has around 132 restaurants in India.

→ Planning to increase the number of outlets to about 220 by the end of 2008.

Steps taken by McDonald’s:

→ Menu customised to Indian taste – McAloo Tikki, Paneer Salsa Wrap, Chicken Maharaja Mac and Veg McCurry Pan.

→ Advertisements that appeal to Indian customers.

→ Menu priced to suit Indian pockets with burger price as low as INR 20.

Success in India:

→ Made its debut by opening two restaurants in Delhi and Mumbai in 1996.

→ Currently, the company has around 132 restaurants in India.

→ Planning to increase the number of outlets to about 220 by the end of 2008.

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

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 18

Case Study – Off-shoring Opportunity

IBM India, a subsidiary of IBM Inc., was set up in September 1999.

Steps taken by IBM

→ IBM expanded its BPO operations with the acquisition of Daksh, the third largest BPO outfit in India.

→ Set up operations in all the sectors of its businesses in the country.

→ Reduced the prices of specific products making them more competitive in the market.

Success in India

→ Operates almost all its businesses in India.

→ Has its second highest number of employees in India (73,000 employees as of December 2007)

IBM India, a subsidiary of IBM Inc., was set up in September 1999.

Steps taken by IBM

→ IBM expanded its BPO operations with the acquisition of Daksh, the third largest BPO outfit in India.

→ Set up operations in all the sectors of its businesses in the country.

→ Reduced the prices of specific products making them more competitive in the market.

Success in India

→ Operates almost all its businesses in India.

→ Has its second highest number of employees in India (73,000 employees as of December 2007)

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

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 19

Case Study – Sourcing Opportunity

Steps taken by Piaggio:

→ Localized 100 percent of its 3-wheeler product in India in order to compete effectively

→ Set up a predominant Indian management team for India operations

→ Setting up of R&D operations in India

Success in India:

→ Introduced, new 3- and 4- wheeler models, superior engine technology, and innovative customised solutions in India.

Leveraging India:

→ Planning to make India a global hub for 3-wheeler manufacturing and export products components to the EU

Steps taken by Piaggio:

→ Localized 100 percent of its 3-wheeler product in India in order to compete effectively

→ Set up a predominant Indian management team for India operations

→ Setting up of R&D operations in India

Success in India:

→ Introduced, new 3- and 4- wheeler models, superior engine technology, and innovative customised solutions in India.

Leveraging India:

→ Planning to make India a global hub for 3-wheeler manufacturing and export products components to the EU

Piaggio is an Italy-based company that specialises in the design and manufacture of two-wheel motor vehicles.

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 20

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

Steps taken by Cadbury:

→ Tailored products to suit Indian consumers (almonds are more preferred in India as compared to peanuts).

→ Innovative distribution strategy and advertisements that appeal to Indian consumers.

→ Products sold at lower margins as the company believes high penetration compensates for the reduced margins.

→ A predominant Indian management team for India operations.

Success in India:

→ Leads the chocolate and confectionary market in India.

Leveraging India:

→ Exports finished goods and innovative concepts to its other branches around the world.

Steps taken by Cadbury:

→ Tailored products to suit Indian consumers (almonds are more preferred in India as compared to peanuts).

→ Innovative distribution strategy and advertisements that appeal to Indian consumers.

→ Products sold at lower margins as the company believes high penetration compensates for the reduced margins.

→ A predominant Indian management team for India operations.

Success in India:

→ Leads the chocolate and confectionary market in India.

Leveraging India:

→ Exports finished goods and innovative concepts to its other branches around the world.

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

.

Page 21: © Evalueserve, 2008. All Rights Reserved - Privileged and Confidential Conducting Successful Business in India - A Perspective.

© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 21

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

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© Evalueserve, 2008. All Rights Reserved - Privileged and ConfidentialSlide 22

Challenges Faced by MNCs

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

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

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

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

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

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

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

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