International Business

ICMIND INSTITUTE OF MANAGEMENT - IIMSUBJECT: INTERNATIONAL BUSINESS – MARKS: 100

Note: Attend any Four Case studies. Each case carry equal Marks.

Case I: SEVENTH HEAVEN

If there is one thing William H. Pickney, Managing Director and CEO, Amway India has mastered during

his seven year stay in India, it’s the art of breaking the coconut in one go. He has had enough practice

at the opening of every new branch office, and during the annual Diwali puja in office, which is an

Indian followed religiously at Amway.

From wearing a kurta pyjama to eating local food, Pickney has taken to India and things Indian. Even

his office has shades of Indian influence, including a bronze Ganesh statue. “My wife and I had always

talked about an adventure, and to us, India was the ultimate adventure, “says Pickney.

The Pickney affair with India started in late 1997, when Amway sent them for a typical look-see, to

decide whether they could contemplate living here for some two-odd years. They spent a week in Delhi

just ‘getting a feel for living in the capital city’.

“Before I came here, I had heard a lot of stories, and none of them were good.” What didn’t help

matters was the number of vaccinations he had to take before coming to India; “I had never had as

many shorts I my life before,” says the only expat on the rols of the Rs. 600-crore Indian operations of

Amway.

Cleanliness and health were two issues the Pickneys were concerned about. But, to their immense

relief, it turned out be far better. “We have not taken any malaria pills in the last five years.”

People were the first thing Pickney noticed on his arrival in India. “In Sydney, you don’t find people on

the roads just outside the city. Here, they are everywhere.” What’s impressed him most about Indian is

the level of education, dedication and commitment, which he says is ‘the best and the highest in the

world’.

Professionally, the HR aspect of working in India has been most interesting, ‘a learning curve’ for him.

“Coming out of the West, one used to giving direct feedback. But in India you have to be very careful

about that. Constructive criticism has to be applied very carefully.”

Another interesting observation he made was regarding performance appraisal. “People here equate

hard work with high performance. Just because you spent as many hours, it does not make you a high

achiever.”

Pickney himself works almost every Sunday, if he is in town, and dislikes taking work home to his lovely

house in the plush Sainik Farms locality in the outskirts of Delhi. While both husband and wife tend to

stay in more, dining out with friends is one entertainment options available in India. He has got more

Indian friends than expats, mostly people he met through business, like Kanwar Bhutani of Tupperware.

Both, however, try to find time to play golf at the ITC Golf Course in Gurgaon. It’s a game Mrs. Pickney

took up in India, since she found free time on hr hands for the first time in her life. A certified chartered

www.icmind.com | [email protected] | of 17

mailto:[email protected]

http://www.icmind.com/


accountant, Mrs. Pickney used to run her own business in Australia. Some of that time has been used to

learn to cook typical Indian fare, butter chicken, also palak Rogan josh and dal makhani.

It’s no wonder then that half their meals are Indian. They’ve adjusted to the spice factor in Indian food.

What was hot when they first came is nothing compared to hot today. “When was hot when they first

came is nothing compared to hot today. “When we travel abroad, we really miss the spice.”

After all this in India, they still find it striking that irrespective of which part of the country they are in,

‘there’s a positive spirit about people of India.’ “People have hope, optimism, and are generally happy.”

The respect Indians have for their culture and beliefs is another factor that the Pickneys appreciate.

“Family ties are much stronger here, as is respect for elders and their wisdom. For instance, girls in our

office who talk and dress in a Western way, have no problems accepting arranged marriages,” says

Pickney, whose daughter is getting married in Australia in November this year. Papa Pickney is planning

to throw an Indian reception after the Autralian wedding, including traditional attire for the bride and

the groom.

“Yet another occasion to break a coconut, Mr. Pickney?” we wonder.

Questions:

1. How could William H. Pickney acculturate himself in India?

2. What lessons can Pickney convey to similar other expatriates?





CASE II: A GLOBAL PLAYER?

This is one game that India has permanently lost to its arch-rival Pakistan - manufacturing and

exporting sports goods. Historically, when India and Pakistan were one before 1947, Sialkot, now in

Pakistan, used to be the world's largest production centre for badminton, hockey, football, volleyball,

basketball, and cricket equipment. After the creation of Pakistan, Jalandhar became the second centre

after Hindus in the trade migrated to India. Soon Jalandhar overtook Sialkot and till the early 1980s it

remained so. However when the face of the trade began to change in the 1980s and import of quality

leather and manufacturing equipment became a necessity for quality production, Pakistan wrested the

initiative as India clung it its policies of discouraging imports through high duties and restrictions. As it

was, the availability of labor and skills was a common factor in both Sialkot and Jalandhar, but with

Sialkot having the advantage of easier entry, most of the world's top sports manufactures and

procedures developed an association with local industry in Sialkot that continues even today. Ten years

later, in the early 1990s, when Manmohan Singh liberalised the norms for importing equipment and raw

material required for producing sports goods, it was too late as majority of the global majors had

already shifted base to Sialkot.

In 1961 the late Narinder Mayor started the first large scale sports goods manufacturing unit, Mayor &

Company, thereby laying the foundation of an organized industry. Even today, more than 70 percent of

the industry functions in an unorganized manner. Starting with soccer balls, Mayor expanded to

produce inflatable balls like volleyballs, basketballs, and rugby balls. Today his two sons Rajan & Rajesh

have built it up into five companies engaged in a wide array of businesses, though sports goods remain

the group's core business. While the parent trading company, Mayor & Company, remains the leading

revenue-earner to the tune of Rs. 55 crore annually out of a total group turnover of Rs. 85 crore-plus,

Mayor's second venture, the Indo-Australian Mayor International Limited, is spinning another Rs. 15

crore. Mayor International is a 100 per cent export-oriented unit (EOU) exclusively manufacturing and

exporting golf and tennis balls. The product portfolio of the company comprises the following:

Inflatable Balls

Soccer balls and footballs (Professional, Indoor, Match and Training, leisure toy)

Volley balls, rugby balls (Volley balls and Beach Volley Balls)

Australian rugby, hand balls (English League, Union and touch) (Australian rules, Australian Rugby

League balls with laces)

Boxing Equipment

Boxing and punching balls (Boxing and Punching Balls, Head Gear, Gloves, Punching Mitts and Kits

Punching Bags & Bag Sets)

Gloves

Goal keeper's gloves (Football / Soccer)

Boxing gloves

Cricket Equipment

Worldwide distributor for Spading Cricket Bats, Balls and Protective equipment.





HOCKEY EQUIPMENT

Worldwide distributor for Spading Hokey Sticks, Balls & Protective equipment

Based in Delhi, Rajan Mayor, 41 is the CMD of the group, which also comprises an IT division working on

B2B and B2C solutions; Voyaguer World Travels in the tourism sector; a houseware exports division

specializing in stainless steel kitchenware, ceramics, and textiles; and a high school. Younger brother

Rajesh, 34, is the executive director and looks after all the divisions operating in Jalandhar. Technical

director Katz Nowaskowski divides his time equally between India and Australia, where he looks after

the group’s interests. “While inflatable balls are our prime competence in our core business, we are

presently focusing on golf balls, for which we are the sole producers in South Asia. Out of a total Rs.

300 crore of sports goods business generated in domestic market, most of which is supplied by the

unorganized players, golf balls constitute a miniscule amount and therefore we came up with a 100 per

cent EOU for producing golf balls. Later the same facility was utilized with little moderation for tennis

balls too,” says Nowaskowaski.

Clarifying that the sports good industry in India only includes playing equipment and not apparels or

shoes, D K Mittal, chairman of the Sports Goods Export Promotion Council and joint secretary in the

Ministry of Commerce, has certified Mayor group as the number one exporter since 1993 till date,

barring 1996. However, SGEPC secretary Tarun Dewan points out that being the number one exporter

does not mean that Mayor is the number one brand being exported. “Actually we have tie ups Dunlop,

Arnold Palmer, and Fila for manufacturing golf balls. For footballs and volleyballs we have association

with Adidas, Mitre, Puma, Umbro, and Dunlop. We manufacture soccer World Cup and European Cup

replicas for Adidas, which is a huge market. Only 400 balls used for actual play in the World Cup are

manufactured in Europe & that too only for sentimental reason, otherwise we are capable of delivering

products of the same, if not better quality. Now since we manufacture balls for them, we cannot

antimonies them by producing balls of similar quality with our own brand name. Secondly, I agree that

competing with such big quaint in the world market in terms of branding is a task that is well beyond

our reach at the moment. However, we are trying to brand ourselves in the domestic market and that is

one of the prime focus in the coming year,” says Rajan.

Coca-Cola, Unilever, McDonald’s, American Airlines, Disney club, and other such big brands come up

with huge orders at tines for golf balls with their logos for promotional schemes. However, there is no

mention of the producing country since these companies do not want to show that balls they deliver in

the US are being produced in Asia, “Not only is our quality good enough; labour in India is cheap

enough to churn out a much less expensive product in the end. Yet, the main threat to our industry

comes from countries like Taiwan and China, who have already cornered a chunk of world markets in

tennis, badminton, and squash rackets. This is primarily because of two reasons – slow response to our

needs in tune with the market requirements from the government and lack of infrastructure. And most

importantly, tags ‘Made in China’ or ‘Made in Taiwan’ are more acceptable in the West than ‘Made in

India’ or ‘Made in Pakistan’. One of the mottos of the Mayor group has been to make ‘Made in India’ an

acceptable label in the West. For that we stress quality, timely delivery, and competent rates. Yet, a lot

depends on perception value, which in our case is sadly on the negative side, much owing to our

government’s stance over the years. Things might be improving, but the pace is very slow and as our





economy drifts towards a free market scenario supinely, it might just prove to be too little too late in

the end,” says Rajesh.

Today, Mayor group is sitting pretty as its competitors, Soccer International Sakay Trades, Savi, Wasan,

Cosco, Nivia and Spartan are only trying to catch up in the inflatables category. With 1.2 million dozen

golf balls, Mayor is way ahead of its competitors. The company is planning to enhance its

manufacturing capacity to 1.5 million dozen golf next fiscal. With approval from the world’s two top golf

associations – the US PGA and RNA of Scotland, demand for its product is not a problem, the company’s

senior marketing officials point out. With the markets in Mayor’s current export destinations – Europe,

North America, Australia, and Nw Zealand – all set to expand in the coming years after the present

slump, Mayor wants to expand its sports goods business that caters to 60 per cent of its overall

exports. Though 40 per cent of exports come from house ware manufactured in Delhi and Mumbai, with

export centres in the same countries for its sports goods, just about maintaining this business at its

present state, and concerning entirely on sports goods is what the mayors are intent on.

With nearly 2000 skilled workforce; quality certification from ISO 9001:2000 and ISO 14001: 2004; and

having spread to more than 40 countries, Mayor and Company is obviously sitting pretty.

Questions:

1. What routes of globalization has the Mayor group chosen to go global? What other routes could

it have taken?

2. What impediments are coming in the Mayor group’s way becoming a major and active player in

international business?

3. Why is ‘Made in India’ not liked in foreign markets? What can be done to erase the perception?





CASE III: ARROW AND THE APPAREL INDUSTRY

Ten years ago, Arvind Clothing Ltd., a subsidery of Arvind Brands Ltd., a member of the Ahmedabad

based Lalbhai Group, signed up with the 150-year old Arrow Company, a division of Cutlet Peabody &

Co. Inc., US, for licensed manufacture of Arrow shirts in India. What this brought to India was not just

another premium dress shirt brand but new manufacturing philosophy to its garment industry which

combined high productivity, stringent in-line quality control, and a conducive factory ambience.

Arrow’s first plant, with a 55,000 sq. ft. area and capacity to make 3,000 to 4,000 shirts a day, was

established at Bangalore in 1993 with an investment of Rs. 18 crore. The conditions inside – with good

lighting on the workbenches, high ceilings, ample elbow room for each worker, and plenty of

ventilation, were a decided contrast to the poky, crowded, and confined sweatshops characterizing the

usual Indian apparel factory in those days. It employed a computer system for translating the designed

shirt’s dimensions to automatically mark the master pattern for initial cutting of the fabric layers. This

was installed, not to save labour but to ensure cutting accuracy and low wastage of cloth.

The over two-dozen quality checkpoints during the conversion of fabric to finished shirt was unique to

the industry. It is among the very few plants in the world that makes shirts with 2 ply 140s and 3 ply

100s cotton fabrics using 16 to 18 stitches per inch. In March 2003, the Bangalore plant could produce

stain-repellant shirts based on nanotechnology.

The reputation of this plant has spread far and wide and now it is loaded mostly with export orders

from renowed global brands such as GAR, Next, Espiri, and the like. Recently the plant was identified by

Tommy Hilfiger to make its brand of shirts for the Indian market. As a result, Arvind Brands has had to

take over four other factories in Bangalore on wet lease to make the Arrow brand of garments for the

domestic market.

In fact, the demand pressure from global brands which want to out outscore from Arvind Brands, is so

great that the company has had to set up another large for export jobs on the outskirts of Bangalore.

The new unit of 75,000 sq. ft. has cost Rs. 16 crore and can turn out 8,000 to 9,000 shirts per day. The

technical collaborates are the renowned C&F Italia of Italy.

Among the cutting edge technologies deployed here are a Gerber make CNC fabric cutting machine,

automatic collar and cuff stitching machines, pneumatic holding for tasks like shoulder joining, threat

trimming and bottom hemming, a special machine to attach and edge stitch the back yoke, foam

finishers which use air and steam to remove creases in the finished garment, and many others. The

stitching machines in this plant can deliver up to 25 stitches per inch. A continuous monitoring of the

production process in the entire factory is done through a computerized apparel production

management system, which is hooked to every machine. Because of the use of such technology, this

plant will need only 800 persons for a capacity which is three that of the first plant which employs 580

persons.





Exports of garments made for global brands fetched Arvind Brands over Rs. 60 crore in 2002, and this

can double in the next few years, when the new factory goes on full stream. In fact, with the lifting of

the country-wise quota regime in 2005, there will be a surge in demand for high quality garments from

India and Arvind is already considering setting up two more such high tech export-oriented factories.

It is not just in the area of manufacture but also retailing that the arrow brand brought a wind of

change on the Indian scene. Prior to its coming, the usual Indian shirt shop used to be a clutter of racks

with little by way of display. What Arvind Brands did was to set up exclusive showrooms for Arrow shirts

in which the functional was combined with the aesthetic. Stuffed racks and clutter were eschewed. The

products were displayed in such a manner that the customer could spot their qualities from a distance.

Of course, today this has become standard practice with many other brands in the country, but Arrow

showed the way. Arrow today has the largest network of 64 exclusive outlets across India. It is also

present in 30 retail chains. It branched into multi-brand outlets in 2001, and is present in over 200

select outlets.

From just formal dress shirts in the beginning, the product range of Arvind Brands has expanded in the

last ten years to include casual shirts, T-shirts, and trousers. In the pipeline are light jackets and jeans

engineered for the middle age paunch. Arrow also tied up with the renowed Italian designer, Renato

Grande, who has worked with names like Versace and Marlboro, to design its Spring / Summer

Collection 2003. The company has also announced its intention to license the Arrow brand for other

lifestyle accessories like footwear, watches, undergarments, fragrances, and leather goods. According

to Darshan Mehta, President, Arvind Brands Ltd., the current turnover at retail price of the Arrow brand

in India is about Rs. 85 crore. He expects the turnover to cross Rs. 100 crore in the next few years, of

which about 15 per cent will be from the licensed non-clothing products.

In 2005, Arvind Brands launched a major retail initiative fir all its brands. Arvind Brands licensed brands

(Arrow, Lee and Wrangler) had grown at a healthy 35 per cent rate in 2004 and the company planned

to sustain the growth by increasing their retail presence. Arvind Brands also widened the geographical

presence of its home-grown brands, such as Newport and Ruf-n-Tuf, targeting small towns across India.

The company planned to increase the number of outlets where its domestic brands would be available,

and draw in new customers for readymades. To improve its presence in the high – end market, the firm

started negotiating with an international brand and is likely to launch the brand.

The company has plans to expand its retail presence of Newport Jeans, from 1200 outlets across 480

towns to 3000 outlets covering 800 towns.

For a company ranked as one of the world’s largest manufacturers of denim cloth and owners of world

famous brands, the future looks bright certain for Arvind Brands Ltd.





Company Profile

Name of the Company : Arvind Mills

Year of Establishments : 1931

Promoters : Three brothers – Katurbhai, Narottam Bhai and

Chimnabhai

Divisions : Arvind Mills was spilt in 1993 into three units –

textiles, telecom and garments. Arvind Brands Ltd.

(textile unit) is 100 per cent subsidiary of Arvind

Mills.

Growth Strategy : Arvind Mills has grown through buying – up of sick

units, going global and acquisition of Germanand

US brand names.

Questions:

1. Why did Arvind Mills choose globalization as major route to achieve growth when domestic

market was huge?

2. Hoe does lifting of Country-wise quota regime’ help Arvind Mills?

3. What lessons can other Indain business learn from the experience of Arvind Mills?





CASE IV: AT THE RECEIVING END…!

Spread over 121 countries with 30,000 restaurants, and serving 46 million customers each day with the

help of more than 400,000 employees, the reach of McDonald’s is amazing. It all started in 1948 when

two brothers, Richard and Maurice ‘Mac’ McDonald, built several hamburger stands, with golden arches

in southern California. One day a traveling salesman, Ray Kroc, came to sell milkshake mixers. The

popularity of their $O. 15 hamburgers impressed him, so he bought the world franchise rights from

them and spread the golden arches around the globe.

McDonald’s depends on its overseas restaurants for revenue. In fact, 60 percent of its revenues are

generated outside of the United States. The key to the company’s success is its ability to standardize

the formula of quality, service, cleanliness and value, and apply it everywhere.

The company, well known for its golden arches, is not the world’s largest company. Its system wide

sales are only about one-fifth of Exxon Mobil or Wal-Mart stores. However, it owns one of the world’s

best known brands, and the golden arches are familiar to more people than the Christian cross. This

prominence, and its conquest of global markets, makes the company a focal point for inquiry and

criticism.

McDonald is a frequent target of criticism by anti-globalization protesters. In France, a pipe-smoking

sheep farmer named Jose Bove shot to fame by leading a campaign against the fast food chain.

McDonald’s is a symbol of American trade hegemony and economic globalization. Jose Bove organized

fellow sheep farmers in France, and the group led by him drove tractors to the construction site of a

new McDonald’s restaurants and ransacked it. Bove was jailed for 20 days, and almost overnight an

international anti-globalisation star was borne. Bove, who resembles the irrelevant French comic book

hero Asterix, traveled to Seattle in 1999, as part of the French delegation to lead the protest against

commercialization of food crops promoted by the WTO. Food, according to him, is too vital a part of life

to be trusted to the vagaries of the world trade. In Seattle, he led a demonstration in which some ski-

masked protestors transhed at McDonald’s/ As Bove explained, his movement was for small farmers

against industrial farming, brought about by globalization. For them, McDonald’s was a symbol of

globalization, implying the standardization of food through industrial farming. If this was allowed to go

on, he said, there would no longer be need for farmers. “For us”, he declared, “McDonald’s is a symbol

of what WTO and the big companies want to do with the world”. Ironically, for all of Bove’s fulminations

against McDonald’s, the fast food chain counts its French operations among its most profitable in 121

countries. As employer of about 35,000 workers, in 2006, McDonald’s was also one of France’s biggest

foreign employers.

Bove’s and his followers are not the only critics of McDonald’s. Leftists, anarchists, nationalists,

farmers, labor unions, environmentalists, consumer advocates, protectors of animal rights, religious

orders and intellectuals are equally critical of the fast food chain. For these and others, McDonald’s

represents an evil America. Within hours after US bombers began to pound Afghanistan in 2001, angry

Pakistanis damaged McDonald’s restaurants in Islamabad and an Indonesian mob burned an American

flag.





McDonald entered India in the late 1990s. On its entry, the company encountered a unique situation.

Majority of the Indians did not eat beef but the company’s preparations contained cow’s meat nor could

the company use pork as Muslims were against eating it. This left chicken and mutton. McDonald’s

came out with ‘Maharaja Mac’, which is made from mutton and ‘McAloo Tikki Burger’ with chicken

potato as the main input. Food items were segregated into vegetarian and non-vegetarian categories.

Though it worked for sometimes, this arrangement did not last long. In 2001, three Indian

businessmen settled in Seattle sued McDonald’s for fraudulently concealing the existence of beef in its

French fries. The company admitted its guilt of mixing miniscule quantity of beef extract in the oil. The

company settled the suit for $10 million and tendered an apology too. Further, the company pledged

to label the ingredients of its food items, and to find a substitute for the beef extract used in its oil.

McDonald’s succeeded in spreading American culture in the East Asian countries. In Hong Kong and

Taiwan, the company’s clean restrooms and kitchens set a new standard that elevated expectations

throughout those countries. In Hong Kong, children’s birthdays had traditionally gone unrecognized,

but McDonald’s introduced the practice of birthday parties in its restaurants, and now such parties have

become popular among the public. A journalist set forth a ‘Golden Arches Theory of Conflict

Prevention’ based on the notion that countries with McDonald’s restaurants do not go to war with each

other. A British magazine, The Economist, paints an yearly ‘Big Mac Index’ that uses the price of a Big

Mac in different foreign currencies to access exchange rate distortions.

Questions:

1. What lessons can other MNCs learn from the experience of McDonald’s?

2. Aware of the food habits of Indians, why did McDonald’s err in mixing beef extract in the oil used for

fries?

3. How far has McDonald’s succeeded in strategizing and meeting local cultures and needs?





CASE V: BPO-BANE OR BOON?

Several MNCs are increasingly unbundling or vertical disintegrating their activities. Put in simple

language, they have begun outsourcing (also called business process outsourcing) activities formerly

performed in-house and concentrating their energies on a few functions. Outsourcing involves

withdrawing from certain stages/activities and relaying on outside vendors to supply the needed

products, support services, or functional activities.

Take Infosys, its 250 engineers develop IT applications for BO/FA (Bank of America). Elsewhere, Infosys

staffers process home loans for green point mortgage of Novato, California. At Wipro, five radiologists

interpret 30 CT scans a day for Massachusetts General Hospital.

2500 college educated men and women are buzzing at midnight at Wipro Spectramind at Delhi. They

are busy processing claims for a major US insurance company and providing help-desk support for a big

US Internet service provider – all at a cost upto 60 percent lower than in the US. Seven Wipro

Spectramind staff with Ph.Ds in molecular biology sift through scientific research for western

pharmaceutical companies.

Another activist in BPO is Evalueserve, headquartered in Bermuda and having main operations near

Delhi. It also has a US subsidiary based in New York and a marketing office in Australia to cover the

European market. As Alok Aggarwal (co-founder and chairman) says, his company supplies a range of

value – added services to clients that include a dozen Fortune 500 companies and seven global

consulting firms, besides market research and venture capital firms. Much of its work involves dealing

with CEOs, CFOs, CTOs, CLOs and other so-called C-level executives.

Evalueserve provides services like patent writing, evaluation and assessment of their

commercialization potential for law firms and entrepreneurs. Its market research services are aimed at

top-rung financial service firms, to which it provides analysis of investment opportunities and business

plans. Another major offering is multilingual services. Evalueserve trains and qualifies employees to

communicate in Chinese, Spanish, German, Japanese and Italian, among other languages. That skill set

has opened market opportunities in Europe and elsewhere, especially with global corporations.

ICICI Infotech Services in Edison, New Jersey, is another BPO services provider that is offering

marketing software products and diversifying into markets outside the US. The firm has been promoted

by $2-billion ICICI Bank, a large financial institution in Mumbai that is listed on the New York Stock

Exchange.

In its first year after setting up shop in March 1999, ICICI Infotech spent $33 million acquiring two

information technology services firms in New Jersy – Object Experts and lvory Consulting – and

Command Systems in Connecticut. These acquisitions were to help ICICI Infotech hit the ground in the

US with a ready book of contracts. But it soon found US companies increasingly outsourcing their

requirements to offshore locations, instead of hiring foreign employees to work onsite at their offices.

The company found other native modes for growth. It has started marketing its products in banking,





insurance and enterprise source planning among others. It has ear------- $10 million for its next US

market offensive, which would go towards R & D and back-end infrastructure support, and creating new

versions of its products to comply with US market requirements. It also has a joint venture – Semantik

Solutions GmbH in Berlin, Germany with the Fraunhofer Institute for Software and Systems Engineering,

which is based in Berlin, Germany with the Fraunhofer Institute for Software and Systems Engineering,

which is based in Berlin and Dortmund, Germany, Fraunhofer is a leading institute in applied research

and development with 200 experts in software engineering and evolutionary information.

A relatively late entrant to the US market, ICICI Infotech started out with plain vanilla IT services,

including operating call centers. As the market for traditional IT services started weakening around mid-

2000, ICICI Infotech repositioned itself as a “Solutions” firm offering both products and services. Today,

it offers bundled packages of products and services in corporate and retail banking and insurance,

among other areas. The new offerings include data center and disaster recovery management and

value chain management services.

ICICI Infotech’s expansion into new overseas markets has paid off. Its $50 million revenue for its latest

financial year ending March 2003 has the US operations generating some $15 million, while the Middle

East and Far East markets brought in another $9 million. It now boasts more than 700 customers in 30

countries, including Dow Jones, Glaxo – Smithkline, Panasonic and American Insurance Group.

The outsourcing industry is indeed growing from strength. Though technical support and financial

services have dominated India’s outsourcing industry, newer fields are emerging which are expected to

boost the industry many times over.

Outsourcing of human resource services or HR BPO is emerging as big opportunity for Indian BPOs with

global market in this segment estimated at $40-60 billion per annum. HR BPO comes to about 33

percent of the outsourcing revenue and India has immense potential as more than 80 percent of

Fortune 1000 companies discuss offshore BPO as a way to out costs and increase productivity.

Another potential area is ITES/BPO industry. According to a NASSCOM Survey, the global ITES/BPO

industry was valued at around $773 billion during 2002 and it is expected to grow at a compounded

annual growth rate of nine percent during the period 2002-06. NASSCOM lists the major indicators of

the high growth potential of ITES/BPO industry in India as the following :

During 2003-04, The ITES/BPO segment is estimated to have achieved a 54 percent growth in revenues

as compared to the previous year. ITES exports accounted for $3.6 billion in revenues, up from $2.5

billion in 2002-03. The ITES-BPO segment also proved to be a major opportunity for job seekers,

creating employment for around 74,400 additional personnel in India during 2003-04. The number of

Indians working for this sector jumped to 245,500 by March 2004. By the year 2008, the segment is

expected to employ over 1.1 million Indians, according to studies conducted by NASSCOM and

McKinsey & Co. Market research shows that in terms of job creation, the ITES-BPO industry is growing

at over 50 percent.





Legal outsourcing sector is another area India can look for Legal transcription involves conversion of

interviews with clients or witnesses by lawyers into documents which can be presented in courts. It is

no different from any other transcription work carried out in India. The bottom-line here is again cheap

service. There is a strong reason why India can prove to be a big legal outsourcing industry.

India, like the US, is a common-law jurisdiction rooted in the British legal tradition. Indian legal training

is conducted solely in English. Appellate and Supreme Court proceedings in India take place exclusively

in English. Indian legal opinions are written exclusively in English. Due to the time-zone differences,

night time in the US is daytime in India which means that clients get 24 hour attention, and some

projects can be completed overnight. Small and mid-sized business offices can solve staff problems as

the outsourced lawyers from India take on the time consuming labour intensive legal research and

writing projects. Large law firms also can solve problems of overstaffing by using the on-call lawyers.

Research firms such as Forrester Research, predict that by 2015, more than 489,000 US lawyer jobs,

nearly eight percent of the field, will shift abroad.

Many more new avenues are opening up for BPO services providers. Patent writing and evaluation

services are markets set to boom. Some 200,000 patent applications are written in the western world

annually, making for a market size of between $5 billion and $7 billion. Outsourcing patent writing

service could significantly lower the cost of each patent application, now anywhere between $12,000

and $15,000 apiece – which help expand the market.

Offshoring of equity research is another major growth area. Translation services are also becoming a

big Indian plus. India produces some 3,000 graduates in German each year, which is more than in

Switzerland.

Though going is good, the Indian BPO services providers cannot afford to be complacent, Phillippines,

Mexico and Hungary are emerging as potential offshore locations. Likely competitor is Russia, although

the absence of English speaking people there holds the country back. But the dark horse could be

South Africa and even China.

BPO is based on sound economic reasons. Outsourcing helps gain cost advantage. If an activity can be

performed better or more cheaply by an outside supplier, why not outsource it ? Many PC makers, for

example, have shifted from in-house assembly to utilizing contract assemblers to make their PCs.

CISCO outsources all productions and assembly of its routers and switching equipment to contract

manufacturers that operate 37 factories, all linked via the Internet.

Secondly, the activity (outsourced) is not crucial to the firm’s ability to gain sustainable competitive

advantage and won’t hollow out its core competence, capabilities, or technical knowhow. Outsourcing

of maintenance services, data processing, accounting, and other administrative support activities to

companies specializing in these services has become common place. Thirdly, outsourcing reduces the

company’s risk exposure to changing technology and / or changing buyer preferences.





Fourthly, BPO streamlines company operations in ways that improve organizational flexibility, cut cycle

time, speedup decision making and reduce coordination costs. Finally, outsourcing allows a company to

concentrate on its crore business and do what it does best. Are Indian companies listening? If they

listen, BPO is a boon them and not a bane.

Questions:

1. Which of the theories of International trade can help Indian services providers gain competitive

edge over their competitors?

2. Pick up some Indian services providers. With the help of Michael Porter’s diamond, analyze their

strengths and weaknesses as active players in BPO.





CASE VI: THE SAGA CONTINUES:

It was the talk of the town in Bangalore during the late 1970s and early 1980s. The plant was coming

up on the Bangalore – Yelahanka Road, about 20 km from the city. Everything the people over three did

became a folklore. The buildings were huge with wonderful architecture, beautifully built with wide

roads and huge spaces. Should a situation demand, the entire plant could be dismantled, bundled up,

loaded into trucks and ferried to other places. Lighting inside the building had to be seen to be

believed. Interiors had to be seen to be believed. Washrooms, stores, reception, canteen, healthcare,

had to be seen to be believed. It had never happened elsewhere. It was amazing, the boss was not

addressed as Sir, he was called Mr. ---- and so ! The yellow painted buses on the city roads made a

delightful sight. Legends were fold about the two gentlemen who founded the company.

An interesting story is told about how one of the surviving founders (Larsen who lived till 2003) visited

the Bangalore plant once a year, he stayed in a hotel on his own, hired his own cab, went to the plant

and greeted every employee, from the top brass down to the last person in the hierarchy. Story is also

told about how, on one such visit Larsen went to the reception and asked for permission to enter the

plant. Not knowing who he was, the young lass in reception room made him wait for half-an-hour. By

luck, someone recognized him.

A budding author captured all these and many more in his first book, which became a big hit with all

the teachers and students in different colleges buying and reading it.

If cannot be anything other than L & T, the huge engineering and construction multi-plant organization,

founded in 1938 by two Danish engineers, Henning Holck – Larsen and Soren Kristin Toubro.

Henning Holck – Larsen and Soren Kristin Toubro, school – mates in Denmark, would not have dreamt,

as they were learning about India in history classes that they would, one day, create history in that

land. In 1938, the two friends decided to forgo the comforts of working in Europe and started their own

operation in India. All they had was a dream. And the courage to dare. Their first office in Mumbai

(Bombay) was so small that only one of the partners could use the office at a time! Today, L & T is one

of India’s biggest and best known industrial organizations with reputation for technological excellence,

high quality of products and services and strong customer orientation.

As on today, L & T is a 62 business conglomerate with turnover of Rs. 18,363 crore (2006-07), with the

script commanding Rs. 2400 in the bourses.

No, L & T is not sitting pretty. It want to hit Rs. 30,000 crore turnover mark by 2010 and is busy

restructuring, sniffing new pastures, grooming new talent and projecting the new company credo – “It’s

all about Imagineering.” With the sole idea of creating several MNCs within, with footprints across

nations, L & T is shedding the old economy and embracing the emergent opportunities and challenges.

Stagnant Revenues and Low Margins Not everything went the L & T way.





In the late nineties, the macro environment was ----- inspiring with stagnant revenues and low margins,

and L & T’s core strength, its engineers, were being constantly weaned away by the fast-growing

software sector. So, the general comment around the bourses was about the credibility of the

company, ‘L & T is a, good company but its stock price, for some reason or the other, is fixed at the Rs.

140-210 band. So the company had to change by keeping its core intact. As s senior executive

remarks. “L & T was perceived to be un –sexy and we had to create a new buzz around the campuses.”

The metamorphosis must echo through a whimper, not a bang. Even before the company divested its

cement business in 2003, which accounted for 25% of its total sales, there were years of incremental

and low visibility organizational moves towards a new L & T.

At a 52-week high of Rs. 2400, the L & T scrip today looks dapper, a far cry from the nineties when the

stock price was in a state of flux. Much of the change started as a ripple way back in 1999 when Naik

took over as the CEO. He visited employees at all levels across the organization and asked them what it

took to transform the company. The insights were mapped and implemented. “None of our employees

thought that we build shareholder value. They thought we build monuments,” the chairman reminisces.

The focus on people became stronger and formed the basis of restructuring. It became the first old

economy company to provide stock options to its employees.

When Naik came to the helm, he set upon himself a 90 – day transformational agenda. Portfolios were

reviewed and a vision clearly chalked out. He drew up a simple, brief, “L & T has to be a multinational

company and it has to deliver shareholder value at any cost. At the end of 90 days, between July 22

and July 24, 1999, the company launched Project Blue Chip, which essentially fast – tracked projects.

The moot point was to complete all projects by February of the new millennium. Strategy formation

teams were formed, portfolios reviewed and structures were optimized. Young leadership was brought

to the fore and the business streamlining process kicked in.

Hiving off from 1999-2001, L & T went about debottle- necking its cement plants. They were

modernized and capitalized were raised from 12 million tones to 16 million tones annually, with

minimum costs. The mantra really was to grow the business and then divest it as cement fell in the

non-core category.

So, in September 2003, L & T sold its cement business to the Aditya Birla Group, which resulted in the

company’s Economic Value Add…





SUMMARY

Technological environment wields considerable influence on international business. Technology is

systematic application of knowledge to practical tasks.

Three features of technology are conspicuous, change, widespread effects and self-reinforcement.

Technology may be structured into different categories, for example, state of art, proprietary,

supporting, and the like.

Technology management involves its awareness, acquisition, adaption, advancement and

abandonment phases.

Impact of technology can be studied under three heads - impact on society, impact on economy and

plant level implications. Major aspect of plant level implications relates to the management of

technology transfers.

QUESTIONS:

1. What is technology? How does it differ from science?

2. Describe the different phases of technology management?

3. Bring out the impact of technology on: (a) Society, (b) Economy, and

(c) A plant.

4. What is technology transfer? What are the directions of such transfers?

5. Bring out the stages in technology transfer.

6. Explain the issues involved in international technology transfers.




International Business

Documents

Transcript of International Business