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The context of international business has evolved over the years, and has always

reflected the climate of the time. This book addresses three major changes that
have taken place in the last decade in a series of articles compiled by the
authors. First, the landscape of the global economy changed drastically in the
last decade or so. The Asian and Latin American financial crises, the further
expansion of the European Union (EU), and the emergence of the BRIC (Brazil,
Russia, India and China) as economic powerhouses have occurred during the
this period. And most recently, the global financial and economic crisis, caused
primarily by the U.S. subprime mortgage loan crisis since late 2008, is ravaging
the integrity of the global economy with unprecedented severity.

Second, the explosive growth of information technology tools, including the


Internet and electronic commerce (e-commerce), has had a significant effect on
the way we do business internationally. On the one hand, everyone seems to
agree that business transactions will be faster and more global. As a result, the
nature of global supply chain and global trade as managed by multinational firms
has fundamentally changed. However, on the other hand, the more deeply we
have examined this issue, the more convinced we have become that certain
things will not change, or could even become more local as a result of the
globalization that the Internet and e-commerce bestow on us.

Third, it is an underlying human tendency to desire to be different when there are


economic and political forces of convergence (often referred to as globalization).
When the globalization argument (and movement) became fashionable in the
1980s and 1990s, many of us believed that globalization would make global
business easier. Doing business beyond national borders, indeed, has become
easier, but it does not necessarily mean that customers want the same products
in countries around the world. Attention to local market demands remains a
global business imperative.

Indian Refinery Industry


Energy is an important accelerator for growth of economy and at present oil
and natural gas is the main source of energy India has limited oil and natural
gas so it is dependent on Arbian and African Countries for supply of the energy
Indian industry is at present intransformation period and is growing at around
14% per annum which is not sufficient to meet the increasing requirement of
energy.

India has 18 refineries -- 17 in the public sector and one in the private, with
an installed capacity of 127.37 mmtpa. During balance period of the 10th
Plan, it is estimated that another 26.33 mmtpa capacity would be added,
raising it to 153.7 mmtpa in total. It includes HPCL Mumbai: 2.4, HPCL
Visakh: 0.83, BPCL Mumbai: 5.1, IOCL Panipat: 6.0 and Essar Oil
Jamnagar: 12.0. The information was disclosed in a recent meeting of the
Consultative Committee of the Members of Parliament for the ministry of
petroleum & natural gas.

India largely imports the sour variety. The overall basket is much cheaper
than Brent. Environmental standards in India permit higher sulphur content
in petrol and diesel.

The average price of Brent per barrel in October was $50, of Dubai crude
was $38.Approximately 72 million barrels per day. (7.33 barrels make one
tonne.) For petro products manufactured by them, oil refineries in India
are paid the ‘import parity price’, the international price plus the insurance
and freight cost plus the customs duty. Thus, higher the customs duty,
higher will be the gross refining margin.

If the customs duty is cut, say, to 10 per cent, the domestic company would
reduce its price from 15 per cent above the landed cost to 10 per cent above
the import parity price. In case it does not do so, the customer, that is the
marketing company, will import the product. India does not import petrol, but
a cut in customs duty on petrol reduces the domestic price of petrol.

Higher duties on products are imposed to encourage the growth of the


refining industry. In this case, the intention is to encourage the domestic
refining industry, by ‘‘protecting’’ it.

Today crude has a customs duty of 10 per cent, but the customs duty on
petro products is 15 per cent. The value addition in the refinery business is
around 10 per cent; the duty differential of 5 per cent means that the ERP is
very roughly 50 per cent. When the customs duty was 20 per cent, before
the recent cuts, the effective rate of protection was even higher.

Cutting duties only on crude oil will not reduce the domestic price of
petroleum products. It will only increase the profit margin of domestic
refineries.
The first step should be to eliminate rate dispersion by bringing down the duties on
petro products. When the customs duty on crude oil and petroleum products is
equal, then this anomalous profitability of Indian refineries would be removed.

Duties on oil and petro products still involves penalising Indian consumers owing to
the presence of tariffs. Hence, for the consumer, the best thing is zero customs
duties. In this case, Indian refineries would have to compete with international
refineries.

Refineries in India are already major exporters of petro products. This shows that
they already have the engineering capability to compete with the best refineries of
the world. However, if after decades of protection, refineries in India are still not
efficient, there is no reason why consumers should bear the burden of their
inefficiency.

Nearly 50 per cent of the price of petrol that we pay at the petrol pump goes to the
Government as excise and sales tax. For diesel, nearly one-third goes as tax. The
discrepancy is because the excise on petrol is 63 per cent of import parity price (23
per cent + Rs 7.50 per litre) and on diesel is 16 per cent (14 per cent + Rs 1.50 per
litre).

No. The Government will not lose any customs revenue as India does not import
petrol or diesel. The custom duties unfairly protects the refineryand penalises the
Indian consumer, who has to pay prices higher than in the rest of the world.

In India the demand of energy is rising by 20% specially in automobile industrial


and farm sector so refining capacity is necessary although the country has excess
capacity so government should try to boost the exports by taking corrective and
prevent steps through the public and private sector participation giving maximum
fiscal and budgetary support.

Strength

• Strong financial position


• Advanced technology
• Professional management
• Trend employees
• Good location

Weaknesses

• Political interference
• Higher degree of competition
• Gap between demand and supply
• Changing government policies

Opportunities & Threats:

Opportunities:
• Projected Gross Domestic Product (GDP) growth rate of 8% during the
tenth plan period and consequent growth of demand for petroleum products.
• Continued deficit for LPG and MS in the KRL supply Envelope.
• Expected growth of primary energy demand in the Asia-Pacific region at
a significantly faster rate that world demand.
• Additional opportunities due to the special Global investment Meet
organized by the Government of Kerala.
• Locational advantage of being a coastal Refinery.

Threats:

• Increased competition in the petroleum sector.


• Reduced availability of Mumbai High Crude oil.
• Substantial investment of plant facilities for auto fuel quality
upgradation.
• Availability of Natural Gas for Fertilisers and Power Plants. This could
affect Naphtha and Furnace oil offtake.
• Incidence of entry tax in neighvbouring States

The Indian FMCG sector with a market size of US$13.1 billion is the fourth
largest sector in the economy. A well-established distribution network,
intense competition between the organized and unorganized segments
characterize the sector. FMCG Sector is expected to grow by over 60% by
2010. That will translate into an annual growth of 10% over a 5-year period. It
has been estimated that FMCG sector will rise from around Rs 56,500 crores
in 2005 to Rs 92,100 crores in 2010. Hair care, household care, male
grooming, female hygiene, and the chocolates and confectionery categories
are estimated to be the fastest growing segments, says an HSBC report.
Though the sector witnessed a slower growth in 2002-2004, it has been able
to make a fine recovery since then.

For example, Hindustan Levers Limited (HLL) has shown a healthy growth in
the last quarter. An estimated double-digit growth over the next few years
shows that the good times are likely to continue.

Growth Prospects
With the presence of 12.2% of the world population in the villages of India,
the Indian rural FMCG market is something no one can overlook. Increased
focus on farm sector will boost rural incomes, hence providing better growth
prospects to the FMCG companies. Better infrastructure facilities will improve
their supply chain. FMCG sector is also likely to benefit from growing demand
in the market. Because of the low per capita consumption for almost all the
products in the country, FMCG companies have immense possibilities for
growth. And if the companies are able to change the mindset of the
consumers, i.e. if they are able to take the consumers to branded products
and offer new generation products, they would be able to generate higher
growth in the near future. It is expected that the rural income will rise in
2007, boosting purchasing power in the countryside. However, the demand in
urban areas would be the key growth driver over the long term. Also, increase
in the urban population, along with increase in income levels and the
availability of new categories, would help the urban areas maintain their
position in terms of consumption. At present, urban India accounts for 66% of
total FMCG consumption, with rural India accounting for the remaining 34%.
However, rural India accounts for more than 40% consumption in major FMCG
categories such as personal care, fabric care, and hot beverages. In urban
areas, home and personal care category, including skin care, household care
and feminine hygiene, will keep growing at relatively attractive rates. Within
the foods segment, it is estimated that processed foods, bakery, and dairy
are long-term growth categories in both rural and urban areas.

Indian Competitiveness and Comparison with the World


Markets

The following factors make India a competitive player in FMCG sector:

 Availability of raw materials


Because of the diverse agro-climatic conditions in India, there is a large raw
material base suitable for food processing industries. India is the largest
producer of livestock, milk, sugarcane, coconut, spices and cashew and is the
second largest producer of rice, wheat and fruits &vegetables. India also
produces caustic soda and soda ash, which are required for the production of
soaps and detergents. The availability of these raw materials gives India the
location advantage.

 Labor cost comparison

 Low cost labor gives India a competitive advantage. India's labor cost is
amongst the lowest in the world, after China & Indonesia. Low labor costs
give the advantage of low cost of production. Many MNC's have established
their plants in India to outsource for domestic and export markets.

 Presence across value chain


Indian companies have their presence across the value chain of FMCG sector,
right from the supply of raw materials to packaged goods in the food-
processing sector. This brings India a more cost competitive advantage. For
example, Amul supplies milk as well as dairy products like cheese,

Retail Sector is the most booming sector in the Indian economy. Some of the
biggest players of the world are going to enter into the industry soon. It is on
the threshold of a big revolution after the IT sector. Although organized retail
market is not so strong as of now, but it is expected to grow manifolds by the
year 2010. The sector contributes 10% of the GDP, and is estimated to show
20% annual growth rate by the end of the decade. The current growth rate is
estimated to be 8.5%, but CRISIL report says that the retail market is most
fragmented in the world and only 2% of the entire retailing business is in the
organized sector. There are about 300 new malls, 1500 supermarkets and
325 departmental stores being built in the cities very soon.

The retail boom will face a strong competition from the 12 million mom-and-
pop stores, which are easily accessible and approachable and provide
services like free home delivery and goods at credit. But buying from Malls,
Supermarkets and Department stores like Subhiksha, Marks & Spencers, etc
gives a different feeling and the environment of pick and choose from a
variety of products. A number of retail giants are also going to explore the
market such as Reliance Retail Ltd and Wal-mart. The revolution is driven by
large expectations where both domestic and international players will be
channel through which other large stores in India are spreading themselves
across the country.

butter, etc.  Leading Indian Retailers

Bata India Ltd, Big Bazaar, Crossword, Ebony Retail Holdings Ltd., Food
Bazaar, Globus Stores Pvt. Ltd., Liberty shoes Ltd., Music World
Entertainment Ltd., Pantaloon Retail India Ltd., Shoppers Stop, Subhiksha,
Titan Industries, Trent and the new entrants penetrating the market soon will
include Reliance Retail Ltd, Wal-Mart Stores, Carrefour, Tesco, Boots Group,
etc.

Current Scenario

A glimpse of the International Retail

 One of the world's largest industries exceeding US$ 9 trillion


 47 global fortune companies & 25 of Asia's top 200 companies are
retailers
 Dominated by developed countries
 US, EU & Japan constitute 80% of world retail sales.
 Biggest player in India is Pantaloon Retail India Limited.

Percentage of Organized Retail

USA - 85%
Taiwan - 81%
Malaysia - 55%
Thailand - 40%
Brazil - 36%
Indonesia - 30%
Poland - 20%
China - 20%
India - 3%

Key Trends

The existing players like Big Bazaar, Shoppers' Stop, Piramyd are expanding
to smaller towns and cities. Many other business houses are planning to enter
the retail sector either on their own or through partnerships. New entrants
like Reliance Retail Ltd and Wal-Mart are going to enter the market soon.
Even rural areas will provide a huge opportunity to be explored.

Estimates and Predictions

 The industry is estimated to be more than US$ 400 billion by a study of


McKinsey.
 The Economist Intelligence Unit (EIU) estimates the retail market in India
to increase to US$608.9 billion in 2009 from US$394 billion in2005.
 A KPMG report says that the organized retail would grow at a higher rate
than GDP in the next five years.
 The retail sector would generate employment for more than 2.5 million
people by the year 2010, says an analysis by Ma Foi Management
Consultants Ltd.

Benefits of FDI in Retail Sector

 Higher competition would lead to higher quality in products and services.


 Better lifestyle as better products would be introduced.
 Exports would increase due to greater sourcing of major players.
 Investment in whole supply chain would increase.
 Technology would be upgraded in terms of logistics, production, and
distribution channels.
 The markets of the sector would flourish and develop.
 Employment would increase and skills & manpower will develop.
 A strong retailing sector would promote tourism.
 Economies of scale would help lower consumer prices and increase the
purchasing power of the consumer.
 In the long term it will be beneficial in the up-gradation of agriculture and
small scale & medium scale industries.

Indian Consumerism
The Indian consumer behaviour is rapidly changing with a shift in new
generation's preference towards luxury commodities

Retail Space: A Scope for Real Estate Sector


With new boom in the retail industry, the country has identified new scope for
real estate development. The already revolutionizing urbanization and
growing demand for finished
Scope of Indian Automobile Sector
The Indian automobile industry is going through a phase of rapid
change and high growth. With new projects coming up on a regular
basis, the industry is undergoing technological change. The major
players are expanding their plants and focusing on mass
customization, mass production, etc.

INVESTMENT IN AUTO SECTOR


Nearly every automobile company is investing at a higher rate than
ever before to achieve a high growth trajectory. The overall
investment in the sector has been increasing quite rapidly. It is
expected that by the end of 2010 Indian automobile sector will be
investing a huge amount as Rs. 30,000 crores.
For example, Maruti Udyog has plans of investing Rs. 6,500 crores; the Tata
Motors is coming up with more investment of Rs. 2,000 crores in its compact
car project. Not only the Indian companies but also foreign players like
Hyundai are coming up with the investment of more than Rs. 3,800 crores in
India.

GROWTH IN THE SECTOR


At present the industry is enjoying a growth rate of 14-17% per annum, with
domestic sales growth at 12.8%. The growth rate is predicted to double by
2015.

As it is seen, the total sales of passenger vehicles - cars, utility vehicles and
multi-utility vehicles - in the year 2005 reached the mark of 1.06 million. The
current growth rate indicates that by 2012 India will overtake Germany and
Japan in sales volumes.

Financing schemes have become an important factor in the growth of


automobile sales. More and more financial schemes are coming up with easy
installment plans to lure the customers.

Apart from domestic production, the industry is consistently focusing on the


automobile exports. The auto component segment is contributing a lot in the
export arena. The liberalized policies of the government are now making the
companies go for more and more exports.

The automobile exports are increasing year by year. According to the Society
of Indian Automobile Manufactures (SIAM) automobile exports in the last five
years are as follows:

Export trend over the last five years

NEW LAUNCHES
The Indian automobile sector is experiencing changes in every arena.
Changes in the looks of the vehicles are taking place; the vehicles are being
made more user-friendly. Each and every firm is competing to give the
customers more customized vehicles with respect to speed, mileage, and
maintenance. At present there are many new models entering the Indian
market. To name a few, Suzuki Heat 125 and Suzuki Zeus 125X are the two
bikes in the motorcycle segment; Kinetic Blaze and Honda DIO in the scooter
segment; Maruti's Zen Estillo in the car segment, so on and so forth.

EMPLOYMENT IN THE SECTOR


Investment is leading to the employment growth in the sector. With the
emergence of new projects and introduction of technological advancements,
the focus is more on the skilled and experienced human resource. The
companies are looking for skilled and hard working people who can give their
best to the organization.
The engineers in the automotive or electrical or mechanical field are in
demand. Some of the firms going for automation, i.e. planning for CAD
(Computer Aided Designs) systems, are also recruiting people with IT
specializations.

products has necessitated development of new space for retail outlets.


IT Sector - An Overview
Career Prospects
The Indian IT sector is growing rapidly and it has already made its presence felt in all parts
of the world. IT has a major role in strengthening the economic and technical foundations of
India. Indian professionals are setting up examples of their proficiency in IT, in India as well
as abroad.

The sector can be classified into 4 broad categories - IT Services, Engineering


Services, ITES-BPO Services, E Business

IT Services can further be categorized into Information Services (IS) outsourcing,


packaged software support and installation, systems integration, processing services,
hardware support and installation and IT training and education.

Engineering Services include Industrial Design, Mechanical Design, Electronic System Design
(including Chip/Board and Embedded Software Design), Design Validation Testing , Industrialization and
Prototyping.

IT Enabled Services are services that use telecom networks or the Internet. For example, Remote
Maintenance, Back Office Operations, Data Processing, Call Centers, Business Process Outsourcing, etc.

E Business (electronic business) is carrying out business on the Internet; it includes buying and selling,
serving customers and collaborating with business partners.

Major Trends
 Trends in Hiring
The bar chart shows that the recruitment of engineers and IT professionals in the industry is growing at the
Compound Annual Rate of 14.5% approximately.

In the FY06, the direct employment in the IT-ITES sector was 1.3 million people and the indirect
employment was 3 million approximately.
 Trends in Salary Hikes

Along with abundant growth opportunities, IT sector is one of the highest paying sectors. The average
increase in salary in IT sector across the levels was around 16% and the average increase in the ITeS BPO
sector across the levels was in between 16%-18% Requisites for balanced salaries -
 End to poaching
 Review of compensation according to the skills
 Developing talent in-house
 Entry of talented freshers in the industry

IT: Success Factors


 Increasing number of skilled professionals in IT.
 The demographic factor. Approximately 60% of the population of India lies in the age group of 15-65.
More than half of the population of India is below the age of 25. So in the future, the number of working
people is going to be more than the number of dependants.
 The vast academic infrastructure of India. In the year 2006, Total Enrollment in colleges was 9.3 million
and India produced 441,000 Technical graduates.
 India has the second largest English-speaking workforce in the world.

IT Industry Swot Analysis

Swot Analysis
Strengths Weaknesses

• Highly skilled human • Absence of practical knowledge


resource • Dearth of suitable candidates
• Low wage structure
• Less Research and Development
• Quality of work
• Initiatives takenthe • Contribution of IT sector to India 's
by
GDP is still rather small.
Government (setting up
• Employee salaries in IT sector are
Hi-Tech Parks and
increasing tremendously. Low wages
implementation of e- benefit will soon come to an end.
governance projects)
• Many global players have
set-up operations in India
like Microsoft, Oracle,
Adobe, etc.
• Following Quality
Standards such as ISO
9000, SEI CMM etc.
• English-speaking
professionals
• Cost competitiveness
• Quality
telecommunications
infrastructure
• Indian time zone (24 x 7
services to the global
customers). Time
difference between India
and America is
approximately 12 hours,
which is beneficial for
outsourcing of work.

Opportunities Threats

• High quality IT education • Lack of data security systems


market • Countries like China and
• Increasing number of Philippines with qualified
working age people workforce making efforts to
• India 's well developed overcome the English language
soft infrastructure barrier
• Upcoming International • IT development concentrated in a
Players in the market few cities only

Banking & Insurance Sector - An Overview


The economic reforms undertaken in the last 15 years have brought about a
considerable improvement in the health of banks and financial institutions in India. The
banking sector is a very important sector of the Indian economy. The sector has made
a marked improvement in the liberalization period. There has been extraordinary
progress in the financial health of the commercial banks with respect to capital
adequacy, profitability, asset quality and risk management. Deregulation has opened
new doors for banks to increase revenues by entering into investment banking,
insurance, credit cards, depository services, mortgage, securitization, etc.
The limit for foreign direct investment in private banks has been increased from 49% to 74%. In
addition, the limit for foreign institutional investment in private banks is 49%. Liberalization and
globalization have created a more challenging environment in the banking sector as well as in the other
segments of the financial sector such as mutual funds, Non Banking Finance Companies, post offices,
capital markets, venture capitalists, etc. Now the challenges faced by the sector would be gaining
profitability, reinforcing technology, maintaining global standards, corporate governance, sharpening
skills, risk management and, the most important of all, to establish 'Customer Intimacy'.

The insurance business is one of the most rapidly growing areas in the financial sector. As an economy
grows over the years, insurance sector intensifies and broadens its reach. Every practical and futuristic
individual would want himself, his family and his assets to be insured. Insurance deals mainly with life
and general insurance. India has a large insurance market commensurate with its population. The IRDA
Act 1999 (Insurance Regulatory and Development Authority of India Act) has given new opportunities to
private players to enter into the market on the fulfillment of certain prerequisites. The IRDA is the
licensing authority in the sector; the current FDI cap/Equity in the sector stands at 26 percent. There is
no doubt the challenges ahead will become tougher with more companies competing both in general
and life Insurance. Also mortgage insurance will soon be coming into the industry. New players have
contributed to the launch of innovative products, services and value-added benefits. Major foreign
players have entered the country and announced joint ventures in both life and non-life areas. These
include New York Life, Aviva, Tokio Marine, Allianz, Standard Life, Lombard General, AIG, AMP and Sun
Life among others.

Commercial banks are coming up with more and more vacancies, and the banking sector now has more
new jobs than any other sector. Right from the branch level to the highest level, there is tremendous
range of opportunities available in the sector. Jobs in this sector can be both rewarding and enjoyable,
as you get opportunities to learn about business, interact with people and build up clientele. The same
is the case with insurance, as it is the fastest growing industry under the financial sector. Both
government and private players are currently offering a plenty of jobs in this sector. So, this is great
news for you if you are thinking to go into the banking & insurance streams.

Overview of Pharmaceutical Sector


Accounting for two percent of the world's pharmaceutical market, the Indian
pharmaceutical sector has an estimated market value of about US $8 billion. It's at
4th rank in terms of total pharmaceutical production and 13th in terms of value. It
is growing at an average rate of 7.2 % and is expected to grow to US $ 12 billion by
2010.

Over the last two years the pharmaceutical market value has increased to about US
$ 355 million because of the launch of new products. According to an estimate,
3900 new generic products have been launched in the past two years. These have
been by and large launched by big brands in the pharma sector. And in the year
2005 Indian pharmaceutical companies captured around 70% of the domestic
market.
As in the present scenario, only a few people can afford costly drugs, which have increased price sensitivity
in the pharmaceutical market. Now the companies are trying to capture the market by introducing high
quality and low price medicines and drugs.

With the Product Patent Act, which came into action in January 2005, this industry is able to attract big
MNCs to India. Earlier these big firms had apprehensions in launching new drugs in the Indian market.

At present, a large number of Indian pharmaceuticals companies are looking for tie-ups with foreign firms
for in-license drugs. GlaxoSmithKline is among the top choices for the firms that wish to launch their
product in India, but do not have any branch over here.

Contract research and pharmaceutical outsourcing are the new avenues in the pharmaceutical market.
Contract manufacturing is growing at a very fast pace and is estimated to grow to US $30billion, whereas
contract research is estimated to reach US$6-10 billion.

Indian multinational companies like Dr.Reddy's Lab, Cipla, Ranbaxy, etc have created awareness about the
Indian market prospects in the international pharmaceutical market. Approvals given by Foods and Drugs
Administration (FDA) and ANDA (Abbreviated New Drug Application)/DMF (Drug Master File) have played an
important role in making India a cost-effective and high quality product manufacturer. Furthermore, the
changes that took place in the patent law, change of process patent to product patent, have helped in
reducing the risk of loss for intellectual property.
Industry Strengths:

 Capital Investment in Technology: Owing to the availability of advanced technology at low costs, t
companies can produce drugs at lower costs.
 Cost Effective: The filing cost of ANDAS and DMFs is comparatively low for the Indian companies.
 Manpower: There is a large pool of technical experts available at modest salaries.
 Contract Research & Contract Manufacturing: There is a good scope for contract research and contra
manufacturing.
 Infrastructure: There is a well-developed infrastructure for the pharmaceutical industry.
 Generic Drugs: In the last few years, the generic drug-manufacturing segment has received hu
investments, in the process making it more competitive and efficient.
Strengths

• Cost effective technology


• Strong and well-developed manufacturing base
• Clinical research and trials
• Knowledge based, low- cost manpower in science & technology
• Proficiency in path-breaking research
• High-quality formulations and drugs
• High standards of purity
• Non-infringing processes of Active Pharmaceutical Ingredients (APIs)
• Future growth driver
• World-class process development labs
• Excellent clinical trial centers

• Chemical and process development competencies


Weaknesses

• Low Indian share in world pharmaceutical market (about 2%)


• Lack of strategic planning
• Fragmented capacities
• Low R&D investments
• Absence of association between institutes and industry
• Low healthcare expenditure
• Production of duplicate drugs

Opportunities

• Incredible export potential


• Increasing health consciousness
• New innovative therapeutic products
• Globalization
• Drug delivery system management
• Increased incomes
• Production of generic drugs
• Contract manufacturing
• Clinical trials & research
• Drug molecules

Threats

• Small number of discoveries


• Competition from MNCs
• Transformation of process patent to product patent (TRIPS)
• Outdated Sales and marketing methods
• Non-tariff barriers imposed by developed countries