Post on 23-Dec-2015
© 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
© 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
© 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.
© 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
© 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
© 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
© 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.
© 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
© 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
© 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
© 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
© 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
© 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
© 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
© 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
© 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.
© 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.
© 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.
© 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.
.
© 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
© 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.