Strategic Sourcing Analysis: India

Nathan Babcock

Ronald Myers

Justin Vanstry

Quick Facts

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Quick Facts

Four religion origins: Hinduism, Jainism, Buddhism and Sikhism

Gained Independence in 1947 Official National Language: Hindi Capital: New Delhi Largest City: Bombay

Source: Wikipedia

Quick Facts

Population: 1,192,225,812 people (2006)

National Symbols Animal: Royal Bengal Tiger Bird: Indian Peacock Flower: Lotus Tree: Banyan Fruit: Mango

Source: Wikipedia

Current News

Asian Development Bank to Double Lending to India

US and India agree upon a nuclear deal

Germany and India try to forge a deal

Geographic Information

7th Largest Country in world in size

7000 km (4350 miles) of coastline

1.1 billion people (2nd most in world)

Geographic Infrastructure

Very poor and basic infrastructure Antiquated transportation system

(roads, rails, etc) Antiquated and poor port system Large growth opportunity if some of

these systems were improved

Geographic Infrastructure

There are many corporations currently in India Ex. Ford Motor Co has a factory near the south

Indian city of Chennai, which makes Ikon and Fiesta sedans. It requires its engine supplier in central India to fit delivery trucks with global positioning system devices so it can locate vehicles stuck in traffic and adjust production schedules. According to Arvind Matthew, managing director of Ford’s Indian unit, in order to hedge against delays, the Chennai factory must stock more parts than needed.

Another Example: Heinz

Heinz Co pays youths, some of them barefoot, to carry tomatoes from farms that aren’t accessible by road to collection points where they are loaded onto trucks. Niles Patel, the head of Heinz’s Indian unit, stated that India’s incomplete road network boost freight cost by a fifth.

Geographic Infrastructure

India increased the spending on roads, ports, power grids and telecom networks to 992 million rupees

Aiming to boost the economy’s growth by 10% with the increased spending

Domestic Infrastructure

Favorite country for IT outsourcing but lacking on manufacturing

Spent only 6% of GDP ($31 billion) on infrastructure improvements

Private corporations and people are finally allowed to invest in the Indian government

Source: Wikipedia

Domestic Infrastructure

Key problem: Lack of adequate energy High numbers of blackouts and power

outages Solution: Large investments to improve

the power stations and grids

Domestic Infrastructure

In 2004, Indian roads carried 85% of passenger traffic and 70% of freight traffic (India Budget)

3.3 million km of roads Rural or urban roads: 3 million km State highways: 200,000 km National highways: 58,000 km

Source: (India in Business)

Domestic Infrastructure

40% of traffic is on the national highways

Solution: Converting ~14,000 km of national highway into 4-6 lane highways

Source: (India Budget)

Domestic Infrastructure

12 major ports and 180 minor ports The 12 major ports handle 75% of the

traffic Port traffic growth is currently at 11% Problems: Long berth times, long

turnaround times and long lead times (India Budget)

Social Infrastructure

Large differences in the land Rural, Tribal, Urban

Poor water and sanitation systems High ratio of slum settlements Reason: Poor roads system

Source: www.dfidindia.org

Social Infrastructure

Poverty is a big problem 53% of the children under age 5 are

malnourished 20% of deaths are from anemia

Solution: Improve the roads system

Source: (India Watch, http://www.wakeupcall.org/education_policy/nri-participation.php ).

Cultural Infrastructure

Ministry of Culture “The mission of the department is to

preserve, promote and disseminate all forms of art and culture.”

Cultural Agreements Over 100 countries

Source: (India Culture, http://www.indiaculture.nic.in/indiaculture/index.asp).

Cultural Infrastructure

Cultural Exchange Programs Part of the agreement Allows students to experience life outside

of India Suppression of females

Males dominate most of the leadership and decision making

Females head 9% of the householdsSource: (India Culture, http://www.indiaculture.nic.in/indiaculture/index.asp).

Political Infrastructure

Sovereign, socialist, secular liberal democracy

Quasi-federal republic with a bicameral parliament

3 branches of government: the Legislature, the Executive, and the Judiciary

Political Infrastructure

The current Prime Minister Manmohan Singh said the following in regards to allowing foreign retail chains to establish a presence in India:

““We will examine this issue in all its dimensions, including its effect on livelihoods, and discuss this widely before taking any decision. There is no hurry in this.”

Source: The Times of India, Feb 23, 2006

Political Infrastructure

Agreed upon a nuclear deal with the US

The partnership between India and the United States is a strategic one for both countries

Political Infrastructure

Condoleezza Rice called India a “Multi-ethnic, multi-religious democracy that is characterized by individual freedom and the rule of law.”

She also stated “India is a rising global power that we believe can be a pillar of stability in a rapidly changing Asia”.

Educational Infrastructure

94% of students between 1st and 12th grade drop out

Reason: India is focused on higher education

5% choose Arts, Commerce, or Science in their higher education

Educational Infrastructure

The ratio of scientists and engineers with more education and the technicians and mechanics is highly lopsided

Solution: More vocational and technical training

Educational Infrastructure

Only 68% of India is literate

Problem: Lack of investment (2.5% of GDP)

Solution: Increase investment to roughly 10% of GDP

Economic Infrastructure

Fourth Largest Economy in the world GDP: $3.36 trillion In the first quarter of 2005-06, India’s

economy is growing at a 8.1% (2nd fastest growing)

Low per capita income: $3,100

Economic Infrastructure

Made up primarily of agriculture and industries

Two-thirds of the people work in agriculture

Agriculture sector: 21% of GDP Service sector: 51% of GDP

Economic Infrastructure

Imports 2004: $99,836 million 2003: $79,658 million

Exports 2004: $76,345 million 2003: $62,952 million

Source: India at a Glance

Economic Infrastructure

Starting a business In India

On average it takes 70 days and 61.7% of income per capita

Business license takes 270 days In Southeast Asia

it takes 35 days and 40% of income per capita

Business license takes 195 days

Source: Explore

Recommendation

Pros: Advances to improve some critical

areas Promised increased spending on the

roads system Nuclear agreement should improve the

energy problems

Recommendation

Cons Overwhelming infrastructure problems Delayed shipments due to

transportation

Recommendation

Conclusion:

We have decided to recommend against investing in India as a source or procurement at this time. There is huge potential in the future for India and this is why we would consider sourcing from India in the next 5-7 years, just not right now.

The End…

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