Posts Tagged ‘Government Policy’
GLOBALISATION OF INDIAN BUSINESS
India’s economic integration with the rest of the world was very limited because of the restrictive economic policies followed until 1991. Indian firms confined themselves, by and large, to the home market. Foreign investment by Indian firms was very insignificant.
With the new economic policy ushered in 1991, there has, however, been a change. Globalisation has in fact become a buzz-word with Indian firms now, and many are expanding their overseas business by different strategies.
This section takes a look at the hurdles to and prospects for globalisation of Indian business and the different globalisation strategies.
Obstacles To Globalisation
The Indian business suffers from a number of disadvantages in respect of globalisation of business. The important problems are the following.
Government Policy and Procedures: Government policy and procedures in India are among the most complex, confusing and cumbersome in the world. Even after the much publicised liberalisation, they do not present a very conducive situation. One prerequisite for success in globalisation is swift and efficient action. Government policy and the bureaucratic culture in India in this respect are not that encouraging.
High Cost: High cost of many vital inputs and other factors like raw materials and intermediates, power, finance infrastructural facilities like port etc., tend to reduce the international competitiveness of the Indian business.
Poor Infrastructure: Infrastructure in India is generally inadequate and inefficient and therefore very costly. This is a serious problem affecting the growth as well as competitiveness.
Obsolescence: The technology employed, mode and style of operations etc., are, in general, obsolete and these seriously, affect the competitiveness.
Resistance to Change: There are several socio-political factors which resist change and this comes in the way of modernisation, rationalisation and efficiency improvement. Technological modernisation is resisted due to fear of unemployment. The extent of excess labour employed by the Indian industry is alarming. Because of this labour productivity is very low and this in some cases more than offsets the advantages of cheap labour.
Poor Quality Image: Due to various reasons, the quality of many Indian products is poor. Even when the quality is good, the poor quality image India has becomes a handicap.
Supply Problems: Due to various reasons like low production capacity, shortages of raw materials and infrastructures like power and port facilities, Indian companies in many instances are not able to accept large orders or to keep up delivery schedules.
Small Size: Because of the small size and the low level of resources, in many cases Indian firms are not able to compete with the giants of other countries. Even the largest of the Indian companies are small compared to the multinational giants.
Lack of Experience: The general lack of experience in managing international business is another important problem.
Limited R & D and Marketing Research: Marketing Research and R & D in other areas are vital inputs for development of international business. However, these are poor in Indian business
Expenditure on R & D in India is less than one per cent of the GNP while it is two to three percent in most of the developed countries. In 1994-95, India’s per capita R&D expenditure was less than when it was between S100 and 5 for most of the developed nations.
Growing Competition: The competition is growing not only from the firms in the developed” countries but also from the developing country firms. Indeed, the growing competition from the developing country firms is a serious challenge to India’s international business.
Trade Barriers: Although the tariff barriers to trade have been progressively reduced thanks lo the GATT/WTO, the non-tariff barriers have been increasing, particularly in the developed countries. Further, the trading “blocs like the NAFTA, EC etc., could also adversely affect India’s business.
Factors Favouring Globalisation
Although India has several handicaps, there are also a number of favourable factors for globalisation of Indian business.
Human Resources: Apart from the low cost of labour, there are several other aspects of human resources to India’s favour. India has one of the largest pool of scientific and technical manpower. The number of management graduates is also surging. It is widely recognised that given the right environment, Indian scientists and technical personnel can do excellently. Similarly, although the labour productivity in India is generally low, given the right environment it will be good. While several countries are facing labour shortage and may face diminishing labour supply , India presents the opposite picture. Cheap labour has particular attraction for several industries.
Wide Base: India has a very broad resource and industrial base which can support a variety of businesses.
Growing Entrepreneurship: Many of the established industries are planning to go international in a big way. Added to this is the considerable growth of new and dynamic entrepreneurs who could make a significant contribution to the globalisation of Indian business.
Growing Domestic Market: The growing domestic market enables the Indian companies to consolidate their position and to gain more strength to make foray into the foreign market or to expand their foreign business.
Niche Markets: There are many marketing opportunities abroad present in the form of market niches. (A niche is a small segment of a market ignored or not properly served by large players). Such niches are particularly attractive for small companies. Several Indian companies have become very successful by niche marking.
Expanding Markets: The growing population and disposable income and the resultant expanding internal market provides enormous business opportunities.
Transnationalisation of World Economy: Transnationalisation of the world economy, i.e., the integration of the national economies into a single world economy as evinced by the growing interdependence and globalisation of markets is an external factor encouraging globalisation of India business.
NRIs: The large number of non-resident Indians who are resourceful – in terms of capital, skill, experience, exposure, ideas etc., is an asset which can contribute to the globalisation of Indian
business. The contribution of the overseas Chinese to the recent impressive industrial development of China may be noted here.
Economic Liberalisation: The economic liberalisation in India is an encouraging factor of globalisation. The delicensing of industries, removal of restrictions on growth, opening up of industries earlier reserved for the public sector, import liberalisations, liberalisation of policy towards foreign capital and technology etc., could encourage globalisation of Indian business. Further, liberalisation in other countries increases the foreign business opportunities for Indian business.
Competition: The growing competition, both from within the country and abroad, provokes many Indian companies to look, to foreign markets seriously to improve their competitive position and to increase the business. Sometimes companies enter foreign market as a counter – competitive strategy, i.e., m fight the foreign company in its own home market to weaken its competitive strength.
Department of Commerce
Periyar University, Salem-11