Main Products and Industries in India - Coursework Example

Global Business Plan for Starbucks in India Assessing the Economic/Geographic Environment a) Geographical Influences India is a diverse nation that is composed of a diverse population and is located in the Eastern Hemisphere, South Asia. There are 25 states in India as well as 7 union territories. Most of the land is rural. However, there are urban areas with New Delhi as the capital city. The country has a high population and the urban areas are more densely populated as compared to the rural areas. It geographical features highly favour business development. There is big land for companies’ development. The diverse population is also a feature that favours business in India and hence has influenced Starbucks decision to expand its operations there (Paunikar, 2004). b) Main products and Industries in India India is said to have big land and therefore it is not a surprise that its major products are from the agricultural sector. Most of its exports are agricultural with the textile and leather industries the leading ones. In fact, the agricultural sector in India is said to contribute about 25% of the country’s GDP. Textile industry employs a lot of people both directly and indirectly. The other major industry in India is the chemical industry which is known to be among the oldest industries in India. The industry is known to produce about 70 000 commercial products. Food industry is also a common one in India. Starbucks is a company that deals with agricultural products it has a high probability of succeeding in India. It will add to the agricultural sector and this could have influenced it (Paunikar, 2004). c) Current economic condition Indian economy has grown significantly over the last one decade. The economy is actually showing promising trends that are attracting more and more investors to India. The economy of India has developed courtesy of agriculture and the decision of the state to eliminate socialism as well as the centralized bureaucracies which were high ineffective. Liberalization was a key factor to the growth of Indian economy since it opened the way for foreign investors and this is a factor that could have influenced Starbucks (Paunikar, 2004). d) Infrastructure India has improved in terms of infrastructure. The roads have opened to the rural areas and it is easy for farmers to transport their agricultural goods to the markets. Mumbai and New Delhi are two towns that have an efficient railway system that can also be used for transportation purposes (Paunikar, 2004). The accessibility of these towns might be one of the factors that Starbucks considered before opening operations there. e) Action Plan Starbucks is planning to continue expanding its presence in India and Asia in general. By the end this year (2013), the company is planning to open 50 outlets across India (Bennett, Coleman & Co. Ltd, 2013a). This will help it market its brand in the country and will also be an economic benefit to the host country. Assessing the Political Legal Environment a) Government and politics India is a federal republic headed by the president. Its government, led by the prime minister started making reforms in the year 1999 which were meant to improve the investment climate and also improve the agricultural as well as the industrial sector. The government has enacted policies which favour foreign investors especially those from the high priority sectors such as agriculture (Rumi, 2011). b) Formal Trade Barriers Trade barriers have been reduced in India allowing more foreign investors into the country. However, there are some barriers which still remain and they have been a challenge to foreign companies that wish to invest in India. Most of the barriers that remain are in the banking and insurance sector but those in the agricultural sector have been highly reduced. The tariffs are however relatively high (The World Bank Group, 2011). c) Promoting Global Business The economy of India has steadily opened up in the past few years. It has become a major exporter and home to many foreign companies. India has become a major player in the world business among countries such as China. However, it only encourages imports that can stimulate its economy (The World Bank Group, 2011). This influenced Starbucks to open operations in the country. d) Intellectual Property Most of the intellectual property in India is owned by the locals. Foreigners will only own intellectual properties after obtaining permission from the relevant authorities. Similarly, ownership of land and buildings by foreign companies has to be granted permission by the Reserve Bank of India (Paunikar, 2004). e) Action Plan Starbucks need to understand the political environment of India so as to abide to all the policies that will help it in conducting business without many interruptions. The company is actually in the process of familiarizing with the environment as it continues to expand its business. Financing Sources for Global Business Operations a) Economic Environment The economic environment of India is highly favourable for foreign investments. The recent growth of the economy and its transition from a closed economy to an open one has seen foreign investors start operations in various parts of the country. The government policies make the environment even better through policies enactment (The World Bank Group, 2011). b) Start-Up Costs It is never cheap to start a business especially in a foreign land. In India, a foreign investor has to go through all the procedures that are required for them to be granted permission. They need to pay for the permits, acquire land and buildings or buy shares of the companies they wish to invest in. it is important to note that a foreign company is not allowed to hold more than 51% of Indian ventures unless it is on the basis of case by case (Paunikar, 2004). c) Financing Sources The financing sources in India include financial institutions and government grants. The financial institutions are banks and insurance companies among others (Paunikar, 2004). d) Action Plan Starbucks is an established company that might not need financing from India. However, it should be familiar with the financial sources for the global operations. It needs to understand the borrowing procedures for multinationals in India. Managing International Financial and Business Risks a) Economic and Financial Risks The expansion of India is said to be slower than expected and this could be a threat to the economy and trade (Krishnan, 2012). In addition, financial risks in India and some other Asian countries are also threatened by the natural disasters (Bennett, Coleman & Co. Ltd, 2013b). b) Social and Cultural Risks Among the Social and Cultural Risks that might affect business in India include the diverse workforce owing to the diverse population of India. These might lead to human resource problems hence affecting the companies’ productivity. The large diversity also causes language barriers and hence ineffective communication (Rumi, 2011). c) Political and Legal Risks Law enforcement in India is not strong a factor that might affect businesses. Corruption and red tapes are other factors that might be risky to Indian businesses. Legal cases take long before they are settled and therefore if a company has a case in Indian courts, it might take long hence affecting its business. The high media attention on big cases might tarnish companies’ names in case a company is involved. The Indian democracy is not reliable and this is another factor that might affect businesses (Rumi, 2011). d) Action Plan Starbucks should be familiar with these risks and should plan in advance on how to cope with them. The plans should involve ways of dealing with diversity in India, how to avoid the financial risks and avoidance of legal cases. References Bennett, Coleman & Co. Ltd, (2013). India at greater financial risk from natural disasters: Study; The Economic Times; Retrieved from < http://articles.economictimes.indiatimes.com/2012-08-15/news/33216848_1_natural-disasters-british-risk-consultancy-natural-hazards > On March 30, 2013 Bennett, Coleman & Co. Ltd, (2013). Will meet target of 50 Starbucks cafes in India this year: Tata Global; The Economic Times; Retrieved from < http://articles.economictimes.indiatimes.com/2013-03-04/news/37437214_1_starbucks-cafes-china-and-asia-pacific-john-culver > On March 30, 2013 Krishnan, U. (2012), Risks to Indian Economic Stability Have Risen, Reserve Bank Says; Bloomberg; Retrieved from < http://www.bloomberg.com/news/2012-12-28/risks-to-indian-economic-stability-have-risen-reserve-bank-says.html > On March 30, 2013 Paunikar, V., (2004) International Business Plan; Starbucks India; Retrieved from < http://www.cbe.csueastbay.edu/~sbesc/1bp04.pdf> On March 30, 2013 Rumi, J. (2011), Risks of Doing Business in India; Retrieved from On March 30, 2013 The World Bank Group, (2011), India: Foreign Trade Policy; International Economics & Trade in South Asia; Accessed online from < http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/EXTSARREGTOPINTECOTRA/0,,contentMDK:20592520~menuPK:579454~pagePK:34004173~piPK:34003707~theSitePK:579448,00.html > On March 30, 2013 Read More