India and China: The Global Emerging Markets - Essay Example

INDIA AND CHINA: THE GLOBAL EMERGING MARKETS BY COLLEGE PRESENTED TO India and China: The Global Emerging Markets Cognisant of thefact that globalisation has abolished market boundaries with transnational Corporations TNC seeking to expand their operations, there are a good number of benefits that have made China and India appealing for FDIs driven by a myriad of location specific factors. Location specific factors may include political policies and stability, economic factors, social and geographical factors and resources such as labor and natural resources (Sinha, 2007). Therefore, considering the location specific factors in China and India, Rim will have a better strategy investing in India than in China where the political, economic and social factors are more favorable to IT related firms and due to the immense potential of penetrating the untapped market in the Indochina region. One of the major location specific advantages that RIM has to evaluate in considering India as a lucrative destination is favorable government policies on FDIs. The Indian government allows 100% FDI in some sectors, which include research and development and infrastructure (Himachalapathy, 2010), two sectors where RIM has an interest. In other words, India has an investor friendly climate that RIM may capitalize to access the more than a billion Indian population in addition to prospective customers in the Indochina region, a market that has immense opportunities for growth. For instance, considering the unsaturated penetration of mobile technologies in the region, RIM has a chance to undertake comprehensive research and development in coming up with a product that targets the specific needs of the population through its Blackberry model. In other words, as Dickens (2011) argued, Rim by taking such an approach will be in a position to connect with different social strata and classes in the region and produce specific products that target the needs of people, which will result in more market penetration. Similarly, as a consequence of globalization, China has opened up its doors to FDIs, with the country being the current highest destination of FIDs globally driven by improved economic policies (Himachalapathy, 2010). As such, RIM has a huge prospective market in the new and untapped Chinese market where the Blackberry brand can find an impressive market driven by a rapidly broadening middle class population with a high purchasing power that is attracted to spending on foreign products (Sinha, 2007). Labor is another location specific advantage that makes both India and China lucrative destinations for investors and where RIM may lower its production costs by a significant margin. China and India have the lowest labor costs per unit among the emerging economies today, a huge attraction to western- based firms. Hill (2011) argues that in addition to investments in market-seeking FDIs, which targets potential markets such as that of India and China, firms also invest in resource –seeking FDIs, which is motivated by the availability of resources, the human resources being the most vital resource in this case. China largely inherited the technology and expertise of the western markets due to its closeness to Hong Kong where the western based firms initiated their operations before encroaching to the mainland China (Sinha, 2007). Consequently, despite its low unit labor, China has extensive expertise in technological fields, which RIM seeks to pursue in manufacturing its BlackBerry brand at a lower cost; China has emerged as the new center for innovations and mass production. Moreover, India has been a leading IT hub with a rapidly growing population of highly experienced and young IT professionals who have managed to come up with ground breaking IT products, with IT companies such as Microsoft and Intel having their footing in the country (Himachalapathy, 2011). As such, RIM has its focus in recruiting the best talents in the IT field with minimal trading costs. Therefore, RIM has a great opportunity for growth by turning to the two emerging markets to benefit from the extensive research and development programs considering that China and India are rapidly becoming the new centers for research and innovations (Cavusgil et al., 2008), two factors that RIM needs most in its operations Consequently, the huge pool of highly skilled IT experts in India is a huge potential for Rim to recruit the best talents at restively lower cost compared to recruiting similar talent in US. However, despite the promising location specific advantages that RIM may have in China and India, there are a number of challenges that the company has to consider before making a final decision. For instance, India suffers from stifling bureaucracies, has poor infrastructure compared to China and there lacks the political will towards improving investment policies and improving the necessary infrastructure to encourage investments (Sinha, 2007). All the same, the state of Tamil Nadu in India has emerged as a different investment destination where RIM may focus its investment strategies. The government in the state facilitates foreign investors to set up their ventures, offers tax based incentives among other benefits, with the state emerging as the Indian Silicon Valley due to an influx of sophisticated IT expertise and developments (Himachalapathy, 2011). Another challenge is that India lacks the mass production capacity, which may limit RIM in its mass production plans unlike in China where mass production is easier and cheaper. On the other hand, RIM has to face numerous cases of copyright infringement in China as one of the risks of FDIs in developing markets. There are many cases of copyright infringements in China involving companies that have been set up in the country with many cases ending up in courts while others are never discovered (Hill, 2011). Making of cheaper versions of the product, which has to sell at much lower prices, will affect RIMs market penetration strategies. India and China are two emerging markets with rapid growth forecasts in virtually all sectors. However, considering the above analysis, RIM would have a better strategy investing in India than in China. RIM has its focus in identifying and recruiting the best IT talents in facilitating extensive research and development, which would lead to improvement of its BlackBerry model. RIM would find the required IT skills in Tamil Nadu, the emerging Indian Silicon Valley. Moreover, unlike in China where copyright infringement is rampant, such cases are on a lesser scale in India. Compared to China, India has more relaxed controls especially about the extensive privacy features of the blackberry, which have alarmed many governments and are viewed as a security threat. Therefore, in addition to obtaining relatively cheaper labor per unit of production, RIM will also enjoy a 100% ownership of any investment set up in India, making it possible for the company to have full control of its investments, unlike in China where there are limitations to such shareholding. List of References Cavusgil, S.T., Knight, G., & Riesenberger, J.R. 2008. International Business: Strategy, Management, and the New Realities. Upper Saddle, NJ: Person Education. Dicken, P. 2011. Global Shift: Mapping the Changing Contours of the World Economy, 6th ed. NY: Sage. Hill, C.W.L. 2011. International Business: Competing in the Global Marketplace, 8th ed. NY: McGraw Hill. Himachalapathy, R. 2010. “A Comparative analysis of FDI in India and China.” Journal of Contemporary Research in Management, pp. 127-158. Sinha, S. S. 2007. Comparative Analysis of FDI in China and India: Can Laggards Learn from Leaders? Boca Raton: Universal Publishers. Read More