Book Retail Industry in India - Case Study Example

PHYSICAL BOOKS AND ONLINE BOOKS IN INDIA Physical Books and Online Books in India Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 23, 12, 2010 Table of Contents Terms of Reference 1 Book Retail Industry in India 1 Comparison of E-books and Physical books in the Indian Book Industry 2 Country Analysis 2 PEST Analysis 3 Political Factors 3 Economic Requirements 4 Social Requirements 5 Technological Factors 6 SWOT Analysis 7 Conclusion 8 References 9 Appendix 10 Appendix A: Minimum Wage For the Mumbai Region in India 10 Terms of Reference This is a formal report about the comparison of normal books and online books as used in different areas of the market. It is Global Ventures PLC’s report that gives the management insights into the details that are relevant for the management to be able to make the decision about taking the company venturing into foreign markets. The choice of delving in the use of online books was informed by the realization of how central gathering of information has become in modern times for any country where there is intense stressing of the need to have all entire citizenry to be empowered through instilling in them a culture of reading and learning (Guha 2007). Book Retail Industry in India In the recent past, as recent as 2007 fiscal year, India has greatly appreciated in its use of internet to market and do business through e-commerce. There are a number of sites that are currently offering free delivery of latest bestsellers (books) for an affordable monthly rental price. This ease of use of such services is wholly attributed to the fast internet connectivity and availability of the same to the larger citizenry. Statistics show that by 2013, India will be third largest economy the largest number of internet users. This means that the venture of production and trade in online as well as physical books is a viable venture now that the publishing industry is feeling strained by this immense demand of books by Indian populace. India is the third largest market for English books in the whole world where the value of the whole book market in India is estimated to be around Rs 10 000 crore annually and a recent research (Majumdar & Bandyopadhyay 2006) shows that the online book industry is expected to grow by a constant rate of about 30 – 35 percent annually for the next half of a decade and therefore it will be this tremendously growing customer base that GV Plc will be targeting by its venture into the Indian market. Comparison of E-books and Physical books in the Indian Book Industry From the research that was, it was found the thing that greatly affected readers preference was convenience and cost of books. Online books services in India are cheap as well as easy to us as the procedure of getting membership on any online book sale involves filling a simple membership form and payment for membership through a bank transfer or cash on delivery (Majumdar & Bandyopadhyay 2006). After completing the form and payment, the reader simply has to log on into the members area and order for book(s) or browse for books of their choice then simply press a ‘rent button’ to rent the selected book(s). This service is for physical books which are delivered to the doorstep of the customer and will be collected when the customer logs in and indicates that they have finished with the book(s). For online books, the clients just pay for them and are directed to the e-library where the books are downloaded in their completed pdf format. Country Analysis The country of choice for this venture is India. There are inherent attributes about India that make it ideal for economic expansion a quality that informed the choice of it over other countries. There are additional details that further explain this surmise. India to a large extent fulfils the most essential characteristics when selecting a country for such a venture. It has a relatively high standard of living and a large population which puts a need for the use of books which makes it have a higher purchasing power. It is imperative that the country of choice is economically diversified and stable so that the choice of investment in it is both viable and justifiable (Rajadhyaksha, & Willemen 2008). According to IMF, the Gross Domestic Product (GDP) of India is USD 1.3 trillion and this according to the records in existence puts it at number eleven in the world in size of economies in the past fiscal year. Its per capita income is USD 1 000 and when its Purchasing Power Parity (PPP) is considered, Indian economy is the fourth largest economy in the world worth of USD 3.6 trillion (Rajadhyaksha, & Willemen, 2008). In addition to this, it is also important that the country of choice has an increasing desire to improve its citizenry’s literacy. This is essential as this is the unique selling point of the using of books and their usage. PEST Analysis Political Factors From the research that was done on this, it was found that after the liberation of the economy in 1991, The Licence Raj which were the socialist policies then, have been slowly been under the process of being scrapped off thereby easing the restrictions that impeded foreign investment in the country. Since Global Ventures Plc is a foreign investor in India, details of the tariffs, licensing regulations and duties are very important to its management and since India has appreciably reduced its restrictions through these duties and taxes to an extend of opening its economy to the International Investment and Trade constitutes good tidings for GV Plc’s expansion into the economy (Kulke & Dietmar 2004). As a package of the liberalization, it has now easier to acquire licenses without direct permission from the government which reduces paperwork and bureaucratic protocol that slows business transactions. In addition to this, there is little danger that the government will nationalize foreign companies as the case is in Venezuela since the banking industry is the only one where nationalization is still common in India to date (Kulke & Dietmar 2004). The cessation of The Licence Raj has resulted into a 30 percent annual growth in the 2009 fiscal year in exports and use of books and educational materials (MacDonell 2004). Economic Requirements The starting and trading on both online and normal books in such an economy as India will require a considerable starting cost. India being a country with a relatively low GDP PPP favours this expansion as it has a minimum wage while still with a skilled workforce as indicated in appendix A. Take Maharashtra for instance, the minimum wage is increasing marginally but quite regularly. However at 124.23 Rupees (£1.64) per day for semi skilled labour and 128.08 Rupees (£1.70) for skilled labour the increase will be affordable. The minimum wage is extremely low compared to more economically developed countries. The advantage of this is that labour costs are very low effectively reducing production costs and ultimately reducing start up costs. This increases profits without major pressure from Trade Unions as the working environment is well above the Indian average which has resulted in better compliance and better enforcement and ease of tax payment, thus reducing the company’s administrative work. The Indian Government offers several foreign investment incentives such as what is stated by the Indian embassy as regards exporters. It says that exporters are allowed a 100 percent tax deduction for 10 year in respect to profits derived from export trade which is used in the calculation of the taxable income. These benefits can be passed onto the manufacturers”. As parts of Mumbai are FTZ and GV Plc will be purchasing a lot of industrial inputs, the company can save a considerable amount of money. This will again lower costs thus increasing profits (Metcalf & Randall 2006). Since not all components can be sourced in India, there has to be some cheap importation/exportation to keep costs low as the cargo is generally of low value. The average price of a container to import/export is roughly $950, compared to $1500 in Brazil, $1000 in Japan and $1750 in Mexico. (See appendix B for further comparison details). Social Requirements One of the greatest requirements is the need of a skilled labour force to aid in the production, marketing and selling of the books that the company intends to use as it primal merchandize. India has the second largest labour force in the world which given as 46 million people. Among the most dominant markets in India are the Agricultural sector, the manufacturing sector and the industrial sector which has trading in books coming a distant fifteenth place (Ramanujan 2009). Given that there is a robust human resource workforce that allows for diversification and utilization of the workforce with minimal costs, it is a great advantage for GV Plc since the market in which it intends to join is not flooded extensively. Inasmuch as there was a crunch on India’s robust human resource force following the 2009 global economic crisis, the resilience with which India’s economy absorbed the shockwaves from the crisis was amazing as it left 86 percent of its workforce intact (Posey 1994). The corollary of this is that GV Plc will have a near guaranteed workforce because the demands for jobs are high but the supply is low which makes the recruitment of staff easier and the selection tighter, allowing the firm to hire only the most qualified personnel. The greatest advantage however for GV Plc as regards social factors is that 9% (100’000’000) of the population are near to fully literate in English while 33% (350’000’000) are semi literate. This is important for the company’s initiative to begin book sales in India as there are many volumes that are in English from across the world and just as compared to those in vernacular. In the same way, this high level of literacy will ease the management as language barriers can promote misunderstanding and frustration in the workplace which can lead to de-motivation and errors occurring. Technological Factors The technological factors that are important for selling of both physical and online books have to do with the ICT compliance in India and the access to internet connectivity by the locals. Means of transport is also important as a factor for consideration. India has advanced infrastructure especially in Mumbai where GV Plc considers an important town to initiate its business. Mumbai contains the largest airport and shipping port in India with several rail networks and 3 main motorways linking Mumbai to the rest of the country. This will allow GV Plc to import and export goods nationally and globally with the choice of what form of transport is the most appropriate after economic considerations have been assessed regarding the fastest and cheapest means to prefer. The internet is a requirement that will be most crucial for online lending and purchase of books. It will also help connect businesses to the far corners of the world at any time and for very cheap as well as being a great place to advertise (Kiple & Ornelas, 2000). Without telecommunications this venture would fail as GV Plc will be unable to do business if they cannot connect to their potential customers. SWOT Analysis Using SWOT analysis and more specifically the opportunities aspect I believe that this again demonstrates how Global Ventures new product would be successful if marketed in the India. As discussed above it is essential that the country chosen has access to the internet as it is important in terms of ordering products from retailers and also is important with the possibility that Global Ventures will sell the product directly to the consumer. As of 2009 79 percent of Indian citizens were internet users as opposed to 22 percent of Chinese citizens were internet users (World Bank 2009). This is yet another example as to why India is highly favoured as a favourable country of choice for Global Ventures Plc to introduce its book products. Considering India on a macro-environmental level there are also clear signs that this is the leading candidate in my opinion. In terms of employing workers it’s ranking on the Doing Business in website is number one. This demonstrates that hiring staff is particularly easy and the time in which it takes to set up a business is 6 days. This compares to the OECD of 13 days. This exemplifies the relative ease with which Global Ventures could introduce itself in India compared to other countries (Rajadhyaksha, & Willemen 2008). It’s 'doing business in rank' is number 4 overall. I believe that this high ranking, along with factors discussed already are clear examples of the benefits of choosing India as a country of choice for GV Plc’s expansion. Conclusion From the discussion above and the PEST as well as SWOT analyses that has been done for the market opportunities that is presented in India for GV Plc’s expansion it is clear that the book business is a viable venture that is economically justifiable and strategically authentic. The rich Indian culture blended with high level of literacy and access to internet services make the expansion of a business that is dependent on internet accessibility very capable. The ease with which online renting, purchasing and access to books is afforded gives further incentive to encourage GV Plc to venture into the business in India. Finally, the political stability and economic robustness that India boasts is a further additional motivation for the company’s forging of an expansion front in it which sums up the viability and authenticity of this business paper. References Guha, R 2007, India after Gandhi: The History of the World's Largest Democracy, 1st edition, Picador, Mumbai. Heitzman, J & Worden, L, R 1996, India: A Country Study in Politics and Economics, Library of Congress, Istanbul. Kiple, F & Ornelas, K 2000, The Beginning or an Era: Internet Frenzy in India, Cambridge University Press, Cambridge. Kulke, H & Dietmar, R 2004, A History of Indian Politics, 4th edition, Routledge, Mumbai. Lal, A 1998, Business Processing in India, Oxford University Press, Oxford. MacDonell, A 2004, A PEST Study on India and its Economy, Kessinger Publishing, New York. Majumdar, B & Bandyopadhyay, K 2006, Online Book Industry in India, Routledge, Mumbai. Metcalf, B & Randall, M 2006, A Concise History of Modern India: Cambridge Concise Histories, Cambridge University Press, Cambridge. Posey, C 1994, Business Opportunities in India and its Robust Culture, Reader's Digest Association, Duabi. Rajadhyaksha, A & Willemen, P 2008, Indian Infrastructure and the World Bank Initiatives, University of California Press and British Film Institute, California. Ramanujan, A2009, The Growth of Indian Economy over the Last Decade, Columbia University Press, New York. Appendix Appendix A: Minimum Wage For the Mumbai Region in India Appendix B: Trading Across Borders of India compared to good practice and other economies. Read More