Difficulties That Australian Companies Face while Trading in India - Literature review Example

AUSTRALIA-INDIA TRADING CHALLENGES Name: Course Instructor’s name Institution Date Australia-India Trading Challenges The tremendous advancement in economic affairs of India in the recent past has attracted global relationships with other world countries including Australia. The Australian market provides an avenue for establishing a foothold in India and other emerging East-Asia markets. Therefore, Australia is an important component in India’s strategic priorities of international markets. Australian firms have unlocked the Indian markets as the global economy is struggling to recover from a worldwide recession. Looking beyond the surface of India’s global economy shows that it has faced various problems in the previous years. According to Global Competition Index 2010-2011, shows that various multinationals are scared but are willing to go right about entering Indian markets. The companies are queuing up to do business with India in President, Deepak-Raj Gupta, and Camberra Chapter despite the challenges. The companies are experiencing delays in their entry processes as the Australia-India business opportunities outnumber the impediments. Corruption has been cited to be common in entry processes and other operations. Most people need to be sure on what they are investing in as well as whether they are investing in legitimate businesses. The typical situation seen in most Australian exporters is that India has DS-RCA erosion in respect of Australia. The observation points out to lack of India’s focus towards eastern markets. India is neck-to-neck competing with China in that Australia is sometimes divided between the two. Lack of focus presents a factor that leads to small trade competitiveness (Pargaonkar and Ravishankar, 2012) The system of federalism in India, as well as those in Australia, is one of the challenges that have been realized. According to Harcourt (2014), there are also overlapping regulations that affect the business between the two countries. For example, ‘License Raj’ has left negative effects and a red tape legacy throughout India regardless of the recent improvements. Another global challenge that is facing Australia’s situation while trading with India is demography. The issues are well understood when the situation of young and productive personnel is explored. It is noted that India’s young are more concentrated to the east of the nation. The problem is identified because many jobs that would have been facilitated the trading process are found in the south and the west of India (Harcourt, 2014). Another identified challenge is the issue of raised expectation in the labor market. The expectations are unrealistic as in reality; a not person is a rocket scientist or Information Technology entrepreneur. The challenge also faces India’s needs to move its educational value changes beyond call centers (Harcourt, 2014). According to Nicola Watkinson (Austrade's Trade Commissioner), the first challenge for Australian organizations is not to view India as a single market. The problem is to pick a section of it to start with and consider how they could do business in that given location. The global challenge comes in because of different rules that apply to different states with unique and distinct jurisdictions. The challenge forces the Australian organizations to go into one location before going to another. A company should succeed in one area as one market before expanding out from that part to other Indian regions making the expansion slower. The second challenge according to Watkinson has a market entry strategy. The Australian companies face these global challenges in relation to the nature of entry strategy to use. Most of the companies are in a dilemma of whether to they will have Indian distributors, enter a JV partnership or set own companies (Johnson, 2015). Branding becomes a problem because more attention is given, and funds used in research that determines the best approach. The companies are struggling to have good partners with no historical problems regarding corruption and other issues in the current complex market. According to Johnson (2015), operating in an economy characterized by a rapid growth but still have inadequate infrastructure poses global challenges to Australia as Indian market is highly sensitive price wise. Therefore, having global brands sometimes does no guarantee acceptance of the companies by local Indian markets. India has hierarchical, and paternalistic management system that is characterized with subordinate believing that being a boss demands that one should be consulted on almost every decision. The Australian global branding faces the nature in which highly qualified experts often feel obliged to refer to organizational managers. The situation takes time for Australian companies to get used to it. According to Shyamsunder (Tata BlueScope's CFO), global branding requires IP protection, careful use of language while doing business and respect of religious and cultural sensitivities. The above issues show that only adaptive global and Australian companies will succeed. The other global challenge that faces Australian organizations while doing business with India is India’s strong business culture. People often underestimate and misunderstands this culture that is different to the rest of South-East Asian Nations. The confident business culture even at corporate leadership surprises those from Western corporate culture. Another aspect here is that Indian companies are often prudent about investments. The situation requires Australian companies to be prepared to conduct business through these issues in order to work together (Johnson, 2015). Another global challenge that is facing Australia’s trading with India is seen when some organizations invest more in New Zealand and other European nations than Asia. The low level of engagement in Asia has been evidenced in statistics about foreign direct investment. 8.1 percent of the foreign direct investment (FDI) was in India. The 2013 figure was on par with that in EU and US (Popli and Singh, n.d.). Globalization presents global branding that involves Australia’s trading with India. Globalization fuels technology that in return is changing traditional and local business models. The changes are removing historical protections offered by borders and other geographical barriers. The outcome puts Australian companies into competition from traditional markets. Australian organizations also face increasing competition from other world-class companies especially from emerging markets from other Asian countries. The competition significantly impacts the trade by bringing formidable scale, strong brands, innovation and low-cost basis to the market. These factors may be seen as advantages to the locals as well as challenges to business operators (Dahiya, 2013). Another significant challenge facing Australia’s companies in trading with India is Chinese companies going global. By 2005, there were only eight China-based companies in R&D spending. The number increased to 114 in 2014. Australia had two in 2005 and five in 2014. The research shows that China has spent more in R&D than Australian companies. Chinese companies have hugely succeeded in building global brands. Their lower costs bases and high productivity has impacted Australia’s manufacturing industry negatively (Chaklader and Gulati, 2015). According to Roy Morgan Research & PwC Australia (2014), the central issue that is core to Australia’s trading with India is the problem of cultural difference. Others are organization’s willingness in dealing with change and the ability to operate and manage in Asian environments. Australian businesses have previously worked in sheltered and comfortable environment that has made them complacent. The research shows that most of the Australian businesses owners and managers think that India and Asia at large are different. For many, this is uncomfortably different (Dahiya, 2013). According to Mark Monaghan, who is an ANZ’s senior managing director of institutional and corporate relations, fear is often an excellent motivator. In this case, it is a big motivator for doing nothing as many investors fear to fail when it comes to doing business with Asia (Chaklader and Gulati, 2015). In conclusion, there are a number of perceptions that have been present to explain difficulties that Australian companies face while trading in India. Some of the cited aspects include corruption, uneven playing grounds, cultural differences, legally barriers and trade barriers. The paper has also explained the difficulties that the companies face while trying to enter Asian and especially Indian markets. The most important global challenge that has been pointed is the difference in culture and language use. Finally, the paper noted that Australia faced both local and international competition. The companies will be successful if they embrace the challenges and be adaptive to change so as to fit new technological changes and fitting to the new environments. Reference List Chaklader, B. and Gulati, P. (2015). A Study of Corporate Environmental Disclosure Practices of Companies Doing Business in India. Global Business Review, 16(2), pp.321-335. Dahiya, O. (2013). India–Australia Maritime Cooperation: Challenges and the Way Ahead.Maritime Affairs:Journal of the National Maritime Foundation of India, 9(1), pp.61-79. Harcourt, T. (2014). [online] Available at: https://bluenotes.anz.com/posts/2014/09/the-main-game-in-india-australia-trade/ [Accessed 25 Apr. 2015]. Johnson, A. (2015). Time to chase the tiger: exporting to India. [online] Manufacturers Monthly. Available at: http://www.manmonthly.com.au/features/time-to-chase-the-tiger-exporting-to-india [Accessed 25 Apr. 2015]. Pargaonkar, A. and Ravishankar, K. (2012). Opportunities for Australian businesses in India. [online] Slideshare.net. Available at: http://www.slideshare.net/ValueNotes/opportunities-for-australian-businesses-in-india [Accessed 25 Apr. 2015]. Popli, G. and Singh, S. (n.d.). Commodity Markets Challenges and Arbitrage Opportunities – An Insight into Commodity Trading Business in India. SSRN Journal. Read More