Unique Challenges that Are Faced with Businesses Operating in India - Example

Report on Unique challenges that are faced with businesses operating in India Student’s Name: Institution: Course Code: Date of Submission: Introduction India has high performance. It is ranked 132 in relation to the ease of doing business in India and it is also considered number 166th as the most disheartening country for start up business (Sam, 2006). It is proven that it is not easy to start a new business in India as compared to maintain existing business. In is therefore important to determine some of the unique challenges that are likely to cause problems for start up businesses and existing ones (Scott, 2002). The challenges need to be identified so that appropriate course of action can be taken to overcome such challenges. 1.0 Economic and political climate for foreign business in India The critical challenge that most multinational corporation’s face when doing business in India is architecture of the Governance framework which is not properly entwined between the central and states structure (Shiva, 2013). The economy of India is also very poor. This makes businesses to have low customer turnover since there is low disposable income to most households. This reduces the revenue of the businesses in India and as a result there is low profitability. Politically, there is political instability as every election term, new Government comes with its own laws which regulate the way businesses are done in India (Scott, 2002). Indian Government also has laws and incentives which are only meant to promote local investors and they are based on electoral constituencies of the ruling parties. In India, there is also deception in terms of incentives where investors are lure that there is easy access to market but in the long run they realize that it was a great deception. 2.0 Legal and bureaucratic environment in India There are also some legal issues which challenge businesses in India. These challenges include tax laws, competition framework and fair trade regulation (Shiva, 2013). These regulations require the new businesses to comply with them and any non compliance may lead to legal action which is a great challenge to companies that do businesses in India (Sam, 2006). There companies that operate in India are also expected by law to pay high tax annually. This legal obligation challenges the business that operates in India since there are different tax bases which they have to meet. There are also legal unique challenges of companies that do business in India face. These legal challenges include maintenance of environmental regulations which require the company to dispose off its waste products effectively (Scott, 2002). These legal obligations must be achieved by all the companies that do business in India. The companies are also expected not to use non degradable materials so that there is low pollution (Asit, 2015). The employers also have to observe labor laws which give employees rights to claim other incentives from the business. 3.0 Managerial and labor environment in India In India there is low skilled labor since most people in Indian have formal skilled training. This therefore makes the companies that operate in India to pay high cost of labor due to high demand for labor (Shiva, 2013). There is also poor management of businesses since managers of different businesses in India are done by family members who have no proper education and who does not know how to motivate employees or how to handle conflicts in the organization. This makes employees to have negative attitudes towards work and work under strict supervision. 4.0 Social and cultural environment for foreign business in India The misunderstanding of culture greatly affect international business (Asit, 2015). It makes many international business firms to fail as a result of inability to understand the kind of products embraced by people of various cultural backgrounds. It is therefore important to consider cultural diversity as a unique challenge that new businesses face when doing business in India (Scott, 2002). It is evident that some of western investors are not keen on Indian Culture since Indians are very polite and well mannered making business men to think that their products have been accepted by Indians (Shiva, 2013). In the long run they realize that Indians do not buy their products not because of their taste nor quality but because they are not based on their culture. India is a country with diverse culture, with different languages, religion, caste and education background (Sam, 2006). This makes new investors to have difficulties to run their businesses as they have to produce and sell products which match different cultural background. 5.0 Human resource and labor environment in India In India, there is a big gap for skilled professionals. The whole country has 487 million professionals which is in excess of two third of their employers. These professionals are struggling to secure employment in different firms in the country (Asit, 2015). The only unique challenge that businesses face is the selection of appropriate employee with the right talent and skills to manage and scale up the business. This challenge makes it difficult to do business in India since there are high chances of recruiting employee whose quality of talent does not match the required talent (Shiva, 2013). There is also shortage of employees since there available workforce with formal skills training is only 2.3%. This increases the cost of labor as there is high demand for skilled labor which attributes to a critical challenge to new foreign businesses in India. 6.0 Industry and policy factors The industrial policies of India are also not very conducive for new business organizations. Some industries require new businesses to follow some industrial laws such as payment of some levy to enter into the industry (Scott, 2002). There are some companies which require new companies to obey some industrial laws to ensure that they limit the number of companies that operate under such industries (Asit, 2015). For the company to operate under a given industry, the company has to meet some capital requirement in order to enter. There are also some cultural policies which new businesses must observe so as to get entry into the industry (Sam, 2006). The Government also requires the new business to pay high tax and other registration fees to start doing business in India (Sudalaimuthu & Raj, 2009). This registration fees is very high and might give burden to new business operating in India. 7.0 Customer and competitive factors There is a wide customer base in India. Indian population is high which gives it new businesses to have high customer base to buy different products (Shiva, 2013). Competition is the only challenge which new businesses face. There are many companies that produce substitute products (Sam, 2006). This creates difficulties in the way new businesses firms do their business. They have to incur high marketing and advertisement cost which has a negative effects on its profitability (Scott, 2002). The uniqueness of customers in India is that they buy products based on their cultural values and beliefs (Asit, 2015). This has great challenges on new businesses since they still lack an understanding to deal with Indian customers. Conclusion It is very important for the Government of India to create flexible laws and strengthen the economy of India. This will help new businesses to do business under a very good condition. The unique challenges that businesses in India face include high completion, lack of enough skilled manpower and cultural practices. These challenges make it very difficult for foreign companies to do business in India. It is therefore important for companies that have the urge to do business in India to form some alliances with existing business organizations to adapt to Indian business environment and to learn how to deal with Indian customers. References Sudalaimuthu, S. & Raj, S.A. (2009). Logistics Management for International Business: Text and Cases. PHI Learning. ISBN 9788120337923. Asit R, (2015). Wholesale inflation falls sharply to -4.05% in July. Live Mint. Retrieved 15 August 2015. Shiva K (2013). Unemployment rate increases in India. The Times of India. Retrieved 23 May 2014. Scott C (2002), The Indian diaspora in Central Asia and its trade, 1550–1900, BRILL, ISBN 90-04-12320-2 Sam S (2006). The Rise and Fall of Indian Socialism: Why India embraced economic reform. Reason. Retrieved 2011-01-17. Read More