1. 2. 3. 4. Introduction…………………………………………..05 Foreign Direct Investment (FDI)……………………..09 Shining Indian Multinational…………………………11 Impact of MNCs on Indian Industrial Sectors………..13  Automobile Industry……………………………….14  Manufacturing Sector……………………………...16  Telecom Industry…………………………………..18  Research & Development………………………….21  IT Industry………………………………………….23  Food & Beverages Industry………………………..25 5. 6. 7. Case-Study1: Impact of Glaxo-SmithKline Merger….27 HP marks Indian Employment Milestone……………29 Case-Study2: Pepsi Co……………………………….31

8. 9.

India v/s China……………………………………….34 Conclusion……………………………………………36


The MNCs slowly but reluctantly began to pour capital investment. The single biggest effect evidenced was the improvement in the standards of living of the country's population. Compared to its potential. Impact On Developing Economies & Policy Implications: Investments by multinational companies (MNC) allow developing economies to share in the considerable benefits of the global economy. India was more or less a closed Economy. can result in inefficiency and waste. 4 . it's just a drop in the bucket. Through the application of capital. Official incentives. Food and Beverages. Information Technology. Foreign direct investment is already having a dramatic impact on the way companies do business and developing economies integrate with the global economy. The contribution of the local industries to the country’s GDP was limited that were the main cause of shortage of funds for various development projects initiated by the government. This was the post 1991 era where the government began to invite and welcome giant MNCs into the country. higher quality goods.Introduction Till 1991. however. In an effort to revive the industries and to bring the country back on the right track. and broader selection. though. etc to the Multinational Corporations. and a range of skills. as consumers have directly benefited from lower prices. Automobile. trade barriers. Tourism. the impact on employment was either neutral or positive in two-thirds of the cases. Opportunities for Developing Economies The opportunities for developing economies are significant as well. and other regulatory policies. across different industries and within different policy regimes. the government began to open various sectors such as Infrastructure. The rate of growth of the economy was limited. technology and other valuable resources in the country causing a surge in GDP and upliftment of the economy as a hole. And despite often-cited worries. Improved productivity and output in the sector and its suppliers indirectly contributed to increasing national income. multinational companies' overseas investments have created positive economic value in host countries. technology.

9 18. Rather than leading to the exploitation of lower-wage workers.2 27. The world's service provider • • The services sector. when it comes to foreign direct investment.09 5 .3 21.90 274313. brokerages and accounting firms have set up large research establishments in India. Global investment banks.7 35. rather than regulation.68 22.4 14. consumer behaviour and industrial processes.06 14. as some critics have charged. A growing number of US companies are hiring Indian mathematics experts to devise models for risk analysis.6 11. MNC investment had a positive to very positive impact on the host country. and an improved living standard. Crore) YEAR 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2003-04 (April-Jan) 2004-05(P) (April-Jan) EXPORTS 32558 44042 53688 69751 82674 106353 118817 130101 139753 159561 203571 209018 255137 293367 222863. Indian Exports Overview (in Rs.9 29. the investments fostered innovation. Therefore. productivity.37 GROWTH RATE 17. government seeking those advantages would be advised to favor policies of openness.Case studies reveal that in virtually all cases. which has been growing consistently at a rate of 7 percent per annum.5 7. Export revenues from the sector are expected to grow from $8 billion in 2003 to $46 billion in 2007.7 9.98 23.6 2.5 28. accounts for almost half of the country's GDP.

Gross Domestic Product (GDP) Year Total GDP 156566 212253 213983 225268 238864 861064 926412 998978 1049191 1112206 1985-86 1990-91 1991-92 1992-93 1993-94 1994-95* 1995-96 1996-97 1997-98 1998-99 Total GDP 1200000 1000000 800000 600000 400000 200000 0 198586 199091 199192 199293 199394 199495* 199596 199697 199798 199899 (In Rs. Crores) years 6 .

Aetna. CISCO. assured quality and value addition. AutoZone. American Express. Sony Citi group. Honda. India: A Services and Manufacturing Supplier to the World Sector IT Services Company Infosys Tata Consultancy Wipro Outsourcing Client Goldman Sachs. Watson. Pharma Manufacturing Bharat Forge Tata Motors Moser Baer Essel Propack Meritor. Verizon GE. Eon Labs Eli Lilly. Colgate ITES Mphasis BFL Spectramind Pharmaceuticals Cipla Shashun Chemicals Lupin Laboratories 7 . Watson Pharma.The world's service provider • • The services sector. A growing number of US multinational companies are hiring Indian mathematics experts to devise models for risk analysis. HSBC Transco. Northwestern Mutual. accounts for almost half of the country's GDP. Capital One Dell. Ford. Besides being an outsourcing hub. The brick and mortar companies India is not merely a provider of services. Arm Ex. Capital one Ivex. Unilever. consumer behaviour and industrial processes. About 20 percent of Indian automotive production in 2004 is exported to developed countries. DHL. Export revenues from the sector are expected to grow from $8 billion in 2003 to $46 billion in 2007. it has grown into a global manufacturing hub. HP-Compaq. brokerages and accounting firms have set up large research establishments in India. reconfiguration and customisation with creativity. Caterpillar. BASF P&G. which has been growing consistently at a rate of 7 percent per annum. General Motors. Global investment banks. Nortel. World corporations are now leveraging its proven skills in product design. GSK Pharma Apotex. Accenture. FAW(China) Rover Imation. Toyota. APP. UBS.

FDI is required by a developing economy such as ours to tap unexplored resources and put them to more productive use.503 crore was more than 80 per cent of what the country received in 2003. A series of ambitious economic reforms aimed at stimulating foreign investment has moved India into the front ranks of the rapidly growing Asia Pacific region. Rs 5. The Government of the host country controls the FDI levels in various segments of the economy such as Telecom.4 million) in July 2004. With a half-billion strong middle class. consumer demand in India will grow sky high. • • The Finance Minister cleared 46 proposals of foreign direct investment (FDI) amounting to Rs 408. It is evident. amounts to 96 per cent of the total FDI approved during the full year of 2003. • • There has been a sharp rise in the number of FDIs approved in 2004. Retail. Tourism. Research and Development. During the first seven months of 2004. between January and July. 8 . Infrastructure.22 crore (US$ 93. This figure. Automobile and so on. The investment scenario in India has changed. 487 million middleclass Indians will spend an additional $420 billion during the next four years. The actual FDI inflow too is expected to surpass last year's figure -during the first seven months of 2004 actual FDI inflow at Rs 9. Perhaps the biggest advantage of MNCs is the influx of valuable Foreign Exchange.220 crore worth of FDI was approved. FDI allows the host country to earn valuable foreign exchange that can be used for future imports or to pay off existing loans of the country. which accounts for only seven months of 2004.Foreign Direct Investment FDI or Foreign Direct Investment refers to the investment of foreign currency and other valuable resources by Multinationals into the host country. According to some estimates. And the figures say that it is for the better.

In a bid to stimulate the sector further. • • • • The Centre has divested some of its own powers of approving foreign investments that it exercised through the Foreign Investment Promotion Board (FIPB) and has handed them over to the general permission route under the RBI. It has set up an Investment Commission that will garner investments in the infrastructure sector among others.78 billion in July 2004. which was acting as a deterrent to foreign investors. Comparison between India and China with respect to FDI India vs. China FDI Flows Chinese reform process Indian reform process 1977 1991 5 years since 1982 5 years since 1991 India China USD 4488 m USD 4508 m 10 years since 1982 10 years since 1991 China India USD 13791 m USD 15483 m 9 . India's foreign exchange reserves rose $700 million to a record high of $120. and plans to increase the limit for investment in the infrastructure sector. the government is working on a series of ambitious economic reforms. The government has scrapped Press Note 18. The FDI cap for aviation has been hiked from 40 to 49 per cent through the automatic route.

This month. About 80 percent of revenues for Tata Consultancy Services comes from outside India. is flying high. becoming world-popular suppliers and are recruiting staff cutting across nationalities. Small auto components company Bharat Forge is now the world's second largest forgings maker.17 billion) in Asia's second-biggest tech IPO this year and India's largest IPO ever. German.2 billion ($1. While an Asian Paints is painting the world red. Indian businesses are acquiring companies abroad. Essel Propack is the world's largest manufacturers of lamitubes tubes used to package toothpaste. American and Chinese people. It has 17 plants spread across 11 countries and a turnover of Rs 609. 10 . Asian Paints is among the 10 largest decorative paints makers in the world and has manufacturing facilities across 24 countries.8 billion-units global tubes market. It has 31 customers across the world and only 31 percent of its turnover comes from India. Ranbaxy is the ninth largest generics company in the world.Shining Indian Multinationals India Inc. Dr Reddy's Laboratories became the first Asia Pacific pharmaceutical company outside Japan to list on the New York Stock Exchange in 2001. Many Indian firms have slowly and surely embarked on the global path and lead to the emergence of the Indian multinational companies. It became the world's second largest forgings manufacturer after acquiring Carl Dan Peddinghaus a German forgings company last year.2 crore for the year ended December 2003. Its workforce includes Japanese. The company commands a staggering 30 percent of the 12. Tata is rolling out Indicas from Birmingham and Sundram Fasteners nails home the fact that the Indian company is an entity to be reckoned with. With each passing day. it raised Rs 54. Not only over the Indian sky. An impressive 76 percent of its revenues come from overseas. Some instances: • • • • • • • Tata Motors sells its passenger-car Indica in the UK through a marketing alliance with Rover and has acquired a Daewoo Commercial Vehicles unit giving it access to markets in Korea and China.

Sundram Fasteners is not merely a nuts and bolts company. did not have to go far from home to access the product.• • Infosys has 25. The plant in Jiaxin city in the Haiyan economic zone has ensured one fact: that its customers who were earlier buying Sundram products in Europe and the US. It believes in thinking out of the box. Australia. Probably that is why it decided to acquire a plant in China. 11 .634 employees including 600 from 33 nationalities other than Indian. It has 30 marketing offices across the world and 26 global software development centres in the US. Canada. the UK and Japan.

17. 10. we have the actual analysis of the effect of MNCs on various Indian Industrial Sectors. 18. 12. we have analyzed the Indian Economy and the way in which multinational have added more value and increased the exports. 14. Cement Aviation Automobiles Auto Components Biotechnology Financial Services Food Industry Gems and Jewellery Healthcare Information Technology IT enabled Services Media & Entertainment Oil & Gas Pharmaceuticals Real Estate Retail Research & Development Science & Technology Steel Textiles Telecommunications Tourism & Hospitality Training & Education 12 . Further more. 4. resulting in all round development. 21. 19. 13. Certain important sectors are considered and the actual effect of MNCs i.e. 15. 16. GDP and productivity.Impact of MNCs on Industrial Sectors Indian So far. 20. 9. 7. 2. 8. 3. 22. the practical way in which they are affected are studied viz. 5. 6. 11. 23. 1.

Dealership Operations including Parts. easy availability of finance at relatively low rate of interest and price discounts offered by the dealers and manufacturers appear to have stimulated the demand for vehicles and a strong growth of the industry. Ashok Leyland. Employment opportunities are emerging with Manufacturers. 2004. Sales. Mitsubishi etc. In other vehicle segments too. This has opened up numerous opportunities or employment in this sector for trained and skilled professionals who are well versed in the latest manufacturing process. Honda. Consequent to liberalisation.0 per cent in April-December. which increases the demand for multi skilled personnel. In the two-wheeler segment besides the other major MNC brands made available to the Indian consumers. Multinational giants are vying with one other to launch their models. Volvo. has been on an upswing for the past few years. 13 . Audi etc. The growth curve of India Auto Inc. Service. Mitsubishi. Fiat to come up with plants in India. On the other hand. the growth rate in 200304 was 15. Mercedes-Benz. Suzuki. Toyota. as well as in the fast developing Automotive Aftermarket sector. As a result conducting business in the Automotive Industry has become more competitive and sophisticated. The post liberation economical scenario has resulted in all the big names such as General Motors. Annual growth was 16. Leasing & Financing. have carved out their niche. Mahindra. Hyundai.Impact Of MNCs on Automobile industry The present scenario is a highly transformed one. Ford. General Motors. Manufacturing in India has also come of age. the arrival of new and contemporary models. The Indian automotive giants like Telco. Mercedes Benz. Big names of the vehicle industry like the Korean giant. Bajaj are revamping their production strategies and launching new models designed and developed indigenously. have already opened their account. The high growth observed since 2001-02 in automobile production continued in the first three quarters of the 2004-05.1 percent.

which has just hit European roads.The automotive industry is the barometer of any major economy and the same holds true for India as well. in India by October-November 2004. There has been a phenomenal growth in the automotive manufacturing sector in our economy. Maruti Udyog. these models are the latest cars zipping on international roads and not the dated versions that were passed on earlier. Porsche is bringing in the Cayenne and Toyota is planning a simultaneous release of its IMV. TVS Motors and Hero Honda. India has become a launch pad Rising sales and strong growth prospects heightened the popularity of auto stocks in July 2004 as foreign institutional investors (FIIs) increased their stakes in key automobile companies like Mahindra & Mahindra. DaimlerChrysler plans to launch the new Mercedes SLK roadster. Global names such as Daimler Chrysler and Porsche have begun introducing their new offerings in India. 14 . Ashok Leyland. Note.

• • • • According to a CII-McKinsey report. Manufacturing exports from India grew 20 per cent in 2003 over the previous year.apparel.000 cr.5 per cent share of the world manufacturing trade. India's exports in these sectors were $10 billion in 2002.000 crore over the next two years. The country would then have a 3.000 cr will come from internal generation Half of this debt may come through the ECB route Most corporates are going for brownfield expansion Rising interest rates won't impact India Inc's investments 15 . The Indian economy grew by 7. • • • • Of Rs 200. Manufacturing firms on expansion binge Manufacturing companies are planning to invest as much as Rs 200. compared with 7. To reach the $300 billion target. FY2005. manufacturing exports from India are likely to grow to $300 billion in 2015 from $48 billion in 2003. the industry has to clock a growth of 17 per cent every year as against the 11 per cent rate at which it is growing at present. Not only are profits soaring.4 percent in the April-to-June quarter.6 percent in the previous quarter. auto components. Manufacturing grew 8 percent in the quarter. speciality chemicals and electricals and electronic products. $70. Of the total $300 billion. The picture is about to brighten further.Impact on the Indian Manufacturing sector The resurgence of India's manufacturing sector has been quite magical. Rs 100.$90 billion is expected to come from just four sectors . the sector is fast spreading its tentacles abroad as many Indian manufacturing firms inch close to becoming true blue multinationals. buoyed by growth in manufacturing and services.

Mexico Manufacturing Outsourcing India is fast developing into a manufacturing hub for world corporations wanting to leverage the sector's proven skills in product design. while Europe accounted for 40 per cent of the total outflow. South Korean two-wheeler major Hyosung is making India the manufacturing hub for its 250cc cruiser bike. assured quality and value addition. a call centre in the Philippines Msource's Spanish language centre in Tijuanna. accounting for around 37 per cent of the total Indian overseas investments during last year. About 20 percent of Indian automotive production in 2004 is exported to developed countries. 16 . reconfiguration and customisation with creativity. Aquila through a technical tie-up with Pune-based Kinetic Engineering. • • • GE has entered into an OEM deal with Thermax India to supply chillers for the latter's power systems.With annual outflows averaging at $1 billion. Ford Motor Company is aiming to source US$ 120-160 million worth of auto components from Indian manufacturers over the next two years under its India Sourcing Program. The two most important destinations for Indian FDI last year were the US and the Russian Federation. While some MNCs enter into OEM deals to source components.312 crore) The Hinduja's purchase of controlling interest in C3. others have Indian arms to supply to global markets. the country's ranking in UNCTAD's outward FDI performance index has already shot up from the 107th position in 1999 to the 61st spot in 2003. Some large Indian investments • • • ONGC's 25 per cent stake buy-out in a Sudan oil firm from Talisman Energy of Canada for $720 million (around Rs 3.

the growth in the mobile subscriber segment picked up in December 2004 after remaining at around 1. 2. In the mobile segment. (According to the Telecom Regulatory Authority of India (TRAI). Even in fixed line. it had a growth of 139 per cent year on year in 2004.51 million mobile users in 2004 marks an increase of 11. the cellular user base registered a 68 per cent growth to touch the 48-million mark.65 at the end of 2003. an increase of over 30 per cent. ten years after private telephony was introduced in India. the mobile subscriber base had crossed the number of fixed line connections.42 per cent to touch 92.42 million GSM subscribers and 0. Colgate is setting up a brand new toothpaste facility in western India which will be one of 15 such facilities across the world.76 million at the end of 2004. According to a study by IDC. telecommunications has been growing at a feverish pace in the past few years. registering an increase of 24 per cent. additions consisted of 1. The speed of growth can be gauged by the fact that in 2004.58 million at the end of 2003.67 million subscribers were added as compared to 2.5 million per month for the previous two months. as compared to 6.5 per cent over the 17. The gross telecom user base stood at 70.) The year 2004 ended with the tele-density reaching an all-time high of 8.15 million new users during 2003.49 million additions made in 2003. Impact on Telecom Industry One of the fastest growing sectors in the country. The total telecom subscriber base. registered a growth of 31.53 million CDMA subscribers.• • Global consumer electronics giant Matsushita of Japan has decided to source Panasonic colour television sets from India for its international market. 17 . The non-voice market (message and data services) for mobile operators has also registered tremendous growth in 2004. consisting of fixed as well as mobile users. • • • • • While fixed lines touched 44 million at the end of 2004.62. The total of 19. More than a third of these subscribers were added during 2004.

52 mn Additions during the 0.0 45. is setting up a mobile phone manufacturing plant in India. Analysts believe that if the current rate of growth is maintained.54mn March'05 98. Telecom statistics January' 05 Total subscribers Tele-density Fixed line 94.92mn 8. A study released by Ernst and Young says revenues from the sector could touch US$ 25 billion by 2007. 18 . 14. which is around Rs.08 45.15mn February'05 97.36mn 52.560 crore (US$ 3. it could add up to amazing figures in the next few years.03mn 9.54mn 0.3 billion).73mn 1.90mn 0.80 45.08mn 9.7 per cent to the total mobile services revenue. While the government expects over US$ 800 million investment from foreign telecom companies in the coming year. • • Japanese conglomerate Kyocera.13mn 0.5mn Foreign interest The growth statistics combined with the government's decision to increase the foreign direct investment cap in the sector to 74 per cent is generating interest among global investors.At present non-voice revenue contributes around 4.39mn month Mobile Total additions during the month GSM additions CDMA additions Source: TRAI 49.27mn 0. Alcatel wants to make GSM mobile phones in India. The French major is planning a cell phone manufacturing facility in India with an annual capacity of 2.67mn 1.24mn 0.5-5m units to cater to the Asia-Pacific markets. It plans to start shipping to countries in South East Asia. Australia and New Zealand next year. which has acquired the mobile equipment division of CDMA technology pioneer Qualcomm.49mn 1. a number of them are already here.77mn 1. and expects to ship phones to Africa by the end of the year.17mn 0.39mn 51.77mn 1.

VSNL also received a dark (uncommissioned) fibre that links Japan to Singapore and 200 employees of TGN.• • LG recently started assembling phones in India and Nokia plans to set up a manufacturing plant with an investment of US$ 100-150 million. which will have 19 . As part of the TGN deal. The Mahanagar Telephone Nigam Limited (MTNL). The network. Technology advancements Among other tidings in the telecom sector are the technology upgradations being effected in Delhi and Mumbai. Tyco has supplied the optic fibre for the Chennai-Singapore link. It is of the order of 7 terabits on the Pacific route. infrastructure vendors. As the sector has been performing well. manufacturers and associated services companies. Indian companies going global India offers an unprecedented opportunity for telecom service operators. The development helped Tata gain a foothold in the South African market. • • • The Tata group's Videsh Sanchar Nigam Ltd.000 kilometre) submarine fibre optic network that connects northern Asia.208-mile (60. (VSNL) struck a $130million deal to pick up Tyco Global Network's (TGN) 37. The Tata Group has also won a bid to acquire 26 per cent stake in South Africa's second network operator (SNO) that gives the company a mandate to develop and operate both national long distance (NLD) and fixed-line networks in the country. the state-run telecom services provider.175kilometre. VSNL inaugurated its own 3. Reliance Infocomm had also picked up FLAG Telecom for $210 million a few months before VSNL bought TGN. The Tyco cable has the largest capacity globally. India will soon join the elite club of countries that have 3G mobile services. is setting up India's first 3G network in Delhi and Mumbai. Global handset major Siemens India Ltd is planning to invest over US$ 500 million in India in the next three to four years for setting up new factories and expanding its existing capacities. the bulging bottom lines of Indian telecom companies are making them invest in assets. VSNL's was the second submarine cable deal struck by an Indian company in 2004. 5. Within days of bagging TGN.12-terabit Chennai-Singapore submarine link. America and Europe.

27% identified India as the leading relocation destination for R&D. in August 2004. Companies such as Ranbaxy.000 crore (US$ witnessing increasing vitality and growth. More than 125 Fortune 500 companies have opted to have their R&D base in India. which put India on the world map. The best-known Indian R&D companies are in pharmaceuticals and biotech sectors. followed by China with 17%. Of this. Around 10% of the respondents reported either new or relocated R&D operations in the past two years.9 million). Following in the footsteps of the information technology enabled services (ITeS) industry. though it continues to be the leading destination for MNCs relocating their manufacturing operations. The reasons for this are obvious. Sun Pharma and Biocon and Shanta Biotech are attracting interest from companies in the US and Europe. will require a total investment of Rs 4. These are some of the underlying trends that emerge from the Ernst & Young Transfer Pricing 2005 global survey that polled 348 multinational parent companies and 128 subsidiary corporations in 22 countries. China comes next. 25 in 20 . Dr Reddy's Laboratories. comprising 55 in transgenic work. About 165 institutions in the country are engaged in genetic engineering research.a capacity of 4m lines. which are seeking a strong platform for development skills. yet another sector -Research and Development (R&D) -. • • India conducted its inaugural test flight for Saras. the country's first indigenous civilian light-transport aircraft. Impact on Research & Development India has emerged as the hottest destination for multinational companies (MNCs) starting or relocating their research & development (R&D) centres over the past two years. India's wealth of scientific talent is unmatched in the world.

600 researchers and plans to raise the number of staff to 2. Welch Technology Center in Bangalore is the company's largest such facility outside the US. With an investment of US$60 million. Having proved its scientific mettle. The DaimlerChrysler Research Centre in Bangalore is involved with fundamental and applied research in avionics. especially to India. Eli Lilly. • India is the only developing country and sixth worldwide to manufacture and launch its own satellites in geo-stationary orbit and even plans a moon mission in 2008. MNC products developed by R&D centres in India Companies Sun Microsystems’ India Engineering Centre Products Portal server. it employs 1.400. The country has already started commercial cultivation of genetically modified cotton in Gujarat and some southern states. simulation and software development. Gone are the days when international companies retained R&D jobs at home and sent abroad work that were clerical and of a repetitive nature. even innovation and design work have begun to move offshore. It has also launched satellites for foreign customers such as Germany and Korea. General Electric. according to the Department of Biotechnology. 21 . • • • GE's John F.• therapeutics and 85 in basic research. India has begun to appear on the outsourcing radar with a monotonous regularity. Web server. Boeing is working with HCL Technologies to co-develop software for everything from navigation systems and landing gear to the cockpit controls for its upcoming 7E7 Dreamliner jet. Now. Identity server and meta directory. Hewlett Packard. with several other crops in various stages of getting approvals for commercial plantation. DaimlerChrysler and others — have put up R&D facilities in India over the past few years. More than 100 Fortune 500 companies — including Delphi.

It develops most of the software required for Philips products. Satyam and HCL Technologies-are the prime contenders in the race to the Fortune 500. The lab is also working on a solution for Value Added Tax (VAT). The centre has fully developed a strategic sourcing solution for i2. a bridge router for the DSL. to become the number one exporter in the country. including the Channel Management Solution. According to Karnik. The world software Arena. Experts feel that even within the top 10 the dip-offs start getting sharper after the top three to 22 . The Top Five The top five Indian IT companies based on FY04 revenues-TCS. which helps chip manufacturers negotiate prices with their dealers online. which is growing by leaps and bounds both through participation by captive units of multinationals and third party providers of Indian origin. which runs multimedia applications. and Zeno. the remaining two are already half way through to that mark. besides delivering nearly eight manufacturer-industry templates and retail solutions from India. Some of them are the big home-grown IT Services companies like Infosys. IT is now an industry. Almost i2 Technologies’ R&D Centre Philips Innovation Impact on IT Sector Information Technology enabled Services (ITES) by MNCs has probably generated the maximum number of sunshine stories in the Indian industry in the last few years. mobile laptop solutions and oil and gas upstream solutions. the way things are shaping up the companies that are most likely to make it are going to be the ones from the current top 10 because the dip-offs in size are sharp beyond the top 10. Currently India is the Power House. including the Ankur Digital Signal Processor. Wipro. Infosys. Dealer Portal for the automotive industry.Texas Instruments’ R&D Centre SAP Labs Fully developed at least 20 products. The lab has produced some of SAP’s products meant for the global market. According to Nasscom. While the first three have made it to the billion-dollar club. the software industry has overtaken the gems and jewellery as well as textiles industries. Wipro and Tata Consultancy Services (TCS). Sangam.

000 Market Cap*: $21 bn Azim Premji Wipro Ranking: 2 Revenue: $1. a US-based financial services consultant and utilities' practice of consultancy AMS.3 bn Head Count: 39. Leading the Charge 2004 S Ramadorai TCS Ranking: 1 Revenue: $1. The top companies are indeed rapidly expanding their global outlook and reach. these companies have also been open to foreign acquisitions and JVs. And the acquisition list is very long: TCS acquired Phoenix Global Services (technology solution provider). Prudential.6 23 .000+ Market Cap: $19. to expand their global footprint. Ford. The global locations for Infosys.84 bn Some IT MNCs in 2004 Global Fortune 500 Name Revenues ($ bn) IBM 96. to the top three. Wipro acquired Nervewire.4 bn Nandan Nilekani Infosys Technologies Ranking: 3 Revenue: $1.6 Accenture 15.7 Market Cap ($ bn) 149 63 10. TCS is located across over 30 countries and serves clients in around 60. more specifically. and the Standard Chartered Bank.000+6300 Market Cap: $14. setting up centers across the world and competing with the top tier global IT companies. In the last two to three years.9 EDS 20. As a result. Ericsson.1 CSC 14. the likelihood is restricted to only the top five and. American Express. Wipro and HCL Technologies range between 10-20 countries.1 bn Head Count: 35.7 23 8. a business integration firm with offices in San Jose. a Deutsche Bank-owned outfit. Deutsche Bank.five companies.23 HP 79.6 bn Head Count: 43. These companies serve some of the top clients globally including the likes of GE. US. Transco. Infosys acquired Expert Information Services of Australia and US-based Trade IQ product division of IQ Financial Systems. HCL Tech has acquired majority stake in Aalayance.

HP. "The organic growth will continue to happen but that is not going to be good enough for rapid growth. Acquisitions will help these companies to add expertise in terms of both new markets and technologies. While TCS. will this be enough for our top three to join the ranks of the likes of Wal-Mart Stores." he adds. Citigroup. BP. etc. IBM. Shell Group. Wipro and Infosys may have crossed the psychological billion-dollar barrier. General Motors. 24 . BMW. Karnik points out that along with organic growth these companies will have to go in for acquisitions to be able to achieve the required rapid growth. achieving the next few billion dollars is going to be a tough task. warranting a much more rapid growth.Rules of the game But.

The economy of the country is widely anticipated to double by 2010 (Merrill Lynch 2004) to become the world's third largest by 2050 (Goldman Sachs). and airlines. the HRI service sector is expected to grow by 6-7 per cent over the next few years. The Indian middle-class. a US department study says the prospects for investment in Indian markets could be gauged from the fact that total Hotel. positive impact of 'Incredible India' tourism promotion campaign and the world's increasing interest in India's rapidly growing economy are some of the main reasons cited for growth. comprising innumerable roadside eateries and tea/snack shops. The institutional food service sector consists of food service facilities for Railways. the HRI service sector in India has vast potential for growth as there are approximately 55.5 per cent of their food expenditure in hotels and restaurants. is the main drivers of the economy. Eyeing the over 250 million-strong middle class. as Indian food imports are likely to grow 6-7 per cent over the next few years. says a study. the study pointed out.000 in the unorganised sector.000 to 5. prisons. 25 . An upswing in the Indian hotel industry since 2003 following turnaround of the global tourism industry. armed services.Impact On Food and Beverages Sector New Delhi: India's booming tourism sector and its rapidly growing Westernstyle fast food joints offer unlimited opportunities for foreign food and beverage exporters.00.00. hospitals. education institutions. Restaurant and Institutional (HRI) service sector sales of F and B amounted to $ 8 billion during 2003-04. government and corporate offices. unorganised and untapped so far. on an average.000 registered restaurants in the organised sector and in the range of 1. Though Indian consumers. spend only 2." the study noted. "Though new. which some estimate is 250 million-strong and growing at 30-40 million a year.

and about 12 per cent eat out once a month. By 2007. Cafe Coffee Day). This growth is expected to remain strong over the next few years. The eating-out culture is evolving fast in India. the study said. more women in the workforce and increasing urbanisation support HRI food sales. the study pointed out.5 per cent of urban consumers eat outside their home at least once a week. adding that the Indian hotel industry was gearing up to cater to the food needs of the international visitors. 26 . hotels managed to get a miniscule five per cent of total sales of Indian food service sector while restaurants and institutional caterers together cornered 52 and 43 per cent respectively. Foreign tourist arrivals into the country in 2004 crossed 3. Pizza Hut. approximately 22 per cent of households (44 million) are expected to have an average annual income of $3. Barista. It is believed that the multinational and domestic multi-unit restaurant segment will drive the future expansion of the Indian restaurant industry.300 on purchasing power parity basis) compared to less than seven per cent in 1995. An expanding young population. both multinational chains (McDonald. Dominos etc) and Indian chains (Nirula's. Sixty-five million people are expected to enter the 20-34 year age group from 2001 to 2010 in India and the number of dual income households has been expanding rapidly in urban areas. Pizza Corner. About 4. as more consumers seek variety in their food choices. the study observed. In recent years. Urban Indians are aware of international cuisines and an increasing number are willing to try new foods. a growth of 24 per cent over the previous year. the study said. noting that close to 30 per cent of the population live in urban areas. There has been double-digit growth in the Western-style fast-food outlets and coffee shops.According to the study. it said quoting a survey.36 million.150 (USD 17. A rapidly growing Indian economy (6 per cent annually over the last decade) has increased incomes of the consuming class. This share was likely to grow to 40 per cent by 2025. the Indian hospitality industry has benefitted from a steadily growing economy and a booming tourism sector.

Most Indians still prefer Indian food. while SmithKline Beecham is a 40 per cent affiliate of the UK-based parent. Impact of Glaxo. or SBCH.278. Large market share In terms of retail drug sales. as regional cuisines offer many choices. the merged entity will have 27 . Burroughs Wellcome and SmithKline Pharma would further widen the gap between the number one company and the rest of the top five drug companies in India. adding "vegetarianism" was still a widely popular culinary tradition in India.382.06 crore. SmithKline merger on India Economy The merger of Glaxo India and SmithKline Beecham Pharma will create the second largest pharmaceutical company in India. is unlikely to be a part of the merger in India. which together account for a 63 per cent share of this market). Glaxo India has already sold its consumer business to Heinz India. the merger of Glaxo. after Ranbaxy Laboratories. and Boost. SBCH India is a 40 per cent subsidiary of SmithKline Beecham plc. Nutritional products will stay out SmithKline Beecham Consumer Healthcare. with its sales of Rs 1. However. it said. based on the results for the year ended 31 December 1998. which comprised popular brands such as Complan and Glucon-D. the younger urban population is increasingly shifting to Western-style fast food items. oral care products Aqua Fresh toothpaste and tooth brushes. Glaxo Wellcome holds 51 per cent in Glaxo India and Burroughs Wellcome India. According to the IMS 1999 audit (Dec 98 to Nov 99).26 crore (not counting the sales of SmithKline Beecham Consumer Healthcare). This is because the parent companies have decided to sell their worldwide nutritional business as part of their merger plan. The new entity will have combined net sales of Rs 1. the study observed. and over-the-counter products Crocin and Eno. SmithKline's consumer business in India comprises of nutrition drinks (Horlicks.

While SmithKline Pharma has already announced its intentions to launch research products through this subsidiary. which is in the midst of a major restructuring excercise. Burroughs Wellcome and Biddle Sawyer into seven business units. Glaxo. The emerging entity will have a combined annual prescription base of 23. based on therapeutic categories.5 million prescriptions per year. 28 . Its chairman Sir Richard Sykes has already conveyed this during his recent visit to the subcontinent. Glaxo has split the product portfolio of Glaxo. The two companies complement each other very well in terms of therapeutic classes. Glaxo products too may use this subsidiary to launch certain new products. along with its affiliate companies Burroughs Wellcome and Biddle Sawyer have a prescription base of 19 million. Glaxo is the market leader in therapeutic categories such as cephalosporins.87 crore and a 7." says Devinder Pal. anti-ulcerants and topical corticosteroids. analysts feel. anti-infective antidiarrhoeals and iron preparations. "The existing imbroglio between the Burroughs Wellcome union and the Glaxo management is yet to be resolved before Burroughs Wellcome can be integrated with Glaxo. while SmithKline recorded a retail turnover of Rs 205. SmithKline is the market leader in pure vaccines and has a sizeable presence in broad spectrum penicillins. Market leader Glaxo's IMS audited sales were Rs 879. while SmithKline products generate 4.51 crore. Problems to be overcome The amalgamation of the two entities is likely to pose some problems for Glaxo. SmithKline Beecham Pharma is ranked 20 in terms of retail sales. Another important aspect of the merger is SmithKline Beecham's 100 per cent subsidiary in India – SmithKline Beecham Asia.combined annual sales of Rs 1. Glaxo spokesperson declined to comment on the merger.5 million (IMS medical audit Dec 98 to Nov 99). plain corticosteroids.36 crore.92 per cent share of the Indian pharmaceuticals market. This may cause some delays.084. Glaxo is also not averse to setting up another 100 per cent arm in India. chief executive of Mumbai-based Catalyst Pharma consulting. but a company source says that a board meeting was held today for preliminary discussions.

000.000 global employees. which has an Indian headcount of 6. reported the daily. 29 . reported the Economic Times. Including the DGS employees.400 by the end of September this year. with another 2. However.000 staff. Digital GlobalSoft (DGS). IBM's headcount goes over 10. DGS had a headcount of 4. with more than 10. HP's total rises to around 10.800 staff.HP marks Indian employment milestone Hewlett-Packard has become the largest multinational IT employer in India Beating more well-known contenders such as IBM.000 is just under 2 percent. IBM. Intel and Microsoft. Measuring the size of multinational corporations (MNCs) in India is difficult. This puts HP far ahead of its main rival. Big Blue also has a relatively weaker presence in India compared to HP. HP is in the process of acquiring the public stake of Indian software services exporter.000 employees. while HP has a smaller overall headcount of around 140. the back office division. as most do not disclose country-specific revenue figures. 6.000.000-plus is expected.600 employees in software operations and 3. turning its current 51 percent stake into an acquisition. Of the estimated 320. which makes its India operations account for well over 7 percent of headcount. Headcount provides one reliable standard.000 in HP's Global eBusiness. Hewlett-Packard has recently become India's largest multinational IT employer. IBM is growing quickly in India. and a rise to 8. an Indian daily. With another 800 from sales and support teams.

and that they expected it to hire 3. the IT consulting and services corporation.000 employees within the next two years.000 by the end of this year.000 in India in 2005. human resource recruiters in Bangalore told the Economic Times that Microsoft was aggressively recruiting for back-office operations. However.000 now and Oracle will expand to 4. and Intel plans to hit 3. most of them working for GE's business-process outsourcing and call-centre operations. Cisco has 3.Other large foreign companies in India are also expanding. With Indian outsourcing a hot topic in the US and other source markets. 30 . Outsourcing is seen as a threat to US IT jobs. wants to rise from its current 3. The conglomerate has 22. beating HP and the rest of the MNCs in India for IT employment by a broad margin is US-based General Electric (GE). Accenture.000 to rival HP with more than 10. the Economic Times said none of the IT MNC executives it contacted were willing to comment on their hiring plans. While Microsoft officially says it only has 700 staff in India now.000 employees in India.000 people by the end of 2004.

An excerpt. To start with. In that scenario. we created a model which has evolved to its current form. With an elaborate contract-farming programme underway for the last 15 years. there have been learnings along the way for the cola and foods major. Pepsico’s Worldwide President and CFO. suitable modifications and adjustments have to be made to ensure it’s relevant to local conditions. Pepsi’s entry into contract farming was triggered by the need to make available sufficient quantities of tomatoes & potatoes of the right quality for our domestic plant. The latter was primarily set up to meet our export obligations. Why then should an MNC expend so much time and energy on them? What are the collateral benefits of entering the rural economy? 31 . when you take up contract farming for different crops in different areas. This basic objective has not undergone any change. Indra Nooyi shares some of them with Chaitali Chakravarty & Bhanu Pande. Case Study Pepsico has been an early starter in engaging farmers in India. In 1989. Have the objectives changed? The objective of contract farming is to backward integrate the supply chain to ensure timely availability of right quality and quantity of materials. starting from the basics of application research. Has Pepsi’s contract farming model changed in India? It hasn’t changed but evolved over time. Contract farming models rarely generate profits. when Pepsi came into India. there was no blueprint available either in India or internationally of an appropriate model which could be emulated to structure our contract farming initiative. However.Pepsi Co. we set up a potato processing plant for our snacks business and a tomato processing plant in Punjab for exports.

Why has Pepsi not been able to scale up contract farming of various crops? The latest seaweed project started out with a different objective. Today. which could be granted only after due evaluation and observation of the trials. Self Help Groups have 32 . due to the efforts of the CM of Tamil Nadu and her team. Our snacks business requires low sugar potatoes to produce the right quality of potato chips as such varieties weren’t grown in India. Do MNCs face any special hurdle entering the rural areas in contract farming? The seaweed contract farming project is a path breaking initiative as cultivation of seaweed in the open sea had never been undertaken before in India. All this to ensure the profitability of the business. Close to 50% of the potatoes processed by us come from our contract farming programmes. Our potato programme starting from Punjab has a footprint across the country to support manufacturing capacities established in Maharashtra and West Bengal. We then put in place an extension team to transfer these learning’s to the farmers. Our efforts were also made to increase productivity to ensure higher income for the farmer and to reduce our procurement costs. who would manage the Self Help Groups undertaking this activity. being a new activity. thereby bringing our efforts in sync with the national priorities. In order to succeed we had to undertake extensive trials of various varieties and evolve agronomic practices suited to local areas. It is an integral part of a business model which ensures that raw material is available at the right time conforming to the quality standards in required quantity at competitive prices. Initially. Its efficacy had to be demonstrated to the funding and partnering institutions. the number of farmers who participate in our contract farming programme is higher than what we started with. But it suffered delays and is now being touted as a liquid fertiliser project. effectiveness of the technology to deliver a viable and sustainable income model for the growers had to be established. Only last month. and many of the pioneers are still with us. So we had to introduce the suitable varieties via contract farming. Last. Efforts to increase agricultural productivity also go a long way in improving farm incomes. Doesn’t this show the lack of clarity with which MNCs enter contract farming in India? The contract farming programme gets scaled up in line with business needs. regulatory clearances were required.Contract farming in itself is not a business.

do you see in partnering with farm workers? Any successful initiative requires clear understanding of the ground realities of the terrain and the needs of its people. We hope to now make available this organic and cost effective growth nutrient to the Indian farmers and we believe this will have a significant impact on the yields and their incomes. What kind of challenges. CSMCRI. Indian or multinational entering this field has to make the effort and spend time and money to learn in order to build a successful partnership with the farmers.been given the go ahead to take up this activity. Very soon it will work on a commercial scale. which provided the technology for this while working on the process optimisation discovered an additional application of the weed. if at all. Any corporate. 33 . It made sense for us to acquire this technology for which CSMCRI had taken a global patent. their resource base and their constraints. Indian farmers have no bias against the multinationals and our 10 years of successful partnership with the Punjab farmers is a testimony of the same. They discovered that it could also deliver a by product — a liquid plant growth nutrient.

Mexico (45). with a score of 91 out of 100. followed by Argentina (76). political stability. Iraq is the most dangerous country to do business. who have got 'C' rating. India has been ranked 10th among 29 emerging markets in the latest country risk analysis by Economic Intelligence Unit (EIU). A rating). India is less risky than China NEW DELHI : India continues to be less risky than China as a business destination. an information service arm of the Economist group. according to a corporate study. Some of the operational factors that are considered in determining country risk include security. Saudi Arabia (41). Israel. India has got 'B' risk rating and has outranked China (41). Experts said country risk report comes in handy as a decision making tool for MNCs to enter or expand in new markets. Singapore (11. EIU country risk rankings combine measures of political risk (like threat of war) and economic risk (like size of fiscal deficits). With a score of 39 out of 100 in the risk scale. A low risk rating is an important indicator of a country's global credit rating and the willingness of foreign investors to invest in a country. They also include measures that affect a country's liquidity and solvency (debt structure and forex reserves). Hungary and Poland (37). who have qualified for 'B' rating. However. Brazil (48) and Egypt (49).For investors. Industry representatives said India has an opportunity to gain from China 's slowdown. Not surprisingly. South Africa (45). Hong Kong (21) continue to be the safest place for foreign investment. followed by Taiwan (25). government 34 .

China will continue to be among top emerging markets for FDI. highly skilled labour and opportunities in outsourcing boosted India 's ratings. " India is as safe as what it was and change in government has not changed the situation. macroeconomic conditions. but India is also becoming very attractive to global investors. Ficci. " China 's GDP is likely to grow by 9. " India is watched closely by overseas investors on whether reforms will continue in the Left supported government. EIU reviews the risk ratings of over 100 emerging markets on a monthly basis." Former RBI governor Bimal Jalan is confident that the country can handle any economic crisis.3% in 2004-05 — owing to a "smaller harvest and hence less robust growth in personal incomes". considering Indian authorities' commitment to attract more FDI is yet to be fully matched by more investment-friendly policies. This perception could be partly attributed to the strong external sector performance and reduced border-tension that India experienced a year back." projects EIU. 35 . financial & tax policy. He said FDI investment will gather momentum. Rapid growth. India has become marginally safer in 2004. Despite slowdown.1% in 2005. Compared to China . EIU says that India is poised to grow at 8. " India 's performance as one of the most attractive destinations for FDI is based on several criteria. There is little awareness about economic policies adopted by Left in West Bengal . legal & regulatory framework. While change in government brings no decline in risk for India . India has an edge over other global competitors in outsourcing opportunities. secretary general. DG-designate. China is forecast to receive $58 billion in FDI this year. However. It also predicted a slowdown in China . labour market and infrastructure.4% this year and by 8. with the slowdown being led by an easing of investment growth." says N Srinivasan ." says Amit Mitra. "Indian industry is upbeat and full of self-belief. CII.3% in 2003-04 (April-March) and will grow at 7. China has scored over every country in cheap labour. R&D.effectiveness. EIU says that Manmohan Singh-led coalition must support reforms to sustain current ranking." says EIU. EIU has projected FDI flows to India to touch $13 billion in 2008 from $5 billion in 2003.

firms desiring to have a longer-term relationship with the suppliers (rather than those simply using the host country as a marketing/export base) will be more inclined to effect transfer technology. Conclusion Multinational companies are like double-edged sword. 2000. Further.CII says effective communication is key to reduce India 's risk further. The extent of technology and management of know-how transfer by the MNCs depend to a large extent on their corporate strategy. arguing that FDI inflows and economic liberalization automatically facilitates technology transfer is being extremely naïve. saying. they may hold back the upgrading of the affiliate technology or invest insufficiently in host-country training and R&D in accordance with their global corporate strategies." Jalan pointed out the need to reduce fiscal deficit. 36 . As pointed out in the World Investment Report. Therefore. MNCs may restrict the access of particular affiliates to technology in order to minimise interaffiliate competition. "The biggest challenge is spreading the right message to the global investing community. It is noted that MNCs are more likely to licence older technologies from which they have already derived significant rents than newer technologies on which there are still relying for market leadership. Similarly the Multinational companies have their own pros and cons. The sword can harm if not handled properly. for example.

indoinfoline.Webliography Bibliography International Marketing Management . Kulkarni International Marketing Cherunilam 37 .M.ficci.

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