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18 Research & Development………………………….Index 1.14 Manufacturing Sector……………………………..21 IT Industry…………………………………………..31 4 . 7. Introduction………………………………………….27 HP marks Indian Employment Milestone……………29 Case-Study2: Pepsi Co………………………………...13 Automobile Industry………………………………. 6. 4.. 2...23 Food & Beverages Industry……………………….05 Foreign Direct Investment (FDI)…………………….25 5.16 Telecom Industry…………………………………. 3.09 Shining Indian Multinational…………………………11 Impact of MNCs on Indian Industrial Sectors………. Case-Study1: Impact of Glaxo-SmithKline Merger….
India v/s China……………………………………….34 Conclusion……………………………………………36 5 .8. 9.
the government began to open various sectors such as Infrastructure. etc to the Multinational Corporations. Improved productivity and output in the sector and its suppliers indirectly contributed to increasing national income. technology. technology and other valuable resources in the country causing a surge in GDP and upliftment of the economy as a hole. In an effort to revive the industries and to bring the country back on the right track. Opportunities for Developing Economies The opportunities for developing economies are significant as well. and a range of skills. the impact on employment was either neutral or positive in two-thirds of the cases. across different industries and within different policy regimes. and other regulatory policies. India was more or less a closed Economy. Automobile. though. The single biggest effect evidenced was the improvement in the standards of living of the country's population. The MNCs slowly but reluctantly began to pour capital investment. trade barriers. Tourism. Compared to its potential. 6 . however. This was the post 1991 era where the government began to invite and welcome giant MNCs into the country. and broader selection. And despite often-cited worries. Food and Beverages. higher quality goods.Introduction Till 1991. 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. can result in inefficiency and waste. The rate of growth of the economy was limited. Foreign direct investment is already having a dramatic impact on the way companies do business and developing economies integrate with the global economy. Information Technology. as consumers have directly benefited from lower prices. it's just a drop in the bucket. Official incentives. Impact On Developing Economies & Policy Implications: Investments by multinational companies (MNC) allow developing economies to share in the considerable benefits of the global economy. multinational companies' overseas investments have created positive economic value in host countries. Through the application of capital.
6 11.7 9. as some critics have charged. productivity.3 21.98 23. Rather than leading to the exploitation of lower-wage workers.6 2.Case studies reveal that in virtually all cases. consumer behaviour and industrial processes.9 18. MNC investment had a positive to very positive impact on the host country. brokerages and accounting firms have set up large research establishments in India. The world's service provider • • The services sector. government seeking those advantages would be advised to favor policies of openness. Export revenues from the sector are expected to grow from $8 billion in 2003 to $46 billion in 2007. A growing number of US companies are hiring Indian mathematics experts to devise models for risk analysis.7 35. accounts for almost half of the country's GDP.06 14.68 22. Therefore. the investments fostered innovation. and an improved living standard.5 7.4 14.2 27. which has been growing consistently at a rate of 7 percent per annum. rather than regulation. Global investment banks. Indian Exports Overview (in Rs.09 7 .37 GROWTH RATE 17.9 29.90 274313. when it comes to foreign direct investment.5 28. 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.
Crores) years 8 .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.
Watson Pharma. APP. Accenture. HP-Compaq. Caterpillar. HSBC Transco. accounts for almost half of the country's GDP. Honda. Export revenues from the sector are expected to grow from $8 billion in 2003 to $46 billion in 2007. Capital One Dell. BASF P&G. which has been growing consistently at a rate of 7 percent per annum. General Motors. Besides being an outsourcing hub. FAW(China) Rover Imation. Global investment banks. GSK Pharma Apotex. Ford. AutoZone. reconfiguration and customisation with creativity. World corporations are now leveraging its proven skills in product design. Unilever. Pharma Manufacturing Bharat Forge Tata Motors Moser Baer Essel Propack Meritor. DHL. Sony Citi group. UBS. Toyota. Eon Labs Eli Lilly. brokerages and accounting firms have set up large research establishments in India. Verizon GE. Aetna. India: A Services and Manufacturing Supplier to the World Sector IT Services Company Infosys Tata Consultancy Wipro Outsourcing Client Goldman Sachs. Capital one Ivex. Northwestern Mutual. Nortel. assured quality and value addition. A growing number of US multinational companies are hiring Indian mathematics experts to devise models for risk analysis. Colgate ITES Mphasis BFL Spectramind Pharmaceuticals Cipla Shashun Chemicals Lupin Laboratories 9 . Arm Ex. About 20 percent of Indian automotive production in 2004 is exported to developed countries. American Express. consumer behaviour and industrial processes.The world's service provider • • The services sector. The brick and mortar companies India is not merely a provider of services. CISCO. it has grown into a global manufacturing hub. Watson.
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.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. 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. 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 2004.503 crore was more than 80 per cent of what the country received in 2003. According to some estimates.4 million) in July 2004. The investment scenario in India has changed.220 crore worth of FDI was approved. which accounts for only seven months of 2004. FDI is required by a developing economy such as ours to tap unexplored resources and put them to more productive use. With a half-billion strong middle class.22 crore (US$ 93. Research and Development. 487 million middleclass Indians will spend an additional $420 billion during the next four years. This figure. During the first seven months of 2004. consumer demand in India will grow sky high. 10 . Automobile and so on. The Government of the host country controls the FDI levels in various segments of the economy such as Telecom. Rs 5. And the figures say that it is for the better. Retail. Tourism. Perhaps the biggest advantage of MNCs is the influx of valuable Foreign Exchange. It is evident. • • The Finance Minister cleared 46 proposals of foreign direct investment (FDI) amounting to Rs 408. 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. Infrastructure. between January and July.
In a bid to stimulate the sector further. It has set up an Investment Commission that will garner investments in the infrastructure sector among others. The FDI cap for aviation has been hiked from 40 to 49 per cent through the automatic route. India's foreign exchange reserves rose $700 million to a record high of $120. Comparison between India and China with respect to FDI India vs.78 billion in July 2004. The government has scrapped Press Note 18. and plans to increase the limit for investment in the infrastructure sector. which was acting as a deterrent to foreign investors. China FDI Flows Chinese reform process Indian reform process 1977 1991 5 years since 1982 China 5 years since 1991 India USD 4508 m USD 4488 m 10 years since 1982 China USD 13791 m 10 years since 1991 India USD 15483 m 11 . • • • • 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. the government is working on a series of ambitious economic reforms.
It has 17 plants spread across 11 countries and a turnover of Rs 609. becoming world-popular suppliers and are recruiting staff cutting across nationalities. The company commands a staggering 30 percent of the 12. 12 . About 80 percent of revenues for Tata Consultancy Services comes from outside India. Dr Reddy's Laboratories became the first Asia Pacific pharmaceutical company outside Japan to list on the New York Stock Exchange in 2001. Its workforce includes Japanese. An impressive 76 percent of its revenues come from overseas. Not only over the Indian sky. It became the world's second largest forgings manufacturer after acquiring Carl Dan Peddinghaus a German forgings company last year. With each passing day.2 crore for the year ended December 2003.8 billion-units global tubes market. It has 31 customers across the world and only 31 percent of its turnover comes from India. American and Chinese people. Essel Propack is the world's largest manufacturers of lamitubes tubes used to package toothpaste. While an Asian Paints is painting the world red.2 billion ($1. German. Indian businesses are acquiring companies abroad.Shining Indian Multinationals India Inc. Ranbaxy is the ninth largest generics company in the world. is flying high. 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. Many Indian firms have slowly and surely embarked on the global path and lead to the emergence of the Indian multinational companies.17 billion) in Asia's second-biggest tech IPO this year and India's largest IPO ever. This month. it raised Rs 54. 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. Small auto components company Bharat Forge is now the world's second largest forgings maker. Asian Paints is among the 10 largest decorative paints makers in the world and has manufacturing facilities across 24 countries.
Australia. Sundram Fasteners is not merely a nuts and bolts company. Canada. Probably that is why it decided to acquire a plant in China.• • Infosys has 25. It believes in thinking out of the box.634 employees including 600 from 33 nationalities other than Indian. the UK and Japan. 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 has 30 marketing offices across the world and 26 global software development centres in the US. did not have to go far from home to access the product. 13 .
resulting in all round development. 8. 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 14 . 1. 17. 13. 14. Further more. we have analyzed the Indian Economy and the way in which multinational have added more value and increased the exports. 7. 10. 21. 11. 23. 19. Certain important sectors are considered and the actual effect of MNCs i. 5. 4.Impact of MNCs on Industrial Sectors Indian So far. 6. 15. 16. we have the actual analysis of the effect of MNCs on various Indian Industrial Sectors. GDP and productivity. 12. 3. the practical way in which they are affected are studied viz. 2. 18. 20. 22. 9.e.
has been on an upswing for the past few years. Mercedes Benz. which increases the demand for multi skilled personnel. On the other hand. 15 . Mercedes-Benz.Impact Of MNCs on Automobile industry The present scenario is a highly transformed one. Volvo.0 per cent in April-December. In the two-wheeler segment besides the other major MNC brands made available to the Indian consumers. General Motors. Mahindra. 2004. Suzuki. The high growth observed since 2001-02 in automobile production continued in the first three quarters of the 2004-05. The post liberation economical scenario has resulted in all the big names such as General Motors. Ford. Honda. as well as in the fast developing Automotive Aftermarket sector. The growth curve of India Auto Inc. Dealership Operations including Parts. Manufacturing in India has also come of age. Audi etc. Hyundai. Multinational giants are vying with one other to launch their models. Big names of the vehicle industry like the Korean giant. In other vehicle segments too. Mitsubishi. the growth rate in 200304 was 15. Annual growth was 16. Ashok Leyland. have carved out their niche. the arrival of new and contemporary models. 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. Service. The Indian automotive giants like Telco. 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. Bajaj are revamping their production strategies and launching new models designed and developed indigenously.1 percent. Fiat to come up with plants in India. Leasing & Financing. have already opened their account. Employment opportunities are emerging with Manufacturers. Consequent to liberalisation. Mitsubishi etc. Sales. As a result conducting business in the Automotive Industry has become more competitive and sophisticated. Toyota.
Note. 16 . these models are the latest cars zipping on international roads and not the dated versions that were passed on earlier. There has been a phenomenal growth in the automotive manufacturing sector in our economy. 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. which has just hit European roads. Ashok Leyland. Maruti Udyog. in India by October-November 2004.The automotive industry is the barometer of any major economy and the same holds true for India as well. TVS Motors and Hero Honda. Porsche is bringing in the Cayenne and Toyota is planning a simultaneous release of its IMV. 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.
The country would then have a 3. Of the total $300 billion. India's exports in these sectors were $10 billion in 2002. The picture is about to brighten further. Manufacturing firms on expansion binge Manufacturing companies are planning to invest as much as Rs 200.000 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 17 . auto components. compared with 7. buoyed by growth in manufacturing and services. • • • • According to a CII-McKinsey report. 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. • • • • Of Rs 200. speciality chemicals and electricals and electronic products. The Indian economy grew by 7.$90 billion is expected to come from just four sectors . FY2005. $70. Manufacturing grew 8 percent in the quarter. To reach the $300 billion target. Rs 100.apparel. Manufacturing exports from India grew 20 per cent in 2003 over the previous year. manufacturing exports from India are likely to grow to $300 billion in 2015 from $48 billion in 2003.6 percent in the previous quarter.Impact on the Indian Manufacturing sector The resurgence of India's manufacturing sector has been quite magical. Not only are profits soaring.5 per cent share of the world manufacturing trade. the sector is fast spreading its tentacles abroad as many Indian manufacturing firms inch close to becoming true blue multinationals.4 percent in the April-to-June quarter.000 crore over the next two years.000 cr.
About 20 percent of Indian automotive production in 2004 is exported to developed countries. • • • GE has entered into an OEM deal with Thermax India to supply chillers for the latter's power systems. the country's ranking in UNCTAD's outward FDI performance index has already shot up from the 107th position in 1999 to the 61st spot in 2003. Ford Motor Company is aiming to source US$ 120-160 million worth of auto components from Indian manufacturers over the next two years under its India Sourcing Program. 18 . accounting for around 37 per cent of the total Indian overseas investments during last year. 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.With annual outflows averaging at $1 billion.312 crore) The Hinduja's purchase of controlling interest in C3. 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. a call centre in the Philippines Msource's Spanish language centre in Tijuanna. while Europe accounted for 40 per cent of the total outflow. assured quality and value addition. others have Indian arms to supply to global markets. Aquila through a technical tie-up with Pune-based Kinetic Engineering. South Korean two-wheeler major Hyosung is making India the manufacturing hub for its 250cc cruiser bike. The two most important destinations for Indian FDI last year were the US and the Russian Federation. reconfiguration and customisation with creativity. While some MNCs enter into OEM deals to source components.
the growth in the mobile subscriber segment picked up in December 2004 after remaining at around 1. (According to the Telecom Regulatory Authority of India (TRAI).62. Even in fixed line. ten years after private telephony was introduced in India. More than a third of these subscribers were added during 2004. 19 . the mobile subscriber base had crossed the number of fixed line connections. The gross telecom user base stood at 70.65 at the end of 2003. Impact on Telecom Industry One of the fastest growing sectors in the country. Colgate is setting up a brand new toothpaste facility in western India which will be one of 15 such facilities across the world. as compared to 6.) The year 2004 ended with the tele-density reaching an all-time high of 8.67 million subscribers were added as compared to 2.42 per cent to touch 92. telecommunications has been growing at a feverish pace in the past few years.76 million at the end of 2004. 2. consisting of fixed as well as mobile users.5 per cent over the 17.53 million CDMA subscribers.58 million at the end of 2003.15 million new users during 2003. it had a growth of 139 per cent year on year in 2004. The total of 19. additions consisted of 1.51 million mobile users in 2004 marks an increase of 11.5 million per month for the previous two months.49 million additions made in 2003. The non-voice market (message and data services) for mobile operators has also registered tremendous growth in 2004. The speed of growth can be gauged by the fact that in 2004. the cellular user base registered a 68 per cent growth to touch the 48-million mark. • • • • • While fixed lines touched 44 million at the end of 2004. In the mobile segment. registered a growth of 31. The total telecom subscriber base.• • Global consumer electronics giant Matsushita of Japan has decided to source Panasonic colour television sets from India for its international market. an increase of over 30 per cent. According to a study by IDC.42 million GSM subscribers and 0. registering an increase of 24 per cent.
13mn 0.73mn 1.92mn 8. Analysts believe that if the current rate of growth is maintained.08 45. is setting up a mobile phone manufacturing plant in India. The French major is planning a cell phone manufacturing facility in India with an annual capacity of 2.36mn 52.17mn 0. which is around Rs.3 billion). Alcatel wants to make GSM mobile phones in India.08mn 9.24mn 0.560 crore (US$ 3. a number of them are already here.49mn 1.03mn 9.52 mn Total additions during 1.67mn 1.54mn 0.80 45. 14.77mn February'05 97.77mn the month GSM additions CDMA additions Source: TRAI 1.39mn 49.90mn 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.0 45. 20 .15mn 0.27mn 0. Australia and New Zealand next year. Telecom statistics January' 05 Total subscribers Tele-density Fixed line Additions during the month Mobile 94.5-5m units to cater to the Asia-Pacific markets.39mn 51. and expects to ship phones to Africa by the end of the year.At present non-voice revenue contributes around 4. While the government expects over US$ 800 million investment from foreign telecom companies in the coming year.7 per cent to the total mobile services revenue. which has acquired the mobile equipment division of CDMA technology pioneer Qualcomm.54mn March'05 98. It plans to start shipping to countries in South East Asia. A study released by Ernst and Young says revenues from the sector could touch US$ 25 billion by 2007. it could add up to amazing figures in the next few years. • • Japanese conglomerate Kyocera.
Tyco has supplied the optic fibre for the Chennai-Singapore link. The Tyco cable has the largest capacity globally. 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. Reliance Infocomm had also picked up FLAG Telecom for $210 million a few months before VSNL bought TGN. infrastructure vendors.208-mile (60. is setting up India's first 3G network in Delhi and Mumbai. It is of the order of 7 terabits on the Pacific route. 5.000 kilometre) submarine fibre optic network that connects northern Asia.• • LG recently started assembling phones in India and Nokia plans to set up a manufacturing plant with an investment of US$ 100-150 million. • • • The Tata group's Videsh Sanchar Nigam Ltd. manufacturers and associated services companies. America and Europe. the bulging bottom lines of Indian telecom companies are making them invest in assets. The development helped Tata gain a foothold in the South African market. As part of the TGN deal. VSNL's was the second submarine cable deal struck by an Indian company in 2004.12-terabit Chennai-Singapore submarine link. the state-run telecom services provider. Indian companies going global India offers an unprecedented opportunity for telecom service operators. As the sector has been performing well. The network. Within days of bagging TGN. The Mahanagar Telephone Nigam Limited (MTNL). India will soon join the elite club of countries that have 3G mobile services. Technology advancements Among other tidings in the telecom sector are the technology upgradations being effected in Delhi and Mumbai. VSNL also received a dark (uncommissioned) fibre that links Japan to Singapore and 200 employees of TGN. VSNL inaugurated its own 3. (VSNL) struck a $130million deal to pick up Tyco Global Network's (TGN) 37. The Tata Group has also won a bid to acquire 26 per cent stake in South Africa's second network operator (SNO) that gives the company a mandate to develop and operate both national long distance (NLD) and fixed-line networks in the country.175kilometre. which will have 21 .
yet another sector -Research and Development (R&D) -. will require a total investment of Rs 4. 27% identified India as the leading relocation destination for R&D.9 million). Dr Reddy's Laboratories. • • India conducted its inaugural test flight for Saras. Impact on Research & Development India has emerged as the hottest destination for multinational companies (MNCs) starting or relocating their research & development (R&D) centres over the past two years. Following in the footsteps of the information technology enabled services (ITeS) industry. Sun Pharma and Biocon and Shanta Biotech are attracting interest from companies in the US and Europe. which are seeking a strong platform for development skills. India's wealth of scientific talent is unmatched in the world.000 crore (US$ 914. though it continues to be the leading destination for MNCs relocating their manufacturing operations. About 165 institutions in the country are engaged in genetic engineering research. followed by China with 17%. Of this.a capacity of 4m lines. Around 10% of the respondents reported either new or relocated R&D operations in the past two years. in August 2004. 25 in 22 . the country's first indigenous civilian light-transport aircraft. The best-known Indian R&D companies are in pharmaceuticals and biotech sectors. comprising 55 in transgenic work. Companies such as Ranbaxy. More than 125 Fortune 500 companies have opted to have their R&D base in India.is witnessing increasing vitality and growth. The reasons for this are obvious. 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. which put India on the world map.
India has begun to appear on the outsourcing radar with a monotonous regularity. Welch Technology Center in Bangalore is the company's largest such facility outside the US. Having proved its scientific mettle. General Electric. It has also launched satellites for foreign customers such as Germany and Korea. Eli Lilly. More than 100 Fortune 500 companies — including Delphi.• therapeutics and 85 in basic research. MNC products developed by R&D centres in India Companies Sun Microsystems’ India Engineering Centre Products Portal 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. it employs 1. With an investment of US$60 million. with several other crops in various stages of getting approvals for commercial plantation. Web server. • 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. simulation and software development. Hewlett Packard. according to the Department of Biotechnology. DaimlerChrysler and others — have put up R&D facilities in India over the past few years. The DaimlerChrysler Research Centre in Bangalore is involved with fundamental and applied research in avionics. The country has already started commercial cultivation of genetically modified cotton in Gujarat and some southern states. Identity server and meta directory. especially to India. even innovation and design work have begun to move offshore. Now. 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. 23 .400. • • • GE's John F.600 researchers and plans to raise the number of staff to 2.
which helps chip manufacturers negotiate prices with their dealers online. The lab is also working on a solution for Value Added Tax (VAT). Sangam. Dealer Portal for the automotive industry. Wipro. The centre has fully developed a strategic sourcing solution for i2. a bridge router for the DSL. Wipro and Tata Consultancy Services (TCS). Currently India is the Power House. besides delivering nearly eight manufacturer-industry templates and retail solutions from India. It develops most of the software required for Philips products. Experts feel that even within the top 10 the dip-offs start getting sharper after the top three to 24 . The Top Five The top five Indian IT companies based on FY04 revenues-TCS. 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. which runs multimedia applications.Texas Instruments’ R&D Centre SAP Labs Fully developed at least 20 products. mobile laptop solutions and oil and gas upstream solutions. including the Channel Management Solution. The world software Arena. According to Karnik. Some of them are the big home-grown IT Services companies like Infosys. IT is now an industry. the remaining two are already half way through to that mark. and Zeno. While the first three have made it to the billion-dollar club. to become the number one exporter in the country. The lab has produced some of SAP’s products meant for the global market. including the Ankur Digital Signal Processor. 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. the software industry has overtaken the gems and jewellery as well as textiles industries. Infosys. Satyam and HCL Technologies-are the prime contenders in the race to the Fortune 500. According to Nasscom. which is growing by leaps and bounds both through participation by captive units of multinationals and third party providers of Indian origin.
9 EDS 20. The top companies are indeed rapidly expanding their global outlook and reach. a business integration firm with offices in San Jose.five companies.3 bn Head Count: 39. As a result. a US-based financial services consultant and utilities' practice of consultancy AMS. these companies have also been open to foreign acquisitions and JVs. more specifically. The global locations for Infosys. to expand their global footprint. Infosys acquired Expert Information Services of Australia and US-based Trade IQ product division of IQ Financial Systems. to the top three.1 bn Head Count: 35.000+6300 Market Cap: $14. Ford. Ericsson.84 bn Some IT MNCs in 2004 Global Fortune 500 Name Revenues ($ bn) IBM 96. Prudential. setting up centers across the world and competing with the top tier global IT companies. American Express. Deutsche Bank. the likelihood is restricted to only the top five and.7 Market Cap ($ bn) 149 63 10. Transco.6 25 . Leading the Charge 2004 S Ramadorai TCS Ranking: 1 Revenue: $1.6 bn Head Count: 43.1 CSC 14. TCS is located across over 30 countries and serves clients in around 60. Wipro and HCL Technologies range between 10-20 countries. And the acquisition list is very long: TCS acquired Phoenix Global Services (technology solution provider). These companies serve some of the top clients globally including the likes of GE. US. and the Standard Chartered Bank.000 Market Cap*: $21 bn Azim Premji Wipro Ranking: 2 Revenue: $1. a Deutsche Bank-owned outfit.000+ Market Cap: $19.4 bn Nandan Nilekani Infosys Technologies Ranking: 3 Revenue: $1.6 Accenture 15.7 23 8. Wipro acquired Nervewire. In the last two to three years. HCL Tech has acquired majority stake in Aalayance.23 HP 79.
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. Wipro and Infosys may have crossed the psychological billion-dollar barrier. Citigroup." he adds. achieving the next few billion dollars is going to be a tough task. HP. 26 . BP. will this be enough for our top three to join the ranks of the likes of Wal-Mart Stores. IBM. Acquisitions will help these companies to add expertise in terms of both new markets and technologies. warranting a much more rapid growth. etc.Rules of the game But. General Motors. "The organic growth will continue to happen but that is not going to be good enough for rapid growth. While TCS. Shell Group. BMW.
a US department study says the prospects for investment in Indian markets could be gauged from the fact that total Hotel.00.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. as Indian food imports are likely to grow 6-7 per cent over the next few years. spend only 2. government and corporate offices. says a study. The Indian middle-class. comprising innumerable roadside eateries and tea/snack shops. unorganised and untapped so far. education institutions.000 to 5. 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). An upswing in the Indian hotel industry since 2003 following turnaround of the global tourism industry.00.5 per cent of their food expenditure in hotels and restaurants. armed services. 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. "Though new. 27 . on an average. the HRI service sector is expected to grow by 6-7 per cent over the next few years. and airlines. prisons. Though Indian consumers. is the main drivers of the economy. which some estimate is 250 million-strong and growing at 30-40 million a year. Eyeing the over 250 million-strong middle class.000 registered restaurants in the organised sector and in the range of 1. the HRI service sector in India has vast potential for growth as there are approximately 55. hospitals. Restaurant and Institutional (HRI) service sector sales of F and B amounted to $ 8 billion during 2003-04.000 in the unorganised sector. the study pointed out. The institutional food service sector consists of food service facilities for Railways." the study noted.
This growth is expected to remain strong over the next few years. the study observed.5 per cent of urban consumers eat outside their home at least once a week. the Indian hospitality industry has benefitted from a steadily growing economy and a booming tourism sector. and about 12 per cent eat out once a month. the study pointed out. noting that close to 30 per cent of the population live in urban areas. Foreign tourist arrivals into the country in 2004 crossed 3. a growth of 24 per cent over the previous year. An expanding young population. A rapidly growing Indian economy (6 per cent annually over the last decade) has increased incomes of the consuming class. Urban Indians are aware of international cuisines and an increasing number are willing to try new foods.300 on purchasing power parity basis) compared to less than seven per cent in 1995. it said quoting a survey. There has been double-digit growth in the Western-style fast-food outlets and coffee shops. Cafe Coffee Day). as more consumers seek variety in their food choices. Dominos etc) and Indian chains (Nirula's.150 (USD 17. the study said. About 4.According to the study. the study said. Pizza Corner. Pizza Hut. 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. It is believed that the multinational and domestic multi-unit restaurant segment will drive the future expansion of the Indian restaurant industry. 28 .36 million. 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. In recent years. Barista. both multinational chains (McDonald. By 2007. approximately 22 per cent of households (44 million) are expected to have an average annual income of $3. The eating-out culture is evolving fast in India. more women in the workforce and increasing urbanisation support HRI food sales. adding that the Indian hotel industry was gearing up to cater to the food needs of the international visitors. This share was likely to grow to 40 per cent by 2025.
and over-the-counter products Crocin and Eno.382. the younger urban population is increasingly shifting to Western-style fast food items. SmithKline merger on India Economy The merger of Glaxo India and SmithKline Beecham Pharma will create the second largest pharmaceutical company in India. while SmithKline Beecham is a 40 per cent affiliate of the UK-based parent. 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. The new entity will have combined net sales of Rs 1. SmithKline's consumer business in India comprises of nutrition drinks (Horlicks.Most Indians still prefer Indian food. According to the IMS 1999 audit (Dec 98 to Nov 99).06 crore. as regional cuisines offer many choices. with its sales of Rs 1. is unlikely to be a part of the merger in India. the merged entity will have 29 .26 crore (not counting the sales of SmithKline Beecham Consumer Healthcare). Nutritional products will stay out SmithKline Beecham Consumer Healthcare. which together account for a 63 per cent share of this market). it said. the merger of Glaxo. after Ranbaxy Laboratories. SBCH India is a 40 per cent subsidiary of SmithKline Beecham plc. Large market share In terms of retail drug sales. which comprised popular brands such as Complan and Glucon-D. This is because the parent companies have decided to sell their worldwide nutritional business as part of their merger plan. Glaxo India has already sold its consumer business to Heinz India. oral care products Aqua Fresh toothpaste and tooth brushes.278. Impact of Glaxo. Glaxo Wellcome holds 51 per cent in Glaxo India and Burroughs Wellcome India. based on the results for the year ended 31 December 1998. However. the study observed. or SBCH. and Boost. adding "vegetarianism" was still a widely popular culinary tradition in India.
92 per cent share of the Indian pharmaceuticals market. "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 products generate 4. Burroughs Wellcome and Biddle Sawyer into seven business units. but a company source says that a board meeting was held today for preliminary discussions.5 million prescriptions per year. analysts feel. Glaxo. based on therapeutic categories. Glaxo spokesperson declined to comment on the merger. anti-ulcerants and topical corticosteroids. Glaxo products too may use this subsidiary to launch certain new products. Glaxo is the market leader in therapeutic categories such as cephalosporins.combined annual sales of Rs 1. Glaxo is also not averse to setting up another 100 per cent arm in India.87 crore and a 7. along with its affiliate companies Burroughs Wellcome and Biddle Sawyer have a prescription base of 19 million. SmithKline Beecham Pharma is ranked 20 in terms of retail sales. 30 . Glaxo has split the product portfolio of Glaxo.5 million (IMS medical audit Dec 98 to Nov 99). while SmithKline recorded a retail turnover of Rs 205.51 crore.084. 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. The emerging entity will have a combined annual prescription base of 23. plain corticosteroids. Another important aspect of the merger is SmithKline Beecham's 100 per cent subsidiary in India – SmithKline Beecham Asia. Its chairman Sir Richard Sykes has already conveyed this during his recent visit to the subcontinent. Market leader Glaxo's IMS audited sales were Rs 879." says Devinder Pal.36 crore. Problems to be overcome The amalgamation of the two entities is likely to pose some problems for Glaxo. The two companies complement each other very well in terms of therapeutic classes. anti-infective antidiarrhoeals and iron preparations. chief executive of Mumbai-based Catalyst Pharma consulting. This may cause some delays. SmithKline is the market leader in pure vaccines and has a sizeable presence in broad spectrum penicillins.
turning its current 51 percent stake into an acquisition. the back office division. IBM is growing quickly in India.000 employees. HP's total rises to around 10. IBM's headcount goes over 10. Headcount provides one reliable standard.000-plus is expected.000 global employees. Digital GlobalSoft (DGS). as most do not disclose country-specific revenue figures. However.000 is just under 2 percent.800 staff. 6. with more than 10.000. with another 2. Measuring the size of multinational corporations (MNCs) in India is difficult.400 by the end of September this year. This puts HP far ahead of its main rival. 31 .HP marks Indian employment milestone Hewlett-Packard has become the largest multinational IT employer in India Beating more well-known contenders such as IBM. IBM. an Indian daily. reported the Economic Times. Of the estimated 320. which has an Indian headcount of 6. Including the DGS employees. and a rise to 8.000 staff. which makes its India operations account for well over 7 percent of headcount.000 in HP's Global eBusiness. Intel and Microsoft. Big Blue also has a relatively weaker presence in India compared to HP. while HP has a smaller overall headcount of around 140.000. reported the daily.600 employees in software operations and 3. DGS had a headcount of 4. With another 800 from sales and support teams. HP is in the process of acquiring the public stake of Indian software services exporter. Hewlett-Packard has recently become India's largest multinational IT employer.
000 by the end of this year. beating HP and the rest of the MNCs in India for IT employment by a broad margin is US-based General Electric (GE). the IT consulting and services corporation. Accenture. the Economic Times said none of the IT MNC executives it contacted were willing to comment on their hiring plans. However. While Microsoft officially says it only has 700 staff in India now.000 now and Oracle will expand to 4. wants to rise from its current 3. human resource recruiters in Bangalore told the Economic Times that Microsoft was aggressively recruiting for back-office operations. most of them working for GE's business-process outsourcing and call-centre operations.000 to rival HP with more than 10. and Intel plans to hit 3. Outsourcing is seen as a threat to US IT jobs. With Indian outsourcing a hot topic in the US and other source markets. 32 .000 employees in India. Cisco has 3.000 in India in 2005. and that they expected it to hire 3.000 people by the end of 2004.000 employees within the next two years. The conglomerate has 22.Other large foreign companies in India are also expanding.
Has Pepsi’s contract farming model changed in India? It hasn’t changed but evolved over time.Pepsi Co. The latter was primarily set up to meet our export obligations. we created a model which has evolved to its current form. This basic objective has not undergone any change. However. 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. Pepsico’s Worldwide President and CFO. An excerpt. when you take up contract farming for different crops in different areas. In that scenario. we set up a potato processing plant for our snacks business and a tomato processing plant in Punjab for exports. In 1989. 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. With an elaborate contract-farming programme underway for the last 15 years. To start with. there was no blueprint available either in India or internationally of an appropriate model which could be emulated to structure our contract farming initiative. when Pepsi came into India. there have been learnings along the way for the cola and foods major. Contract farming models rarely generate profits. suitable modifications and adjustments have to be made to ensure it’s relevant to local conditions. Case Study Pepsico has been an early starter in engaging farmers in India. Indra Nooyi shares some of them with Chaitali Chakravarty & Bhanu Pande. Why then should an MNC expend so much time and energy on them? What are the collateral benefits of entering the rural economy? 33 .
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. Today. In order to succeed we had to undertake extensive trials of various varieties and evolve agronomic practices suited to local areas.Contract farming in itself is not a business. Initially. Last. Its efficacy had to be demonstrated to the funding and partnering institutions. We then put in place an extension team to transfer these learning’s to the farmers. the number of farmers who participate in our contract farming programme is higher than what we started with. Self Help Groups have 34 . Why has Pepsi not been able to scale up contract farming of various crops? The latest seaweed project started out with a different objective. and many of the pioneers are still with us. Efforts to increase agricultural productivity also go a long way in improving farm incomes. 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. All this to ensure the profitability of the business. regulatory clearances were required. being a new activity. effectiveness of the technology to deliver a viable and sustainable income model for the growers had to be established. Close to 50% of the potatoes processed by us come from our contract farming programmes. But it suffered delays and is now being touted as a liquid fertiliser project. 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. who would manage the Self Help Groups undertaking this activity. Only last month. So we had to introduce the suitable varieties via contract farming. due to the efforts of the CM of Tamil Nadu and her team. which could be granted only after due evaluation and observation of the trials. thereby bringing our efforts in sync with the national priorities. Our efforts were also made to increase productivity to ensure higher income for the farmer and to reduce our procurement costs. Our potato programme starting from Punjab has a footprint across the country to support manufacturing capacities established in Maharashtra and West Bengal. Our snacks business requires low sugar potatoes to produce the right quality of potato chips as such varieties weren’t grown in India.
Very soon it will work on a commercial scale. 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. They discovered that it could also deliver a by product — a liquid plant growth nutrient. 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. What kind of challenges. 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. Any corporate. CSMCRI. It made sense for us to acquire this technology for which CSMCRI had taken a global patent. which provided the technology for this while working on the process optimisation discovered an additional application of the weed. 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. if at all. 35 .been given the go ahead to take up this activity. their resource base and their constraints.
Hong Kong (21) continue to be the safest place for foreign investment. However. A rating). India has got 'B' risk rating and has outranked China (41). Not surprisingly. political stability. Iraq is the most dangerous country to do business. Experts said country risk report comes in handy as a decision making tool for MNCs to enter or expand in new markets. Some of the operational factors that are considered in determining country risk include security. Saudi Arabia (41). They also include measures that affect a country's liquidity and solvency (debt structure and forex reserves). South Africa (45). with a score of 91 out of 100. With a score of 39 out of 100 in the risk scale. Industry representatives said India has an opportunity to gain from China 's slowdown. Brazil (48) and Egypt (49). 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. 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. EIU country risk rankings combine measures of political risk (like threat of war) and economic risk (like size of fiscal deficits). India has been ranked 10th among 29 emerging markets in the latest country risk analysis by Economic Intelligence Unit (EIU). Israel. who have got 'C' rating. government 36 . followed by Taiwan (25). followed by Argentina (76). Hungary and Poland (37).For investors. who have qualified for 'B' rating. according to a corporate study. Singapore (11. Mexico (45).
However. DG-designate. 37 . While change in government brings no decline in risk for India . "Indian industry is upbeat and full of self-belief. with the slowdown being led by an easing of investment growth. CII.1% in 2005." says N Srinivasan . China will continue to be among top emerging markets for FDI. EIU reviews the risk ratings of over 100 emerging markets on a monthly basis. Ficci. He said FDI investment will gather momentum. considering Indian authorities' commitment to attract more FDI is yet to be fully matched by more investment-friendly policies.3% in 2003-04 (April-March) and will grow at 7. highly skilled labour and opportunities in outsourcing boosted India 's ratings." says EIU. " India is watched closely by overseas investors on whether reforms will continue in the Left supported government. It also predicted a slowdown in China . macroeconomic conditions. Rapid growth. EIU has projected FDI flows to India to touch $13 billion in 2008 from $5 billion in 2003." projects EIU. " India 's performance as one of the most attractive destinations for FDI is based on several criteria. but India is also becoming very attractive to global investors. labour market and infrastructure. This perception could be partly attributed to the strong external sector performance and reduced border-tension that India experienced a year back." Former RBI governor Bimal Jalan is confident that the country can handle any economic crisis. EIU says that Manmohan Singh-led coalition must support reforms to sustain current ranking. EIU says that India is poised to grow at 8. Compared to China . India has an edge over other global competitors in outsourcing opportunities. secretary general. " India is as safe as what it was and change in government has not changed the situation. financial & tax policy.4% this year and by 8. legal & regulatory framework." says Amit Mitra. " China 's GDP is likely to grow by 9. R&D. China is forecast to receive $58 billion in FDI this year.3% in 2004-05 — owing to a "smaller harvest and hence less robust growth in personal incomes". China has scored over every country in cheap labour. India has become marginally safer in 2004.effectiveness. There is little awareness about economic policies adopted by Left in West Bengal . Despite slowdown.
The sword can harm if not handled properly. "The biggest challenge is spreading the right message to the global investing community. MNCs may restrict the access of particular affiliates to technology in order to minimise interaffiliate competition. saying. for example. 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. 38 . Further. 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. 2000. 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. Conclusion Multinational companies are like double-edged sword. Similarly the Multinational companies have their own pros and cons. arguing that FDI inflows and economic liberalization automatically facilitates technology transfer is being extremely naïve. The extent of technology and management of know-how transfer by the MNCs depend to a large extent on their corporate strategy. Therefore. As pointed out in the World Investment Report." Jalan pointed out the need to reduce fiscal deficit.CII says effective communication is key to reduce India 's risk further.
ibef.cii.V.org www.com Bibliography International Marketing Management . Kulkarni International Marketing .Francis Cherunilam 39 .ficci.Webliography www.indoinfoline.com www.com www.com www.M.google.
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