MB0053-Unit-15-Global Sourcing and its Impact on Indian Industries Unit-15-Global Sourcing and its Impact on Indian Industries Structure:

15.1 Introduction Objectives 15.2 Globalisation and India Evolution in India Liberalisation of economy in 1991 15.3 Com etitiveness !no"led#e base $emo#ra %ics Cost 15.& C%allen#es for Indian 'usinesses 'rand India Government and bureaucracy Cor orate #overnance (ana#in# diversity 15.5 )trate#y for International 'usiness in India *e#ional understandin# )trate#ic alliances

15.+ )ummary 15., Glossary 15.- .erminal /uestions 15.9 0ns"ers 15.11 Case2Let 15.1 Introduction In t%e revious unit "e studied about re#ional inte#ration. *e#ional inte#ration is a met%od in "%ic% t%e states enter into a re#ional a#reement to im rove coo eration t%rou#% re#ional institutions. In t%is unit you "ill study about #lobal sourcin# and its im act on Indian industries. Global sourcin# is a rocurement strate#y t%at is aimed at e3 loitin# #lobal efficiencies in roduction. .%is unit discusses t%e evolution of #lobalisation in India and its im act on Indian business. It also discusses t%e revailin# com etitive environment in India "it% res ect to international business4 c%allen#es and t%reats faced by Indian business. )ome roven strate#y models %ave also been discussed for better understandin# of international business o erations in India. Ob ecti!es: 0fter studyin# t%is unit you s%ould be able to5 6 evaluate t%e im act of #lobalisation in India. 6 inter ret t%e com etitive environment in India. 6 e3 lain t%e c%allen#es faced by Indian business due to #lobalisation. 6 describe strate#ies t%at can be ado ted by Indian businesses. 15." Globalisation and India Globalisation is t%e rocess of increasin# connectivity and interde endence of t%e "orld7s mar8et and businesses. It is a "ay of interactin# amon# countries to

develo #lobal economy. Globalisation is t%e inte#ration of economies of t%e "orld t%rou#% trade and mutual e3c%an#e of tec%nolo#y and 8no"led#e. In India4 #lobalisation refers to t%e o enin# u of t%e economy to forei#n direct investment by offerin# facilities to forei#n com anies to invest in various areas of economic activity. Globalisation %ad a stron# im act in all sectors and business in India. It %as created c%allen#e for tec%nical man o"er in India. Globalisation %as %el ed India in t%e follo"in# "ays to5 6 O en u Indian economy to forei#n direct investments and to facilitate forei#n com anies to invest in different sectors of economic activities. 6 Enable Indian com anies to enter into forei#n collaboration. 6 *emove restrictions for t%e entry of multinational com anies. 6 9ave a direct and indirect im act on Indian currency and enable inflo" of forei#n e3c%an#e into India. 15.".1 #!olution in India :or India4 #lobalisation is not somet%in# ne". One of t%e first instances of #lobalisation in India "as in 1+&, 0.$4 "%en t%e !in#s in India %ad a forei#n collaboration "it% East India Com any. 9o"ever4 t%e incidents t%at occurred ost t%e forei#n collaboration4 until India attained inde endence in 19&,4 is an e3am le of collaboration "it%out any sufficient control. $urin# 19&,4 India %ad laced restrictions on :orei#n $irect Investments ;:$I< "%ic% restricted t%e flo" of :$I in India. Globalisation "it% res ect to India "as seen in terms of %o" t%e Government of India allo"ed t%e forei#n business entities to o erate in India and t%e amount of forei#n direct investments entered India. Globalisation in India became rominent after 1991. .%e early olicies from 19+2 to 19,, "ere mainly driven by t%e needs of t%e local industry and economy. :rom 19,-4 t%e olicies romoted liberalisation of t%e economy and several ste s "ere ta8en to im lement t%ese olicies. Over a eriod of time4 t%e "%ole entre reneurial abilities of a eo le "ere restricted "it% a set of re#ulations and licenses and t%e Indian economy "as called a =License *aj>. In t%e year 19914 a major restructurin# of t%e Indian economy called L?G ;Liberalisation4 ?rivatisation and Globalisation< "as "elcomed. 15."." $iberalisation o% econom& in 1''1

Liberalisation is t%e rocess to reduce unnecessary restrictions on business units t%at are im osed by t%e #overnment. 'efore 19914 t%e #overnment %ad im osed many restrictions and controls on t%e economy suc% as im ort license4 forei#n e3c%an#e control4 and industrial licensin# system and so on. .%ese restrictions discoura#ed entre reneurs to establis% ne" industries. .%e economic liberalisation in India be#an in @uly 1991 "%ic% aved "ay for a ra id ro#ress in India. .rade liberalisation rovided fle3ible e3c%an#e rate. Liberalisation of olicies to"ards forei#n direct investments ;:$I< %el ed in o enin# u t%e economy. .%e reforms brou#%t c%an#es in t%e o inion about t%e role of ublic sector. .%e areas t%at "ere reserved e3clusively for ublic sector "ere no" o en to t%e rivate sector4 e3am le4 telecommunications4 air trans ort4 steel4 etroleum and so on. )ince 19914 t%e Government of India too8 many olicy measures to brin# t%e country out of economic crisis and to accelerate t%e #ro"t% of t%e economy. .%e im ortant olicy measures are t%e follo"in#5 6 *educin# controls and romotin# liberalisation. 6 Encoura#in# rivate sector. 6 ?romotin# forei#n direct investment. 6 Introducin# im roved tec%nolo#y. 6 Introducin# c%an#es in trade and monetary olicy. Aarious olicy measures "ere underta8en since @uly 1991 to increase t%e roductivity and efficiency of t%e economy. In addition to liberalisin# t%e economic olicies4 t%e ot%er major c%an#e t%at occurred in t%e le#islation front "as t%e re ealin# of :orei#n E3c%an#e *e#ulation 0ct ;19,3< B:E*0C to :orei#n E3c%an#e (ana#ement 0ct ;1999< B:E(0C. In case of ot%er la"s everyt%in# is allo"ed unless s ecifically ro%ibited4 under :E*0 not%in# "as ermitted unless s ecifically ermitted. :E*0 "as more of re#ulation of t%e forei#n e3c%an#e containin# stricter rules and olicies. .%e Enforcement $irectorate t%at o erated under :E*0 %ad enormous o"ers to order im risonment for minor offences. 9o"ever t%e scenario "as c%an#ed after 19994 "%en :E(0 "as assed. :E(0 "as more of forei#n e3c%an#e mana#ement le#islation "it% less strin#ent rules "%en com ared to :E*0. Sel% (ssessment )uestions

1. .%e rocess of increasin# connectivity and interde endence of t%e "orld7s mar8et and businesses is DDDDDDDD. a< Liberalisation b< Globalisation c< ?rivatisation d< )tandardisation 2. DDDDDDDDDDDDD is t%e rocess to reduce unnecessary restrictions on business units t%at are im osed by t%e #overnment. 3. .%e economic liberalisation in India be#an in @uly 19-5. ;.rueE:alse< 15.3 *ompetiti!eness Com etitiveness is t%e main drivin# force for all or#anisations. .%e economic reforms commenced by t%e Government of India in 19914 o ened "ay to create ne" business o ortunities for rivate investors and entre reneurs in t%e country. .%e com etitive advanta#e of a com any is im ortant to determine t%e success of its #lobal business. .%is %as led to tou#% com etitive environment amon# t%e rivate investors to com ete for mar8et s%are. .%e economic reforms %ave attracted many forei#n investors4 mainly (FCs to invest in India. India %as demonstrated #lobal com etitive standards in telecom and I.E)4 manufacturin#4 medico2tourism4 tec%nical and mana#ement education and so on. (any major Indian com anies %ave transformed into (FCs to #o #lobal. India is constantly tryin# to en%ance its #lobal com etitiveness to dominate #lobal mar8et. India %as core com etencies in I.EI.E) sector. .%e I. 0ct %as %el ed India in #ettin# reco#nition as a leader in t%e service sector. .%e com etitiveness of service sector is emer#in# as a crucial factor. .o im rove com etitiveness in t%e service sector4 t%e Government of India %as set u a board "%ic% %as recommended reforms in t%e education system. .%e #overnment is ta8in# measures to im rove t%e s8ills t%at are deficit in all service sectors. 15.3.1 +no,ledge base India is t%e "orld7s si3t% most im ortant offs%ore researc% and develo ment location. .%e country %as a #lobal re utation by bein# in t%e leadin# osition for

business rocess outsourcin# ;'?O< and call centers. Global tec%nolo#y leaders suc% as I'(4 9e"lett2?ac8ard4 Fo8ia4 $ell and ot%ers invest in o erations in India. $ell %as establis%ed a major roduction center to serve t%e local Indian mar8et. Git% t%e increased de#ree of #lobalisation4 t%e *esearc% and $evelo ment ;*H$< activities are #iven im ortance to en%ance #lobal com etitiveness. .%ere %as been steady increase in t%e literacy rate in India. India %as a lar#e resource of educated and tec%nical staff. India ran8s %i#% in terms of availability of s8illed labour4 es ecially en#ineers. Currently4 India is a service %ub of t%e "orld and %olds a dominant osition in a variety of service and 8no"led#e based activities. 15.3." -emograp.ics $emo#ra %ics are a statistical data of t%e o ulation "%ic% includes a#e4 #ender4 occu ation4 income and so on. :or t%e success of a business an understandin# of t%e demo#ra %ics is essential. $emo#ra %ics is t%e basic statistical information study of o ulation based on factors suc% as a#e4 #ender4 economic status4 education4 income and em loyment4 $emo#ra %ics are used by #overnments4 cor orations and non2#overnment or#anisations to learn more about t%e c%aracteristics of t%e o ulation for various ur oses4 "%ic% includes olicy develo ment and economic mar8et researc%. 'asic demo#ra %ic analysis is conducted for t"o reasons5 6 .o identify t%e c%aracteristics of t%e o ulation to determine t%e otential customer. 6 .o locate #eo#ra %ic areas of t%e majority of otential customers. :or e3am le4 if a firm "ants to sell a ne" denture cream4 it first identifies t%e states or cities in India t%at %as t%e lar#est o ulation of elderly consumers. 0fter identifyin# t%ose areas4 t%e firm analyses certain information about t%e consumers4 suc% as t%eir buyin# %abits4 number of eo le usin# dentures4 number of eo le %avin# fi3ed income. .%e demo#ra %ic studies can %el in #ettin# t%e relevant information. In addition4 t%e demo#ra %ic data also %el s in analysin# t%e factors "%ic% in turn %el in #ettin# information about t%e customers. .%ey are as follo"s5 6 Income I .%e de#ree of income t%at a erson s ends over ot%er e3 enses. 6 /esidences I If t%e customers live in %ome t%at is rented or o"ned.

6 0ransportation I .%e number of ros ective customers "%o o"n ve%icles. 6 (ge ranges I .%e number of youn# rofessionals and retirees. 6 1amil& status I .%e marital status of t%e eo le. 6 /ecreational acti!ities I .%e %obbies and recreational activities of t%e eo le. .%e above e3am les clearly state t%at t%e demo#ra %ic data acts as a o"erful tool for lannin# business strate#ies. 15.3.3 *ost .%e main reason of #lobal sourcin# is to benefit from lo"er costs of labour4 ra" materials and so on t%at is available in t%e %ost country. Enter rises need to bear t%e cost of 8no"led#e acJuisition for outsourcin#. It can be conducted inde endently or by levera#in# industry e3 erts. .%e cost of 8no"led#e acJuisition covers t%e cost of levera#in# an e3ternal 8no"led#e base for rocesses4 tools and tem lates and t%e best ractices to %el develo and mana#e t%eir offs%ore rojects. 0 #lobal sourcin# roject reJuires substantial travel by various eo le as t%e initiatives ro#ress t%rou#% t%e #lobal life cycle. (any s onsors and rocess o"ners travel durin# t%e 8no"led#e %ase. .%e mana#ers and rocess leads travel substantially durin# t%e transitional %ase. 9ence4 international travel increases t%e e3 ense. E3c%an#e rate fluctuations affect t%e financial situation. .%e cost includes e3 enditure in %ysical infrastructure and su ort4 trainin#4 "a#e rate and so on. (cti!it& 1 $ell is t%e second lar#est ersonnel com uter manufacturer in t%e "orld. $ell India is one of t%e star erformers of $ell. $iscuss t%e com etitiveness of $ell India. *efer to t%e follo"in# "ebsite for #uidance5 %tt 5EE""".tec%#oss.comE)toryE1,-9)1&2$ell2s2 remature2release.as 3 Sel% (ssessment )uestions &. DDDDDDDDDDDDD bears t%e cost of 8no"led#e acJuisition for outsourcin#. 5. $emo#ra %ic is a statistical data of t%e (FCs in a country. ;.rueE:alse<

+. India %as core com etencies in DDDDDDD sector. a< (anufacturin# sector b< 0utomobile sector c< I.EI.E) sector d< Education sector 15.2 *.allenges %or Indian Businesses India is a develo in# country and every develo in# country %as its o"n or#anisational roblems. In t%e ast decade4 some Indian com anies %ave made remar8able ro#ress by reac%in# t%e international latform in s%ort time. India %as transformed from bein# rimarily domestic layers into confident #lobal cor orations. .%e .0.0 @a#uar deal "as one rominent e3am le of an Indian #lobal o"er %ouse to acJuire an internationally re uted automotive com any 15.2.1 Brand India 'rand India is a %rase t%at describes t%e cam ai#n "%ic% rojects India as an emer#in# destination for business in various fields suc% as information tec%nolo#y4 manufacturin#4 infrastructure4 service sector and so on. Country names can amount to brand names and assist consumers in evaluatin# t%e roducts before urc%asin# t%em. 'rand India is receivin# a ositive res onse. 9o"ever4 'rand India is "ea8 in many "ays. In develo ed countries4 eo le are yet to associate India "it% "orld2 class standards. .%e initial mar8et entry strate#y of a com any from a develo in# country is to offer c%ea er roducts of acce table Juality4 e3am le4 C%ina and !orea. .%e customers of develo ed countries buy t%ose roducts only on t%e basis of rice. 'rand India is com rised of a lar#e number of sub2brands t%at are relatively establis%ed. It reflects t%e economic reforms and liberalisation rocess t%at Indian economy %as under#one. .%e famous brands from India are Indian information tec%nolo#y ;I.< com anies suc% as Infosys4 Gi ro and .ata. .%e ositive ima#e of t%ese com anies %el in c%an#in# consumer erce tions and also %el in re2brandin# India as a leadin# manufacturin# and service %ub by im rovin# India7s brand eJuity. Brand India is a %rase used to describe t%e cam ai#n India is usin# to attract business. 'asically t%e cam ai#n is to roject t%e attractiveness of India as an emer#in# destination for business in t%e fields of service sector4

manufacturin#4 information tec%nolo#y4 infrastructure4 information tec%nolo#y enabled services4 etc. .%e cam ai#n uses bot% India as %u#e mar8et for roducts and services as "ell as a lucrative destination for investment. .%e federal #overnment is s ear%eadin# t%e cam ai#n "it% considerable coo eration from t%e domestic business body Confederation of Indian Industry ;CII< and t%e more informal India Inc abroad. 0mon#st t%e leadin# or#aniKations "or8in# on buildin# 'rand India is India 'rand EJuity :oundation ;I'E:<4 a ublic2 rivate artners%i bet"een t%e (inistry of Commerce and Industry4 Government of India4 and t%e Confederation of Indian Industry. It aims to effectively resent t%e India business ers ective and levera#e business artners%i s in a #lobalisin# mar8et2 lace.Its "ebsite ;ibef.or#< is a resource centre for #lobal investors4 international olicy2ma8ers and "orld media see8in# u dated4 accurate and com re%ensive information on t%e Indian economy4 states and sectors. I'E: re#ularly trac8s #overnment announcements in olicy4 forei#n investment4 macroeconomic indicators and business trends.

'rand eJuity is t%e "ort% derived from t%e #ood"ill and name reco#nition acJuired over a eriod of time. It im roves sales volume and rofit mar#ins. .%e India 'rand EJuity :oundation ;I'E:< "as establis%ed to romote brand India. 15.2." Go!ernment and bureaucrac& .%e olitical environment of a country influences t%e business to a lar#e e3tent. .%e olitical environment includes olitical stability in t%e country4 nature and e3tent of bureaucracy4 ideolo#y of #overnment4 arty in o"er and so on. 0not%er c%allen#e t%at influences business is bureaucracy. Industrial incentives are administered by an elaborate and e3 ensive bureaucracy. .%e relations%i of #overnment to international business is based on t%e conce t of soverei#nty. .%e conce t identifies t%at t%e nation %as com lete control over t%e international affairs. .%e infrastructure suc% as air ort4 road or ort u #radation ta8es years for com letion or are stalled for many years. .%is affects t%e business in India ne#atively. Government olicy and rocedures in India are very com le3 and confusin#. Government olicy and bureaucratic culture in India do not encoura#e international business. Lnnecessary #overnment interference can %inder

#lobalisation. Government su ort is essential to encoura#e #lobalisation. Government su ort is e3tended in t%e form of olicy reforms4 develo ment of infrastructure4 financial mar8et4 *H$ su ort and so on. C%an#es in #overnment and olitical instability disru t business. Good business t%rives on redictability "%ic% is lac8in# in India. 15.2.3 *orporate go!ernance Cor orate #overnance is a rocess of romotin# cor orate trans arency and accountability. It is set of olicies t%at affect t%e "ay a com any is administered and controlled. /uality cor orate #overnance is a tool for socio2economic develo ment. Cor orate #overnance deals "it% o"er and accountability for t%e safety of assets and resources entrusted to t%e o eratin# team of t%e firm. .%e objective of t%e cor orate #overnance is to attain %i#%est standards of rocedures and ractices t%at are follo"ed by t%e cor orate "orld. .%e ne" emer#in# cor orate India needs #uidin# rinci les for cor orate #overnance. .%e common as ects for t%e failure of cor orate #overnance are misuse of o"er4 frauds4 misa ro riation of funds and so on. Good cor orate #overnance romotes accountability in relation to ublic satisfaction and res onsive delivery of service. In India4 cor orate #overnance initiatives are underta8en by (inistry of Cor orate 0ffairs ;(C0< and t%e )ecurities and E3c%an#e 'oard of India ;)E'I<. #t.ics Cor orate #overnance is about et%ical conduct of t%e business. Et%ics is related to t%e code of values and rinci les t%at %el s a erson to c%oose bet"een ri#%t or "ron#. (ana#ers ma8e decisions based on a set of values and rinci les t%at are influenced by t%e culture of t%e or#anisation. Et%ical leaders%i is im ortant for t%e business to be conducted by meetin# t%e e3 ectations of all t%e sta8e%olders. Cor orate #overnance is t%e et%ical frame"or8 under "%ic% cor orate decisions are ta8en. Et%ics is a #eneralised value system avoidin# discrimination in recruitment and ado tin# fair business ractices. 'usiness et%ics rovide a #eneral #uidelines "it%in "%ic% a mana#ement can o erate. 0n or#anisation %as to be et%ical because it %as to e3ist in t%e com etitive "orld. .%e varyin# et%ical norms and social values ma8e international business environment com le3. .%e et%ical norms vary from country to country. $abour practices

Et%ical concerns are at t%e core of dis ute re#ardin# t%e labour ractices. .%e multinational enter rises are c%ar#ed of unjust treatment of "or8ers in develo in# nations. .%e labour la" enforcement is "ea8. .%e la"s t%at force firms to obtain ermission from t%e #overnment rior to retrenc%ment are not enforced ro erly. 9irin# labors to contractor and subcontractin# non2core activities to ot%er com anies rovides fle3ibility to t%e firms t%at see8 to mana#e t%eir labour force in volatile conte3t. C%ild labour is used in t%e manufacture of e3 orts from t%e develo in# countries is criticised by eo le in t%e develo ed countries. :or e3am le4 in India t%e car et industry uses c%ild labour and social activists in develo ed nations demand ban on t%e im ort #oods embodyin# c%ild labour. Consumers tend to boycott suc% #oods and t%is in turn adversely affects t%e business. 15.2.2 Managing di!ersit& (ost of t%e international businesses face roblems in mana#in# multicultural diversity. ?reviously4 (FCs %ad a country s ecific business strate#y but no" it is movin# to"ards a #lobal one. (ana#in# diversity is a rocess of establis%in# "or8force to erform in an unbiased environment "%ere no member %as an advanta#e or disadvanta#e. :or an international mana#er4 mana#in# diversity is a c%allen#e. .%e c%allen#e is to create a "or8 environment "%ere every erson erforms to %is full otential and com ete for re"ards and romotions t%at based on merits. .%e success of an (FC is determined by its ability to mana#e diversity. In an international or#anisation4 t%e "or8force consists of variety of cultures. .oday4 a ty ical firm is a combination of diverse "or8force in terms of #ender4 race and so on. (ost com anies encoura#e e3c%an#e ro#rams "%ere em loyees from one country come and interact "it% em loyees of ot%er countries. .%ere are some ractical ste s ta8en by mana#ers to mana#e diversity. .%ey are5 6 :ocusin# on brin#in# in best talent. 6 Establis%in# ro#rammes amon# em loyees of same and different race. 6 $evelo in# an a#e4 #ender and race rofile of t%e "or8force. 6 ?romotin# minorities and ot%er sections to decision2ma8in# ositions. 6 ?rovidin# e3tended leaves4 fle3ible time4 and job s%arin# o Sel% (ssessment )uestions ortunities.

,. .%e %rase used to describe t%e cam ai#n "%ic% rojects India as an emer#in# destination for business is5 a< (ade in India b< 'rand India c< Incredible India
d< $estination India -. DDDDDDDDDDDDD is a rocess of romotin# cor orate trans arency and accountability. 9. $iscrimination in recruitment is an et%ical ractice. ;.rueE:alse< 15.5 Strateg& %or International Business in India .%e strate#y for international business is t%rou#% incor oration of t%e conce t of confi#uration and com etence. .%e conce t of confi#uration is based on t%e value c%ain conce t. .%e com etence strate#y is to identify t%e core com etency of t%e firm t%at uts it in a su erior osition. Core com etence is ac%ieved "%en t%e financial4 tec%nolo#ical and man o"er resources are available conveniently at lo" cost. 15.5.1 /egional understanding *e#ional understandin# is a strate#y t%at %as macrosco ic and microsco ic forms. In a macrosco ic vie"4 a re#ional understandin# refers to t%e co2o eration bet"een nations t%at %ave are #eo#ra %ically laced to#et%er. $evelo in# countries must stren#t%en re#ional coo eration "it% ot%er develo in# countries to en%ance develo ment. .%e international re#ional or#anisations suc% as 0)E0F ;0ssociation of )out% East 0sian Fations<4 EL ;Euro ean Lnion<4 (E*CO)L* ;)out% 0merican Countries<4 and F0:.0 ;Fort% 0merican :ree .rade 0#reement< are e3am les of international re#ional alliances t%at %ave evolved immensely benefitin# t%e member countries in terms of mar8et access and economies. .%e re#ional co2o eration also %as its o"n advanta#es and disadvanta#es. .%e advanta#es of re#ional understandin# are t%e follo"in#5 6 'etter mar8et access amon# t%e re#ional alliances. 6 Im roved inflo" of forei#n e3c%an#e. 6 En%anced economies of scale. 6 Easier mode of re resentation in t%e international mar8et. .%e conflicts arise in terms of bilateral a#reements outside t%e re#ional co2o eration4 t%reat of acJuisition by forei#n com anies4 destruction of domestic mar8et and so on. In a microsco ic vie"4 t%e re#ional understandin# as a cor orate business strate#y ac%ieves t%e follo"in#5

6 En%ance business roductivity and increase em loyment o

ortunities. ort "%ic% satisfies business

6 ?rioritise resources suc% t%at ublic fundin# offers effective business su needs. 6 (a3imum benefit to t%e re#ion by focusin# on 8ey riorities.

6 *e#ional understandin# as a business strate#y is a rocess by "%ic% decisions are coordinated and inte#rated across t%e entire re#ion. *e#ional understandin# focuses on t%e revie" of an overall re#ional acJuisition. It also focuses to re#ionalise contractin#4 facilitate s%arin# of contracts4 develo contractin# ca abilities4 develo and im lement standard o eratin# rocedure for re#ional contractin#4 and en%ance small business o ortunities. 15.5." Strategic alliances )trate#ic alliances refer to t%e alliance bet"een actual or otential com etitors. In strate#ic alliance4 t"o or#anisations "%o are otential com etitors a#ree to coo erate "it% eac% ot%er and form an alliance by enterin# into a coo erative a#reement. :or e3am le4 (otorola initially found it difficult to enter t%e @a anese mar8et. It t%en formed an alliance "it% .os%iba in 19-, to build micro rocessors. .os%iba rovided mar8etin# and mana#erial %el to (otorola for e3 ansion in @a an. )trate#ic alliances amon# international businesses are common. )trate#ic alliance is referred in industries suc% as electronics4 com uter %ard"are and soft"are4 telecommunication and so on. .%e com anies coo erate in tec%nolo#y develo ment4 s%arin# *H$ information of mutual interest to develo ne" roducts t%at com lement eac% ot%er. )trate#ic alliance also %el s t%em to build net"or8s of dealers and distributors to %andle t%eir roducts. 0not%er reason for formin# strate#ic alliance is ris8 s%arin#. G%en industries enter a ne" mar8et or develo ne" roducts t%ere is no #uarantee of success. .%ese a#reements can %el in reducin# and controllin# t%e ris8 of an individual firm. )trate#ic alliances are formed to e3 loit economies of scale. 0lliance artners can rea economies of scale in artners%i . .%e com lementary assets and resources t%at alliance artners ossess are t%eir develo ment4 manufacturin# and distribution activities. )trate#ic alliances %el in learnin# im ortant s8ills and abilities from t%eir com etitors. )trate#ic alliance can be classified into t%e follo"in# cate#ories5 6 3on-e4uit& alliances I In t%e non2eJuity alliance4 t%e coo eratin# firms a#ree to "or8 to#et%er to carry out activities. .%ey do not ta8e eJuity ositions in eac% ot%er or form an inde endent or#anisation to mana#e t%eir coo erative efforts. .%ese alliances are mana#ed by contracts. 6 #4uit& alliances I In eJuity alliance4 t%e coo eratin# firms su alliance artners. lement contracts "it% eJuity %oldin# in

6 5oint !entures I In joint venture4 t%e coo eratin# firms create a le#al inde endent firm in "%ic% t%ey invest and s%are rofits.

)trate#ic alliance is referred in international business because it %el s in5 6 ?rovidin# access to ne" mar8ets. 6 Gainin# access to local distribution net"or8. 6 Gainin# access to ot%er financial resources. 6 0ttainin# ris8 reduction. 6 En%ancin# t%e manufacturin# rocess. 6 Im rovin# access to latest tec%nolo#ies. 0lliances formed amon# firms of develo ed and develo in# countries %el in mutual motivation. .%e artner from t%e develo in# country obtains tec%nolo#y and ca ital from t%e develo ed country. .%e artner from t%e develo ed country #ets advanta#es from t%e lesser2develo ed country in form of lo" cost labour4 reserves of ra" materials and so on.

(cti!it& " *efer any "ebsite and create a re ort on t%e strate#ic alliance bet"een 9CL and )ybase. *efer to t%e follo"in# "ebsite for #uidance5 %tt 5EE bdj.sys2con.comEnodeE11-3-25 Sel% (ssessment )uestions 11. In DDDDDDDDDDDDD t%e coo eratin# firms create a le#al inde endent firm in "%ic% t%ey invest and s%are rofits. a< Fon2eJuity alliance b< EJuity alliance c< @oint venture d< Fon2joint venture 11. DDDDDDDDDDDDD refer to t%e a#reement bet"een otential com etitors to form an alliance by enterin# into a coo erative a#reement.

12. In t%e non2eJuity alliance4 t%e coo eratin# firms a#ree to "or8 to#et%er to carry out activities and ta8e eJuity ositions in eac% ot%er. ;.rueE:alse< 15.6 Summar& Let us no" summarise t%e salient oints you learnt in t%is unit on #lobal sourcin# and its im act in India5 6 Global sourcin# is a rocurement strate#y t%at is aimed at e3 loitin# #lobal efficiencies in roduction. 6 Globalisation is t%e rocess of increasin# connectivity and interde endence of t%e "orld7s mar8et and businesses. 6 .%e economic liberalisation in India be#an in @uly 1991. .%e economic liberalisation aved "ay for ra id ro#ress in India. 6 .%e com etitive advanta#e of a com any is im ortant to determine t%e success of its #lobal business. 6 'rand India is used to describe t%e cam ai#n "%ic% rojects India as an emer#in# destination for business in various fields. 6 Cor orate #overnance is a rocess of romotin# cor orate trans arency and accountability. 6 .%e strate#y for international business is t%rou#% incor oration of t%e conce t of confi#uration and com etence. 6 )trate#ic alliance bet"een otential com etitors is t%e contract to coo erate "it% eac% ot%er and form an alliance by enterin# into a coo erative a#reement. 15.7 Glossar& Economies of scale: *eduction in cost er unit resultin# in increased roduction. Equity: O"ners%i interest in a cor oration in t%e form of common stoc8. International management: .%e s8ills and 8no"led#e reJuired by mana#ers in c%ar#e of o erations t%at involve eo le from different countries. Sub-contracting: .%e ractice of assi#nin# "or8 under a contract to anot%er arty. 15.8 0erminal )uestions 1. Evaluate t%e im act of #lobalisation in India. 2. Inter ret t%e com etitive environment in India. 3. E3 lain t%e c%allen#es faced by Indian business in t%e "a8e of #lobalisation. &. $escribe strate#ies t%at can be ado ted by Indian businesses.

15.' (ns,ers Sel% (ssessment )uestions 1. Globalisation 2. Liberalisation 3. :alse &. 1991 5. Enter rises +. I.EI.E) sector ,. 'rand India -. Cor orate #overnance 9. :alse 11. @oint venture 11. )trate#ic alliance 12. :alse 0erminal )uestions 1. In India4 #lobalisation refers to t%e o enin# u of t%e economy to forei#n direct investment by rovidin# facilities to forei#n com anies to invest in different areas of economic activity in India. *efer to section 15.2 for details. 2. .%e com etitive advanta#e of a com any is im ortant to determine t%e success of its #lobal business. *efer to section 15.3 for details. 3. .%e c%allen#es faced by Indian businesses due #lobalisation are #iven in section 15.&. &. .%e strate#y for international business is t%rou#% incor oration of t%e conce t of confi#uration and com etence. *efer to section 15.5 for details. 15.10 *ase-$et

*.allenges 1aced b& Mc-onalds in India

(c$onalds is an (FC and is one of t%e lar#est fast food c%ains in t%e "orld. (c$onald7s be#an its o erations in India in 199+. Initially4 t%e (c$onald7s food outlets re orted accumulated losses. .o overcome t%is failure4 (c$onald7s develo ed a business strate#y to be successful in India. (c$onalds ada ted to t%e local culture in India4 its localisation and ricin# strate#y. (c$onald7s famous dis% is t%e beef2based %ambur#er. In India4 most of t%e eo le do not eat beef and or8 and some refer ve#etarian. (c$onald7s customised its menu "it% more t%an 51 er cent ve#etarian roducts. It introduced an Indian version of bur#ers "%ic% are made from mutton and c%ic8en. (c$onald7s also introduced its rice strate#y in India. It announced reduction in rices by 25 ercent for its lunc% and dinner menus. .oday4 (c$onald7s is a successful food c%ain and %as more t%an 1,1 restaurants in India. -iscussion )uestion 1. G%at c%allen#es did (c$onald7s face in IndiaM Source: %tt 5EE""".scribd.comEdocE+&+&1&3E(c$onalds2&?s2Of2mar8etin#
/e%erences 6 @ayanta 'a#c%i. ;2115<. Liberalisation of )ervices I Global and Indian ?ers ective. I.!.International ?vt Ltd. 6 'outilier4 *obert. ;1993<. .ar#etin# :amilies5 (ar8etin# .o and .%rou#% t%e Fe" :amily. 0merican $emo#ra %ics 'oo8s. 6 (iller4 'erna. ;1995<. 0 'e#inner7s Guide to $emo#ra %ics. (ar8etin# .ools. 6 Firmalya !umar4 ?radi ta !. (o%a atra H )uj C%andrase8%ar. ;2119<. India7s Global ?o"er%ouses. .ata (cGra"29ill ?ublis%in# Com any Limited. #-/e%erences 6 %tt 5EEboo8s.#oo#le.co.inEboo8sMidNb#LO.G2oJ2cCH #N?01&&HdJN labourP racticesPinPindia#lobalPsourcin#H%lNenHeiNn&n).Ib8$ob-v/O&#+if$"HsaNOHoiNboo8DresultHctNresultHresnumN,HvedN1C:Q /+0E"'#RvNone a#eHJN*e#ionalS21understandin#HfNfalse 6 %tt 5EEboo8s.#oo#le.co.inEboo8sMidN,L-.s(ACGE8CH #N?0+,2HdJN internationalPbusinessPstrate#yPinPindiaH%lNenHeiNrQ,).OuC9Iv(u0Odl-)D$"HsaNOHoiNboo8DresultHctNresultHresnumN2HvedN1C$c /+0E"0/RvNone a#eHJNinternationalS21businessS21strate#yS21inS21 indiaHfNfalse 2 *etrieved on 2nd Fovember 2111 6 %tt 5EEboo8s.#oo#le.co.inEboo8sMidN&iJ@21+-I"CH #N?031,HdJN)trate#yPforPInternationalP'usinessPinPIndiaH%lNenHeiNCI3).I)C?Q2 0v#OK2Dn*$"HsaNOHoiNboo8DresultHctNresultHresnumN11HvedN 1CGE/+0E"C/RvNone a#eHJN)trate#yS21forS21InternationalS 21'usinessS21inS21IndiaHfNfalse 6 %tt 5EEboo8s.#oo#le.co.inEboo8sM idN39l@KDL&(dLCH #N?0133HdJNC%allen#esPforPIndianP'usinesses'randPindiaH%lNenHeiNAl9*.(?@II,Jv/?)%bm*$0HsaNOHoiNbo o8DresultHctNresultHresnumN1HvedN1C$I/+0E"00RvNone a#eHJHfNfalse 2 *etrieved on 3rd Fovember 2111

/e%erences 6 0bbass :. 0l8%afaji4 ;2113<4 )trate#ic (ana#ement4 :ormulation Im lementation in dynamic environment4 9a"ort% ?ress. 6 0brol ?. F.4 '%alla A. !. ;2115<4 International business environment and management, 0nmol ?ublications ?A. L.$. 6 0s"at%a a. !. ;211-<. International Business. .ata (cGra" 9ill Education5 Fe" $el%i.

6 '. L. (at%ur ;2111<4 .owards economic development, $iscovery ublis%in# %ouse. 6 'atra G. ). ;211+<. Liberalisation, Globalisation and International Business. $ee and $ee ?ublications. 6 'ennet *o#er ;211+<. International Business, ?earson Education Ltd 6 'ernadette 0ndrTosso2O7Calla#%an ;2115<4 *e#ional inte#ration5 Europe and Asia compared 6 '%alla4 A. !. and )%iva *amu ). ;211-<. International Business Environment and Management, Anmol ?ublications. 6 '%atia ). !. ;211&<. Business Ethics and Corporate Governance, $ee and $ee ?ublications Ltd. 6 'outilier4 *obert. ;1993<. .ar#etin# :amilies5 (ar8etin# .o and .%rou#% t%e Fe" :amily 0merican $emo#ra %ics 'oo8s. 6 'ra%m CanKer ;211+<4 E2business strate#ic t%in8in# and ractice4 Cen#a#e learnin#. 6 're"ster4 C%ris4 ) arro"4 ?aul H Aernon4 Guy. ;211-<. International uman !esource Management. Lniversities ?ress ;India< Limited. 6 'ulc%andani !. *. ;2111<. 'usiness La" for (ana#ers. 9imalaya ?ublis%in# 9ouse. 6 C%au%an ?. L.4 !a88ad4 *atis%4 ?atel4 *u al 9. ;211+<. International Business. )%ant%i ?ra8as%an 6 C%erunilam :rancis. ;2111<. International Business Environment, 9imalaya ?ublis%in# 9ouse 6 Colin Gilli#an4 (artin 9ird ;19-+<. International mar8etin#5 strate#y and mana#ement 6 CKin8ota (ic%ael *.4 *on8ainen Ll88a 0.4 (offett (ic%ael 9. ;2112<. International Business, ?G) )out% Gestern $u3bury Cole On"o 6 Gary )%ou ;199-<. .%e international #uide to forei#n currency mana#ement. 6 Geoff Goldman4 Cecile Fieu"en%uiKen ;211+<. )trate#y5 )ustainin# Com etitive 0dvanta#e in a Globalised Conte3t. @uta and Co. 6 Gerardo *. Ln#son H Qim Qu Gan#4 ;211-<4 Global "trategic Management, Library of Con#ress Catalo#in# in ?ublication $ata. 6 Goel ?. !. ;2111<. 'usiness La" for (ana#ers. 'iKmantra. 6 9arKin#4 0nne Gill H *usysseveldt4 @oris Aan. ;211,<. International uman !esource Management. )a#e ?ublications India ?vt. Ltd. 6 International 0ccountin# )tandards Committee ;2111<4 International 0ccountin# )tandards E3 lained4 C%ic%ester 5 Giley 6 @anice *eynolds ;2111<4 Lo#istics and fulfillment for e2business5 a ractical #uide to masterin# bac8 office functions for online commerce4 :ocal ress. 6 @ayanta 'a#c%i ;2115<. Liberalisation of )ervices I Global and Indian ?ers ective. I. !. International ?vt. Ltd. 6 @eff (adura ;211-<5 International #inancial Management, $th edition% .%omson )out%2Gestern ?ublications

6 !. 0s"at%a 6 !. 0s"at%a 6 !. 0s"at%a Ltd.

a H !. *amac%andra ;2111<. ?rinci les of 'usiness La"4 9imalaya ?ublis%in# 9ouse. a ;2111<. International Business. .ata (cGra" 9ill ?ublications Co. Ltd. a H )ad%na4 $as%. ;2119<. International uman !esource Management I &e't and Cases. .ata (cGra"29ill ?ublications Co.

6 !evin. ;2119<. :undamentals of International :inancial (ana#ement. 6 !umar F ;2112<. International (ar8etin#4 :irst Edition. 0nmol ?ublication. 6 (c$onald4 :ran8 and 'urton4 :red ;2112<. International Business. International .%omson Com uter ?ress. 6 (ic%ael :ren8el4 0le3ander !armann4 'ert )c%oltens4 L.@.* )c%oltens ;211&<. Ban( "overeign ris( and )inancial crisis% ) rin#er ?ublications 6 (ic%ael *. CKin8ota4 Best *ractices In International Mar(eting, .%e 9arcourt Colle#e ?ublis%ers )eries In (ar8etin# 6 (ic%ael *. CKin8ota4 Il88a 0. *on8ainen.;2111<4 International Mar(eting, :ort Gort% U London 5 9arcourt Colle#e ?ublis%ers. 6 (i8e G ?en# ;2119<4 Global "trategic Management, Cen#a#e4 London. 6 (iller4 'erna. ;1995<. 0 'e#inner7s Guide to $emo#ra %ics. (ar8etin# .ools. 6 Felson Carl 0. ;1999<. International Business 2 A Manager+s Guide to "trateg, in the Age o) Globalism, ?G) )out% Gestern $u3bury Cole On"o 6 Felson4 Carl 0. ;1999<. International Business - A Manager+s Guide to "trateg, in the Age o) Globalism. ?G) )out% Gestern $u3bury Cole On"o. 6 Firmalya !umar4 ?radi ta !. (o%a atra H )uj C%andrase8%ar. ;2119<. India+s Global *owerhouses. .ata (cGra"29ill ?ublis%in# Com any Limited. 6 ?aul @ustin ;2119<. International Business, ?rentice 9all of India ?vt. Ltd. 6 ?aul *od#ers ;211,<4 International 0ccountin# )tandards4 :rom L! )tandards to I0) I An Accelerated !oute )or .nderstanding the /e, *rinciples, Elsevier Ltd.4 6 ?%illi e Lesserre ;211,<4 Global "trategic Management, ?al#rave (acmillan. 6 ?orter4 (ic%ael ;1991<. &he Competitive Advantage o) 0ations. .%e :ree ?ress 6 *o#er 'ennett4 @im 'lyt%e ;2112<. International mar8etin#5 strate#y lannin#4 mar8et entry. 6 *ou%olla% !. *amaKani4 @ose % 0. !ec%ic%ian ;19--<4 &he Gul) Cooperation Council% record and anal,sis 6 )ean $e 'urca4 *ic%ard :letc%er and Linden 'ro"n ;211&<4 International mar8etin# 5 an "ME perspective, London 5 :. 2 ?rentice 9all 6 )%aran4 Ayu ta8es%. ;199-<. International :inancial (ana#ement. 6 )isir Gu ta ;19-1<4 India and re#ional inte#ration in 0sia. 6 .%iru at%i .. ;2119<. 'usiness La". Global *esearc% ?ublications. 6 .%omson @r.4 0rt%urU )tric8land III4 0. @.U Gamble4 @o%n E. H @ain4 0run !. ;211+<. Cra)ting and E'ecuting "trateg,% &he 1uest )or Competitive Advantage. .ata (cGra" 9ill ?ublications Co. Ltd. 6 .ulsian ?. C. ;2119<. 'usiness La". .ata (cGra" 9ill ?ublis%in# Com any Ltd.

6 Aern .er stra4 *avi )arat%y ;2111<4 International mar(eting, $ryden ?ress 6 Galter Carlsnaes4 .%omas *issee and 'et% 0. )immons. ;211+<. andboo( o) International !elations. )a#e ?ublications Ltd. 6 Geiss @ose %. ;2119<. Business Ethics Concepts and Cases, Cen#a#e $elmar learnin# India ?vt. Ltd.

(bout t.e (ut.or

admin Co yri#%t V 2112 )(L. ?o"ered by Gord?ress.