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Aureole Institute of Business Management

Assignment
On
International Business

QUESTIONS

Q1) Why couldn't Chevy sell the Nova in Spanish countries? How far is the
understanding of culture of various countries important for international business?

&

Q2) Analyze the current business environment of India.

Name: - Aman Bhattacharya Submitted to: - Mrs. Sukalpa


Roll No: - A209
Submission Date: - 9th October 2010

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Q1) why couldn't Chevy sell the Nova in Spanish countries? How far is the
understanding of culture of various countries important for international
business?

Ans) An American automobile brand Chevrolet under General Motor invigilation, one of
the well known brand around the globe, Chevrolet is a pre- world war 1 company mark
it self in the year of 8th November 1911. After a year of service the western front of
World War 1 breaks out the world wide. In that time there was 270 car manufacturers in
America. After the war ends up only few remains in the market were Chevrolet is one
of them with Ford motors.

Chevy introduce nova variant class car in Latin America Spanish speaking countries
(Mexico, Honduras, Costa Rica, Panama, Cuba etc) and Europe state county Spain. A
car like nova, which is most popular segment with in the America and it sub-continents
1961 – 1988.in that time its performance, Look and reliability gives tough competition to
its rival (Ford Motors). So the question is why they failed to gain a market in Spanish
countries. The legend says that the car sold poorly because the word "Nova" is similar
to the phrase "no va" which translates to "doesn't go." There was no confusion,
however, as the pronunciation of the two phrases is different, "Nova" having the accent
on the first part of the word and the phrase "no va” has the accent on the second word.

Understanding the cultures from various countries or the country where the business
going to set up can help to understand where and what changes need in the project as
per the society and that is the reason why Chevrolet fails.

As entrepreneur or business developer why does he/she need to get a sense of the
prevailing culture? It is essential to understand the culture of the society if the company
wants to make impression or money. Understanding the culture can mean the
difference between attracting and retaining impression from the societal consumers.

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When it comes to international business, understanding cultural differences and


promoting cultural sensitivity will help ensure that communication across borders is
effective and that business transactions are successful.

Each country has its own cultural standards of being, thinking, and acting, and these
cultural differences strongly influence workplace values and business communication.
What may be considered perfectly acceptable and natural in the workplace of one
country, can be considered confusing or even offensive in the workplace of other
country.

For examples:-
Basically the Hollywood movies those releases in India gets it hindi name such as The
Matrix named as Maha shaktimaan and so on. The film Avatar release world wide but
the name stud still in India because the term AVATAR derives from Sanskrit refers to
the hindu god Vishnu. So the word creates different impression in mind and people
those who are don’t like to watch English movies (as per the Indian mind sets) can
watch hindi version of the movie.
And the same problem with the Spanish countries also (they didn’t aspect/like the name
of the car), was the name creates huge barrier between the Chevy ‘Nova’. So each and
every company should focus on while they enter in the new market or country or
introducing new product in to the commodity market about the culture and its different
society actually they should know what consumer looking for and want from them.
The company should be aware of how other cultures differ across the following
dimensions. Many of these dimensions are based on Geerte Hofstede's framework for
assessing culture.
Power Distance

In some countries, such as the Arab nations and many Latin American countries,
people recognize and respect differences in power. In these high power distance
cultures, bypassing a supervisor or any other superior would be considered
insubordination. In low power distance countries, such as America, the lines between

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superiors and subordinates are often blurred. It is perfectly acceptable in America, for
example, that supervisors can mingle with subordinates as equals within a social
setting.

Explicit Versus Implicit

In some countries, such as America and Germany, people tend to be explicit in


communication. Ideas are fully spelled out, and when trying to understand a message,
people will depend on what has been actually said or written. In other countries, such
as Japan, people tend to speak and communicate in an implicit and indirect manner. In
this case, people depend on common understanding in knowledge and etiquette to
extract the underlying message.

Monochronic versus Polychronic

Monochronic cultures prefer to focus on one task at a time. They emphasize order and
do not favor interruptions. For these people, time is a precious commodity. Schedules
and timetables are greatly valued and are meant to be strictly followed. Polychronic
cultures, on the other hand, like to multi-task and are generally less stringent when it
comes to establishing or following an agenda. In this setting, the concept of time is
more fluid, and the pace of life is more relaxed.

Individualism versus Collectivism

In individualist cultures, such as America, individuality, independence, and self-


determination are valued. In collectivist cultures, such as Japan, people are expected to
identify with and work well in groups. In exchange for their loyalty and compliance,
people receive a sense of security, protection, and shared responsibility.

Masculinity versus Femininity

The cultures those are more masculine, such as Japan, value competitiveness,
assertiveness, ambition, and the accumulation of wealth. On the other hand, feminine

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cultures, such as Sweden, place more emphasis on relationships, compassion, and the
general quality of life.

Uncertainty Avoidance

This dimension concerns the level of uncertainty and ambiguity that members of a
culture are comfortable with. Cultures that are high in uncertainty avoidance prefer rules
and structured circumstances. Within their structured environment, these people tend to
be more emotional and expressive. Cultures that are comfortable with uncertainty avoid
rules and in general are less emotionally expressive and pragmatic.
Every culture possesses a unique mixture of attitudes, values, and social expectations.
When conducting business across countries, it is vital that business representatives are
provided with an understanding of the cultural differences and are able to be sensitive
to them.

Q2) Analyze the current business environment of India.

Ans) Basically India is an emerging economy and it promotes Foreign Investments in the
country. That's why the legal system for businesses in India is very flexible. The implementation
of the legal system starts right from your decision to start a business in India. You have to take
an online Director Identification number and then you obtain an online Digital signature
certificate. It is a legal requirement to register the name and nature of the business in Registrar
of Companies or ROC. Then you have to stamp the company documents from a
superintendent. Medical insurance is also required for all sorts of businesses. There is an
employee provident organization, where registration of companies are carried out. It is a legal
requirement for all of the businesses to register for profession tax. Although India
encourage business opportunities over there but still the legal environment requires a lengthy
process to start or carry on a business.

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Growing sectors in India

Telecommunication

India's telecom sector has been one of the major successes in the country. With more
than 270 million connections, India's telecommunication network is the third largest in
the world and the second largest among the emerging economies of Asia. The total
number of telephones has increased from 76.53 million on March 31, 2004 to 688.38
Million telephone (landlines and mobile) subscribers and 652.42 Million mobile phone
connections as of July 2010 it is projected that India will have 1.159 billion mobile
subscribers by 2013.Furthermore, projections by several leading global consultancies
indicate that the total number of subscribers in India will exceed the total subscriber
count in the China by 2013.The industry is expected to reach a size of 344,921 crore
(US$74.85 billion) by 2012 at a growth rate of over 26 per cent, and generate
employment opportunities for about 10 million people during the same period.
According to analysts, the sector would create direct employment for 2.8 million people
and for 7 million indirectly. In 2008-09 the overall telecom equipments revenue in India
stood at 136,833 crore (US$29.69 billion) during the fiscal, as against 115,382 crore
(US$25.04 billion) a year before. The tele-density has also increased from 23.9 per cent
in December 2007 to 58.17% July 2010.

Real Estate

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The infrastructure sector also growing it wing in a massive scale. Due to commonwealth
games government of India spends Rs 28,054 out of which Rs 16,560 crore was given
to the Delhi government for upgrading the capital infrastructure and building of various
stadiums (Rs 650 crore for street scraping, Rs 900 crore for development bus depots,
Rs 3,000 crore for extension of Metro, Rs 18,000 crore for augmenting DTC bus
services and Rs 3,700 crore on flyovers and bridges). As of newly union budget of
Rs.1, 73,552 crore for infrastructure growth in the country in budget 2010.
Government has set the target of constructing 20km of national highways on daily basis
and to trigger these changes projects have been undertaken via public private
partnerships (PPPs). The government also allotment the road transport to Rs.19, 894
crore against the previous Rs.17, 520 crore for 2010-11. In an attempt to revise and
enlarge the railway network, he also allocated Rs.16, 752 crore.

Automobile Industry

The growth of the Indian middle class along with the growth of the economy over the
past few years has attracted global auto majors to the Indian market. India provides
trained manpower at competitive costs making India a favoured global manufacturing
hub.

Propped by the increase in its car sales after the launch of General Motors’ (GM) new
model Beat, along with the robust growth in the Indian automobile sector, Kevin E
Wale, President and Managing Director, General Motors China Group stated that India
should be among the top ten markets for the company globally by 2011. As of now all
the major player of the Indian market show huge turn over in the month of August were
India’s largest commercial vehicle producer, Tata Motors reported a rise in its July
global sales near about 36% and Hyundai India claims 17.2% of growth.

Domestic Sales Figures (units) - 2010

Passenger Cars Commercial Vehicles Two-Wheelers

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June 141,184 933,101

Januar
145,905 53,447 834,383
y
Annual Domestic Motor Vehicle Sales (Apr '09 - Mar '10)
• Passenger Vehicles: 1.95 million
• Commercial Vehicles: 0.53 m
• Two-wheelers: 9.37 m
• Three-wheelers: 0.44 m
• TOTAL: 12.29 m

Information Technology Sector


Software/BPO/KPO - The Indian BPO market is a highly developed service segment. It
is estimated to grow at 19% annually till 2013. According to Gartner Research, the
Indian BPO market is expected to reach $1.2 billion by 2011 and can further grow to
$1.8 billion by 2013. Gartner Research Director T J Singh says, "In the last two years,
many established Indian BPO providers and some of the multi-national corporation
service providers, focusing primarily on the international offshore services market and
have shifted focus and investments to the Indian domestic market.” The IT services
which are being exported include various sectors such as financial services (41%),
high-tech/ telecom (20%), manufacturing (17%) and retail (8%).

According to the latest government survey, 90% of the new jobs were created during
the last quarter of the financial year 2009-2010. During the October-December quarter
there was a huge rise in employment opportunities i.e. around 0.7 million new jobs were
created which reflected in the economy. According to a NASSCOM report, there is a
tremendous opportunity in the long term. The BPO sector in India allows global
companies to access the skilled workforce at lesser wages.

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The business of global KPO is estimated to reach $17 billion by the year 2010, out of
which business worth $12 billion would be outsourced to India according to a report by
GlobalSourcingNow. According to the National Association of Software and Services
Companies (NASSCOM) Indian software industry grew by 12 percent in the financial
year 2009 and it earned revenue to the tune of $71.7 billion. IT-BPO exports (including
hardware exports) reached $47.3 billion in 2009 as against $40.9 billion in 2008, a
growth of 16%.

The overall exports exceed $36 billion in 2008-09, while the annual growth rate of the
industry never dropped below 30%. The share of exports in total IT output has risen to
almost 70% during the same period, as compared to 19% in 1991-92.

According to NASSCOM, direct employment in Indian IT-BPO crossed the 2.2 million
mark, an increase of about 226,000 professionals over 2008. It estimates an indirect job
creation of about 8 million. As a proportion of national GDP, the sector revenues grew
from 1.2% in 1998 to an estimated 5.8% in 2009. Net value-added by this sector, to the
economy, is estimated to be 3.5-4.1% for 2009. It also reports a maturity of the Indian
market and predicts a good future for the domestic industry.

Where The Indian government is providing incentives to the software development


industry in India by way of developing Software technology parks (STP) and Special
Economic Zones (SEZ).Software Technology Park is the most effective scheme
provided by the Indian government. It provides exemptions from custom duty as well as
service tax for STPs. Other policies include exemption from excise duty and rebate in
the payment of Central Sales Tax. However, the most important policy initiative is the
provision for 100% income tax exemption until 31st March 2011.

Special Economic Zones (SEZ) are also encouraged to boost the software
development industry. The SEZ policy came into effect from February 10, 2006. The
policy is ideal for big industries. It provides exemption from income tax for 15 years,

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100% exemption for export income in the first five years and 50% exemption for the
next five.

Data Warehousing - Large retail companies such as Wal-Mart and Metro have
adopted data warehousing solutions for Business Intelligence (BI) and analysis. Many
companies work on Business Intelligence applications that are dependent on data
warehousing. It provides a retailer the ability to leverage his data assets to gain
strategic insight, recognize emerging trends, and respond quickly.

Many leading retailers see data warehousing and Business Intelligence as essential
strategic investments for their competitiveness. Investments in Data Warehousing has
given companies substantial returns on investment as they see increased revenues,
increased margins, reduced markdowns and shrink, and increased inventory turns.

After a mere 5.4% growth in 2009, India’s ITES industry is expected to bounce back
and grow at 15%. The ‘Market Top 10 Predictions 2010’ report by ICT market
intelligence firm IDC India said that important structural changes brought about by the
impact of economic slowdown, would accelerate industry transformation towards a new
"market order".

The recent global economic slowdown did not affect the Indian IT industry as
disastrously as it did in Europe and the US. This clearly demonstrates the Indian ITES
market potential.

One of the major hubs in India for Data Warehousing is Bangalore, the Silicon Valley of
India. In fact, a major contribution in India's phenomenal growth in the field of software
is provided by the software companies based out of Bangalore. There are various
reasons such as a favorable climate, excellent infrastructure, availability of human
resources, International quality research and development centers, cosmopolitan
ambiance, favorable government policies. Cities like Mumbai, Pune and Nagpur are
also growing markets in the field of data warehousing.

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Life science
Pharmaceutical - India’s pharmaceutical industry is the third largest in the world in
terms of volume and stands 14th in terms of value. According to data published by the
Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, the total turnover
of India's pharmaceuticals industry between September 2008 and September 2009 was
US$ 21.04 billion. Of this the domestic market was worth US$ 12.26 billion. India also
supplies more than 80% of AIDS drugs to African countries.

According to the All India Organization of Chemists and Druggists (AIOCD), the
pharmaceuticals industry in India will grow by over 100 per cent over the next two
years. The pharmaceutical industry is currently growing at the rate of 12 per cent, but
this will accelerate soon. The sale of all types of medicines in the country stands at US$
9.61 billion, which is expected to reach around US$ 19.22 billion by 2012.

Biotechnology - The Indian biotechnology sector is one of the fastest growing


knowledge-based sectors in India and is expected to play a key role in shaping India's
rapidly developing economy. With numerous comparative advantages in terms of
research and development (R&D) facilities, knowledge, skills, and cost effectiveness,
the biotechnology industry in India has immense potential to emerge as a global key
player.

The Indian biotech industry grew threefold in just five years to report revenues of US$ 3
billion in 2009-10, a rise of 17 per cent over the previous year, according to the eighth
annual survey conducted by the Association of Biotechnology-Led Enterprises (ABLE)
and a monthly journal, BioSpectrum, based on inputs from over 150 biotech companies.

The biopharma sector contributed nearly three-fifth to the industry's revenues at US$
1.9 billion, a rise of 12 per cent, followed by bioservices at US$ 573 million and bioagri
at US$ 420.4 million. The remaining revenue came from the bioindustrials US$ 122.5
million and bioinformatics US$ 50.2 million segments.

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India is already being globally recognized as a manufacturer of economical, high-quality


bulk drugs and formulations. With a huge base of talented, skilled and cost-competitive
manpower, and a well-developed scientific infrastructure, India has great potential to
become a leading global player in the field of Life science.

Healthcare - The healthcare industry in the country, which comprises hospital and
allied sectors, is projected to grow 23 per cent per annum to touch US$ 77 billion by
2012 from the current estimated size of US$ 35 billion, according to a Yes Bank and an
industry body report published in November 2009. The sector has registered a growth
of 9.3 per cent between 2000-2009, comparable to the sectoral growth rate of other
emerging economies such as China, Brazil and Mexico. According to the report, the
growth in the sector would be driven by healthcare facilities, private and public sectors,
medical diagnostic and pathlabs and the medical insurance sector. According to the
report, diagnostics would contribute US$ 2.5 billion to the healthcare industry by 2012.

An increasing number of public and private healthcare facilities are expected to propel
demand for the industry, accounting for another US$ 6.7 billion in this period.

The Government of India launched the National Rural Health Mission (NRHM) in 2005.
It aims to provide quality healthcare for all and increase the expenditure on healthcare
from 0.9 per cent of GDP to 2-3 per cent of GDP by 2012.

According to Union Budget 2010-11, the Finance Minister, Mr Pranab Mukherjee


increased the plan allocation for Ministry of Health and Family Welfare from US$ 4.2
billion in 2009-10 to US$ 4.8 billion in 2010-11.

Moreover, in order to meet revised cost of construction, in March 2010 the government
allocated an additional US$ 1.23 billion for six upcoming AIIMS-like institutes and
upgradation of 13 existing Government Medical Colleges.

Tourism & Hospitality

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As per the Travel and Tourism Competitiveness Report 2009 by the World Economic
Forum, India is ranked 11th in the Asia Pacific region and 62nd overall, moving up three
places on the list of the world's attractive destinations. It is ranked the 14th best tourist
destination for its natural resources and 24th for its cultural resources, with many World
Heritage sites, both natural and cultural, rich fauna, and strong creative industries in the
country. India also bagged 37th rank for its air transport network. The India travel and
tourism industry ranked 5th in the long-term (10-year) growth and is expected to be the
second largest employer in the world by 2019.

Medical Tourism - According to Pawan Verma, senior executive vice-president, hotels


division, ITC the market size of medical tourism in India is worth US$ 2.4 billion and is
growing at 27 per cent annually. The country received 1.1 million medical tourists in
2009, registering a growth of 17 per cent.

According to a report by RNCOS, medical tourism will grow at a CAGR of over 27 per
cent in the period 2009–12 to generate revenues worth US$ 2.4 billion by 2012. The
number of medical tourists is anticipated to grow at a CAGR of over 19 per cent to
reach 1.1 million by 2012. The report adds that India’s share in the global medical
tourism industry will climb to around 2.4 per cent by the end of 2012.

According to the World Travel and Tourism Council (WTTC), the growth in the
hospitality industry is pegged at 15 per cent every year, with 200,000 rooms needed,
the hotel segment of India is on the brink of an astounding growth.

According to the Tourism Satellite Accounting (TSA) research, released by WTTC and
its strategic partner Oxford Economics in March 2009:

• The demand for travel and tourism in India is expected to grow by 8.2 per cent
between 2010 and 2019 and will place India at the third position in the world.

• India's travel and tourism sector is expected to be the second largest employer in
the world, employing 40,037,000 persons by 2019.

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• Capital investment in India's travel and tourism sector is expected to grow at 8.8
per cent between 2010 and 2019.

• The report forecasts India to get capital investment worth US$ 94.5 billion in the
travel and tourism sector in 2019.

• India is projected to become the fifth fastest growing business travel destination
from 2010-2019 with an estimated real growth rate of 7.6 per cent.

Each and every country today is looking to boost their business and increased global
competition. Outlined below are the structural transformations undertaken by the
government that have had a positive impact on the growth of the Indian economy &
improving the rankings of India in terms of Business Environment among 183 countries
of the world.

Key benchmarks indicating Business Environment in India rankings among 183


countries of the world.

Doing Doing Change in rank


Business Business

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2010 rank 2009 rank

Doing Business 133 132 -1

Starting a Business 169 166 -3

Dealing with Construction Permits 175 174 -1

Employing Workers 104 102 -2

Registering Property 93 92 -1

Getting Credit 30 27 -3

Protecting Investors 41 38 -3

Paying Taxes 169 171 +2

Trading Across Borders 94 97 +3

Enforcing Contracts 182 182 0

Closing a Business 138 142 +4

Based on the above finding we can conclude that there is a definite improvement in the
Business Environment in India. However, India still has to work on other areas
important to business freedom such as an economy’s proximity to large markets, the
quality of its infrastructure services (other than those related to trading across border),
and macroeconomic condition or the underlying strength of institutions.

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