THE BANGALORE BRAND

BUSINESS ENVIRONMENT

Submitted ToProf. Kunwar Milind Singh

Submitted byKishu Bhatia Arpit Agarwal

ABOUT THE CASE

The case explains the competitive advantage of Bangalore that has helped it earn the name, the "Silicon Valley of India".

It describes the factors that made Bangalore one of the favourite destinations for IT&ITES companies in India and abroad.
The case touches on the proactive role played by the state government in developing the city as an IT destination. However, Bangalore has recently been facing stiff competition from other cities so far as investment from domestic and foreign companies is concerned.

The case looks into the infrastructural problems Bangalore is facing and the growth of alternative destinations such as Hyderabad and Chennai. The last section of the case explains the recent initiatives taken up by the government of Karnataka to revitalize the Bangalore brand

FACTORS :

The factors that contribute to the competitive advantage of a place

The role of the government in developing and sustaining the competitive advantage of a place
The role of infrastructure and civic amenities in making a place an attractive investment destination

The impact of political decisions on business and the relationship between business and politics

INTRODUCTION
Referred to as the 'Silicon Valley of India,' Bangalore, the capital of the southern state of Karnataka, had a population of 5,686,844 in 2001, making it India's fifth largest city Around 1300 information technology (IT) companies operate in Bangalore and it is home to around 110,000 technology workers. This is in addition to the 60,000 people working in Business Process Outsourcing (BPO) firms. Bangalore has been reported as the largest job-creating city in India with more than 65,000 jobs likely to be created in 2004 The Bangalore brand has also been facing stiff competition from upcoming cities like Hyderabad and Chennai , for being projected as the IT hub of India. With the support of the respective state governments, these cities are being projected as the alternative destination for new IT ventures Of the $4 billion IT export revenues from Karnataka in 2003-04, 95 percent came from Bangalore.

GROWTH

Bangalore has a legacy of high quality research institutions starting with the Indian Institute of Science (IISc) built in 1909. The Government of India's (GoI) decision to locate high-level R&D centres in Bangalore laid the foundation for the technological prominence of the city.

Being the pioneer in India in introducing engineering colleges through private participation, Karnataka has a large pool of technically qualified people.
In Bangalore alone, 40,000 graduates trained in technology pass out from 50 colleges every year.

GROWTH (CONTINUED..)

In 1985, Texas Instruments became the first MNC to open a centre in Bangalore with the establishment of its circuit design and development centre. In 1991, the first Software Technology Park in India came up in Bangalore.

In 1992, Bangalore became the first city in India to set up a satellite earth station for high-speed communication services to facilitate software exports.
In 1996, the National Association of Software & Service Companies (NASSCOM) came up with a plan intended to help Karnataka overtake the State of California in the US (known as the Silicon Valley), both in terms of number of software companies and revenue by 2020...

COMPETITION
Competition to Bangalore has come from cities like Hyderabad, Chennai, Pune, NCR, Kolkata, Jaipur, Chandigarh, Pune, and Kochi, among others. Wipro Ltd., with 11,000 employees in Bangalore, has been looking for growth beyond Bangalore. "Bangalore is a zero-sum game. In terms of infrastructure, there has not been any material improvement in the last five years. As a result, it is becoming difficult to sustain growth here. As per reports, IBM Corp. has been considering Kolkata as the hub for its software and IT services activities in India.

ANS-1 BANGALORES COMPETITIVE ADVANTAGE AS AN IT DESTINATION

From a mere 13 software firms in 1991-92, the city now has a pool of over 1,200 software firms.
Working in areas such as computer chip design, systems software and communication software employing over 100,000 IT professionals. Compared to other locations in India, Bangalore has high-end technology/industry concentration such as VLSI and telecom services and higher degree of MNC presence with over 200 foreign firms in operation.

FACTORS RESPONSIBLE FOR COMPETITIVE ADVANTAGE

Bangalore has been fortunate to be rich in the supply of both economic and non-economic factors that make a place a preferred choice of business location.

Bangalore has a large, highly skilled IT talent pool available at a relatively low cost, which it owes to historical development of the citys educational, research and industrial infrastructure. Bangalore has been considered an ideal place in terms of climate and infrastructure to conduct scientific research in sensitive areas like defense and electronics.

ANS-2 HOW BANGALORE SUSTAIN ITS COMPETITIVE ADVANTAGE?

Presence of call centers and Business Process Outsourcing (BPO) companies make it a diverse hub. Through its IT-orientation, the city has also been able to attract a reasonable number of companies into database management/development, data processing/management and engineering, design, and GIS services.

Bangalores major edge is its Human Resource Bank. The State has begun to actively address and remove bottleneck in this area to sustain its competitive advantage.
Bangalore has multitude of Arts, Science, Commerce, Engineering, Law, Medical and Nursing colleges as well as high quality training institutions. There are over one million educated housewives in the State of Karnataka who are an important source of manpower for BPO companies.

ROLE PLAYED BY TELECOM IN SUSTAINING BANGALORES COMPETITIVE EDGE

Bangalore offers a truly wide choice of players in telecom. The entire state is networked via Optic Fibre Cables (OFC) by the State run BSNL (formerly DOT) as well as the private companies like Bharthi, Reliance, VSNL and TATA Tele Services. The new private companies, Bharthi and Reliance, provide the Last Mile Access directly to the customer, in all major cities in Karnataka. VSNL has substantial redundancy in International Bandwidth circuits. Bangalore offers excellent International Bandwidth via Satellite. The STPI at Bangalore presently has more than 1050 IT companies as its customers providing them Individual Satellite Connectivity. Bangalore STPI accounts for 45% of the total STPI revenues in India.

ROLE PLAYED BY GOVERNMENT IN SUSTAINING BANGALORES COMPETITIVE EDGE

IT industry was exempted from payment of purchase tax on computer hardware, computer peripherals & other capital goods for a period of 5years. IT industry was given priority in the sanctioning & servicing of power & was also exempted from power cuts. In case of Mega projects, a package of concessions relevant to the needs of the company were offered in addition to the prevailing tax incentives. The BATF initiated at making Bangalore a world class city & making Bangalore financially self reliant. The BPO companies are exempted from the payment of 50% Stamp Duty & Registration charges on execution of Lease, lease-cum-sale or Sale deeds for the establishment of their venture.

OTHER MAJOR FACTORS

KBITS:

The Department of IT has set up Karnataka Biotechnology & Information Technology Services.
It helps to identify quality man power resources, as well as resolves the problems, if any, of BPO companies with any other Government Departments. A High-powered Cell will be constituted in KBITS which will promote investment of BPO companies . It will provide specific information to companies based on their specific needs. This Market friendly cell will participate in various National & International conferences to provide such information.

FACTORS LEADING TO DOWNFALL OF BANGALORES COMPETITIVE EDGE

The citys infrastructure, especially power and telecom, have not kept pace with IT expansion. While the government promises uninterrupted power supply, the reality is far removed, and many ITES firms maintain their own back-up systems. This cranks up costs. The citys public transport infrastructure is also weak and this has resulted in many people buying their own vehicles, thus overburdening the roads. New government policy to increase sales tax rate from 5.3%-13.5%. Efficient employees were being transferred out of Bangalore by new government.

Ans-3 What Should Be Done To Sustain Bangalores Competitive Advantage In The Future

STATE GOVERNMENT
Infrastructure Services Scarcity of land
. To

POLICIES

Reduce the congestion inside Bangalore, gov. should construct new flyovers and railway over bridges build international airport projects.
If no place is available in Bangalore then provide in neighboring cities. Build four lane expressway for linking Bangalore with the other neighboring place. So IT companies easily operate from there. Reduction in lease rentals. Create self sufficiency with respect to power supply. IT firms should needed 24 hour electricity for fulfilling those requirements gov. should build new power plants.

Power supply

Procedure for seeking clearance

KSPCB (Karnataka state pollution control board) should be simplified the procedure for seeking clearance under the air act and the water act for software companies that used captive diesel generating device.

Approval time

The approval time for commercial building dedicated to IT should be reduced . Now the firms waiting 3 months for getting approval.

Real estate market

Bangalore should expand their real estate market. and reduce real estate price to attract more companies in Bangalore. And also Expand its IT and BPO operations.

Development of satellite townships

Establish R & D institutes

Government should support the development of satellite townships and other cities in Karnataka. Set up a satellite earth station for high speed communication services to facilitate software exports.

Karnataka government should plan to establish R & D institutes and technology institutes in its neighboring cities such as Mysore & Mangalore; as Bangalore will act as a proximity to these states for gaining its competitive edge.

Hotel accomodation

Promotion of sectors other than IT such as hospitality, telecom, etc lack of hotel accommodation is also a great problem

Venture capital fund

Upgrade the range of amenities

Establish a venture capital fund for financing the software industry in Bangalore.

Upgrade the range of amenities like payment of utilities bills, registration of property, getting a telephone connection or any other citizen government interface .

Mega projects

In case of mega projects , a packaged of concessions should be offered. .

IT parks

Develop more IT parks in neighboring cities like Mangalore and maysore.

Software professionals

Increase the density of software professionals in Bangalore by Increase the no. of gov. supported engineering colleges in Bangalore and its neighboring cities like maysore.

Exemption

IT industry should be exempted from payment of purchase tax on computer hard ware for a limited period of time and also exempted from electricity tax.

THANK YOU