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STARTING OPERATIONS IN INDIA Entry Strategies for Foreign Investors


STARTING OPERATIONS IN INDIA Entry Strategies for Foreign Investors By Rahul Kale For Dr Steven Paulson s MAN 6204: TOPICS IN ORGANIZATIONAL THEORY – PowerPoint PPT presentation

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Title: STARTING OPERATIONS IN INDIA Entry Strategies for Foreign Investors

for Foreign Investors
  • By Rahul Kale
  • For Dr Steven Paulsons

Presentation Outline
  • Facts on Ancient India
  • Facts on Modern India
  • Indian Culture An Individual
  • Indian Culture The Society
  • Indian Culture The Business World
  • Setting up Business Operations in India

Facts Ancient India
  • The number system was invented in 100BC in India
  • Albert Einstein
  • We owe a lot to the Indians, who taught us how
    to count, without which no worthwhile scientific
    discovery could have been made
  • Algebra, Trignometry and Calculus came from
    India. Quadratic equations were used by
    Sridharacharya in the 11th Century.
  • The value of p was first calculated in the 6th
    century by the Indian Mathematician Budhayana. He
    was the one who also explained the concept of
    Pythagorean Theorem

Facts Ancient India
  • IEEE (Institute of Electricals and Electronics
    Engineers) of the USA has proved that the pioneer
    of Wireless Communication was Professor Jagdeesh
    Chandra Bose and not Marconi
  • In 500BC, hundreds of years before the astronomer
    Smart, Bhaskaracharya calculated the time taken
    by Earth to orbit the Sun to be 365.258756484
  • Chess was invented in India
  • The birthplace of Yoga is India

Facts Ancient India
  • Ayurveda is the earliest school of medicine known
    to mankind.Charaka, consolidated Ayurveda 2500
    years ago.
  • Over 2600 years ago, Sushruta, conducted
    complicated surgeries like cataract, cesareans,
    artificial limbs, fractures, urinary stones,
    plastic as well as brain surgeries.
  • Usage of Anesthesia was well known in ancient
    Indian medicine.

Facts Modern India
  • India is one of the few countries in the World,
    which gained independence without violence.
  • According to its constitution, India is a
    "sovereign, socialist, secular, democratic
  • India occupies 2.4 of the worlds land area and
    supports 15 of the world population
  • India is the 7th largest and 2nd most populous
    country in the world
  • 30 of the population lives in large towns and
  • India has 18 official languages

Facts Modern India
  • Most people, as in the U.S., profess adherence to
    a religion.
  • Approximately 80 of Indians describe themselves
    as Hindu, 14 Muslim, 2.5 Christian, 2 Sikh.
    The remainder consists of Buddhists, Jains,
    Zoroastrians or Parsis, and a very small number
    of Jews.
  • According to the Supreme Court of India
  • When we think of the Hindu religion, unlike
    other religions in the world, the Hindu religion
    does not claim any one prophet it does not
    worship any one god it does not subscribe to any
    one dogma it does not believe in any one
    philosophic concept it does not follow any one
    set of religious rites or performances in fact,
    it does not appear to satisfy the narrow
    traditional features of any religion of creed. It
    may broadly be described as a way of life and
    nothing more

Facts Modern India
  • India is world's 12th largest economy--and the
    third largest in Asia behind Japan and China
  • It is the 4th largest economy in the world in 
    terms of PPP
  • India is home to the third largest population of
    English speakers in the world, surpassed only by
    the U.S. and the U.K.
  • Services, industry, and agriculture account for
    55, 27, and 18 of GDP respectively
  • There is a large and growing middle class of
    325-350 million with an average yearly income
    comparable to 25,000 in purchasing power in the
    United States
  • Almost 60 of the population (564 million) is
    under the age of 20
  • 700 million Indians live on 2 per day or less

Facts Modern India
  • India is the world's second largest small car
  • 100 of the Fortune 500 have R D facilities in
  • The Bombay Stock Exchange lists 6,600 companies
    only the NYSE has more
  • India is the only country other than USA and
    Japan, to have built a super computer
  • India is one of the six countries that has
    indigenously developed the ability to launch
    satellites into space

Facts Modern India
  • The United States is India's largest investment
    partner, with a 13 share.
  • The United States is India's largest trading
    partner. Bilateral trade in 2006 was 32 billion.
  • Principal U.S. exports are diagnostic or lab
    reagents, aircraft and parts, advanced machinery,
    cotton, fertilizers, ferrous waste/scrap metal,
    and computer hardware.
  • Major U.S. imports from India include textiles
    and ready-made garments, Internet-enabled
    services, agricultural and related products, gems
    and jewelry, leather products, and chemicals.

Facts Modern India
  • Indian exports to US 24 billion, up by 10
  • US exports to India 17.6 Billion, up by 75
  • (Worldwide increase 12)
  • (Based on 2007 numbers)
  • India is a top 10 market for US goods and services

Indian Culture An Individual
  • Our cultures define our fundamental beliefs about
    how the world works and forms ways in which we
    interact and communicate with others and develop
    and maintain relationships
  • At the core of many Indians is a respect for
    parents that results in involving them in major
    life decisions
  • Staying with parents is the natural way of living
  • An adult women would (almost) always consult with
    her parents about her marriage
  • A person would ask for parents approval before
    accepting a job

Indian Culture An Individual
  • As long as one displays a genuine interest in
    getting to know them, most Indians will accept
    you without any reservations, whatsoever
  • The average Indian is naturally a very curious
    person. Inquisitive to the point of irritation,
    the Indian wants to know everything at the first
    meeting, don't be offended.
  • Don't be too surprised if a stranger walks up to
    you, introduces himself and then subjects you to
    a barrage of questions about your origins,
    America, the purpose of your visit here, etc.

Indian Culture The society
  • Generally, major decisions will not be done by
    the individual but as a family
  • Its important to understand the Indian touch, in
    the literal sense A touch on the arm or the arm
    around the shoulders or the holding of the hand
    for a fraction too long are all signs of Indian
    intimacy or brotherhood
  • On the other hand, holding hands across genders
    would be offensive in a predominantly
    conservative culture. Never shake hands, touch or
    sit close or next to a woman.

Indian Culture The society
  • Even to the most modern women the Indian form of
    greeting, folded palms facing each other and the
    word namaste said in a soft tone is the safest
    one to adopt.
  • Women prefer to be greeted from a distance with a
    simple "Namaste". But, in urban cities,
    handshakes between both sexes are quite common.
  • Hospitality is second nature to any Indian. From
    the instant they take a liking to you, you will
    be invited to their homes, to attend their
    weddings and they would expect to be invited in

Indian Culture The Business World
  • Concept of time, the IST! If you are 15 minutes
    late for a business appointment, people may
    scarcely notice.
  • In the West, we are socialized to wait our turn.
    We also expect undivided attention once we do
    start to be served
  • What are considered occult sciences in the West
    are often mainstream practices in India.
    Astrology, numerology, and palmistry can affect
    the functioning of businesses and of society
  • Breakfast meetings are rare in India, and dinner
    is often eaten very late in the evening.

Indian Culture The Business World
  • In the United States of America, efficiency,
    adhering to deadlines and a host of other similar
    habits are considered normal and are expected.
  • Aggressiveness can often be interpreted as a sign
    of disrespect.
  • As Indians are used to a system of hierarchy in
    the work-place, senior colleagues are obeyed and
  • In a group discussion, only the senior most
    person might speak, but that does not mean that
    the others agree with him. They may maintain
    silence, without contradicting him (or you) out
    of respect for seniority.

Options for setting up business operations in
  • As an Indian Company
  • By incorporating a company under the Companies
    Act,1956 through
  • Joint Ventures or
  • Wholly Owned Subsidiaries
  • As a Foreign Company
  • Foreign Companies can set up their operations in
    India through
  • Liaison Office/Representative Office
  • Project Office
  • Branch Office

As an Indian CompanyJoint Venture With An Indian
  • Joint Venture may entail the following
    advantages for a foreign investor
  • Established distribution/ marketing set up of the
    Indian partner
  • Available financial resource of the Indian
  • Established contacts of the Indian partners which
    help smoothen the process of setting up of
  • Foreign equity in such Indian companies can be
    up to 100
  • Examples Ford entered India through a JV with
    Mahindra, Honda with Hero

As an Indian CompanyWholly Owned Subsidiary
  • Foreign companies can also set up wholly-owned
    subsidiary in sectors where 100 foreign direct
    investment is permitted under the FDI policy.
  • Incorporation of Company
  • For registration and incorporation, an
    application has to be filed with Registrar of
    Companies (ROC).
  • Once a company has been duly registered and
    incorporated as an Indian company, it is subject
    to Indian laws and regulations as applicable to
    other domestic Indian companies.
  • Examples Now, Ford India is separate, Honda
    exists in both forms

As a Foreign Company Liaison Office/Representativ
e Office
  • Channel of communication between the principal
    place of business and entities in India
  • Role is limited to collecting information about
    possible market opportunities and providing
    information about the company and its products to
    prospective Indian customers
  • It can promote export/import from/to India and
    also facilitate technical/financial collaboration
    between parent company and companies in India
  • Can not undertake any commercial activity
    directly or indirectly and can not, therefore,
    earn any income in India
  • Approval for establishing a liaison office in
    India is granted by Reserve Bank of India (RBI)

As a Foreign CompanyProject Office
  • Foreign Companies planning to execute specific
    projects in India can set up temporary
    project/site offices in India
  • Such offices can not undertake or carry on any
    activity other than the activity relating and
    incidental to execution of the project
  • Project Offices may remit outside India the
    surplus of the project on its completion, general
    permission for which has been granted by the RBI

As a Foreign Company Branch Office
  • Foreign    companies    engaged   in
    manufacturing and trading activities abroad are
    allowed to set up Branch Offices in India for the
    following purposes
  • Export/Import of goods
  • Rendering professional or consultancy services
  • Carrying out research work, in which the parent
    company is engaged.
  • Promoting technical or financial collaborations
    between Indian companies and parent or overseas
    group company.
  • Representing the parent company in India and
    acting as buying/selling agents in India.
  • Rendering services in Information Technology and
    development of software in India.
  • Rendering technical support to the products
    supplied by the parent/ group companies.
  • Foreign airline/shipping company.

As a Foreign Company Branch Office
  • A branch office is not allowed to carry out
    manufacturing activities on its own but is
    permitted to subcontract these to an Indian
  • Branch Offices may remit outside India profit of
    the branch, net of applicable Indian taxes