Executive Summary
Introduction
Economic,
Political, and Legal Conditions
Political/Regulatory System
Anti-Competitive
Practices
Product and Service
Standards
Intellectual Property
Financial Market
Monetary Policy
Infrastructure Analysis
Economic Infrastructure
Social Infrastructure
Management and Culture
Business and Workforce
Culture
Market Entrance Vehicle
Analysis
Barriers to Entry
The Effect of Change
Staples and the
Indian Market
Conclusion
References
Executive Summary
India is working
towards conducting more international business. As such, it should
thoroughly research its market. Presently, the country is in political
upheaval and anti-competitive practices are supported by a corrupt and
bureaucratic government. India’s products and services are shoddy due
to the lack of citizen protest and property rights for investors are
not guaranteed. India’s infrastructure is slowly improving, but not at
the necessary pace to globally compete. Nonetheless, major
improvements have been made to these areas. Investment in India can be
a substantive option for Staples, Inc. if critical changes are
implemented.
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INTRODUCTION
In
examining international corporate opportunities, India should
primarily focus on its own traditional cultures, values,
organizational management, financial risks, regulations, and the
overall state of the nation before probing the unique prospects of
global business. Additionally, "a company contemplating the
establishment of a foreign subsidiary must undertake a country
analysis and a market analysis... Country Analysis is performed first,
since countries with high risk and poor infrastructure are poor
candidates for business
activities regardless of market potential"
(Sullivan, 2002, p. 364). Therefore, a
market analysis was conducted in order to determine if India is a
feasible country for the company to enter. This market analysis
provides the research necessary to determine the future and stability
of India.
According
to Sullivan (2002) a country analysis encompasses three primary
categories:
1.
Economic, Political, and Legal Conditions - this includes the business
climate, economic conditions, currency issues, government laws and
policies, and the ethics environment. In assessing these conditions
for India, we examined the political and regulatory system,
anti-competitive practices, product and service standards,
intellectual property rights, financial markets, and monetary policy.
2.
Infrastructure Analysis - the focus is "on the factors which support
the economic and business climate and allow it to function" (Sullivan,
2002, p.522). In evaluating India’s infrastructure we specifically
looked at the economic and social aspects of the country.
3.
Management and Culture - "Even if a country has a good economic and
legal environment and suitable infrastructure," the culture "may
create unacceptable conditions for a foreign country" (Sullivan, p.
522). Organizational and business management in India, as well as the
country’s traditional culture and value system, will be a focal point
in this analysis.
Staples, Inc. is an $11 billion retailer of office supplies, business
services, furniture and technology to consumers and businesses from
home-based businesses to Fortune 500 companies. It is
an international
company that currently has stores in the United States,
United Kingdom, Germany, the Netherlands and
Portugal. The company may be able to increase its growth by expanding
into India. India has a diverse market and, over the years, has
developed new business and trade partnerships with the United States
and other countries.
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ECONOMIC,
POLITICAL AND LEGAL CONDITIONS
Political/Regulatory System
The political and regulatory systems
of a target country are very important to the success of any foreign
company, including the entry of Staples into India. In 1991, India
abandoned its socialist economic system in favor of a free market
system designed to spur trade for goods and investments. Prior to
this change, India maintained a very high barrier to entry for foreign
investors like Staples. The free market strategy resulted in foreign
direct investment (FDI) totaling $1-2 billion annually over a
three-year period. Encouraged by India’s reforms, the Enron
Corporation made an entry and investment in the development of Dabhol
Power Company, a subsidiary that was entered into a contract with the
state government of Maharashtra to build a power plant. After a $300
million investment by Enron, in 1995, due to political rankling the
project was cancelled by the state government. Nearly four years
later the project was resumed, but was still overshadowed by political
instability (Sullivan, 2001).
According to Sullivan (2001), the
Indian government developed a free market system to generate hard
currency to address payments on $90 billion in external debt that
existed during that time. Companies, like Staples, were encouraged to
establish operations in India because the Indian government:
·
Allowed
foreign companies to own up to 100 percent of a business.
·
Cut
maximum import duties from 300 percent to 50 percent.
·
Cut
corporate income taxes to the levels of other Asian nations.
·
Reduced
red tape in the licensing system.
India’s socialist tendencies
resurfaced as the $90 billion debt was reduced. It is Sullivan’s
(2001) contention that “a policy born of desperation lasts only as
long as the desperation lasts” (p. 371). Even though the then
leading Congress Party maintained its support of a free market system,
the opposing Hindu nationalist party, which was in control of the
state government of Maharashtra, began making claims that foreign
firms should not be permitted to exploit India.
In order for Staples to fully assess the long-term
viability of conducting business in India, a thorough country analysis
must be completed. The climate today is much more favorable for
liberal trade practices compared to the 1950s and 1960s.
Notwithstanding, cultural traditions and governmental shifts in trade
philosophies suggest some risk to entering India. The successful
strategies used by Staples in the analysis of entry to the United
Kingdom, Germany, the Netherlands and Portugal must be applied to
India. Staples’ entry to India is also dependent on the Indian
government’s development of sound fiscal policies that are designed
for consistent long-term FDI.
Click here for a
more detailed analysis of India’s Political / Regulatory System
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Anti-Competitive
Practices
The success of
Staples in India is contingent on favorable political and regulatory
policies. The Indian government, however, has developed a reputation
of inefficiency, corruption, and poor budgetary management Sullivan
(2001). Protectionism or anti competitive strategies are barriers
established to protect a domestic industry from cheaper competitive
goods and services (p. 93). Protectionist strategies in India are
largely based on the notion that increased importing reduces the
demand for low-wage and low-skilled labor. Moreover, it is inferred by
anti competitive strategists that domestic industries are unable to
grow unless they are given the opportunity to earn profits through the
minimization of competition from foreign companies and products (p.
92). In the 1950’s the Indian government enforced extensive import
restrictions and high tariffs (Gupta & Ray, 1998). India’s
protectionist strategy led to the Monopolistic and Restrictive Trade
Practices Act of 1969, which sought to save jobs, protect profits and
increase government revenue (Anonymous, 2001).
The Indian economy, however, began to
liberalize and globalize in earnest in 1991 (Khandwalla,
2002).
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more detailed analysis of India’s Anti-Competitive Practices
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Product and
Service Standards
Product and service
standards can include any type of measures or criterion which set
parameters on how a product is manufactured or distributed. Product
and service standards provide consumers with the knowledge that a
particular product or service is of high quality.
An article in The
Hindu magazine reports that India has a high tolerance for unsafe
products and that they are basically acceptable because no one
protests. The article goes on to state that the organization
responsible for enforcing such standards, the Bureau of Indian
Standards (BIS), does not have the infrastructure in place to handle
enforcing standards (Deskin, 1999). Therefore, quality may still go by
the wayside at times due to the lack of standards enforcement and the
lack of citizen complaints.
In a study comparing
ISO and non-ISO organizations, Sarkar (1990) studied the status of
quality control in India. His observations concluded that no
performance evaluations of quality control operations are conducted in
Indian manufacturing organizations. He felt it was important to
attempt to infuse a culture of quality improvement throughout
companies in India. Raghunathan et al. (1997) later identified (in a
comparative study including India) that quality was considered
important in the country (Wembley, 2000).
In 1987, the Bureau of
Indian Standards (BIS) was established, resulting in greater consumer
participation of the establishment of standards. The BIS has a
voluntary product certification protocol that attempts to provide
quality and safety to consumers. Presence of a certification mark
known as the "standard mark" insures that a product has met
specifications. The Customer Operations Performance Center Inc. (COPC),
a performance management organization for the customer contact
industry, has established an office in India to help improve the level
of service quality provided to customers (Anonymous, 2001).
There are no set
standards in India that are directly related to office supplies.
Therefore there are no standards that will make it difficult for
Staples to manufacture or distribute its products in India. The area
that comes under India's mandatory requirements that affects Staples
includes electrical wires, cables, appliances and accessories. These
items are subject to BIS standards and Staples must ensure that its
plugs and small appliances are in compliance with the standards
established by the BIS. This is a common requirement that Staples has
encountered when entering into other foreign markets. Many of the
manufacturing machines and supplies the company uses will be subject
to the voluntary standards. This should not present a problem to
Staples. Foreign manufactures are welcome to utilize India's product
certification scheme, which allows them to apply the "standard mark"
on their products.
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more detailed analysis of India’s Product and Service Standards
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Intellectual
Property
India has put
mechanisms in place to offer intellectual property protections;
however, these protections are not fully guaranteed. As such, “less
developed countries (LDCs) offer intellectual property rights in
particular patent rights, not to induce inventions in their country,
but rather as
incentives to
develop trading advantages” (Tikku, 1998, p. 2). With this
understanding, India has decided to develop and implement intellectual
property rights to garner global business.
India is required
by the World Trade Organization’s (WTO) Agreement on Trade-Related
Aspects of Intellectual Property (TRIPS) provisions to fulfill its
obligations by 2005 (Tikku, 1998, p. 5). Consequently, the United
States has put much pressure on India to adhere
to the
provisions prior to the 2005 TRIPS deadline. Because India greatly
desires conducting business with the U.S., its government has “amended
the various laws much earlier than the negotiated deadline” (Tikku, p.
5). In addition, changes to the current patent legislation are being
made to make it more compatible with TRIPS. This massive undertaking
requires amendments to how the laws for intellectual property are
enforced in India.
Due to India’s
slow pace towards regulation enforcement stem from decades of
complacency and corruption, this process has been frowned upon by the
international community (Tikku, 1998, p. 9). Even with this bleak
outlook, India’s efforts to comply with amending intellectual property
regulations is rapidly increasing. “The Arbitration and Conciliation
Ordinance of 1996 consolidates and amends the old law relating to
domestic and international arbitration and enforcement of arbitral
awards” (Gaya, 1996, p. 1). This regulation has been established to
minimize court intervention so as to untie the bureaucratic
legislative process.
Many corporations
are leery of entering the Indian market due to the lack of enforcement
of intellectual property laws and regulations, as well as the slow,
bureaucratic process with which they are implemented. Staples is
presently looking to expand into fertile markets at a slower pace, but
India is still unstable on this level. Therefore, Staples is ready to
enter new international market ventures but needs the assurance of the
entered country that it will be able to conduct business in a legal
manner.
Click here for a
more detailed analysis of India’s Intellectual Property
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Financial Market
The effects of
political risk have caused the positive outcomes of the free
trade
reforms implemented in 1991 to slow down. Policy errors have resulted
in a reduction of growth and have reduced much of the gains in India’s
fiscal position. As a result, credit rating agencies have downgraded
India's medium-term prospects (Nishimizu, 2002). The most serious
difficulty is India's fiscal indiscipline, which was expected to push
the combined central and state governments' budget deficit to nearly
10 percent of GDP in 2002 (Sabharwal, 2002). As of June 2002, India
was the World Bank's largest single borrower, with total lending of
more than $58 billion from the International Bank for Reconstruction
and Development (IBRD) and development credits from the International
Development Association (IDA), the World Bank affiliate that provides
interest-free loans to economies with low per capita incomes (worldbank.int).
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Monetary Policy
Monetary policy is a “central bank's
actions to influence the availability and cost of money and credit, as
a means of helping to promote national economic goals” (Federal
Reserve Bank of Minneapolis, 2003). It helps to promote economic
goals by influencing the availability and cost of money and credit.
Monetary policy affects people everywhere making economic and
financial decisions. It influences the performance of economies, as
reflected in factors such as inflation, employment or unemployment,
and economic output. It affects demand across the economy,
influencing how a person chooses to spend money on goods and services.
India’s banking system is one of the largest in the world.
In India, the
Reserve Bank of India (RBI) is India’s central banking institution.
The Reserve Bank lays downs restrictions on bank lending and other
activities with large companies. It is the sole authority for issuing
bank notes and supervises all banking operations in India. The RBI
acts as banker to central and state governments, commercial banks,
state cooperative banks, and other financial institutions. The RBI
manages overall growth targets by setting interest rates to meet these
growth targets, managing exchange rates and managing money supply in
order to keep a check on inflation and maintaining price stability.
India’s banking system has a close association with the country’s
development efforts. The diversification and development of the
economy, and the acceleration of the growth process, are due in part
to the role banks have played in financing economic activities in
different sectors throughout the economy.
India is still
relatively unstable economically. India’s local currency, the rupee,
is currently under threat due to the country’s bloated fiscal deficit.
The rupee is constantly fluctuating. Poor liquidity is also a problem
in India given the extremely destitute volume and the impact costs it
implies. There are macroeconomic risks of government deficits financed
through borrowing and the impact on GDP growth, interest rates and
potential inflation and rupee foreign exchange rates (Parikh, 2002).
The rising inflation, deficit, and threat of war in Iraq all send up
red flags in terms of investment opportunities for Staples.
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more detailed analysis of India’s Monetary Policy
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INFRASTRUCTURE ANALYSIS
Economic
Infrastructure
The
transportation infrastructure in India consists of roads, ports,
airlines, and supports the world’s most extensive railway network. As
such, “passenger traffic is heavily subsidized by higher charges for
moving freight, increasingly forcing freight on to the roads (Country
Profile 2002, p. 19). Railway safety has become a substantial problem
due to many recent accidents in part stemming from a lack of
investment. To improve this situation, India is examining alternative
ways to increase railway funding. India also has 11 major ports, which
are managed by the Port Trust of India (Country Profile 2002, p. 20).
These ports process 82 percent of cargo and are functioning well
beyond their capacity.
India’s energy
provision is a major limitation to the country’s economic
infrastructure. There are significant shortages, even though the total
power generated in India has continued to increase (Country Profile
2002, p. 22). India’s power and energy capacities
urgently require
significant private investment.
The
telecommunications sector in India has encountered recent and rapid
growth. “A number of private companies that have been given licenses
for land based services have been laying telephone cable lines” due to
the low number of telephone lines in India (EIU Country Report, 2002,
p. 31). In addition, “Internet connectivity remains low, although
numbers are expected to increase rapidly” (Country Profile 2002, p.
21).
India supports a
labor force of 400 million workers (Chemical Business, 2002, p. 3).
The countries government and businesses are rampant with corruption.
Thus, “an unsympathetic bureaucracy, delays, lack of accountability,
and transparency have deterred foreign investors from investing in
India” (Ibid). An entire reengineering of India’s infrastructure is
the only way that the Indian business industry will become globally
competitive and attractive for foreign and domestic investors like
Staples.
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Social
Infrastructure
Social
infrastructure refers to those factors which render the human
resources of a nation suitable for productive work (Sullivan, 2002).
India is drastically different in terms of how its labor laws are
regulated, how its citizens are educated, and how their health is
handled.
India is
reportedly the world's largest and most diverse democracy. “The
country has seen remarkable social, agricultural, and industrial
progress. Life expectancy has doubled and the specter of famine no
longer stalks the sub-continent” (Hammond, 2003). On the other hand,
India (and the south Asian region as a whole) has the world's worst
poverty, the most widespread malnutrition, and the most extensive use
of child labor (Hammond, 2003).
Education is highly valued in India and considered a great asset among
its people.
The
currently
literacy rate is
65.38 percent
(males: 75.96 percent and females: 54.28 percent) (Census
of India, 2003). It has improved steadily
over the years.
The labor laws of
India are drastically different than those of the United States,
lacking the same level of regulation that U.S.-based organizations are
accustomed to. Child labor is also a problem in India. There are
more children under the age of fourteen in India than the entire
population of the United States. Children under fourteen
constitute around 3.6 percent of the total labor force in India.
The Government of India is determined to eradicate child labor in the
country. “The world's largest child labor elimination program is being
implemented at the grass roots level in India, with primary education
targeted for nearly 250 million” (Indian Embassy, 2003).
Environmental degradation is widespread and
resource scarcities are growing, helping to further impoverish India's
rural population. The growing demand for power, fueled largely by
high-ash coal, contributes to air pollution and chronic respiratory
diseases in India. Inadequate access to clean water and sanitation
add to the incidence of other communicable illnesses. Without cleaner
technology or more effective environmental policies, emissions of air
pollutants may increase by the same amount. Over the same period, the
region's industrial growth and its production of chemicals, metals,
and paper-the main source of toxic emissions-are expected to increase
980 percent. Without improved industrial processes and better
enforcement, toxic emissions and health threats may grow by a similar
amount (USAID, 2003).
There are many
unknown variables and differences in social infrastructure. Although
the country has a high illiteracy rate, there is a still a decent
level of skilled and educated workers. India has the labor
productivity to be a viable location; however, there are many possible
barriers including the differences in labor laws and existing child
labor practices.
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MANAGEMENT AND CULTURE
Business
and Workforce Culture
Five dimensions
of culture, developed by psychologist Geert Hofstede, have been used
here to analyze India and the United States. The Hofstede analysis
shows that Indian managers express different values compared to those
of their Western counterparts (Fisher, Shirole, Bhupatkar, 2001, p.
5).
|
Country |
Degree of
Individualism |
Power
Distance |
Uncertainty
Avoidance |
Assertiveness |
Long-term
Orientation |
|
India |
48 |
77 |
40 |
56 |
61 |
|
United States |
91 |
40 |
46 |
62 |
29 |
(Adapted from
Sullivan, table 9.3, p. 342.)
India believes in
collective group and team achievements, while the U.S. supports the
achievements of individuals. The most widely studied cultural value,
the degree of individualism, for both countries is significant (Brett,
2001, p. 15). The wide disparity in scores (n=48, n=91) suggests that
India is an intermediate culture and that the U.S is an individualist
culture (p. 16). This analysis also connotes that conducting business
may prove to be challenging. Power distance, the relationship between
superiors and subordinates, will also be an issue with Indian-U.S.
business relations (Sullivan, p. 341). While the U.S still has many
bureaucratic, paternal organizations, it is swiftly moving in the
direction of flatter, participatory corporations. India, on the other
hand, scored reasonably high (n=77) for the power distance
dimension
of culture.
Due to India’s
unwavering devotion to its culture and traditions, it has
unfortunately fallen behind the globalization bandwagon. “India is a
country that has actively tried to resist much of this global cultural
homogenization. But even there, among India’s elites, the Electronic
Herd is fast at work” (Friedman, p. 292). Cultural preservation is a
significant concern in India. “Unless you preserve at least some of
your own olive trees in your own backyard, you will never feel at home
in your own house” (Friedman, p. 292). India’s tolerance of American
culture will increase if they can be guaranteed that they can maintain
their business and cultural traditions.
The apprehension
between Indian and Western managerial values has developed from deeply
rooted Indian culture (Fisher, Shirole, & Bhupatkar, p. 5) and the
ignorance of the West.
“Indian managers,
in the spirit of their own tradition, should focus on the ethical
quality of the means used to achieve ends rather than simply on the
achievements of ends. These values, emerging from the Bhagavad Gita
and other Hindu and Buddhist texts, claim that it is right to achieve
a sufficiency of
wealth and
possessions but wrong to seek economic growth for its own sake” (p.
5-6).
In India, moral
wellness is more important than economic success. In addition,
the idea of downsizing is a taboo in Indian workforce culture.
“Employees enjoy protection at the
expense of the unemployed and those in the unorganized sector”
(Chemical Business, 2002, p. 2).
Indian labor
laws, regulations, and workforce standards are archaic and outdated.
Thus, Indian labor legislation may clash with American labor laws.
Staples might “to go into India, asking all these questions: ‘Can we
have what we want? Do we trust you here? Will we get tax breaks?’”
(Friedman, p. 347). India would surely benefit from the investment,
but others might question Staples’ motives.
India’s business
culture supports some principles that are not supported by the U.S.
For example,
“the emphasis on
moral judgment, on finding a proper balance between ends and means,
suggests that the Indian tradition would favor the stances of the
contribution a person makes to the organization’s objective and if a
person finds it difficult to make the compromise over values involved
in a problem solving approach” (Fisher, Shirole, & Bhupatkar, p. 6).
However, while
Indian culture maintains a substantial organizational climate of
consensus and “groupthink,” it also supports innovation and
entrepreneurship.
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more detailed analysis of India’s Business and Workforce Culture
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MARKET ENTRANCE VEHICLE
ANALYSIS
Barriers to Entry
As discussed
earlier, the Indian government has established “pre-conditions for
prospective foreign [direct] investors” (Emerging Markets Economy,
2002, p. 1). These preconditions support the bureaucratic structure of
the government, thereby making it difficult for an increase in FDI in
India. To ensure Staples investment, India must open its market by
loosening its “preconditions” to allow more FDI. Additionally,
“certain sectors of the Indian economy cannot receive FDI, and this
prohibition closes off a fruitful source of technology and skills” (Lodovico,
Lewis, Palmade, Sankhe, 2001, p. 2). Allowing FDI in retailing, for
example, would increase India’s market share by 25 percent in ten
years from the present 2 percent (Ibid). Therefore, living standards
in India would increase immediately.
In many sectors
of the India economy, a license is required from the government to
operate and compete. The licensing process was put in place to “ensure
high levels of quality and hygiene” but instead has become a
burdensome, bureaucratic requirement that has restricted competition
in industry (Lodovico, Lewis, Palmade, Sankhe, 2001, p. 3). Removing
these restrictions would enable competition, and in the process, force
corporations to make improvements in how they conduct business.
Due to India’s
thick bureaucracy and political environment, the corruption among
officials is apparent. In addition “government-controlled entities
still account for around 43 percent of India’s capital stock and 15
percent of employment outside agriculture…The near-monopoly status of
government-owned companies in sectors such as oil, power, and
telecommunications, for example, ensures that such companies will be
profitable however unproductive they may be” (Lodovico, Lewis, Palmade,
Sankhe, p. 4). This issue alone would make it extremely difficult for
Staples’ investment in the country. Because India has yet to relieve
this major constraint, it has not experienced higher rates of economic
growth.
Consequently,
property and ownership rights have changed little during the past five
decades in India, with the exception of copyright legislation (Tikku,
1998, p. 15). In probing Staples investment in India, one issue should
be addressed: to what extent has the intellectual property laws in
India curbed the flow of FDI and discouraged innovation and
development (Ibid)? Advantageous to Staples, many FDI approvals have
been geared to the telecommunications sector.
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The Effect of
Change
What would happen
to India’s economy if immediate dismantling of all existing barriers
were to occur? An analysis was completed which shows that “the
resulting increase in labor and capital productivity will boost growth
in the overall gross domestic product (GDP) to 10 percent a year,
release investment capital worth 5.7 percent of GDP, and generate 75
million new jobs outside agriculture” (Lodovico, Lewis, Palmade,
Sankhe, 2001, p. 5). Therefore, eliminating all of the productivity
barriers would almost double India’s rate of growth in labor
productivity to almost 8 percent a year over the next ten years
(Ibid).
|
Industry |
A |
B |
|
Telecom |
25 |
100 |
|
Retail
supermarkets |
20 |
90 |
|
Software |
44 |
85 |
|
Automotive
assembly |
24 |
78 |
|
Steel |
11 |
78 |
|
Apparel |
26 |
65 |
|
Retail
banking |
12 |
62 |
|
Power
generation |
9 |
52 |
|
Dairy
processing |
16 |
46 |
|
Housing
construction |
15 |
28 |
|
Wheat milling |
7 |
17 |
|
Power
transmission |
1 |
9 |
|
Average |
15 |
43 |
|
Legend: A –
current labor productivity, B – expected labor productivity in
2010 if reforms are fully implemented
Index: United
States = 100 in 1998 |
(Lodovico, Lewis,
Palmade, Sankhe, 2001, p. 9-10).
Additionally,
capital productivity would increase by at least 50 percent over the
next three to four years. Increased competition would force
organizational managers to eliminate time and cost overruns and low
use of facility capacity (Lodovico, Lewis, Palmade, Sankhe, 2001).
Presently, these are problems that India’s managers are dealing with,
especially with government-owned, state-run corporations.
The increase in
GDP resulting from these policy changes might flow to India’s rich.
However, “by creating a virtuous cycle of broad-based growth in GDP,
the changes will benefit every Indian” (Lodovico, Lewis, Palmade,
Sankhe, 2001, p. 5). For instance, the real incomes of farming
families in India will rise at least 40 percent over ten years (Ibid).
Many policy
makers believe that it would take a substantial level of FDI equal to
more than 35 percent of India’s GDP to make the country’s GDP increase
by 10 percent per annum. Lodovico, et al, (2001) purport that
eliminating barriers to higher productivity will allow India to
achieve this rate of GDP growth with a level of FDI equivalent to only
30 percent of GDP a year for a decade (p. 6). In fact, India has
experienced recent exponential growth. “A total FDI inflow of 1.30
billion dollars was recorded during the first quarter of the current
fiscal year … resulting in a 106 percent growth” (World Times, 2002,
p. 1).
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Staples
and the Indian Market
These substantive
changes, once implemented, will allow Staples to enter the Indian
market. At present, India is focusing on the telecommunications
sector. “FDI inflow in India’s telecom sector touched 1.67 billion
dollars during August of 1991 to November of 2001, with cellular
mobile telephone service contributing to 455 million dollars and
accounting for 27.2 percent of the inflow (World Times, 2002, p. 1).
This growth is expected to continue. In addition, Internet
connectivity in India is expected to increase rapidly. Accordingly,
Staples is increasing its Internet business. This rapid economic
growth area is Staples’ “Internet sales in North America, which
doubled last year to about $1 billion” (Marcial, p. 2). This growth
has continued to increase in 2003 even with store closings and
layoffs.
Due to Staples
increased growth, the corporation’s international operations have been
exposed to inherent foreign investment risks. Competitive and foreign
currency fluctuations will make Indian investment more difficult
(Staples Annual 2001 Report). Additionally, Staples may have issues
securing future funding for such projects due to current changes in
the economy. India can and must address the barriers to entry in order
for Staples to consider investing in the Indian market.
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CONCLUSION
Even with its
problems, India has been fairly successful in massive undertakings
such as the expansion of telephone lines and copyright legislation.
However, India’s political and regulatory systems should develop and
implement concise policies and procedures that will support consistent
FDI. Additionally, the social and economic infrastruct
ures
of the country require major improvements.
The political
aspects of the country have had an enormous influence on the
infrastructure and culture. As such, Western corporations such as
Staples should be less ignorant and more tolerant of the traditional
values, morals, and standards of India. In turn, India must adapt its
bureaucratic governmental practices to the quick pace of
globalization. Only then will the nation experience a significant
increase in GDP and FDI.
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