India as Destination for Western retailers

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Dezember 2008



In 2010 the Indian market is estimated to be as big as the European Union. The latest Global Retail Development Index ranks India as the top destination for Western retailers even before rising stars like China or Russia. The purchasing power is rising in India. Hence, the Indian market has huge potential for foreign investment. The Indian market is a market multi-national companies should not miss because of its future importance.But India is also a country with a very unique and complex culture. Indianizing a retail company's assortment and strategy is key to succeed in India. Knowledge of the unique characteristics of the Indian market and culture is vital. When a Western retailers has to decide if the Indian market is a possible destination, the company has to asses which facts speak in favor of India and which speak against the country's retail market. The Indian (retail) market provides both opportunities and challenges for Western retailers on a massive scale. This book starts with an overview of the opportunities of the Indian (retail) market such as growing consumption and a demographic advantage. The study also describes the challenges of the Indian market such as the weak infrastructure and the challenges the Indian culture provides. Based on this knowledge, the second part of the book introduces strategic decisions. Necessary adaptations to the Indian market, e.g. when dealing with Indian personnel or communicating with Indian customers, are discussed. Moreover, guidelines, e.g. for choosing the appropriate form of market entry and for choice of location, are presented as well. Finally, recommendations for Western retailers planning to enter the Indian retail market sum up the main results.


1;India as Destination for Western retailers Opportunities, Challenges and Strategic Decisions;1 1.1;Table of contents;3 1.2;List of tables;5 1.3;List of abbreviations;6 1.4;1 Introduction;7 1.5;2 Opportunities of the Indian retail market;9 1.5.1;2.1 Structure and size of the Indian retail market;9 1.5.2;2.2 Consumption;11;2.2.1 General facts;11;2.2.2 Urban vs. rural consumption;14;2.2.3 Consumption behavior;16 1.5.3;2.3 Demographic advantage;19 1.5.4;2.4 Deregulations;21 1.6;3 Challenges of the Indian retail market;23 1.6.1;3.1 Real estate;23 1.6.2;3.2 Infrastructure and logistics;24;3.2.1 Infrastructure;24;3.2.2 Logistics and dealing with suppliers;27 1.6.3;3.3 Bureaucracy, corruption, legal system;31;3.3.1 Bureaucracy;31;3.3.2 Corruption;34;3.3.3 Legal system;36 1.6.4;3.4 Culture;37;3.4.1 Power distance;38;3.4.2 The roots of the Indian understanding of hierarchy;40;3.4.3 Time;50;3.4.4 The roots of the a different understanding of time;53;3.4.5 Context;54 1.7;4 Strategic decisions;56 1.7.1;4.1 Choice of form of market entry;56;4.1.1 Liason Offices;57;4.1.2 Franchise systems;58;4.1.3 Joint ventures and 100% subsidiaries;59 1.7.2;4.2 Choice of format of retail outlets;62 1.7.3;4.3 Choice of location;65;4.3.1 Choice of target regions;66;4.3.2 Choice of target states;67;4.3.3 Choice of target cities;70 1.7.4;4.4 Assortment adaptation;74 1.7.5;4.5 Personnel;79;4.5.1 General facts;79;4.5.2 Identification of staff;80;4.5.3 Expatriates vs. Indian managers;81;4.5.4 The influence of culture;84;4.5.5 Motivation;87;4.5.6 Leadership style;88;4.5.7 Loyalty;90;4.5.8 Labor laws and trade unions;91 1.7.6;4.6 Pricing;92 1.7.7;4.7 Communication;93 1.8;5 Recommendations;97 1.9;References;101


Janine Rößiger holds a graduate degree in Business Administration with majors in international marketing and intercultural communication. She has been working for one of Germany's leading retail groups. Rößiger focuses on how Western retail companies can succeed abroad and in their home countries by implementing innovative strategies collected across different industries and different countries.


Kapitel 4.3.1

Choice of target regions:

First of all, the opportunities and challenges of the various Indian regions will be discussed and the discussion begins with Western India. On the positive side, Western India is characterized by an infrastructure which is above the Indian average and a high supply of skilled workers and mangers. Moreover, the working climate is professional and productivity is high. There are large regional and local consumer markets. But there are also certain drawbacks. Location costs are high. There is much domestic and foreign competition. The business climate is above the Indian average and the state governments are investor-friendly, but both investor friendliness and business climate are not as good as in Southern India. Hence, Western India should be analyzed further as target for retail engagement of foreign retail companies.
Southern India has certain advantages for foreign retail investment. The state governments are investor-friendly and the business climate is very good. Moreover, location costs are lower than in Western or Northern India and there is a large supply of skilled workforce. Drawbacks are the increasing overload of the infrastructure and the fact that only three dynamically growing locations exist (Bangalore, Madras and Hyderabad). Hence, Southern India should be observed further as possible location for expanding to India.
Northern India has a business climate worse than in Western or Southern India. Indian governments and ministries are nearby but highly corrupt. Productivity is low and the working morale is difficult except for the state Punjab. Hence, only very selective investment can be recommended for Northern India.
Eastern India has a major advantage: Low location costs. Drawbacks can be found in weak infrastructure, low productivity, low urbanization and a bad business climate. Once again, only very selective choice of location is recommended.
Central Indias advantage are low loca
tion costs, too. The drawbacks are low economic growth and the fact that Central India has the lowest development stage of all Indian regions with high poverty rates and a low skilled workforce. Furthermore, problems are common in all business-related areas (e.g. major drawbacks in infrastructure). Hence, an engagement in Central India can not be recommended in general.

Choice of target states:

Next, advantages and drawbacks of various states of Northern, Southern, Western and Eastern India will be discussed. Western India consists of the following states and union territories: - Gujarat, Maharashtra, and Goa, which will be discussed further below.
- Daman &, Diu and Dadra &, Nagar Haveli, which can not be recommended for foreign retail investment. Hence, these states will not be discussed further.
Goas major drawback is a weak infrastructure. On the positive side, Goas location costs (especially for real estate and personnel) are low. The state government is investor-friendly and efficient. The population is relatively westernized. Gujarat has a very professional working climate but social problems because of the riots between Hindus and Muslims. Maharashtras biggest advantage is its large consumer market. Western Maharashtra and Southern Gujarat form one of the most important business regions in India (Wirtschaftskorridor West).
Southern India consists of the states and union territories Andhra Pradesh, Tamil Nadu, Karnataka, Kerala, and Pondicherry. Tamil Nadu has the highest urbanization rate (44%) but most of the economic growth is concentrated in Madras. In Andhra Pradesh 70% of the population live in rural areas and the only attractive locations are Hyderabad and Visakhapatnam. Karnataka is growing economically only in Bangalore. The consumer market of Pondicherry is highly fragmented, infrastructure is weak and there is a low supply of skilled workforce. Positive are the low location costs. Kerala has the best basic infrastructur
e of all India states and the highest human development stage. There are also certain economic drawbacks but improvements are expected. One of the four most important business regions of India (Wirtschaftsdreieck Süd) consists of the cities Hyderabad, Bangalore and Madras in Southern India. Moreover, the World Competiveness Yearbook names the states Kerala and Karnataka in Southern India as well as the states Gujarat and Maharashtra in Western India as most important Indian business regions of the future. Hence, these states are very attractive for locating retail business there.
Northern India consists of the following states and union territories: Delhi, Haryana, Punjab, Himachal Pradesh, and Jammu &, Kashmir. As stated above only the state of Punjab can be recommended for foreign retail investment. Productivity in the state of Punjab is high, the purchasing power is above the Indian average and there is a large regional consumer market. Major drawback is the infrastructure (especially roads and railroads). In Northern India one of the four most important business regions is located, the so called National Capital Region consisting of the cities Delhi, Noida, Ghaziabad, Gurgaon and Faridabad.
Eastern India consists of the states West Bengal, Orissa, Assam, Sikhim, Tripura, Nagaland, Meghalanya, Mizoram, Manipur, and Arunachal Pradesh. In the state of West Bengal the second biggest city of India, Calcutta, is situated. The cities Calcutta, Howrah and Dhanbad form the fourth most important business region of India (Wirtschaftsraum Ost). Except of West Bengal no other state in Eastern India can be recommended for foreign retail investment because of low economic growth, high poverty rates, low urbanization and major infrastructure drawbacks. Moreover, this situation is not expected to change in the near future.
Central India consists of the following states: Uttar Pradesh, Uttaranchal, Bihar, Jharkhand, Madhya Pradesh, Chattisgarh, and Rajasthan. Uttar Pr
adesh suffers from high poverty rates, major drawbacks in infrastructure, a low skilled workforce, low productivity, difficult working morale and consumer markets which are limited to low-price products. Rajasthan has the highest purchasing power of all Central Indian states but poverty rates are nevertheless high and infrastructure (except power supply) is weak. Uttaranchal, Chattisgarh, Madhya Pradesh, Bihar, and Jharkland suffer from high poverty rates, major drawbacks in infrastructure and a low future potential. All in all, Central India states can not be recommended for foreign retail investment.


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EAN: 9783836618458
Untertitel: Opportunities, Challenges and Strategic Decisions. Sprache: Englisch. Dateigröße in KByte: 323.
Verlag: Diplomica Verlag
Erscheinungsdatum: Dezember 2008
Seitenanzahl: 114 Seiten
Format: pdf eBook
Kopierschutz: Wasserzeichen
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