In order to do business in India, it is necessary ensure that the business is set under the required procedures and regulations of industrial undertaking. The goods to be manufactured should fall within licensed, relicensed or small scale sector. A license allows a company to use the property of the licensor. The properties could either be intangible items like trademarks, patent rights and production techniques. To get the license, one is required to fill an application with the Ministry of Industry. Starting a company in India for the aforesaid involves assessing the commercial opportunity for self, managing business, obtaining legal requirements, money, business premises, obtaining workers and developing the marketing schemes for the products to be produced and the services to be offered.
In this case Roger Smith at Prime Pumps has suggested that Maddock Inc and Governor Inc enter the Indian market as a joint venture. It will be a great idea to take since a joint venture business has the advantage of sharing risks, sharing of technology to increase and improve production and it is possible to conform to government’s regulations. Also, in a joint venture business internationally, there are quick political connections and distribution channels. Having done business together, it means that the two business associates will experience the converging of their strategic goals while diverging their competitive goal. In this they will only operate to improve their business by influencing market power and learning from one another while restraining admittance to their personal proprietary skills.
Advantages of early entry into a foreign market
– The company enjoys monopoly since there could be no other companies producing the same products. This increases the profits and hence the company can expand its operations in a very short time limit.
– A company enjoys reduced labor cost as there are no other firms to compete with in determining wage packages. The workers will not have options to choose which companies to work for in regard to the pay accorded.
– Ability to secure a wide market in the absence of other competing companies hence increased sales will be experienced.
Disadvantages of early entry into a foreign market
– Lack of competition could lead to poor production quality of goods or services that a company is dealing with.
– Poor quality goods could pose a health hazard situation to the consumer and this could also lead to a crisis in the economy
– A company might not have the power to confront the government when its operating alone in a foreign market pertaining the rights of foreign companies and this could cause oppression on the side of the company for lack of bargaining power.
Peter should be careful to consider what the targets are for the business to be set up in India, where to locate the business and the manner in which it should be established. He should outline how ready is the business to give back to the community in terms of employing the local citizens in India, producing quality services and products. They should also investigate and learn the interests and requirements of the people of India and provide possible solutions to the same.
Peter will have to estimate the potential correctly to avoid underestimation of India’s complexity or overestimation of the probabilities in India. Overestimation or Underestimation may lead to failure and it is necessary to give a due consideration to the factor of the inherent difficulties and uncertainties of operating in the Indian system. It is worth noting that India is has a large economy in the world and it offers high prospects for development in practically all areas of business. Also the inefficient bureaucracy of the Indian government is moving slowly which calls for reforms.
Since Melanie has limited knowledge regarding international law, it will not be appropriate for Peter to share with her what other companions have suggested because she might not even understand. Lack of knowledge on international law means that Melanie will not have an idea of how to deal with any occurrence in the international field.
For a business to thrive in a foreign country, the owners should ensure that they comply with federal regulations so that there will be a smooth running of the business without disturbance from the local authorities. For the joint venture business, the partners should sign up the partnership deed to ensure they conduct themselves as per the requirements. It is important that individual also have a general knowledge of international law and business operations to avoid any inconveniences.
Courtney from Study Moose
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