International Business: Doing business in another country Essay
International Business: Doing business in another country
This report will investigate the viability of “Aussie Boardies” expanding its business overseas. The potential country chosen is India. This country will be analysed with its business protocol, communication and cultural differences. The report will also investigate the strengths and weaknesses of setting up business in India and make comparisons to Australian business ethics. An informed recommendation will be made based upon evidence within the report in relation to establishing an overseas branch.
2.0 GENERAL FACTS
India’s climate and weather are varied depending on the relevant region; the three main regions are the Northern Plains, Central India and the Southern region. The Northern Plains have cities like New Delhi that experience extreme ranges of temperature and are very prone to monsoons during the monsoon season (June to September). Central India consists of hot and dry weather but temperature drops at night. It is the most monsoon prone in all of India during the monsoon season. The southern region of India has generally high humidity throughout the year and relatively low rainfall. The southern region of India’s climate is the most similar to the Gold Coast as they are both tropical and generally high temperatures throughout the year (see Appendix 2).
2.2 GEOGRAPHIC LOCATION
India occupies most of the Indian subcontinent in Southern Asia. Its western border consists of only Pakistan and the eastern border is Bangladesh (see Appendix 1). The town of Chennai located on India’s south eastern coast would be the optimal place to set up “Aussie Boardies”. Chennai’s beaches are similar to the Gold Coast, and are the main tourist attraction. Thus, the demand for swimwear would be higher in that area. Therefore, this will be the optimal area in India to set up a branch of “Aussie Boardies”. The distance from Australia to India is evident in appendix 6, as it is 7822.21km apart from Australia.
India is one of the most diverse countries, with an incredibly large mixture of races and hundreds of different languages spoken. Many aspects of the western lifestyle have been embraced in India in modern day. Foods are liked by the different areas of India but vegetables, pulses and rice are very much liked by all Indians. The people who live near the oceans diet consist mainly of fish as they are mostly fisherman. The Indian clothing is still traditional at its core, with many women wearing the Sari (Appendix 3). However, swimwear is the same as contemporary western styles, making “Aussie Boardies” have more relevance in the Indian society.
As Appendix 4 shows, the main religion of India is Hinduism, with Islam as a minority.
The flag of India sports 3 coloured lines being, Saffron (top), white (middle) and India green (bottom). In the centre is the design of Ashoka Shakra in navy blue.
3.0 ECONOMIC/POLITICAL DETAILS
3.1 DEMOCRACY, MONARCHY, DICTATORSHIP
India’s constitution describes the nation as a “sovereign socialist secular democratic republic”. (see Appendix 5) Politics of India take place within a constitution. India is a federal parliamentary democratic republic in which the President of India is head of state and the Prime Minister of India is the head of government. The political structure of India is similar to Australia, as they are both democracies and operate within a constitutional framework.
3.2 POLITICAL ISSUES
The social issues of India include a lack of homogeneity which naturally sees certain social groups being discriminated against base upon religion, race etc. Economic issues like unemployment, poverty and economic development are also a concern in India. (The Economic Times, 2014) Unemployment effectively hurts the country as it reduces productivity, therefore reducing the GDP. Also, with less people in gainful employment, the nation’s economy won’t be as active through less expenditure. This will effectively reduce the cash supply within the economy and strengthen the value of the currency, as it will deflate. A strengthening of the Indian currency will be very beneficial towards domestic business, as the currency is valuable, making a branch in “Aussie Boardies” a good investment by acquiring Indian assets.
3,3 GROSS DOMESTIC PRODUCT
India is the world’s tenth largest economy and the second most populous. The most important and the fastest growing sector of Indian economy are services. Trade, hotels, transport and communication; financing, insurance, real estate and business services and community, social and personal services account for more than 60 percent of GDP. GDP (Gross domestic product) is an economic indicator that is measured by the final output of goods and services produced by a country within a certain period of time. It is typically used as the main economic indicator when reviewing a countries economic status. (Investorwords.com, 2014)
The GDP value of India represents 2.97% of the world economy. India’s GDP is currently $1841.7 billion, which has seen a steady growth since 2010. (See appendix 8) The GDP growth rate of India expanded by 0.6% at the end of the 2013 quarter, as shown by appendix 9. This steady increase of GDP will increase the confidence of businesses, as the rising rate of GDP guarantees a stable economy. It would be recommended to set up a branch of “Aussie Bardies” in India at this time as the growth rate of GDP is seeing no fluctuations, indicating a healthy economy.
3.4 WORKPLACE ISSUES
Unemployment is measured by the amount of people who are out of work and are actively seeking employment. (Pettinger, 2010) The rate of unemployment is a key economic indicator to the health of an economy. India’s current unemployment rate is 3.8%, as appendix 10 shows; unemployment has seen a rapid decline in the past 3 years, from 9.4% to 3.8%. This low unemployment also encompasses children, as child labour is a big issue in India. The main cause of this compulsory child labour is no education and a high amount of poverty. (ilo.org, 2014) A 2011 UNICEF report showed that in India, 28 million children under the age of 14 were engaged in child labour. (Digitaljournal.com, 2014) This can potentially be beneficial to branching “Aussie Boardies” to India as it can assist in hiring child employees as they don’t require an adult’s income, and need the work, making it a mutually benign arrangement.
4.0 TRAVEL INFORMATION
4.1 TIME DIFFERENCE
As appendix 11 shows, India is 3 hours 15 minutes behind Australia. If you were to set up an international conference, it would have to be ahead to ensure it is between the working times in India.
The Indian rupee (INR) is the official currency of India. As appendix 12 shows, 1 Australian dollar can purchase 55.16 Indian rupees. As India’s inflation has seen a steady trend of decreasing, this will increase the purchasing power and value of the Indian currency, thus making it a good investment to set up an the Australian “Aussie Boardies” branch in India. (See appendix 7)
As appendix 13 shows, there are many different languages spoken in India. The official language spoken is Hindi along with English and French as minorities. If the Australian business was to set up a branch in India, a translator would probably not be needed as some of the population would know English. This would make communication with the local customers a lot more efficient within the established branch of “Aussie Boardies”.
5.0 CULTURE AND CUSTOM
5.1 COMMUNICATION STYLES
As India is part of Asia, their communication styles are very similar to that of Asians. Likewise with many Asians, Indians consider it extremely troublesome to say “no” – feeling that to do so might be hostile and lead to harmful towards future relationships. Accordingly, when confronted with difference, Indians are likely to express dubiousness and lack of commitment. (Worldbusinessculture.com, 2014) This is a polar opposite to how Australians communicate, being western in their communication style. Australians are confronting and to the point, they will express how they feel and aren’t afraid of declining. Australia has alot of slang that other cultures would not understand and should be weary not to use it to avoid miscommunication. In India, a nonverbal form of greeting is to bow slightly with palms together. Australia’s form of nonverbal communication is shaking hands as per usual with western culture.
5.2 SOCIAL BEHAVIOUR
Indians want to work with those they know. Numerous organizations are family run and may utilize numerous family members, since it is accepted that you can trust family over all others. Indeed in multi-national organizations, it is normal for one relative to be contracted and, assuming that it works out, recommend that cousins, siblings, or different relatives discover occupation there, as well. (Rw-3.com, 2007) This is less prominent in Australia as they value friendship or “mateship” rather than families when doing business. The value of modesty is emphasised in India, as boasting about ones achievements is considered rude. This is similar in Australia, as pretentiousness is loathed and authenticity is appreciated.
In India, business meetings are more casual when it comes to scheduling and dont need much lead time. Scheduling is recommended to be carried out through telephone or letter. It is good to set up a meeting between October and March to avoid the heat and monsoon seasons. (Kwintessential.co.uk, 2014) Also be considerate of the numerous religious holidays in India. When entering a meeting room, it is conventional to greet the most senior member first. In Australia, the hierarchy is based on the position rather than the age. When doing business in India, business cards should be exchanged at the first meeting.
It is a good idea to have it translated in Hindi as well as English on one side as an indication of respect rather than linguistic need. (Intercultures.ca, 2014)When giving your business card to someone you should present it with your right hand and have it face up with the text facing the recipient so they can read it as you hand it to them. Likewise, it is convention to receive it with your right as the left hand is considered unclean in India. Also, putting the business card in your back pocket is considered rude, as you should put it in your wallet to signify prosperity. Australia is indifferent to how someone receives the business card as it is more of the contents of the card that matters.
5.4 STATUS, RANK AND POWER
India is a male dominated society, making the status of women in business fairly low. Foreign women don thave issues being accepted in India, but Indian women are usually discriminated against. Although it might be hard for a woman in India to be in a higher position, it still occurs and they are treated with the same respect as a male in that position. Australia has gender equality and doesn’t discriminate, as women have the exact same opportunity as men within business. In India, senior members of the business are usually revered and are in higher positions. This is contrary to Australia as age is respected, but not to that magnitude; with experience and status valued more.
5.5 DECISION MAKING
Business negotiating in India is non-confrontational and it is uncommon for fellow peers to disagree. Decisions are usually made by the person with the highest authority and rarely any discourse occurs in challenging the decision. (Indiahorizonz.com,2014) The process of decision making is slow paced and it is honourable to show patience. Losing your temper out of impatience is looked down upon, making you unworthy of respect and trust. With Australia preferring to sign legal documents and contracts in the knowledge that there is equity in the law for justice should an agreement be broken. Indians wouldn’t appear over legalistic in agreements as they do not trust the legal system. Generally speaking, one’s word is sufficient to reach an agreement and is considered a reflection of their integrity. When decisions are made or negotiations are successful, they are often celebrated with a meal.
Indians believe that gift giving signifies an easing transition into the next life. (Kwintessential.co.uk, 2014) It is recommended to not give expensive or cash gifts, as they can be considered a bribe in a business context but are suitable for family and close friends on special occasions. Gift-giving in Australia is generally not part of the business culture, as minor gifts would only be given at business parties of wine or chocolates. Be mindful in India to not have gifts that are meat or made of leather, as most Indians are Hindu or vegetarian, making a cows skin extremely offensive for them to look at. Gifts should be wrapped using primary colours as any black/white wrapping is considered unlucky.
Based on the impact of various distinctive elements it can be confidently stated that establishing a branch of Aussie Boardies in India has some risks, but is outweighed by the significant amount of benefits. The climate in the southern part of India’s climate has many similarities to the Gold Coast in which Aussie Boardies is located as it has high temperatures and is generally tropical. The optimal area of India to set up business would be the town of Chennai. Located on India’s south eastern coast, Chennai’s beaches are similar to the Gold Coast, and are the main tourist attraction. Thus, the demand for swimwear would be higher in that area. India is seeing a transition into a first world country with increased development as India is very stable with a booming rise in GDP and a fairly low unemployment, thus setting up a business at this time would be encouraged.
The Indian currency is also seeing a strengthening through deflation; this is good for an Australian business as the exchange rates are very high with Australian currency which could see potential profits with an investment of Indian assets. Child labour is a prominent issue in India; however, this labour is not forced and is a result of high poverty and low education. This can potentially be beneficial to branching “Aussie Boardies” to India as it can assist in hiring child employees as they don’t require an adult’s income, and need the work, making it a mutually benign arrangement. As one of the official language used in business is English in India, this lowers a communication barrier with most of the population speaking English. The social and business etiquettes of Australia and India are diverse but Indians are usually accepting of the cultural differences and are open minded about them. Although, many of the core business protocols are similar and there isn’t any radical changes.
Considering the analysis of the viability of expanding the business “Aussie Boardies” overseas, there are many positive factors. Based on the evidence of the stable economic outlook of India, business protocols, communication and cultural differences, expanding business overseas is highly recommended.