• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  6. 6
  7. 7
  8. 8
  9. 9
  10. 10
  11. 11
  12. 12
  13. 13
  14. 14
  15. 15
  16. 16
  17. 17

China or India? Many companies ask themselves this question. Due to saturated markets, increasing costs and low growth rates in the developed western countries, going to Asia might be the only possibility to sustain healthy growth rates

Extracts from this document...


Table of content: * Introduction * Business development and opportunities * Risks o Political and General Instability Risks o Ownership and Control Risks o Operations Risks o Legal risks o Economical risks o Cultural and social risks o Ethical risks * Conclusion * Bibliography Introduction: China or India? Many companies ask themselves this question. Due to saturated markets, increasing costs and low growth rates in the developed western countries, going to Asia might be the only possibility to sustain healthy growth rates. With more than one billion people living in India and China respectively, including a huge middle class and growth rates are more than double as in western countries there are huge opportunities for companies. The benefits of globalization made it possible to enter these markets. But these opportunities come also along with risks, therefore it is vital to have a closer look at these two countries to identify these risks and decide then which country fits to the company and where you think you can handle the intercultural differences best. Business development and opportunities: The key drivers that made the globalization possible were also in favor of the business development in China and India. The evolution to more democratic systems and open market systems enabled the opening up of the market and the falling barriers made it possible to enter these markets. Technological advances especially in the communication and transport sector made it profitable to ship products back and forward and outsource services. Western companies are actually forced to go abroad to make profits because of saturated markets in their home markets or in the western hemisphere. Often they invested a lot on R&D and only if they are global player the gain sufficient returns on investments. They also want to take advantage of the low cost resources and the expanding market demand in China and India. The worldwide demand is more homogeneous than ever before. ...read more.


McDonald is an example of a company that had difficulties. Because it did not have the right 'guanxi', it lost a case against the government and had to move out of a profitable location. China is a member of the WTO since December 11th 2001, but at the moment it does not enforce prosecution of infringements against intellectual property rights rigorous. That is the reason why piracy is very common in China. 'It is one of the worst offenders against IPR and has a piracy rate of 92%' (Hill, 2005, 55). India has because of its colonial past, a legal system that is based on the British common law. It is able to settle 'sophisticated and complex cases' (Hill 2005). But due to many cases there can be delays. India is member of the WTO since January 1st 1995 and Intellectual Property Rights are respected also enforceable at court. Its IPR are compatible to the TRIPS agreement. But for patens it is different, they are prohibited in areas that include the use of food, medicine and drugs. That allows western medicines and drugs to be reproduced. There are still laws that make it difficult for doing business in India; Hill (2005) shows an example of a law that makes it difficult for companies with over a 100 employees to fire people at all. Companies have to make sure that they understand the concept of law and enforcement in the country. Then they should adapt to these conditions and respect them. For western businesses it might be easier to rely on a fixed set of laws, which they are used to. India offers this environment. You can rely on this, without being worried how they might be affected by connections. It gives foreign investors security and they do not need to worry about their attitude towards corruption. A big advantage is as well that Intellectual Property Rights are respected. ...read more.


'India has created world class companies that can often compete with the best in the West, often on the cutting edge of software, pharmaceuticals and biotechnology' (Power2004) and these are the technologies of the future. That means India will be competitive in the future and the growth will be stable then. It shows that India is future orientated. Therefore is 'India better placed than China for further growth' (Power2004). 'If China will be the world's workshop, India will be its laboratory' (Bennhold 2004). Omen for success are also good bond markets and 'better institutions and corporate governance' (FAZ) The reduced risks: A major advantage for India is that is a democracy. There are no risks of revolutions and insurrections. That IPR are protected is also a good way to attract and ensure high tech investment in the future. An advantage is also that India is respecting the human rights. This is getting more and more important for multinational companies, because their image will be affected and consumers all over the world are getting more and more sensible for this topic. But that does not mean that companies should not be careful in entering the Indian market. There are many pitfalls. Companies should conduct a careful market research and be sensible to special circumstances in the market. They should not overestimate the opportunities and the potential market and respect the local tastes, social and cultural differences. To choose the right entry strategy is also a major factor of success. I would recommend if the company has enough resources to set up a wholly owned subsidiary. This will ensure that you will have control and no unwanted technology transfer. Quality standards will be ensured, tariffs and trouble with uncommitted partners avoided. Anyway it should be ensured that there are enough locals under acceptable conditions employed, also in the management level. This will help the company to respond to the specialties of the market and shows that it is aware of its social responsibilities. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. "Spill-overs from multinational companies to the rest of the developing country are a dangerous ...

    be exploited, and the presence of external competition in the export market. Again, without taking this into account, the positive spill-over effect on labour productivity from multinationals will be overestimated. When Haddad & Harrison controlled for these effects, estimating the levels of labour productivity for small foreign owned firms and

  2. Retailing In India - A Government Policy Perspective

    We then discuss the various aspects of Indian Retailing that need improvement and analyze the inherent complexities involved in the Indian retail trade sector. Then we analyze the Indian FDI experience, and try to drive some conclusions from the experience we have had in other sectors.

  1. An Empirical Investigation into the Causes and Effects of Liquidity in Emerging

    Volume measures can also give distorted results; for example when liquidity is low, volume could be high if transactions costs are high. This has been discovered to occur particularly around earnings announcements. Several authors quoted in the Alexander et al.

  2. Case Study: The Home Depot

    For example, customers turn away from DIY. Then there are still other segments (DIFM and professional), but it would still mean a significant loss for Home Depot. This example might be a little bit exaggerated, but it could happen. Other example in a negative change of customer attitudes could be

  1. Citigroup has successfully faced the challenges of the 19th and 20th centuries and has ...

    Success comes from aligning the company's resources and core competencies to deliver values and exploit the windows of opportunities while building strengths to reduce the weaknesses and defend the threats. The Economic, Societal, Political, Technological and Environmental trends give raise to Opportunities as well as threats.

  2. Why has Nucor performed so well in the past?

    This will act to compound the threat of profit seeking competitors or start ups entering the market. 2. Substitution Threat from low cost substitutes may also test the longevity of competitive advantage for Nucor entering the TSC market. Concrete, plastic and aluminium are cheaper and in some cases more effective.

  1. Causes of the Great Depression

    unfortunately for many the money just wasn't there. As the amount of money in circulation dropped deflation hit. Money was worth more but there was little money to be had. The fed which had the power to put more money into circulation did nothing (laissez faire). Workers were fired as thousands of businesses closed down.

  2. Evaluate the impact of Nike's outsourcing strategy and factory location on the host nation

    exert considerable influence on governments to gain preferential tax concessions and subsidies and grants. This can be costly to the host country, as they are not gaining the amount of revenue they are entitled to from multi nationals. However it could be argued that multinationals aren't able to exert that

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work