INB311
Asian Business Environments: India and China
Dr. Lairson
Digital Business
11/18/14
Explain the business strategy known as “fast follower.” How does it work? What are the pros and cons? What kinds of industries? What kinds of firm capabilities?
Noshir Kaka, "Strengthening India's Offshoring Industry," McKinsey, 2009
indiaoff.pdf
India’s Offshoring industry is globally dominant at the low end but faces new challenges that will require considerable change and development to maintain global market share or even avoid large losses.
beyond the current crisis the industry faces a changing global environment that will probably cut into the country’s worldwide market share.
McKinsey analysis suggests that there is little immediate risk to India’s dominance of the market for offshore technology and business services. But the country’s share could sink to 40 percent by 2020, from just over 50 per- cent at the end of 2008, primarily as a result of increased competition from other countries, talent and infrastructure constraints, and an unhelpful regulatory environment. But changes in the global market could also give India opportunities, especially if its companies become more innovative and rely less on low labor costs.
Because of massive market expansion, Indian firms can do nothing and still grow but will likely lose global market share as a result.
McKinsey expects the global market for offshore business and technology services to grow to about $500 billion by 2020, from the current $80 billion a year. Even with this more than six fold growth, the industry will serve less than a third of the potential market, which McKinsey estimates at $1.65 trillion to $1.80 trillion in 2020.
Much of the industry’s expansion will come from nontraditional customers. Increased demand from emerging markets (primarily China and India, but also Brazil and Russia) could add $450 billion to $500 billion to the global market by 2020. Individuals and small and midsize enterprises will find it easier to use offshore services as communications technologies advance, costs go down, and business models evolve, adding $240 billion to $260 bil- lion to the market. Finally, new kinds of customers—particularly in
the public sector (including state-owned enterprises), as well as health care providers—will likely turn to outsourced business and technology services, expanding the global market by an additional $210 billion to $260 billion.
India will be hard pressed to maintain its 51 per- cent market share, which we expect will drop to around 40 percent by 2020 unless Indian providers become more innovative and global.
What are the reasons for India’s potential weaknesses in this industry?
· Talent will be a severe problem: India produces no more than 3 million university graduates a year—too few to maintain its market share.
· An inadequate physical infrastructure will also hinder the industry’s expansion. Transportation systems and power and water supplies are already strained in the country’s leading cities, including offshoring hubs such as Hyderabad and Chennai.
· infrastructure deficiencies and talent shortages have prevented the industry from moving aggressively into smaller cities.
· China, Egypt, many Eastern European countries, and dozens of others are fighting aggressively to build their domestic business and technology services industries, offering tax benefits and improved infrastructure as incentives.
· a lack of clarity surrounding the continuation of fiscal incentives the government has used to spur industry development. Meanwhile, the industry continues to be regulated by the Shops and Establishments Act and other laws not tailored to the service sector’s requirements. Adding to the burden, these laws are applied inconsistently from state to state.
· Weak capacity for innovation: India’s companies captured more than half of the global business and technology services market, but the country still accounts for less than 1 percent of the patents issued around the world annually. To address the opportunities in new geographic and industry markets and to serve individuals and small and midsize enterprises, business and technology services companies must create innovative products that address the needs of these new customers.
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· Noshir Kaka
· DirectorManaging director of McKinsey’s India offices. Leads our client service and knowledge development on business technology—driving the growth of India’s vibrant IT and outsourcing industries.
· Expertise
· Sourcing, Business Technology, Service Operations
· About Noshir
· Noshir Kaka is managing director of McKinsey’s India offices and global leader of our Outsourcing and Offshoring Practice. He joined McKinsey in 1994, soon after the firm opened in India. Since then, he has helped build McKinsey into India’s preeminent consulting firm, playing an active role in the country's transformation and development, helping Indian companies win on the world stage, and growing the next generation of Indian leaders.
· Noshir has worked across South Asia, the the United Kingdom, and the United States. He has helped major companies, public-sector institutions, and nonprofits develop strategies for growth, reshape their organisations, build their people’s capability, and improve operational performance.
· Noshir contributes actively to the growth of India’s vibrant IT and business-process outsourcing (BPO) industries. Across the outsourcing landscape, he has helped over 100 global corporations develop and deliver their strategic plans and has served over a dozen governments to create valuable jobs and investments from the sector. Noshir has also helped several leading business houses in India professionalise and globalise their companies.
· Underpinning his client work, Noshir has led several major knowledge initiatives, including the McKinsey-National Association of Software and Services Companies (NASSCOM) reports on trends and future potential in India’s IT and BPO sectors, and McKinsey’s 360° initiative, a comprehensive benchmarking of service operations across IT, operations, and R&D. He speaks frequently at key industry forums, including those of the Confederation of Indian Industry and NASSCOM, and has served on the juries of several business media awards.
· Noshir is passionate about developing tomorrow’s leaders—in McKinsey, its clients, and beyond. He was actively involved in the creation of the Indian School of Business, a joint initiative between McKinsey, Kellogg School of Management, London Business School, and the Wharton School to build a world-class business school in the Indian subcontinent. He is also a member of the Young Presidents’ Organisation.
· Published work
· “Online and upcoming: The Internet’s impact on aspiring countries,” McKinsey, December 2012
· “Strengthening India’s offshoring industry,” McKinsey Quarterly, August 2009
· “Perspective 2020: Transform business, transform India” (PDF–285 KB), NASSCOM, April 2009
· “Extending India’s leadership of the global IT and BPO industries” (PDF–145 KB), McKinsey and NASSCOM, 2005
· Education
Jamnalal Bajaj Institute of Management Studies, Mumbai / MSc in financeUniversity of Bombay / BComm
Are Indian firms able to adapt and gain from transformative technologies in the near future?
https://www.youtube.com/watch?v=1Orb6rwb3HM
EIU, "Clinical Research: Spotlight India," September 2013
indiaresearch.pdf
What is an offshore clinical trial?
Globalization of clinical research has been evident with the shift of clinical activities into Asia Pacific (APAC). Asia is not just a market and manufacturing powerhouse for the pharmaceutical industry, but is also evolving to become a major destination for drug development and clinical research. Emerging markets especially Asia, are increasingly becoming the choice off-shore destination for biopharmaceutical companies conducting clinical research. Of the markets, Asia is the leading location selected by biopharmaceutical companies to offshore clinical trials
Conducive clinical environment. Asia inherently possesses a large treatment-naive population ideal for recruitment of trial subjects. Government bodies are pushing out incentives and tax exemption to promote R&D activities in the region, and streamlining regulatory procedures ease the initiation of trials in these countries. Quality of Clinical research Associates (CRAs) and quality of trials conducted in the Asia are continuously improving with the adoption of GCP guidelines integrated with international standards, offering a favourable environment for clinical trials to be conducted in Asia.
Cost advantage. Budget constraints and limited patent period also compel pharmaceuticals to explore more profit- driven strategy to increase productivity and maximize profit margins, by reducing the time taken to market drug and by controlling headcount costs. Asia offers cost competiveness, where cost of R&D can be 30-45% cheaper than in developed markets such as US and Europe.
A study conducted by Clearstate in 2013 observed that among the listed attributes in the Industry Standard Research (ISR), low cost, therapeutic expertise, project manager quality, staff quality, local market/regulatory knowledge and data quality metrics were important attributes for pharmaceutical companies when outsourcing clinical trial services.
India’s large patient population, diverse pool of medical conditions including communicable and lifestyle diseases and the rising disease burden, set the stage for the ease of conducting clinical trials in India. Cost advantage, coupled with the availability of medical and technical expertise and talents, also contribute to the opportunity for a growing CRO industry. India’s unique position with its developed IT expertise and capabilities enhances its value proposition as an ideal off- shore destination for clinical IT services like data management. With a healthy clinical research environment, the potential of India being a clinical research hub in the APAC region should be promising.
Reforms in the Indian regulations have been on-going since 2005, and have led to a continuously evolving regulatory landscape. In recent times, there seems to be a firmer commitment and affirmation by the Indian regulators to resolve the issues that have since plagued the clinical research space. Mandatory trial registration of clinical trials and inspection of trials sites were implemented, though still with limitations in curbing the ethical irregularities, due to inadequacy of the drug regulators in India. Stricter laws and punishments were also laid down to hold investigators and sponsors responsible for trial subjects.
In February this year, the regulators have made reforms to tighten control over integrity of trials conducted in India, placing liability on sponsors to compensate for injuries or deaths that occur in the process of a clinical trial, and the authorization of local licensing authority and the Central Drugs Standard Control Organization (CDSCO) to conduct
Max Bearak, "Global Digital News Brands See Growth Opportunity in India"
Digitalmedia.docx newspapers
India offers a significant opportunity to convert high newspaper readership into digital media.
Evaluate the content and appeal of:
http://scroll.in/
http://qz.com/india/
While digital revenues may be growing steadily in India, and the cost per impression for advertisers here is one of the lowest in the world, revenue is comparatively low as advertisers spend very little on digital media ad space.
Nikhil Pahwa, founder of Medianama.com, a website that monitors and analyzes digital media in India, said, “India is a market that delivers very high consumption and usage, but struggles when it comes to being commercially viable.”
What is “Native advertising”?
Both Huffington Post and Quartz India point toward native advertising as perhaps the most practical way of making money in the industry. Native advertising, which is sponsored content made to look like an article, could even be attractive to Indian readers who are used to having to click through ad after ad simply to reach articles on Indian news websites. Quartz India has already inked a deal with General Electric to be a launch partner, and Mr. Patil believes that this year’s sudden maturation in the digital media market will prompt a tide of revenue to help all news sites.
What is the pattern of business success and failure in US digital media? Can this be used to predict India?
Max Beark, "The New Bazaar: In India, Online Stores Catch on With Buyers," NYT, 7/29/2014
Indiaonlinebazaar.docx
http://www.snapdeal.com/
http://www.flipkart.com/
Their previous venture — a physical coupon booklet into which they had sunk their combined savings — flopped in just months. And online retailing was still a largely unproven endeavor in 2010, particularly in India, a country where most people don’t have bank accounts, let alone credit cards to make purchases on the Internet. When an angel investor offered $200,000 as seed money, they took only half and aimed for just 100 transactions a day.
Snapdeal is now on track to handle more than $1 billion in sales this year for over 30,000 merchants across more than 500 categories of goods and services.
The rise of Indian e-commerce — which has started to gain traction only in recent years — has captured the attention of international investors.
This year, Snapdeal has raised $233 million, with about half coming from the American Internet company eBay. Mr. Bahl said Snapdeal was considering an initial public offering in a year or two.
At least half a dozen other leading Indian shopping sites have announced major fund-raising deals in recent months. On Tuesday, Flipkart, India’s largest e-commerce company, said that it had raised $1 billion from investors, including American firms like Tiger Global and Accel Partners. The amount represents the largest ever for an Indian Internet company, and globally, it matches Facebook’s fund-raising round in February 2011 and ranks only second to Uber’s $1.2 billion bonanza this June, according to Thomson Reuters.
Why has ecommerce in India grown so much at this time?
The investment surge reflects the changing landscape in India. Internet access has rapidly expanded, mostly through mobile devices, and Indians are now increasingly shifting daily activity online, like reading the newspaper, doing bank transactions and buying goods and services, from shoes to refrigerators (with installation included).
E-commerce is growing at a compound annual rate of 34 percent, according to the Internet and Mobile Association of India, an industry trade group.
But online shopping remains a largely untapped market. While estimates of the total worth of India’s online retail industry vary greatly, most analysts figure that it accounts for less than 1 percent of the country’s $500 billion retail market, which is still mostly cash-driven.