FT NTB BAIM 4

Global &
International
Business Contexts
(SM0269)
Tutor: Dr Donald Tan
Student: Daryl Chiew
Student ID: 14041195 / CT0221504
Submission Date: 11th February 2015
Word Count: 3502
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Table of Contents
1.0 INTRODUCTION

2.0 PORTERS NATIONAL DIAMOND ANALYSIS

2.1 THEORETICAL FRAMEWORK
2.2 FACTOR CONDITIONS

2.3 DEMAND CONDITIONS

2.4 RELATED & SUPPORTING INDUSTRIES 7

2.5 FIRM STRATEGY, STRUCTURE & RIVALRY

3.0CONTEMPORARY MANAGEMENT ISSUES

3.1 CORPORATE SOCIAL RESPONSIBILITY 8

3.2 CORPORATE GOVERNANCE

10

4.0 MARKET ENTRY STRATEGIES

11

4.1 JOINT-VENTURE

11

4.2 DISTRIBUTION SYSTEM

5.0 CONCLUSIONS

12

13

6.0 REFERENCES 14

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1.0 INTRODUCTION
The purpose of this paper is to discuss and evaluate the attractiveness of the food
retail industry in India. Research on the Indian food retail industry will be executed to
construct an analysis of the overall competitiveness and investment attractiveness.
In Part 1, the researcher will apply the extended version of Porters National
Diamond (PND) model to the Indian food retail industry.
In Part 2, two key management issues will be taken into account and analysed
before developing any further operations into the Indian food retail industry.
In Part 3, two market entry strategies will be selected, compared, and discuss the
advantages and limitations of each to determine the optimal strategy to be
implemented in regards to the Indian food retail industry.

2.0 Part 1: PORTERS NATIONAL DIAMOND ANALYSIS

India has experienced significant social and economic change as of late, enabling a
solid consumer market for foreign retailers. According to UNICEF, the Indian
economy has been booming, with an average GDP growth rate of 4.5% from 1997 to
2007 (Mann & Byun, 2011), and is anticipated to be the world's third greatest
economy after the USA and China by 2050. When market size, development
prospects, and consumer wealth and preparedness are considered to determine the
retail food index, India falls within the main five nations (Mann & Byun, 2011).This
spell of flourishing has come about because of exchange liberalisation.
Since 1991, the Indian Government has permitted foreign direct investment (FDI) in
virtually all divisions of the economy (Mann & Byun, 2011). In 2006, loose forms of
FDI regulations were presented in the retail segment, permitting 51% proprietorship
in retail trade of single brand retailing and 100% proprietorship for wholesale trading
of cash as well as carry items (Mann & Byun, 2011). Likewise, it is predicted that the
Indian retail industry will develop at a rate of 13% every year, from $322 billion in
2006-2007 to $590 billion in 2011-2012 (Mann & Byun, 2011).

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With the Indian government going about as a strategist, the Indian retail industry is in
an exceedingly dynamic state. Albeit past analysts have researched the Indian
market, the available data is shattered into fragments and not much is known about
the Indian food retail division, which exhibit a noteworthy business potential for
foreign retailers. The continuous retail schemes and changed trading/market
environment with an increased liberalised retail trading regulation demands a
relentless monitoring as well as a systematised review.

2.1 THEORETICAL FRAMEWORK:

Porter's (1990) diamond model delivers an outstanding system to analyse the
competitiveness of a specific industry within a nation (Mann & Byun, 2011). The
model has been practiced in a wide array of industries as its implications for
advertisers, law makers and the government for outlining long haul improvement of a
country's competitive advantage (Mann & Byun, 2011), including open and
transitional economies (Mann & Byun, 2011).
Porter (1990) suggests that the attributes of the national environment impact the
competitive advantages of a nation and distinguishes four essential determinants
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that influence competitive performance of organisations: factor conditions; demand

conditions; related and supporting industries; and firm strategy, structure and rivalry.
These determinants associate with one another to structure the nation's diamond,
and interrelations between the determinants secure national competitiveness (Mann
& Byun, 2011).
The government too associates with the four determinants by cultivating or
dissuading the advancement of a country's competitive advantage. The following
examines every determinant to recognize characteristics that may directly influence
the competitive position of the Indian food retail industry.

2.2 FACTOR CONDITIONS

Production factors are regularly described in extremely broad term, for example,
land, labour and capital, which are too general that it is not possible to bear on
competitive advantage in strategic industries. 70% of the Indian population is under
age thirty-five (Pawar & Veer, 2013).Youthful population is certainly an advantage for
economy development on the grounds that these are the productive populace group.
As per UN and Goldman Sachs bank's research report anticipated that Indian's
populace is increasing and now India has the second largest population of the world.
The Indian population is predicted to continue growing annually. It shows that labour
capability is expanding and the cost of effectiveness is conceivable through the
labour market. India possesses various noteworthy qualities in the more advanced
and complex drivers of competitiveness. This reversed pattern of growth is one of
the characteristics of India. The nation has an immensely huge household market
that enables economies of scale and this may pull in potential foreign investors.
According to the World Economic Forum, it can depend on a well-planned and
sophisticated financial market that may channel financial resources to great
utilization, and it boasts a sensibly sophisticated and imaginative businesses (Pawar
& Veer, 2013). Infrastructure is a key area that drives total advancement of the Indian
economy. The Secretariat for infrastructure in the planning commission is involved in
executing regulations that would enable time-bound creation of world class
infrastructure in the nation. This segment concentrates on land, power, bridges,
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dams, streets and urban infrastructure advancement. Details of the developments,

associations, regulations, courses of events, plans, spending on infrastructure are
delivered to the clients (Government of India, 2012). Factor conditions includes
human resources, physical resources, knowledge resources, capital resource and
infrastructure.

2.3 DEMAND CONDITIONS

Demand condition is one of the critical determinant of national competitiveness.
There must be domestic demand for a product before a country will export the
particular product, as domestic demand is essential to enable domestic firms to learn
the steps to success in the industry (Pawar & Veer, 2013). Fundamentally, demand
conditions of any industry is relying upon the size of home demand, demand size,
pattern of growth as well as the number of purchasers.
According to Tushar Poddar, chief Indian economist in Global Investment Research
Division, Goldman Sachet states that India's economic advancement throughout the
most recent decade has been truly eminent: genuine GDP growth was more or less
8% every year over that period, determined by a blend of increasing investment,
consumption demand as well as greater productivity growth. The nation's
demographic dividend will be significant through the following couple of decades.
India will add around 110 million workers to its work force over that time, which is
more than the United States, China, Russia and Japan combined (Pawar & Veer,
2013). Urbanisation has been expanding at the quickest rate over the last decade.
According to the, Ministry of Home Affairs India, the urban population of India in 2011
stood at 31.16% and was 27.81% in 2001. Urbanisation of a nation is a good
indicator of advancement as it is the growth engine of an economy. Disposable
incomes of Indians have risen significantly between 2001-2002 and 2010-2011
(Pawar & Veer, 2013). Households with low income levels have decreased
throughout the years, while the share of those decreasing in higher income brackets
is on the rise.

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2.4 RELATED & SUPPORTING INDUSTRIES

This factor plays a key role as the existence or absence in the nation of supplier
enterprises and related industries is globally competitive and may assist the
company in establishing itself (My Assignment Help, 2013). Economic advancement
highlight the imperativeness of complementarities and linkage among commercial
ventures to the advancement process (Pawar & Veer, 2013).
India is regarded as the nation of retailers; India has the most noteworthy presence
of retail outlets-more than 15 million on the planet. The vast majority of outlets in
India are found in the unorganised sector (independent shop); typically the average
size of these outlets is as little as 500sq.ft (Pawar & Veer, 2013). India is the world's
biggest producer of fresh edible crops, dairy, meat, spices, fibrous crops, and several
staples, for instance, castor oil seed and millets. Additionally, India is the runner up
as the second biggest producer of the world's major food staples such as rice and
wheat. India is positioned within the world's five biggest producers of more than 80%
of agricultural goods, including numerous cash crop products, for instance, coffee
beans and cotton (Pawar & Veer, 2013).
Presently, in the Indian retail industry, there exists several major retailers such as
Trent, Reliance, Future Group, Shopper Stop, Landmark, Aditya Birla etc. (Pawar &
Veer, 2013). These major retailers have already set up operations such as
department stores, specialised stores, hypermarkets, and superstores. India has
both supporting and related industries in regards to the retail food industry to gain a
competitive advantage.

2.5 FIRM STRATEGY, STRUCTURE & RIVALRY

The competitiveness depends on how organisations create, organise, and manage,
as well as the nature of local rivalry. In the linkage of national competitive advantage,
India has a notable advantage in terms of low work cost, accessibility of raw
materials and so forth.
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Additionally, numerous foreign retailers like Arrow, Levi's, JC Penny, Wal-Mart, and
Gap have already been sourcing their items from India labour cost has increased in
developed nations (Pawar & Veer, 2013). An increasing number of corporations are
moving their operations to developing nations such as India and China. Walmart has
decided to set up a fully owned subsidiary in India for item sourcing (Pawar & Veer,
2013).
The organisational objectives, plans, and methods for managing businesses differs
in every nation. National competitive advantage results from a great match between
these factors as well as the sources of competitive advantage in a specific industry. A
corporation's administration and its competitive structure is influenced by national
circumstances. There is not one management system that is universally suitable.
Countries will have a tendency to succeed in businesses on the preface that the
managerial practices and modes of organisation favoured by the national
environment are appropriate to the industries sources of competitive advantage
(Pawar & Veer, 2013).
The abilities of food retailers as well as the power of the buyers are crucial in
achieving a competitive advantage in the food retail industry (UK Essays, 2010). The
food retail industry is immensely powerful and capable in influencing and negotiating
the prices of producers both domestically and internationally. It is fundamental to
create a long-lasting relationship of trust and create partnership amongst the
retailers keeping in mind the end goal to increase the value of opportunities (UK
Essays, 2010).

3.0 Part 2: CONTEMPORARY MANAGEMENT ISSUES

3.1 CORPORATE SOCIAL RESPONSIBILITY
Corporate social responsibility essentially alludes to the concern demonstrated by
the corporation to its social environment. As per this idea, it is immensely
advantageous for corporations to give due thought to the societal effect of the
activities and actions, which are embraced by them. The corporations additionally
need to make strides, which will be beneficial for the corporation in enhancing the
general welfare of the public. The goal of the corporation should not just be towards
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the efficiency of their managerial operations but also deal with the needs of the
general public (My Assignment Help, 2013).
The CSR scene in India is remarkable for various reasons. The principal and of
utmost importance is the nation's 'family-focused' style of administration the vast
majority of large organisations in India are managed by family groups (Kansal, Joshi,
& Batra, 2014). CSR has been used by dominant family corporations for more than
100 years as a family tradition (Kansal, Joshi, & Batra, 2014). Accordingly, choice of
CSR measures (benefactions for education, healthcare et cetera) is affected by the
particular culture and social inclination of the particular family. Case in point, the
founders of the Tata Group founded the JN Tata Endowment Fund in 1892 to urge
Indian scholars to take up higher studies abroad. Meeting the expectations of
stakeholders and improving regular examinations have prompted a greater
concentration on corporate obligation and responsibility.
Corporate responsibility boundaries have exited the corporations themselves and
intends to allow in business' entire chains of worth and to coordinate more extensive
issues of ESG. Creating awareness to consumers about environmental issues has
pressured food retailers to act all the more carefully and responsibly and in the event
that they neglect to do as such, it tarnishes their reputation. What's more reputation
is exceptionally crucial to achieve sustainability in the food retail industry (UK
Essays, 2010). In India, the corporate responsibility is in jeopardy as the commercial
barriers and bureaucracy may incorporate higher costs and moral standards. As the
corporations forcefully strive to grow in India, this issue escalates to increased
importance to be overseen and administered by the corporations. Corporations have
to take in consideration of the ESG report while devising their strategies before
executing any operations.
Finally, it has been shown that tackling the social issues by corporations leads to
gains in regards to the productivity levels of the corporations that leads to a dynamic
transformation in the profitability and share value (My Assignment Help, 2013).

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3.2 CORPORATE GOVERNANCE

It is critical for business corporations to maintain their business exercises
economically and efficiently so that they can improve the performance in their
operations. This can be accomplished when the corporation is effective in achieving
the moral considerations and offer value to the stakeholders inside and outside the
corporation. The corporation ought to make a point to serve its stakeholders in a
moral manner. It is essential for a corporation to evaluate its current moral
considerations between the stakeholders and satisfy their expectations in regards to
the moral considerations.
In the circumstances of India there exists distinctive socio-cultural settings with
suitable leadership, labour welfare considerations and issues relating to corporate
governing (My Assignment Help, 2013). It is imperative for the corporations to
concentrate on the sort of administration systems that prevail in India. The key focus
of corporations is to serve the monetary interest of shareholders and acquire
financial gain. The organisation is obliged to have a balanced out structure of
working so it can advance over the long haul and continue to develop. This could be
possible when the organisation does successful distribution and administration of
resources so that the incomprehensible capital can be completely utilised and
financial gains can be achieved.
The market role is immensely potent in India, in which foreign investors are the key
players (My Assignment Help, 2013). The organisation ought to get itself enlisted
with all the necessities of the government and ought to work in acquiescence with
the current bookkeeping and accounting norm in the market.
It is appropriate for the corporation to concentrate on the shortcomings and zones of
mediocre performance of the market in India. This is advantageous for the
corporation to stay focused and remain competitive in the Indian market. In this way
the corporation can develop its identity and reputation as well as focus on the new
client base to try the amenities offered by their food retail business. Furthermore, the
organisation would be fruitful in making its position in the new market with a lively
commercial culture and exceptionally satisfied and valued stakeholders. An
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imperative thing to take into consideration is to effectively abide the policies,

principles and regulations as well as provide legitimate training to the employees and
management superiors to act in accordance to the obligation of the Indian market
(My Assignment Help, 2013).

4.0 Part 3: MARKET ENTRY STRATEGIES

4.1 JOINT-VENTURE
The researcher has chosen Joint-Venture over Acquisition in regards to the food
retail industry as one of the market entry strategies in the Indian market because the
cultural distance between the two countries is seen as more distant; corporations are
highly likely to experience difficulties and challenges in controlling foreign operations
individually. Secondly, joint-venture is preferred over acquisition when the host
country such as India is perceived as a high risk country (Jung, 2004). In addition to
this, joint-ventures enable risks to be shared by both firms, this is advantageous to
both firms involved. However, one such downside is that resources also have to be
shared equally.
A host-country firm that knows, understands and is familiar with the local competitive
conditions, legal and social standards, and cultural norms of the country should be
appointed as the potential partner (Jung, 2004). There are some disadvantages
associated with joint-ventures such as splitting of rewards, potential controlcoordination issues with local partner, as well as the possibility that both parties may
look only at their firms rather than the partners best interests (Jung, 2004). Jointventures can also be considered as a way to bridge cultural gaps. Unlike acquisition,
joint-ventures often assign management responsibilities to local partners who can
manage the local labour force as well as relationships with suppliers, buyers and
governments in the best possible manner (Jung, 2004). Therefore, joint-ventures
resolves the foreign firms issues resulting from cultural aspects, in spite of the fact
that at the expense of sharing governance and ownership.
Additionally, it has been shown that U.S agencies typically prefer Acquisition over
Joint-Venture in Western Europe. However, when dealing with Asia, Africa and
Eastern Europe, joint-venture is the preferred choice (Jung, 2004). Pretty much as
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Whirlpool did with Sony in Japan, an entering corporation can merge together with a
corporation that has an existing distribution system in the target area. One instance
of this in a developing market sector is the association between Sara Lee and Godrej
in India. Trying to enter the India market, in 1995 Sara Lee merged with local
corporation Godrej to market and distribute its merchandise. (Neuwirth, 2011).
Another such case of a fruitful partnership piggybacking relationship is Proctor &
Gamble and Indian consumer goods corporation Marico Industries. Looking to
distribute deodorants, detergents, and diapers into the rural part of India, Proctor &
Gamble founded a distribution alliance in 1999 with Marico to capitalise the Indian
distribution network (Neuwirth, 2011).

4.2 DISTRIBUTION SYSTEM

In regards to rural emerging markets, working a distribution system can be
considerably more difficult than creating one. This occurs because of poor
infrastructure, immensely fragmented distribution industries, and an absence of
responsibility showed by warehousing as well as logistics companies (Neuwirth,
2011). However much as could reasonably be expected, corporations ought to
piggyback on existing powerful distribution systems that have been constructed by
large corporations. Entering corporations can either collaborate with established
firms to distribute products and services through established systems, or they can
concentrate on business to business deals and permit corporations and associations
established in the target areas assume total ownership over distribution (Neuwirth,
2011).
Firms have likewise discovered successful distribution by cooperating with domestic
non-profit associations like women's Self Help Groups and farmer federations. To
empower its own long haul business success, the entering corporation (the rider)
needs to guarantee that the established corporation (the carrier) it is piggybacking on
has a long haul business or social interest in merging with the rider (Neuwirth, 2011).
Maintaining Consumers After-Sales Service after a consumer in a rural emerging
market has bought an item, the consumer might inevitably require extra support from
the organisation if the item breaks or needs to be serviced. Offering quality after
sales service is an essential service, however is regularly neglected practice that
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organisations need to consider when they are building their marketing channels in
emerging markets (Neuwirth, 2011). On the off chance that a corporation does not
ensure a pleasant experience for consumers after they have bought an item, the
corporation will inevitably see a drop in sales as consumers search somewhere else
for their next purchase and inform their neighbours or friends about their terrible
experience.
Corporations can give after-sales service through their own workers or by merging
with domestic retailers. Corporations ought to pick the most optimal option that best
addresses the needs of their clients, and ought to cautiously consider the expenses
of delivering after-sales service when evaluating the market size they wish to
establish their product to (Neuwirth, 2011).

5.0 CONCLUSIONS
Corporations that enter a rural area of an emerging market such as India will
inevitably face myriad challenges. Scattered populaces, sporadic earnings, and low
education levels are simply a couple of the numerous issues that corporations will
need to tackle to achieve success. In this report, the researcher proposes that the
way to building a fruitful marketing channel in India relies on upon a companys
capacity to initiate clients, distribute products, as well as maintain them.
Nevertheless, just performing these exercises is insufficient, if a corporation intends
to be profitable in the long-run, the operations must be performed with a focus
towards cost viability and economic return. Analysing the essential determinants
from the Michael Porter Diamond, India has the potential to truly gain a competitive
edge in the food retail industry. India may have a huge potential for retail businesses
and a number of reports suggests that top foreign corporations have shown interest
in deploying FDI in the Indian food retail industry.
The factors of Porter's National Diamond show favourable indicators for
competitiveness in the Indian food retail industry. India has the potential to take
advantage of the high market demand, huge market size, economies of scale, low
penetration of food retail industry as well as worldwide sourcing for the retail industry.

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In conclusion, India has be considered a favourable nation for foreign retailers to

invest in.

6.0 References
Hennart, J.-F., & Park, Y.-R. (1993). Greenfield VS Acquisition: The Strategy of
Japanese Investors in the United States. Management Science, 1054.
Jung, J. (2004). Acquisition or Joint-Ventures: Foreign Market Entry Strategy of
U.S. Advertising Agencies. Journal of Media Economics, 35-50.
Kansal, M., Joshi, M., & Batra, G. S. (2014). Determinants of corporate social
responsibility disclosures: Evidence from India. Advances in Accounting,
incorporating Advances in International Accounting, 217-229.
Mann, M., & Byun, S.-E. (2011). Accessing opportunities in apparel retail sectors
in India: Porters diamond approach. Journal of Fashion Marketing and
Management, 194-210.
My Assignment Help. (2013). Porters National Diamond Analysis. Retrieved from
http://myassignmenthelp.info/assignments/porters-national-diamondanalysis/
Neuwirth, B. (2011). Marketing Channel Strategies in Rural Emerging Markets.
Kellogg School Of Management, 1-40.
Pawar, D. A., & Veer, N. B. (2013). Advantage India: A Study of Competitive
Position of Organized Retail Industry. IOSR Journal of Business and
Management, 57-62.
UK Essays. (2010). Porter S National Diamond Analysis Economics Essay.
Retrieved from http://www.ukessays.com/essays/economics/porter-snational-diamond-analysis-economics-essay.php

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