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The Real Economy in the Long Run. India as a Target Location

The Example of a Corn Flakes Manufacturing Company

Essay 2017 6 Seiten

BWL - Unternehmensforschung, Operations Research

Leseprobe

Inhalt

Introduction

The factors determining the country's productivity

How the country's policies influence its productivity growth

How the country's financial system is related to key macroeconomic variables

How your organization can reduce the risk it is likely to face in relocating

The current and projected unemployment over the next five years

References

Introduction

XYZ Investment Limited is a company based in the U.S. that specializes in manufacturing corn flakes. After several years of producing in the U.S., XYZ Investment Limited now wants to establish a new manufacturing plant abroad in an attempt to take advantage of varied factors that contribute towards lowered production costs. The selected overseas location is India, which is a nation situated in the southern part of Asia. In this paper, the suitability of India as a target location for XYZ Investment Limited’s new manufacturing plant will be assessed in detail.

The factors determining the country's productivity

One of the main factors that affect productivity in India is the technical influences. According to Debnath (2017), India has vastly advanced when it comes to technological integration. Indeed, the country boasts of the strongest Information and Communication Technology Sector. Apart from this, India is making concerted efforts to launch its satellites into space. The rich technological profile in India has played a huge role in driving the scope of production with minimum effort and costs, which has, in turn, promoted a higher level of productivity. The government is well aware that technological advent usually brings rise to Intellectual property issues. Therefore, according to Debnath (2017), the regime has put in place stern measures to safeguard these properties.

Managerial factors have also been influential. According to Cappelli, Singh, Singh, and Useem (2010), managers in India usually place great value on their core responsibilities. They perceive themselves as the keepers of the organizational culture, as representatives of investors and owners’ interests, and as guides, teachers, and role models for the workers. This portrays that the Indian managers are not only progressive but also imaginative, which is the key to tapping greater output of both human and non-human resources. Natural factors are also worth mentioning. India is a land of vast natural resources, which include coal, iron ore, mica, manganese, bauxite, natural gas, limestone, and diamonds among others (Ghani, Kerr, & Stanton, 2014). The presence of these resources has led to the emergence of numerous key manufacturing organizations, which has, in turn, promoted the level of productivity.

How the country's policies influence its productivity growth

Reports have shown that the existing policies in India have made the country one of the fastest-growing economies in the world. For instance, India has a free trade policy meaning that the flow of goods and services between India and other countries is not under strict restrictions (Ghani, Kerr, & Stanton, 2014). As a result of this scenario, domestic production, consumption, along with import has been sparked thus scaling the country’s productivity up. The monetary policy in India is also critical in promoting productivity.

The government has emphasized on the liberalization of interest rates, development of alternative monetary controls system, and the entry of foreign and Indian banks (Ghani, Kerr, & Stanton, 2014). Such a monetary policy system has promoted a greater efficiency in the production of products and services in India. For example, with liberalized interest rates, pricing in the Indian credit market has improved tremendously. This has, in turn, allowed for the availability of capital to investors, which is foundational to economic development.

How the country's financial system is related to key macroeconomic variables

The Indian financial system has also continued to receive immense attention from economists. For example, in his article, Kumar (2015) explained that the country’s money market is often regulated by the Reserve Bank of India while the Securities Exchange Board of India regulates the capital market. The scholar added that the capital market is often constituted of both primary and secondary markets. Apparently, all the IPO, which abbreviate Initial Public Offerings, are categorized under the primary markets while all other secondary market transactions are classified under secondary market. Such include equity and debt transactions. The Indian financial system is synonymous with vital macroeconomic variables in the nation.

Just as Kumar (2015) revealed, the transactions that take place in the primary markets in India allow private and public organizations to generate a greater level of capital, which they use to expand their operations. Where an organization enlarges its production capacity, it will contribute more to the country’s overall GDP. Besides, increased production capability necessarily means new job opportunities for the locals. These very effects are generated as a result of the prevalence of the Indian secondary market. For example, the Indian government uses the market to issue treasury bonds among other vital securities. The funds that the regime acquires are used to increase the scope of economy-driving infrastructure including establishing roads that connect to natural resources hubs. This, in turn, promotes the rise of rural industrialization in India.

How your organization can reduce the risk it is likely to face in relocating

By expanding into India, XYZ Investment Limited will be faced with a myriad of risks, for example financial, regulatory, and political threats. Nonetheless, the firm could adopt a set of steps to ensure that these risks and the potential costs such as loss of profits are curbed effectively. For example, if XYZ Investment Limited anticipates hiring local workers, it should be well conversant with the applicable labor laws. The organization should know that, even though some aspects are similar to the case of the U.S., India has relatively different labor laws.

For instance, the payment of Bonus Act of 1965 stipulates that workers employed in an establishment with at least 20 employees have the right to a bonus, which should be between 8.33 and 20 percent of the aggregate salary (Sigh, 2017). Failing to adhere to such a law could subject XYZ Investment Limited to incapacitating litigations. Apart from the labor laws, the XYZ Investment Limited should account for the taxes and regulations that will be imposed on the firm, given the nature of its operations. Additionally, the company should be well aware that corruption is a major threat to organizations operating in India (Naz, 2017). Hence, XYZ Investment Limited should have a strong code of ethics that define the way in which transactions and interactions between the employees and with partners should be conducted.

The current and projected unemployment over the next five years

According to PTI (2016), the rate of unemployment in India is at a record high considering the last five years, currently standing at 5 percent. At 8.7 percent, the women population is the most affected. The unemployment incidence among men is at 4.3 percent. An additional issue related to unemployment is that 77 percent of the households at all-India level do not have a regular salaried/wage person. The increase in unemployment in India is said to prevail, albeit marginally, in the remaining quarter of the 2017/2018 fiscal year, but reform in the next five years (PTI, 2017). The core reason for the increase is the fact that new policies to curb the rate are being implemented. It is not until the end of this quarter that the benefits of the laws will be experienced.

References

Cappelli, P., Singh, H., Singh, J. v., & Useem, M. (2010). Leadership Lessons from India. Harvard Business Review. Retrieved from https://hbr.org/2010/03/leadership-lessons-from-india

Debnath, S. (2017). ICAR–National Institute of Research on Jute and Allied Fibre Technology, Kolkata, India. Sustainable Fibres and Textiles, 12 (4), 69.

Ghani, E., Kerr, W. R., & Stanton, C. (2014). Diasporas and Outsourcing: Evidence from oDesk and India. Management Science, 60 (7), 1677–1697.

Kumar, A. (2015). An Overview of Indian Financial System. Retrieved from www.indianmba.com/faculty_column/FC177/fc177.html

Naz, G. N. (2017). Corruption in India: Causes and Remedial Measures. World Academy of Science, Engineering and Technology, International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, 11 (4), 901-904.

PTI (2016). India’s unemployment rate highest in 5 years in 2015-16. The Indian Express. Retrieved from indianexpress.com/article/india/india-news-india/unemployment-india-paints-grim-picture-highest-in-5-years-in-2015-16-3056290/

PTI (2017). Unemployment in India to increase marginally in 2017-18: Report. T he Economic Times. Retrieved from economictimes.indiatimes.com/jobs/unemployment-in-india-to-increase-marginally-in-2017-18-report/articleshow/56513102.cms

Sigh, P. (2017). Every Indian Employee Needs to Be Aware of These Important Labour Laws. The Better India. Retrieved from https://www.thebetterindia.com/99413/india-employees-labour-laws/

Details

Seiten
6
Jahr
2017
Dateigröße
384 KB
Sprache
Englisch
Katalognummer
v377761
Note
Schlagworte
india economy

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Titel: The Real Economy in the Long Run. India as a Target Location