The globalisation of markets and the globalisation of production towards a more integrated and interdependent world economy is one of the fundamental changes in modern world history. Former isolated countries are opening up and as a result becoming fast growing economies. The two most impressive of all developing countries (emerging markets) for different reasons are China and India. China and India can also be described as newly industrialised economies (NIEs) which are politically stable, have free market systems and are approaching western standards. This report shows the opportunities and risks for multinational companies (MNCs) businesses in China and India, illustrated by several examples of MNCs experiences in those countries. In the end, the analysis leads to a recommendation by the author which of these economies is more attractive to do business in.
Table of Contents
1. Introduction
2. Introduction Part 1: Opportunities in India & China
2.1 Opportunities in India
2.2 MNCs in India
2.3 Opportunities in China
2.4 MNCs in China
2.5 Opportunity Comparison of India & China
3. Introduction Part 2: Risks in India & China
3.1 Risks in India
3.2 Risks in China
3.3 Shortlist of Risks
4. How to Manage these Risks
5. Recommendation
6. Reference List
Objectives and Topics
This report examines the rapid economic growth of India and China, evaluating them as emerging markets for multinational corporations (MNCs). It aims to analyze the opportunities and significant risks associated with doing business in these nations, ultimately providing a recommendation on their respective attractiveness for future investment.
- Economic growth patterns and market potential in India and China
- Strategic approaches of multinational corporations within these emerging markets
- Political, social, environmental, and economical risk assessment
- Comparative analysis of investment environments
- Practical management strategies for navigating emerging market complexities
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2.1 Opportunities in India
After the Second World War India gained independence from Britain. The subcontinent was divided into the secular state of India and the smaller Muslim state of Pakistan. After a third war between Pakistan and India in 1971 East Pakistan was becoming the separate nation of Bangladesh. However, India installed a democratic system of government. The economic system was mixed, characterized by a large number of state owned enterprises, centralized planning and subsidies. The system with government permission and regulations down to production level made it almost impossible to gain economic development. The restrictive system called "licence raj" prevented FDI; controlled the use of land; and prices were managed by the government not the market. In 1991 after 40 years of stagnation the deregulation and privatization in the Republic of India began. Under Dr. Manmohan Singh, now prime minister, as minister of finance political barriers went down. The government started an economic reform program. In 1995 India joined the WTO. This step speeds up the government reform program. The private sector was opened and investments by foreign companies were suddenly welcomed. Tariffs were put down from 400% to 65% on average as well as income and corporate taxes were put down. Also many state owned companies (300 in 1991) were privatized in a rapid pace. Nowadays it is possible to invest 100% in most of India's industries, for example in the software development industry or the film industry. Some exceptions are industries like private sector banking, the media or insurances were FDI is still limited to minority stake.
Summary of Chapters
1. Introduction: Provides an overview of the global integration of markets and identifies India and China as significant emerging economies with potential for multinational companies.
2. Introduction Part 1: Opportunities in India & China: Details the economic growth, market size, and specific opportunities for MNCs in both India and China, supported by corporate examples.
3. Introduction Part 2: Risks in India & China: Analyzes the political, social, environmental, and economic challenges that corporations face when operating in these two countries.
4. How to Manage these Risks: Offers strategic guidance on how to minimize and navigate the complex risks inherent to emerging markets.
5. Recommendation: Concludes with an assessment of the relative investment attractiveness of both nations, recommending sectors where each country excels.
6. Reference List: Contains the scholarly sources and data repositories used to compile this coursework.
Keywords
International Business, Emerging Markets, India, China, Multinational Corporations, FDI, Economic Growth, Market Entry, Risk Management, Globalization, Software Industry, Infrastructure, Trade Barriers, Cultural Factors, Corporate Strategy
Frequently Asked Questions
What is the core focus of this report?
The report focuses on evaluating India and China as emerging markets, exploring their economic potential, associated risks, and strategic considerations for multinational corporations.
What are the central themes discussed in this document?
The central themes include market opportunities, economic growth, regulatory environments, infrastructural challenges, and the cultural landscape influencing business operations in India and China.
What is the primary objective of this study?
The objective is to provide a comparative analysis of the business environments in India and China to help multinational corporations determine where to prioritize their investment efforts.
Which scientific methodology was applied?
The report utilizes a comparative analysis methodology, synthesizing economic data, corporate case studies, and secondary research to assess and contrast the two emerging markets.
What does the main body cover?
The main body covers market opportunities, major risks (political, legal, social, environmental), specific case studies of companies like McDonald's, SAP, and Coca-Cola, and risk management strategies.
Which keywords best characterize this work?
The work is characterized by terms such as International Business, FDI, Emerging Markets, Risk Management, and Global Strategy.
How does "guanxi" affect business operations in China?
Guanxi represents essential relationship-based networks. In an environment with weak legal infrastructure, having the right connections is often critical to business success and navigating regulatory hurdles.
Why is India considered particularly attractive for the service sector?
India offers a significant competitive advantage in services like software and business consulting due to a high-skilled, English-speaking middle-class workforce.
What role did the "license raj" play in India's historical economic development?
The "license raj" was a highly restrictive system of government regulations and permits that stagnated economic development for decades until deregulation began in 1991.
- Quote paper
- Marcel Heide (Author), 2005, Opportunities and Risks in India and China, Munich, GRIN Verlag, https://www.grin.com/document/62026
