Term Paper on "Creating an Overseas Business and if it Is Viable"

Term Paper 8 pages (3598 words) Sources: 4 Style: APA

[EXCERPT] . . . .

Creating a Chain of Internet Cafes in India

II. Table of Contents

Introduction

Specific Competitive Advantages of Proposed Business

Developing A Foreign Country Strategic Framework

. Analysis of economic factors

. Analysis of social/cultural factors

. Analysis of political factors

Analysis of Entry Mode to be Used

Other Factors Influencing Decision

Conclusion

III. Introduction

The purpose of this plan is to evaluate the creation of a series of

Internet caf?s throughout India, specifically concentrating on the cities

of Bangalore, Chennai, and Hyderabad, all located in the southern regions

of the country, and all experiencing rapid growth as call and outsourcing

centers. Both the influx of expatriates from Europe and North America to

manage outsourcing and call center operations in these cities, and the

increasing interest on the part of Indian call center, outsourcing, and

office workers to use personal e-mail in addition to wireless devices of

all types for social networking, the need for Internet access in these

cities continues to grow exponentially. The business model of the proposed

series of Internet caf?s looks to capitalize on the growing cultural shift

away from an agrarian economy to a more urban one. Young professionals in

the 20s, working in these companies, are more connected than ever before

digitally to each other and to the outside world, yet cannot afford the

cost of having Internet access in their homes. Only 7% of the entire

Indian population has Internet access in their homes due to the expense,

and only one in ten has a personal computer of their own (The World is

Flat, 2005). As a result of these dynamics and the growing social

acceptance of using digital forms of communication, the concept of a chain

of Internet caf?s is an attractive one.

IV. Main Discussion

1. Specific competitive advantages of enterprise

The typical Internet Caf? is configured with between seven to ten

computers, with printers, scanners, video conferencing equipment, and

website development expertise is available in larger metro locations. It

is common to also find in the larger metro Internet cafes workspaces or

what is called in these locations "work cabins" where Internet browsing

privacy is assured. This is one of the biggest reasons why students are

drawn to Internet cafes for their e-mail and Instant Messaging, and online

gaming activities. Almost all of these facilities, especially in the

larger metro areas are air conditioned and provide both social networking

and gaming areas. The business model is that of charging a per hour rate

for Internet access, with additional charges for value-added services

including the development of websites, developing e-commerce sites for

local small businesses, and connection in the metro area via wireless

access in the most populated areas of India's major cities. It is common

for the franchised Internet caf?s to have alliances with national telephone

and broadband providers.

2. Analysis of Key Factors

a. Analysis of Economic Factors

India's $1.5 billion outsourcing business is the shining start of all

industries in the country today, and illustrates how illustrates how

foreign investment, trade, and a more cooperative political climate can

increase the performance of an industry within a nation that is otherwise

struggling to find economic growth in its core industries. India's two

largest core industries apart from outsourcing are agriculture, textiles,

chemicals, food processing, steel, transportation equipment, cement,

mining, petroleum, and machinery manufacturing according to the (CIA

FactBook, 2007).

Along with IT and software, business-process outsourcing is the country's

most open sector. In 2002, it attracted 15 percent of total foreign direct

investment and accounted for 10 percent of all exports. By 2008, it is

expected to attract one-third of all foreign direct investment and to

generate $60 billion a year in exports, creating nearly a million new jobs

in the process. This is however leading to a skills shortage and one that

is predicted to outpace the graduation rate of the country's schools. As a

result, companies outsourcing accounting, payroll and other easily

replicated processes are moving to Malaysia, the Philippines, China and

other nations in the region, chasing talent in the process.

Without early investments by multinational companies, the outsourcing

industry probably would never have emerged. Pioneers such as British

Airways and GE were among the first to see the opportunity to move IT and

other back-office operations to India. The success of these companies

demonstrated to the world that off shoring in India could deliver

significant cost benefits according to partners at McKinsey and Company (Di

Lodovico, A., William, P., and Sanke, S., 2001). Aside from the immediate

infusion of capital into the Indian market, these companies are

contributing to the growth of new businesses in the country through

accelerated training programs.

As a result of foreign direct investment and the infusion of capital

India's economy has more than doubled in real terms since a more

cooperative approach to managing joint ventures has begun starting in 1991

according to the research completed (Chakraborty & Basu, 2002) in their

extensive work on Foreign Direct Investment (FDI) in the Indian economy.

India's consumer demand, increasing three to five times faster than their

economy, is starting to develop an aspiring middle class that is young and

looking for higher wages and work and as a result, have latent demand for

Internet access. 70 percent of India's citizens are less than 36 years

old, and the country is home to 20 percent of the world's population under

the age of 24. While the growth of the middle class continues at a rapid

pace, it's important to realize that one out of every four Indians live in

poverty, or nearly 250 million people out of the 1.1 billion total

population of the country. The services and outsourcing sector accounted

for just more than half of the country's GDP in 2004 for example and

employs less than 30% of the workers. The other two thirds of the

country's workforce earns a living through agriculture, where growth is

slow, and prospects for earning more are often limited.

1. Advantages

The Indian government is heavily involved in economic development and

planning, with the currently ruling Congress Party defining economic

policies that have a direct impact on Internet-related businesses that are

quickly globalized. This ruling political party is very pro-business in

terms of inviting FDI as it relates to globalization strategies including

Internet access. This ruling party realizes that for India to continue its

rapid economic growth, the following steps will need to be taken:

. Further reduction tariff levels, targeting an average reduction of 10

percent. This would put India into parity with Association of South

East Asian Nations (ASEAN), their national neighbors and further

increase investment in services and stimulate investment in all forms

of services businesses including Internet access service companies.

. Foreign-ownership restrictions most likely will lifted in the coming

three years. At present, foreign ownership is not only prohibited

altogether in industries such as agriculture, real estate, and

retailing but also limited to minority stakes in many others, such as

banking, insurance, and telecommunications.

. More equitable labor laws to further stimulate FDI in knowledge-

centric industries. The software and business-outsourcing companies

are exempt from many labor regulations, such as those regarding hours

and overtime. Manufacturing however is not, and this is one of the

major impediments of India not growing its manufacturing industries as

fast as China for example. CEOs of companies how have outsourced

major parts of their back-office tasks say that without these labor

law restrictions the 40% cost advantage commonplace in outsourcing

programs would not exist.

. Demographics and rapid Internet adoption and maturity favor the

extension of Cyber Cafes in India into gaming zones and meeting

places. According to research (Internet in India Report, 2006),

Internet users between the ages of 18 and 35 comprise the largest

segment of all users, accounting for 50% of all users of the Internet

throughout the entire nation. While Internet access from home is

growing, the most popular point of access is Internet caf?s in metro

cities. This is because Internet cafes serve an important function of

providing beginning Internet users with guidance. As of 2006

according to (Internet in India Report, 2006) the Internet Caf? is now

also turning into a place for social interaction and networking, and

in top metro areas, is becoming the focus point for gaming zones. The

analysis from the Internet & Mobile Association of India in their

report say that Internet caf?s will continue to be the dominant point

of access for students, driven by convenience and privacy. The

research shown in the (Internet in India Report, 2006) also provides

as startling statistics of 38% of Internet users clock an average of

8.2 hours per week on the Internet. That's impressive given the state

of India's overall infrastructure.

2. Disadvantages

. Capricious policies on tariffs could impact the ability to bring

networking equipment into the country. As the Schindler Elevator

learned in their strategies to enter the Indian market with elevators

(Columbus, 2005) the capricious and very damaging effects of

fluctuating tariffs can put… READ MORE

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