Indian Companies’ Challenge in China

Overview:

For years now Indian companies have tried to permeate the Chinese market by investing in developing centers, sales offices and various service operations. Although some major companies such as TCS, Wipro, to name a couple, have proven to be successful on a global level, they are still falling short when it comes to tapping into the potential of the Chinese market. They have been able to indirectly work themselves into the market by offering services to subsidiaries in China, but are still working to create their own inroads into Chinese companies.  Some may wonder why it’s so difficult for Indian companies to break through that barrier with their competitive pricing and expertise, this is where competition comes into play.

Observation and Opinion:

Back in the 1990’s semiconductor manufacturing and software development became the new focus of China’s development goals. As a result of the shift in focus, competition between Chinese and Indian companies was inevitable. There is more to creating a prolific and established business in China other than technical excellence. Anyone who has worked or done business in China can attest that knowing the culture of how business is conducted is imperative.  Business culture skills, language, trust and reliability are a huge factor when it comes to breaking in and doing annuity business in China.

During a meeting of the Indian IT industry, the Indian Counsel General stated that the Chinese software industry is disjointed lacking in important areas such as expertise and quality. He forecasted that the Chinese companies would never rival Indian companies due to the lacking elements in experience and quality. However, major Chinese companies such as HiSoft, and iSoftStone proved the Counsel General wrong by making a name for themselves and conducting successful IPO’s in the US and Europe. Solutions and suggestions as to how big Indian IT players can start localizing their businesses will be addressed in up and coming articles.

Financial Funding From Venture Capital Made Easy with Strategy Consultants

Money or lack thereof is the determinant of whether or not a business has a chance to get off the ground, and strategy consultants can offer their services to ensure that you get the financial backing you need. Anyone who has tried to set up a small business or office space, knows just how much costs to set up the space as well as payroll.

Affluent individuals as well as firms that look to invest in startup companies they believe to have potential and a novel product, can be the backbone and means of operation to that startup company. Such individuals or firms are popularly known as angel investors and venture capital, and is one of many sources or resources that strategy consultants can help set up.

One thing to remember is that this type of funding is not free or gifted and there are risks involved when accepting funds. One way to look at it is a partnership, and with any partnership there is equal say for both parties, such with venture capital or other investors within a startup company. Upon contractual agreement of funds, part of the collateral between investor and company are funds paid back or equity within the company. In giving investors equity, they have the power to decide what direction to take the business or terminate anyone they feel is not producing positively in the growth of the company.

With risks instated, the issue of financial backing still weighs heavily on the shoulders of the business. Strategy consultants can help to reduce the risks by introducing investors who are not in it for control of the company, but with the intent to help and see a business get off the ground and become successful.  To maximize competition between investors or capitalize on the amount of money invested, strategy consultants can help present a list of great venture capital firms and angel investors that have your company’s best interest in mind and can help grow your business into a fruitful and successful operation.

The Answer to New Market Entry and Strategy Development With Strategy Consultants

When you take your business overseas or to new markets, seeking advice from a strategy consultant helps with the integration process. Anytime you enter into a new market international or domestic, there is risk involved, and one way to reduce that risk and prepare for that new business initiative is to consult with an individual who is knowledgeable and has experience in that industry.

Three issues businesses may encounter when entering into a new market is marketing, sourcing, and investment and control. Marketing can pose a challenge when you do not have a solid marketing plan that prepares you for what countries you will be entering into and what marketing channels you will be leveraging to reach your target market.

Sourcing can be a very troublesome issue in the sense that you have to decide what products you can carry, if you will be making all of your products or if you will need to buy some of the components. If buying components or services for your product, this can make or break your business. If you confer with a strategy consultant they can help set you up with a sourcing channel who will give you the services and products you need that will fit in well in the means of your budget.

The third issue, investment and control, whether it is establishing global partners or acquiring a business, relations and a well established knowledge and presence is vital for making a smart business decision in how to go about broadening your resources and strengthening your business.

Strategy consultants can help you by creating a strategic development plan, and launch business initiatives within the right circles of consumers and potential partners. There is always a good amount of risk in new market entry, but with the help of strategy consultants, you can cut down greatly on the risk and focus more on growing your business and introducing your products or services to new markets and consumers.

Currency Revaluation will not Help to Achieve Global Economic Recovery

You can’t turn on the TV or read any news article without hearing the controversial debate surrounding the issue about currency valuation. The topic of discussion? That the Chinese government does not permit the RMB to be traded on the World Foreign currency Exchange to ultimately keep the value of the RMB artificially low with the goal of dominating the export market and maintaining a trade imbalance.

During the second term of the George W. Bush administration, the US created a policy of a weak dollar. Just go travel anywhere internationally and you can experience first-hand the effects of the weak dollar policy when you try buying any product or foreign goods. Some may accuse the US doing the same thing as the dollar is at its lowest against the Japanese Yen, the Euro and the Pound, but there is a difference. There is a considerable difference is the impact. We are not selling an augmented amount of goods to China, or increasing our exports. We are not opening new factories or creating private sector jobs. Instead we continue to exceed in our government spending and subsidies, as well as increasing our debt to create employment in the government sectors when it is the private sectors and small-medium businesses that need funding.

Let’s view this from another angle. A weak dollar means an influx in cost for manufacturing products that consist of components from international suppliers. As a result of the cost increase in manufacturing, product prices inflate which means once again that as American consumers, we are picking up the tab whether we are buying foreign or domestic products. To top it off, we are progressively running up the government deficits as well as trading deficits with some of our largest partners.

During my 28 years working for a multi-national Hi-tech company, we bought nearly $8B annually from Chinese suppliers. When I first started a joint venture over in Japan, I could see the threat the currency fluctuation posed for my new business. Having assessed the risk factors I consulted with our Corporate Treasurer to create a strategic plan to grow a competitive advantage and profit margin on currency arbitrage. However, the Treasure disagreed with my plan and explained our corporate policy was to never make services plans, make products, or execute strategies to make a profit on currency. Why you ask? Because currencies are unstable, and rather sold based on currency, products and services should be sold based on performance and innovation.

Even with some of these obstacles, America still obtains a great innovative edge over the competition. Just look at Apple, GM and Ford, all three of these companies make products that are in high demand and offer valuable constituents, such as: reliable, fuel efficient cars that can hold their own in a competitive market. With that said, how can we resolve such an issue that is so pervasive and complex?

This question can be answered in a mere three letters: WTO (World Trade Organization).  What we need is the WTO and its members to terminate barriers to free trade. Below are some examples that I have observed.

1. Every car manufactured and sold outside of China is taxed at 100%. It’s no wonder as to why Chinese prefer to buy vehicles made in China, not because they think Chinese made cars are better, but more so for the reason that they can’t justify in paying such a hefty tax mark up.
2. Designer brands, for example, Gucci. We can find Gucci sunglasses for $200. The Cost in China? $1000 for the same product.
3. Cosmetics cost 4 times in China then they do in the US.

Keep in mind that these prices have nothing to do with shipping, handling or packaging costs. These are just pure examples of what we call “market protectionism. I think you can understand now why Chinese visiting the US are much more interested in going to the malls or outlets then seeing historic landmarks.

All we need is a level playing field with our trading partners. Think about the potential in selling products into China at cost. In a market of 1.4 billion people you don’t have to use your imagination as to what that could mean for our economy. Employment would skyrocket, new businesses would flourish, and companies could expand and become successful. Another major benefit to all this economic activity? Deficit reduction.

Resolving our trade deficit and making progress on reducing our federal deficit is a feasible achievement, but first we need to get our government and trade officials kicked into gear and get the WTO to push for the removal of artificial tariffs and trade barriers. There needs to be a wakeup call to Tim Geithner and Ben Bernanke to tell them to step aside and get Gary Locke and Hillary Clinton in there to get things done. We live in a global economy and it is safe to say that while currency manipulation will not resolve global recovery, free, open trade and competition will.