IT Management of International Business - Essay Example

?Management of International Business Table of Contents Management of International Business Table of Contents 2 Executive Summary 4 The Host Country 6 The IT & Consumer Electronics Industry of India 7 PEST analysis of India 8 Political 8 Economic 9 Social 10 Technological 11 Apple Inc 12 Apple’s Corporate Social Responsibility 12 Material Use 13 Toxic Substance 13 Packaging 14 Energy Efficiency 14 Product Recycle 15 Porter’s Five forces 16 Threat of Entry 16 Bargaining Power of Buyer 16 Bargaining Power of Supplier 17 Threat of Substitutes 17 Rivalry 17 SWOT analysis of Apple 19 Strengths 19 Weaknesses 19 Opportunities 19 Threats 20 Mode of Entry of Apple 20 Product 20 Place 20 Price 21 Promotion 21 Conclusion 22 References 23 Executive Summary This report describes the expansion of a company in one of the country of Asian Region. The report will analyse the business condition of that host country where the company is going to operate and reveal vital information for running its operation in that country. This report will analyse the PEST analysis of the country to describe the external condition which can affect the business of the particular company. The report includes the SWOT analysis of the company to enter in the new market. It is a popular tool for analysis of strategic position of a company and business environment. The main reason for conducting SWOT analysis is to identify the strategies that can be aligned with company’s strengths in the environment where it will operate. Through SWOT Analysis company can evaluate its weaknesses and negative factors which can affect its success. It reveals the opportunities and threats from external business environments and accordingly helps to create strategy to tackle them. This report will provide information on the approach of Corporate Social Responsibility of the prospective company. Finally this report will evaluate the possible entry strategy of the company by utilising certain useful methods. The country which is being selected for this report is India. The reason for choosing India is that it has one of the rich cultural legacies in Asian Region. During past 63 years after independence India has shown good economic progress. At present India has become one of the top industrialised countries internationally (NIC, 2005). Indian Economy is the fourth biggest economy according to PPP (Purchasing Power Parity) which is extremely important for a company to operate their business. India has become one of the ‘most attractive destinations’ for foreign companies and FDI (Foreign Direct Investment) because it possess enormous manpower base, strong macro economic condition, and diversified natural resources. Since the year 1991, India have been maintaining good investor pleasant environment by its existing liberalised policy structure (INDIA.GOV.IN, n.d.). India maintains law and regulation which is indispensable part of successful business. India ensures that all companies are performing as per legal framework of the country. The company which is chosen for this report is Apple Inc which comes under computer hardware, software & consumer electronics industry. There are two major reasons for choosing Apple Inc. The first reason is that it’s headquarter is situated in the US and it is a foreign multinational enterprise. Also it is one of the biggest technological companies in the world (Newton, 2011). And the second reason is the fact that Electronics and IT industry is one of the fastest developing industries in India. The Host Country India has been chosen in this report because it has long tradition in technology. It has shown great achievement in technological segment since last few decades. India is capable of meeting national needs, and it has developed as minimum dependence on other nations for satisfying the needs. India is up to date with nearly all modern and advance technology and can absorb readily new technologies for future development (NIC, 2005). Along with liberalisation in foreign investment and export–import policies, India’s IT and electronics sector attract substantial interest from foreign companies as a large market and potential production base. India’s “Software Development & IT Enabled Services” have emerged and provide enormous opportunity for international organisations. In this age of information revolution, Indian authorities are taking necessary steps to make India as a strong IT industry hub and front runner in IT services (NIC, 2005). The IT & Consumer Electronics Industry of India In recent years the consumer electronics industry is developing at a rapid pace. Source: (Corporate Catalyst India, 2009). India is one of the largest segments in consumer electronics. The growth of Indian consumer electronics has attracted many international players to make large investments and access to the Indian market. The growth in telecom products in India is quite huge and is expected to continue at least over next few decades. The growth of computer industry in India had led to the growth of software, hardware and internet industry. It will be great opportunity for Apple Inc to meet the increasing demand of consumer electronics in India’s huge population (Corporate Catalyst India, 2009). The private sector of India had appeared as major end–user of computer and software system, at present the service sector of India has also resorted to computerisation to ensure consistent information (Webindia Internet Services, 2011). PEST analysis of India Political India is recognised as the biggest democratic country internationally. Similar to United States, India possesses a centralised government. The Central Government in India has superior power in context to the states. India has espoused the British approach of parliamentary system. India’s ‘independent judicial system’ had started under the British and its procedures as well as concepts have resembled from Anglo–Saxon countries. India currently posses 28 states and 7 union territories and each state has a presidentially appointed governor. The Central Government wields superior power above the union territories. Indian local governments have less independence compared to United States. In the year 2009, the Congress Party of India had won the general election. The Congress Party had won 206 seats out of total 543 and it is India’s largest single party with leading position (NEWKERALA, 2008). The Bharatiya Janata Party (BJP) is another biggest political party of India which holds the second biggest number of seats in Lok Sabha. Besides these two political parties, there are Four Communist and Marxist parties under “Left front” (Bureau of South and Central Asian Affairs, 2010). According to constitution, the elections of India happen once in ‘every five years’. In case of emergency situation parliament can continue in its position one more year. The central government possesses additional right on the matter of state than state government. The central government has the authority to reallocate state borders. If the political condition of any state is unstable, president can proclaim his regulation in that particular state and at times if necessary the army is put to maintain the legal condition in that state (Daniel, 2004). Economic Indian economy had shown great performance in 2009–10. In current fiscal year it is expected that Indian industry will grow at 9.7%. India had successfully tackled the global economic crisis of 2008–2009. The Indian GDP growth rate had been expected to reach 9% despite economic crisis. It is now the third largest economy in Asian region with GDP of 1.21 trillion USD in the year 2008. Large number of people in India is well educated and poses proper skill in English language. It is especially suitable to run and operate computer software and hardware services. India has large number of growing middle class people with a disposable income of 200,000 to 1,000,000 rupees per year. Indian economy was reformed by liberalisation of foreign investment, industrial decontrol, diminution in tariff and other trade barriers, significant modification in government’s economic and financial policies, more protection measures on intellectual property rights, and up gradation of industrial sector. Since the year 1997, Indian economy had shown average growth rate of almost 7%. In this period, India had successfully minimised the poverty by around 10%. The foreign investment and portfolio had also increased significantly in the recent years. In the year 2009, India had supplied 283.5 billion USD in foreign exchange reserves. The rapid growth of software industry in India has boosted exports and modernises India’s economy. In the year 2009, Indian software export had surpassed 35 billion USD. The uses of personal computers are estimated at ‘14 per 1000 persons’ and the number of mobile users is estimated to increase about 300 million by the year 2010. The US is considered to be the biggest investment partner of India with a share of 13%. In the year 2008, the total inflow from direct investment of US was approximately 16 billion USD (Bureau of South and Central Asian Affairs, 2010). Source: (Trading Economics, 2010). Social India is a diverse country. Its society and culture varies in different states. People speak in different languages, dress differently, follows different religion. Individuality in society is an important factor in India that makes the country different from other countries. Regional territories in India play an important role in distinguishing people’s social and intellectual identities. The religions which are common in India are Hindu, Christian, Sikh, Jain, Buddhist, and Islam. India provides liberty to every civilian to follow any religion they desire. Indian constitution had accepted 22 different languages which are common in the country and within those languages Hindi is recognised as official language and is spoken in the majority of urban area of India (NIC, 2005). India has one of the highest populations in the world and is second to only China. It has a workforce of almost 440 million, which includes graduates with a proficiency in speaking in English. The employment opportunity had also increased significantly in recent days. The government of India had established many Employment Exchanges to facilitate career opportunities (NIC, 2005). Technological In spite of economic crisis, Indian information technology had been able to attain sustainable growth in the year 2008–2009. Indian software industry was expected to grow 16.3 % in the year 2009. Besides the US and the UK, the IT industry of India is increasing in other areas. The export of business with Continental Europe had witnessed stable growth. Almost 600 multinational enterprises are sourcing their engineering and product development services from India (NIC, 2005). The IT industry of India play major role to put India on global map. In terms of revenue generation Indian IT industry had crossed momentous milestones. With regard to export Indian IT sector showed a growth rate of 22.7% in the year 2010. Its aggregate export revenue was 33.5 billion USD which is calculated as 57% of total exports. Rapid economic growth, advancement in adopting technology and emergence of new businesses are the major drivers for increased technology implementation in India. The number of internet users has also increased in India. In the year 2010, total 81 million people had registered for internet and by 2015 this figure will be triple to almost 237 million. The personal computer market had increased by 30% in the year 2010. Almost 25 Lakh PC had been dispatched in Indian market in 2009 which is 14% more than 2008. Hewlett Packard (HP) is the top company in India which provides laptops and desktops. HP had the market share of almost 17.3% and Dell Inc. captured 14.2% of Indian computer market (India Brand Equity Foundation, 2011). Apple Inc Apple Inc. designs and manufactures personal computers, mobile, digital music and video player, and a variety of software. Its products sell in whole world by retailers, wholesalers, direct sales force and online stores. Apple’s products range from personal computer, music player, and software & hardware products to printer, TV and operating system. Apple had their own unique business strategy to provide their customers with latest products and solutions with better and simple handing, flawless integration, and innovative industrial design. Apple Inc makes considerable amount of investment in R&D to develop and improve innovative technologies and products (Jobs, 2009). Since 2008–2009, Apple had shown good revenue growth of 12%. Their number of product shipment had increased by 11% (Apple Inc, 2011). Apple’s Corporate Social Responsibility Apple Inc is striving to minimise the impact of the products on environment for more than 20 years. Apple manufactures its products to be more energy efficient and reduce toxic substances. Apple utilises the renewable energy in their facilities. Material Use Apple’s manufacturer had pioneered the development process of smaller, lighter and thinner products. Apple use minimum material in manufacturing its products to minimise the carbon emission. Toxic Substance Source: (Apple Inc, 2011). Apple Inc always tries to reduce the use of environmentally toxic substances. Apple had eliminated the use of arsenic, mercury, phthalates, brominated flame retardants (BFR), and polyvinyl (PVC) products which are known as toxic substances (Apple Inc, 2011). Packaging With regard to packaging their products, Apple Inc makes product packaging light, protective and small. This type of packaging system minimises waste material and carbon emissions during transportation. For example, Apple’s MacBook was made 53% smaller in the year 2010 compared to 2006, which can help to transport 80% more Apple MacBook in each pallet and thus results in fewer CO2 emissions. Energy Efficiency Apple inc. tries to make their product to be more efficient. Its hardware and software are designed in such a way that its product consumes less energy. For example Apple’s Mac mini consumes one sixth of energy compared to a typical light bulb or a single 13 watt CFL light bulb, which makes Mac mini a super energy efficient desktop computer internationally. Source: (Apple Inc, 2011). Apple designs their products in such a way that it lasts long. For example, the battery of Apple MacBook can be ‘charged up to 1000 times’ which is much greater than other laptop battery which can be charged about 200–300 times. Its battery can last almost five years. Due to its longer lasting battery, Apple’s customers can use one battery whereas in about equal time period other laptop customers use three batteries. Thus, Apple’s products can generate less waste and increase the durability of products. Apple Inc minimises the utilisation of power in their facilities. In many of their facilities such as Ireland, Austin, California, Texas, Cork, and Sacramentro, Apple use 100% renewable energy. This step of Apple had successfully removed the emission of CO2 by 19,200 metric tons. For further minimising the CO2 and energy consumption, Apple had installed in their facilities high-efficiency mechanical technology, better monitoring system, and digital controls. Product Recycle Source: (Apple Inc, 2011) Once the products of Apple Inc reach its useful life, it is recycled for minimising the waste material. In the year 2009, the total recycle rate of Apple’s products was 66.4%, which was much bigger than their competitors Dell and HP, whose recycle rate was less than 20%. By the year 2010, Apple had expected to make their product recycle rate to 70% or more. All of the waste collected by Apple is controlled through their voluntary and regulatory programs throughout the world. Apple Inc obeys the health and safety rule while recycling and does not permit use of labour in any recycling process. Also the company does not permit the removal of harmful electronic waste in landfill or incinerators. Porter’s Five forces Threat of Entry The Indian IT industry has low threat of entry. An IT company can enter in Indian market with low initial cost only with a surplus of talented engineers and scientists. The government policies promote the foreign enterprises by providing benefits in terms of tax holidays and developing software technology. Besides there are many capitalists who can provide financial support to the new company and help them to grow their business. Because of this entry advantage many IT companies had entered in Indian market and are successfully operating their business (Red Hat Enterprise Linux, n.d.). Bargaining Power of Buyer Buyer in IT industry is of two types namely institutional buyers and small buyers. The institutional buyers encompass of big enterprises and outsource their IT solution for improving the business. In India, the bargaining power of buyer is quite high. As there are many players in Indian IT industry and less entry barrier the buyer has many choices to choose from and thus increase their bargaining power. The small buyer also enjoys ample alternatives to choose their products and possess high bargaining power (Scribd, 2011). Bargaining Power of Supplier The bargaining power of suppliers in India is also high. The major suppliers of IT industry in India are HP, IBM, DELL, CISCO, WIPRO and others which are hardware giants. With the rapid changes in technology worldwide these suppliers can make the buying companies to adjust to new technologies. In many cases the buying companies had no option but to take the new technology, otherwise they will wipe out from industry (Red Hat Enterprise Linux, n.d.). Threat of Substitutes The IT industry players provide similar products and so their products become natural substitutes for each other. The differentiation of products is nearly non-existing; every company provides uninterrupted solutions and good products to their customers (Red Hat Enterprise Linux, n.d.). Rivalry The industrial rivalry in India is high. Every industrial players operating in India are giant and so the price competition is extensive. As the IT industry is still in expansion phase, there is sufficient place for the growth of existing company and entry of new entrants. Many multinational enterprises are opening their business in India to influence the low cost advantage and competition. The existence of giant players in IT industry has made India one of the most competitive markets in the world (Scribd, 2011). SWOT analysis of Apple Strengths Apple Inc has international presence which covers America, Europe and Asian region. More than 50% of its revenue is generated from outside of the US. In the last five years Apple’s financial performance had shown strong growth, which increases investor confidence. It is a well renowned brand and Apple has high level of brand awareness and brand appreciation in their products. Apple influences their brand image to distinguish its products and control the sales. Weaknesses In recent years, Apple Inc has faced bad return on investments and assets which can harm the confidence of investors and create a hindrance in company’s growth. For key components in manufacturing the products, Apple is dependent upon other suppliers. For example, IBM supplies the PowerPC G5 processor; Freescale supplies the G4 processor to Apple. The outsourcing can at times cause delay in delivery which is a key disadvantage in this rapidly growing market. Opportunities In future, the demand for wireless products will increase and this can provide big opportunities for Apple in this sector. For example, the wireless technology of Apple provides people to make a computer network system and connect to internet without any wires or phone line or networking hardware. The MP3 player of Apple Inc had increased in the year 2006 to 78% compared to 2005 which was 71%. In this sector, Apple can make superior improvements in future. Threats There are many competitors for Apple which can pose threat in the business. The market for computer and electronics devices is highly competitive because of the presence of giant international players. The price competition in international market for PC is strong. The slow economic growth of European market also possesses threat for Apple Inc because Europe is one of the major markets for Apple. The bad economic condition can minimise the customers’ spending on IT products and negatively affect the revenue of Apple (Datamonitor, 2006). Mode of Entry of Apple Product Apple has good innovative strategy. The company had combined product innovation with industrial design and clever marketing to gain reputation in the IT market. For entering in Indian market Apple can focus on multimedia and entertainment market, because Apple got plenty of innovative products for this market segment such as iPod, iMac, and G5. Apple’s good product design and unique art can help achieve competitive advantage against other competitors. Place Apple Inc can customise their products according to user’s choice and focus on their higher selling products. Apple can open their own retail stores in India and make products available to customers. This strategy can help to test Apple’s products in new market before making the investment decision. Price Apple focuses on product rather than price unlike DELL which focus primarily on price. As the purchasing power of Indian customer is quite high and they can be influenced by unique and differentiated product with less price sensitivity, thus this product focus strategy can help Apple Inc to increase their sales and promote products. Promotion For promoting their products in Indian market, Apple Inc can use internet and television advertising, because it is widely used and can gain more brand awareness. For sales promotion, Apple can offer discount on high quantity purchase, or provide free delivery to customers. Apple also can bring into play different celebrities to sponsor its products (Essay Wow, 2008). Conclusion Foreign business had played important role in India’s industry and it is the third largest economy in Asian region. India’s good governmental policy for business and big market is the main attractor for foreign industries in many sectors. Over the years Indian economy had shown good growth in IT sector, thus it is good choice for Apple Inc to expand their business in India. As Apple has shown good performance in both marketing and social responsibility, they have genuine opportunity to acquire the required benefits and support from the Indian government to run their business in India. 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