General Overview of the Country/Region
The global market provides access to different opportunities in large economies as well as emerging ones. International economic analysis comprises of the underpinnings of business strategy in international production, distribution, and income as well as wealth generation. Once struggling economically, India is today a leader in the global economy. Rated by IMF among the leading economic powerhouse, India’s economy depicts a high GDP (Worstall, 2017). Different factors contribute to its emergence as an economic giant. However, it faces challenges in its policies and corruption, which hinder its exponential growth. It also needs to upgrade on its infrastructural development. International theory describes the interaction of countries in the global market. It defines the strategic policies used as well as factors influencing the interrelationships (Dunning, 2012, p. 72). In global business, there are different stakeholders and each has a role to play. The government in India makes the tax rule thereby encouraging foreign investment. In order to stimulate economic growth, countries devise unique strategies that shape their direction. The theory of competitive advantage describes this strength for uniqueness. As an Asian economy, its strategic location connects it to giants like, Taiwan and Japan.
Political India represents a mixture of ideologies including communism, socialism and democratic alliances. The agenda for most political ideologies in the country focus on unemployment, underdevelopment and poverty (Heritage, 2017). In India, culture is an important aspect of the society and manifests through race, religion and the caste system. Global consumption trends have gradually brought changes in India. Asian communities have a strong attachment to their traditional values hence they prefer local brands.
The economic ideologies in India contribute to the reduction of massive poverty levels. These borrow from the social ownership of the means of production and free markets. Factors shaping the Indian economy are stock markets, flow of capital, India currency rankings, global markets and fuel imports prices. Gupta, et al (2008, p, 137) discusses the process of developing India into economic giants to bring out the free market system, foreign investment, entrepreneurship and privatization as greatest contributors in the Asian economies. The advent of globalization sparked progress in India through policy changes and the reduction of government’s control in economic issues. Its growth has had an impact on its regional neighbors including Japan and South Korea.
Socio-cultural factors reveals India’s affiliation to family systems, cultural lifestyle, values, and traditions. These have clear notions about gender roles, education, attitudes and social status (Bhoganadam, 2015). These factors influence the penetration of foreign investors in the country. MNCs entering the markets face language barriers, racial discrimination and gender disparities. These reflect on the international business, especially in marketing and consumer trends where local values become part of adverts and communication tools (Papadopoulos & Heslop, 2014, p. 223).
Technology in India spreads through innovation country boasts of fast progress in industrialization, and technology innovation. Home to reputable medical and scientific centers, India invests heavily in Research and Development. The enterprising economy also hosts top manufacturers in fashion, electronics and household goods. Technological influences and advantages propel the economy to progress in the contemporary market system (Kamrany & Jiang, 2017).
India’s models of competitive analysis
For India to develop a competitive advantage, it needs to compare its Return on Investment approach (ROI) with its resources against production ability and consumption rates. India has 1.32 billion people and a market share of 2.23% (Gray, 2017). Taking advantage of this strength, the country chose to provide affordable labour to the world. The introduction of affordable technology products like Xiaomi from Asia makes technology affordable to most of its population.
However, India has not reaped much from the foreign trade because of more imports than exports hence its lesser supplies and economic growth. Efficiency in the use of resources is still questionable in India because of environmental effects (Greencarcongress, 2015). The ability to gain from economies of scale is important. This means that the increase in production of goods needs to have an increase in output. India also needs a strategy that would prevent environmental degradation because production without sustainability is a risk (Worker, 2015). The fact that it ranks among the highest in environmental concerns prevents its effective manipulation of natural resources. Health issues also affect its people’s livelihood hence the huge poverty gaps. India’s high fertility rates has poverty consequences if left uncontrolled.
India has bilateral and multilateral trade policies (Ball, et al., 2013, p. 120). Besides the challenge of commitment to environmental sustainability and trade policies, India also has policies to deal with global barriers (Dunning, 2012). India’s GDP per capita in 2016 was at 1861 with a GDP of 2263 (Economics, 2017). This growth rate is partly due to its skilled work force. With its per capita, India stands in the third position of largest economies. Its main industries are Agriculture, construction, manufacturing, mining and the service industry. India’s bilateral trade agreements with Asian counties in the region affects consumption rates in the country (M.F, 2016). Economic effects on large-scale outputs like the manufacturing sector, affects the cost of goods, which become cheaper when there is a variety. Trade strategies include the creation of a competitive advantage using these factors of production and demand. Often India’s bilateral and multilateral trade has had challenges such as effects of overproduction in which the local industry suffers (M.F, 2016)
India’s service industry shows immense growth especially in Business Process Outsourcing (Ball, et al., 2013). Its merchandise exports comprise of a variety including gems, medical products, textile and clothing and engineering. Suggestions for reforms in India’s export strategies include more diversification, foreign trade, export competitiveness, digital and infrastructure as well as intelligence in global market (Prassard, 2017). The government of India places a lot of emphasis on manufacturing, technology and entrepreneurship. Concerns about the massive
In international trade, location is crucial and the ASEAN regional market is supportive of the Indian market (ASEAN, 2016). Regional markets complement the national products. For example, India has local and regional brands like Maruti, Xiaomi and Vivo. Cost reduction is another important aspect that makes their exports easily acceptable in India (Cavusgil, et al., 2017, p. 247). As a result, the Indian government invests heavily in local businesses. By giving financial incentives such as tax relief and subsidies, India encourages production and growth of local industries (EY, 2014). However, trade barriers such as the dominant partners pose a challenge of market penetration.
Trading Policies and Barriers
Poor infrastructural developments such as lack of electricity in some parts of India hinder economic excellence. Inefficiency is another challenge, which lowers the successful performance of a country (Griffin & Pustay, 2014). Ethical practices by government officials encourages transparency and reduces corrupt dealings. Equality reinforces the balanced development of its population with women getting a fair chance of professional opportunities. Labour laws, copyrights, high loans and taxes in India should encourage internal and external investors.
Culture is another barrier, which hinders global industries like Fashion and lifestyle (Ram, 2017). In India, the consumers prefer traditional attires for men, women, and children. Despite the influence from the global markets, the Indian consumer continues to resist westernized clothing and poor quality products (Hindustantimes, 2017). Language and cultural barriers influenced by religion prevents multinational employees from working in India effectively.
India’s cash reserve ratio in 2017 is at 4%. This is lower than other countries in Asia as a region (Economics, 2017). Its inflation rate is 2.36% with a GDP growth rate of 6.25%. Its economy shows rising consumer inflation and trade deficits. Trends across the years indicate difficulties but a progressive growth in capital outflows. Although India’s free market encourages foreign countries and companies to invest in India, the result is lower than the expected outcome. Its balance of trade is $-2240.52 million. The FDI policy is supposed to lead to massive job creation especially in manufacturing, service industries and technology. This could explain drops in unemployment rate, which is at 3.75%.
The national differences in the political economy and culture are significant in shaping the outcome of international relationship (Baylis, et al., 2017, p. 363). Global trade and finance encourages regional integration and India’s FDI plan “Make India” has gained popularity because it stirs up national brands and MNCs to produce in India. Initiated in 2014, this policy propelled India to be ahead of regional powers and global leaders in 2015 (Team, 2016).
India’s Net FDI shows a drop from $9.3 billion in 2014/2015 to $8.8 billion in 2016 (Bell, 2015). Trade barriers cause such falls. Its portfolio investment shows massive drops of $11.5 perhaps because of market competition in the region as well as drops in local investments. The MSCI comparisons featuring India in figure 3 reveal drops in India’s index by 2.7%, which is quite low. India saw drops of $11 million in Foreign exchange hence, the massive difference between the current balance and investor activities shows (Hindustantimes, 2017). The rises in the flow of goods could be due to economic changes in the global market, which causes a decrease, or increase in volume of export and import goods.
Similar to business organizations, countries also need to balance their accounts with foreign assets and net assets (Hill & Hult, 2016). India’s Balance of Payment analyses the trade factors for both goods and services (exports, imports, surpluses, trade structures, diversification, and e-commerce). It also counts direct investments in domestic and foreign markets, portfolio investment among others. India needs to weigh its BOP with its socio economic progress (Dell & Roger, 2013). Improved income accompanied by increases in the balance of financing reveals improvements of $26. 2 billion (SAFE, 2017). Micro and macro analysis indicates the country’s trade flow, transfer of technology, and domestic capital at specific costs and benefits (Dunning, 2012, p. 357).
Each country in the international market is endowed with its own natural resources. India’s features amongst countries with the largest natural resources. Endowed with coal, iron ore, natural gas, diamond and limestone it also has large coastlines. Porter’s Diamond of National Advantage explains this competitive edge by citing the role of government in developing successful corporate strategies (Baylis, et al., 2017). India’s government strategy targets these resources, India’s strategic location, and its skilled labour as well as the technological innovations. However, it needs to improve on efficiency. Good road infrastructural network should be a priority for India. The country also looks at its challenges in order to capitalize on through the risk management plans. India has numerous biotic and non-biotic resources. Unfortunately, it also has natural disasters like earthquakes, which are quite destructive yet hard to predict.
Based on the highly competitive regional and global market, India needs to devise competitive advantage strategies that further stimulate growth (Ball, et al., 2013). This means that the government policies should encourage competition and protect businesses. For example, when the education system provides a skilled workforce, MNCs should not exploit services through outsourcing plans.
The Indian Rupee is currently equal to 64.o8 USD. International accounting describes the international finance management of a country in terms of its foreign currency, wealth status and cash flow management (Ball, et al., 2013, p. 457). Fiscal and monetary policies in India do not have a mechanism that counteracts the effects of the economic recession. This makes it prone to effects of a recession and international financial markets (India, 2017). India’s capital flow include its economic performance as well as monetary policies. Strategies that enhance business in the domestic, regional and global markets are a plus (Cavusgil, et al., 2017, p. 316). India encourages increased production and competitiveness but it has a centralized system (The Monetary Policy Committee) which oversees activities in the monetary reserve. It also has price controls, which might hinder some investors (EY, 2014).
India needs to approach its debt with a management strategy that stabilizes its economy. This could be through the purchase of foreign exchange and improvements in forex reserves. (EY, 2014) The success of emerging markets India, and Brazil and Russia motivates other global economies especially the developing world. Opportunity assessment strategies guides India’s internal and external planning (Cavusgil, et al., 2017, p. 349). Good governance, a favorable environment for investment and foreign capital are helpful. Since its service sector continues to thrive, the country needs mechanisms to exploit the industry to its optimum level. A region full of human resources, it is an example for African and highly populated countries of the global system.
The international theory explains why organizations engage in cross border business. Despite this access to the global opportunities, some countries seem to benefit more than their counterparts do. There are numerous explanations for this occurrence. The international trade environment is highly competitive. Regionalism and the free market system positions states strategically. However, it is upon the state itself to devise strategies that give it an edge against the others. The performance of the emerging markets has brought out economies like India as some of the most promising in Asia and the region. As India follows in the footsteps of developed economies as a regional and global power, it has to overcome its challenges. Taking advantage of its human and natural resources, the country needs to find a balance through financial management.
Economic performance does not depend on a country’s resources only. Instead, it focuses on the creation of a competitive edge using comparative advantages. Porter’s theory gives a guideline for countries to develop a management approach to economic policies. This includes monetary, fiscal, production, consumption and foreign policies. The example of India as an emerging economy is incomplete without a comparison with other economies, which seems to have made good use of its strengths and weaknesses to excel. Similar to business operations, countries of the world also need partners. A good business partner in international economics provides financial support as well as opportunities for growth. In an atmosphere where the best country wins, through best practices in cross border business.
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