Organization go international for variety of reason but most important goal and aim is company's growth and expansion. many company look international market for growth by introducing new product internationally will increase company's customer base, sales and revenue, company gets higher profits in less time, it reduces the dependability of organization on traditional markets, company which can implemented in domestic market and learn global competitiveness. This is the aims of business going international to a stable country (www.imics.com).
Business starting foreign operation in different country is one kind of internationalization. Internationalization is not a new phenomenon. People have been trading acroos border since beginning of history and this process of internationalization refers to growth and international relations, international trade, country/regional alliances, etc, organization has to check the countries economic, social, political, technological, environmental, legal can culture and many other factors before it starts its foreign operation in that stable country. The country with most stable economic, social, political and technological factors can be considered as the most stable country. Economic factors like interest rates, exchange rates, national income, etc, Social factors like ageing population, attitudes of people towards the work, income distribution. Technological factors like rate of technological obsolescence and innovation., Political factors like agriculture and food policy, law and order issues in the society, defense policy etc. the country with more freedom and which consist all the features mentioned before are called as stable country for example: as per the report generated by Oxford Business Group states that despite the economic challenges in 2009-2010 due to the global financial crises, the sultan of Oman remains one of the most economically and politically stable countries in the Middle East in term of business(www.zawya.com). The repot also said on trade side, sultanate made different moves to increase the link with Asia and Oman is also inviting international organization in industry, tourism and education sector to gain ground and increase the GDP by 2020.india is given the place of most stable country in south east Asia .India has the biggest democracy in the whole world .Indian economy is improving continuously. The GDP is estimated at 2.96 trillion US dollars in 2007 and the GDP real growth rate in 2007 was 8.7%. India has the 3rd highest GDP in terms of purchasing power parity just ahead of Japan and its behind US and China .so the developed country USA, UK and Canada are attracted toward developing and stable country like India and China .and best example for this is ;Microsoft is planning to increase its workforce in India by investing $1.7 billion by 2010 and even Cisco is planning to have its 20-30% of its employees in India by 2012.all this are the sign for India's growth but the root cause of these are foreign operation and the attractiveness of India's workforce.
Outsourcing is one of the major examples of foreign operation. Out sourcing is am irresistible trend in the 21st century .we can say globalization has improved the outsourcing activities and its been supported by many countries. Many companies worldwide have supported and has moved there foreign operation in stable countries like India, Philippines. Moreover many big companies like HP, DELL have the offshore units in the stable country for example HP has its customer service unit in Mumbai with third parties like Sutherland Global Services and NIKE company send its designs to their other subcontractor in south Korea and china and then the production takes place in south Korea and china . This helps company to generate more profit for there their business activities .this is as per the information provided in WTO Website. Companies make huge profit by offshore unit for example: a company named 'Xchnaging', its operating profit increased from 47.3 million pounds in 2008 to 63.9 million pound in 2009 (The Times News, 2010). And this research was done one of the IT marketing research company "XMG GLOBAL". And it states that company is one of most successful outsourcing company in India which is established .offshore is means outsourcing or opening foreign operation beyond their location or boundaries in other words going international. Foreign operation in stable country concentrates on much wide variety of different products, services and growing nations.
The factors effecting the business are huge and if an organization want to go international or want start its foreign in an stable country the certain points has to be kept in mind like economic position of that country like Stage of business cycle, Current and projected economic growth, inflation and interest rates, Unemployment and labor supply of that stable country, cost of labor and skilled labor has well, Levels of disposable income and income distribution, Impact of globalization, Likely impact of technological or other change on the economy and changes takes place in economic environment of the stable country. Socio-cultural factors to be kept in mind are Population growth rate of the country and age profile, Population health, education and social mobility, and attitudes to these on the country, Population employment patterns, job market freedom and attitudes to work of the employee. And political view which has to kept in mind are the type government and its stability, freedom of press, different rules of the law and levels of bureaucracy if its has democracy and level or corruption as well, Regulation and de-regulation trends, social and employment legislation of the country, most important taxation policy and trade and tariff controls, Environmental and consumer-protection legislation and likely changes in the political environment.
If the some same as to be implemented on a stable country can be done. India is one of the stable country in south west Asia and develop countries like USA, UK, etc are attracted towards the developing and stable country like India and one of the example for this can be seen recently when David Cameron visited India and he opened a newly first rural MNC BPO in India .and there are many factors company has to keep in mind before they enter India and some of the factors and been here and I have tried to pest analyses on it and explain it
Political Factors - India is the biggest democracy in the World. The government type is federal republic. Based on English common law; judicial review of legislative acts; accepts compulsory ICJ jurisdiction with reservations; separate personal law codes apply to Muslims, Christians, and Hindus. The political Situation in the country is more or less stable. For most of its democratic history, the federal Government of India has been led by the Indian National Congress (INC). State politics have been dominated by several national parties including the INC, the Bharatiya Janata Party (BJP), the Communist Party of India (CPI), and various regional parties. In the 2004 Indian elections, the INC won the largest number of Lok Sabha seats and formed a government with a coalition called the United Progressive Alliance (UPA), supported by various left-leaning parties and members opposed to the BJP. Overall India currently has a coalition led government and both major political parties the UPA and BJP, whichever comes in power.
Economic Factors - The economic factors in India are improving continuously. The GDP (Purchasing Power Parity) is estimated at 2.965 trillion U.S. dollars in the year 2007. The GDP- per Capita (PPP) was 2700 U.S. dollars as estimated in 2007. The GDP- real growth rate in 2007 was 8.7%. India has the third highest GDP in terms of purchasing power parity just ahead Japan and behind U.S. and China. Foreign direct investment rose in the fiscal year ended March 31 2007 to about $16 billion from just $5.5 billion a year earlier. There is a continuous growth in per capita income; India's per capita income is expected to reach 1000 dollars by the end of 2007-08 from 797 dollars in 2006-07. This will lead to higher buying power in the Hands of the Indian consumers. Social - India is the second most populous nation in the world with an approximate population of over 1.1billion people. This population is divided in the following age structure: 0-14 years - 31.8%, 15-64 years - 63.1% and 65 years and above - 5.1%. There has also been a continuous increase in the consumption of beer in India. With an increase in the purchasing power the Indian consumer which preferred local hard liquor which is far cheaper is now able to get a taste of the relatively expensive beer market. The social trend toward beer consumption is changing and India has seen an increase of 90% beer consumption from the year 2002- 2007. This increase is far greater than the increase in the BRIC nations of Brazil (20 per cent), Russia (50 per cent) and China (almost 60 per cent). Thus this shows a positive trend for beer industries in India.Technology - The Indian beer Industry is heating up with a lot of foreign players entering the Indian market. The technological knowhow and expertise will also enter the Indian market with an increase in competition. For example beer brewing technology major Ziemann has entered India and has set up manufacturing plant in India. Ziemann Group, based in Ludwigsburg near Stuttgart in Germany, has founded Ziemann India. It will start production in 2008. This will help bring in technological knowhow and increase the production of beer. SABMiller has just placed an order for the design and construction of two turnkey plants in India to Ziemann. The new plants are planned for Sonipat in Haryana and for another location near Bangalore. Both breweries will have an annual capacity of 1 milllion hectoliters each in the beginning and might be extended later. Thus with European technology entering the Indian beer market increased production and lowering cost of production could play a major role in the Indian beer market. The OLI Model are the different theories like Ownership: The Indian market provides good ownership opportunities for Inbev India International private limited. The Government policies on FDI are relaxing and companies like Carlsberg has also invested in breweries in India. Also cost of manufacturing and brewing beer in India is much cheaper. The cost of raw material and labor in India is cheap thus giving Inbev India a good chance of reducing cost of production. The fact that European companies are setting up plants in India to manufacture brewing technology means that in the future Inbev could have ownership of these technologies at a much cheaper rate as compared to when bought in other markets.
Location: There are a lot of location specific advantages for Inbev India International Private Limited. The Indian beer Industry is all set to heat up with the Indian market's compound annual growth rate (CAGR) of 6.7% from 2002 to 2006. The beer market volume is set to rise to 1155 million liters by 2011 an increase of 37.4% from 2006. North India is enjoying beer like never before. During the first quarter of 2006, nearly 5 million cases of beer were sold in Punjab and Haryana as against 600,000 cases in Q1 of 2005-06. This was the case because the government has revised its policy in these states and there is an improvement in the distribution channels in these areas. India is also expected to become the second largest beer market in Asia by 2020 just after China. Thus all these factors along with India having neighboring countries like Nepal and Sri Lanka, where beer could be exported through India gives Inbev India a good Location advantage. Internalization: Inbev India International Private Limited would want to have internalization because over a period of time it would lose out on a competitive edge in the region if it just sticks to exporting and not FDI investment. As other firms would come in and develop their infrastructure and distribution channel, thus able to produce at with low costs. India also is a huge potential market as mentioned earlier and Inbev would not want to lose out on the opportunity it can provide. Also since there is a lot of red tapism and contractual problems while exporting etc. It would be better to be in India rather than export. (http://www.mysensex.com)
The political structure of European union have different grouping s like European Union (EU), NAFTA and ASEAN and this groupings are becoming highly influential in international trade. In this case the EU integration represents not just economic integration bit also political integration. The main EU political institutions can be summarized as follows council of ministers is the highest law- making authority in the EU with executive authority and ministerial representation from each member state. European commission is the main legislative function. Headed by a president with appointed commissioners from the member states. European parliament is the main representative body but with limited law-making function and membership of each state is in proportion to the state's population. Otther European court of justice is composed of one judge per member state and its function is to ensure that EU legislation is interpreted and applied in the some way in each member state. This court is the one of the ultimate and important authority in EU law and there are many other institutions including court of auditors, European ombudsmen and European data protection body.
The political risk and its impact on international business has been vital in modern business. Political climate across the globe makes difference in business, the issues of democracy transition economies and regionalization? Essentially it is to do with today's political risk to a business. All organization wants to operate its foreign operation and produce in overseas market has to consider the risk of the host country. There is may countries risk like political, economic, competitive and operational risk problem which can interrupt company's internal and external events, the problem created by political actions of government or political development of the region. Political instability is a serious problem in countries where political power is shared there are tensions within society and greater political stability .the country which has political stability it attracts the foreign investors and it increases foreign investment. And if there Is no political stability it can lead to serious consequences for international business. The political instability can arise due to factors like divisions in the society. Which are ethnic differences and social injustice, threats from terrorism it can be internal and external as well for example D company in India and Al Qaeda world wide, armed groups- such as sections of the military, strong regional units -like Tamil tigers in Sri Lanka , Kashmir separatist in India, military government and factionalised political leadership and this factors can make a huge impact on business they can risk to shareholder valve which is kind of loss of capital and directly inability to repatriate dividends. This kind of can be raised during wars .and therefore understanding political environment of the international market is really important for any organization .they may be many countries may seem politically stable and good but they may be may political cultural issues in that countries like corruption so this has to considered before entering the foreign land.
The government policy and factors are influential on international business and its activity and in particularly on the decisions of the international company that the company should operate in the country or not. And the policy decisions which makes difference in business and which company has to keep in mind while entering are fiscal and monetary policy for eg: taxation like what is the tax rules in the country. what percentage of tax the company has to pay, environmental policy like what are the rules to be approve before company starts its industrial work , regional development policy which has to be followed eg- Pepsi promised Indian government that it going to develop the rural area in 1983 , welfare state policy for eg ; health, social security, pensions, education eg : all the organization in India has to do some educational development , agriculture and food policy, defense policy which vital and no country would compromise in it, immigration policies, law and order issues in society, health and safety issues and rules in that government and its one of the major issue, employment policies like minimum wages and age criteria for example : Pepsi when launched in India in 1983 it promised Indian government that it will provide employment to Indian people and through this kind of proposal it made it easier for company to enter the Indian market.
This shows us that political environment makes difference in international business. We have noted that much of international business today is on the countries of the transition democracies and emerging world. These countries have enormous prospects for growth, but at the same time they are facing number of political challenges. Political stability or instability make a huge impact on international business or foreign operation .
