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Case Assignment: International Business Short Term Plan

Stacey Troup

International Management/MGT-316

November 25, 2016

Dr. Jacqueline Gilliard

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Case Assignment: International Business Short Term Plan

In this Week 4 Case Assignment, I will discuss strategies which should be implemented

for business revitalization and visibility within Indian market. A review of management

strategies with analysis of Japanese and American cultures with potential strategies which are

sensitive and specific to Indian culture expansion plans alongside the company’s social

responsibility in Japan and the United States relating to production of automobiles and sales of

same in India and the pertinent responsibilities. Finally, short term goals for the next three and

five years coupled with my considerations in forming global management teams and strategies

for their success will be discussed as part of the short term goals for international business

expansion, revitalization and success of the mock company XYZ Motors.

Indian Market Expansion

While plans to expand into international markets tends to begin early in the onset of any

new business venture (Vaxman, 2014), further expansion plans for the purposes of establishing

emerging markets can positively affect the bottom line of the company’s success.

Historically, the U.S. has given first priority of expansion into china due to the perceived

“romance” that is prevalent in manufacturing (Khanna, Palepu, & Sinha, 2005). As we consider

a plan to expand into the Indian market there are some important factors to consider in terms of

local political climate relating to manufacture. Among these concerns are the regulatory bodies

which monitor product quality and fraud (Khanna, Palepu, & Sinha, 2005). These regulatory

agencies, while designed to protect consumer well-being as well as product safety, could

reaffirm our commitment to quality globally while expanding our market share to this widely

underserved market area.

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While we have struggled with our market share internationally, the proximity between

India and our home office of Japan is such that establishing facilities as well as material

transportation for the purposes of production are very accessible through ocean ports rather than

roadway transportation. The time in transit (and cost) for material transfer is substantially

reduced due to this proximity to home office (Khanna, Palepu, & Sinha, 2005).

Aside from the advantages in transporting materials, several very lucrative incentives are

provided by the Indian government which assist manufacturers such as us in establishing a new

base in that country. Among these incentives are “sector specific” incentives which are designed

to boost manufacturing of electronics. This incentive provides a “capital subsidy of up to 25%

for 10 years”. Income based incentive examples consisting of an investment allowance of 15%

to companies who invest more than $4.17M (U.S.D.) in any new year in plant and machinery

investments. Tax deductions include (but are not limited to) a 30% deduction of additional

wages paid to new workmen when a company employs more than 50 workers. R&D incentives

include higher deductions around 200% for expenditures related to R&D (subject to fulfillment

conditions by local government). Export incentives also present which fall under Foreign Trade

Policy, provide for duty drawback and duty remission scheme incentives (The Next

Manufacturing Destination, 2015).

In addition to these tax incentives provided by India, the specific states have been

authorized to provide incentives for industrial projects for things like: “rebated land costs,

relaxation in stamp duty exemption on sale or lease of land, power tariff incentives, concessional

rate of interest on loans and special incentive packages for mega projects” (The Next

Manufacturing Destination, 2015). These incentives make establishing a manufacturing arm of

XYZ Motors very enticing.

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In order to revitalize business through establishment of a new plant in India, I would do

considerable R&D on the local car markets, average prices and incomes of the residents and, like

our competitors, gauge our product offering to the market we will build in. Smaller cars tend to

be favorable on European and Indian roads and many of our competitors have released “mini

SUV’s” as well as compact cars to offer to this market. We could design cars meant for these

markets and, given our reputation for innovation in our automotive technology, give the lower

priced “value” cars a run for their money and establish ourselves as a quality alternative to these

offerings. This willingness to make cars designed for a specific market in terms of price and

size, will open up emerging markets in other countries by providing us with customers who may

not have otherwise been able to afford our cars (Enderwick, 2007).

International Management Style Diversity

While Indian management style is considered a Hierarchy whereby managers are

expected to act as both managers and supervisors giving very explicit instructions, deploying a

management team from Japan should prove a better training and management model than

deploying a manager from the U.S. (Indian Management Stylees, N.D.) as management styles

between Japan and India are very similar in structure.

Management styles in the United States are more geared toward individualism and

employees have a lower focus on education than Japan and India. Additionally, employees in

Japan and India tend to work more as “team players” than individual workers, all focused on a

common goal for the good of the company, not themselves (Martin, Schelb, Snyder, & Sparling,

1992).

By expanding into India, we are able to tap into the “Indian Ivy League” of engineers,

managers, tech savvy R&D employees and others through the local colleges and recruitment

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from same (India's New Ivy League, 2015). Indian universities are also welcoming students

from around the globe who wish to attend a more ivy league college while exploring the

opportunities of the host country. This diversity will serve us well as we are able to capture key

employees from around the globe who are accustom to the Indian management style and way of

life and can more easily adapt (while helping others to adapt) to an international company as part

of a team.

Indian society pride themselves on their cultural diversity and strive to be more diverse

than most countries in the world. Realizing that women play a key role in the future of the

workforce in India (and globally), they are striving for this key diversification conversion in

order to ensure future success in emerging markets globally (Buddhapriya, N.D.). Management

teams dispensed to newly formed location(s) in India will need to embrace cultural differences

and diversity in order to find success in this highly lucrative emerging market. These

management teams are meant to be an interim team (often called “beachhead” teams) in order to

hire permanent people to fill the shoes locally, who will carry on the mission and vision

statements of the corporate company (Evans, 2015).

While U.S. companies tend to favor more flat management styles and employee

interaction in all levels of company information (such as that of Google.com), top-down

management styles are still the favored style in both Japan and India. The Japanese management

principles are still very much alive and well in Indian culture whereby the belief that each person

has a very distinct role in the company. Beyond the normal aspects of managing in this style in

India, societal norms for managers include a concern for home based well-being and an inquiring

of one’s home happiness and happenings to ensure overall employee happiness. Where this is

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frowned upon in the U.S., it is common in India and needs to be accounted for by any manager

assuming that role in India for XYZ Motors (India Management Guide, N.D.).

U.S. companies who embrace diversity find favor in their advancement of products,

reputation and loyalty through inclusion. Google.com often allows for any employee, regardless

of position, to submit an idea to the owners of the company. This flat management style and

inclusion in diversity (as many of these ideas stemmed from employees from other countries),

resulted in the creation of several new products which gave Google greater market share in

addition to new product developments. Only when we embrace diversity and appreciate the

cultures and contributions of every member of our team do we become a fully functional team

with a goal oriented purpose of helping the company rather than individual success.

Social Responsibility in Host Countries (Japan, US, India)

Social resopnsibility will play a major role in our synergy with India when establishing a

presence there. Similar to the U.S., the idea of giving to local charities is at the forefront of our

social responsibility structure in India. By giving back generously to local charities we will, in

turn, open ourselves up to a great public profile in the area as well as attract key employees who

wish to be part of our company and its vision for the future in India in addition to strengthining

our commitment to the people in need (Handbook on Corporate Social Responsibility in India,

N.D).

In 2013, Indian Parliament passed the Companies Act in India. This Act encourages

companies to give back 2% of its profits to Corporate Social Responsibility (CSR) programs.

Under Title VII of the Act, the activities it encourages participation in include: Eradication of

extreme poverty and hunger, promotion of education, gender equality and women empowerment,

combating HIV/AIDS and other diseases, reducing child mortality and improving maternal

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health, environmental sustainability, social business projects, contribution to Prime Ministers

relief fund, employment enhancing vocational skills, and other such related matters as seen fit

under the Act (Handbook on Corporate Social Responsibility in India, N.D).

Through the social responsibility programs we establish in the host country in India,

similar to that of Japan and the U.S., we are going to be able to provide for the community while

encouraging educational and career opportunities which may not otherwise exist. Empowering

India on the road to recovery while taking advantage of the educational system and improving

our reputation through these programs will be key to gaining a greater market share (The Seven

Pillars of Corporate Social Responsibility, N.D.).

Three and Five Year Short Term Plan for Recovery

During the first three years for recovery, we should review the emerging markets in India

as they seem very favorable from a due diligence perspective and begin to establish a base in that

country after both a cost analysis and in depth due diligence review. Additionally, we should

work with our designers to establish a viable product offering in the underserved emerging

markets in India and beyond. Goals for hiring should include internship programs with colleges,

recruiting events and other such hiring events to gain line workers to assemble these cars while

taking advantage of the Indian collegiate system and the advanced technology, engineering and

other skilled trades that will help us remain on the cutting edge of our product offerings.

Beyond establishment in emerging markets such as this, a constant review of our business

plan internationally and key milestone changes outlining short and long term goals (Evans,

2015). By creating these plans and making contingent plans to allow for market, climate and

political changes which may be beyond our control, we will establish ourselves as a leader in the

industry, thus, increasing our market share beyond expectations (Evans, 2015).

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Many investors believe that by 2030, “BRIC” (Brazil, Russia, India & China) will be the

world’s dominant suppliers of manufactured goods due to lower production costs (Brazil, Russia,

India & China: (BRIC) definition, N.D.). By recognizing these emerging markets and getting in

while others are still hog tied to their locations, we will gain the best talent and position in the

market (Smith, MBA, 2016).

On the five year plan, the necessary revisions to design and technology need to be

benchmarked for constant improvement as do benefit structures and offerings in order to ensure

our continued commitment to employees, their success and the overall success of the company.

Continuing our commitment to quality and technology we need to put extra effort into our R&D

teams on both design and technology to stay ahead of our competitors while still maintaining the

price points and needs of the emerging markets we intend to break into while constantly looking

for new markets, like India, to break into. We need to constantly review our CSR policy for

opportunities beyond our original scope of offering and include educational aspects which allow

for promotion from within or educational grants/scholarships to those who might not otherwise

be able to attain them (Evans, 2015).

In addition to these resarch goals, we need to establish viable supply chains who also

adhere to our commitment to quality, fair labor practices and contractual obligations to ensure

we do not fall into the trap of “sweatshop” outsourced labor for parts, thus committing us to the

upstanding corporate standards put forward by XYZ Motors.

Global Management Team Formation Considerations

Though striving for acceptance through diversification of employees, international teams

often find themselves with problems due to diversity (culture, language, communication). In

order to create an effective global business team, it is important to address team cultivation,

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cultural barries to ensure synnergy in the team as well as to develop a team charter which with

address processes (Govindarajan & Gupta, 2001).

Teams often fail because team members are misaligned in terms of goals. This is due to a

lack of necessary goals and skills needed in order to successfully reach goals as well as a lack of

clarity regarding the team objectives. Communication is the key to overcoming these barriers

and also addresses diversity issues such as language and culture. Through the cultivation of a

synnergistic team, we seek to bring trust through effective communication so that goals, skills

and diversity related issues (driving synnergy) are addressed. The development of a team charter

helps with composition of process of team member reponsibility toward goals. Charter

framework is to be continually checked for needed changes and to clarify misunderstanding

(Govindarajan & Gupta, 2001)

Creating “cognative diversity” is key to the success of any international team formation

as it drives not just understanding but acceptance of diversity issues while clarifying goals and

skills needed to reach these goals (Govindarajan & Gupta, 2001).

Conclusion

Emerging markets in India create incredible business opportunities for reestablishment of

market share and expansion of product offerings. By aligning ourselves with the country’s

schools for recruiting needs while taking advantage of tax deductions and incentives for

establishment within their area, we are able to not only obtain the best talent from local

educational pools but also get ahead of the viable products we should be offering in order to

expand our market share beyond that of india and into the european markets we currently do not

have a market share in.

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Embracing diversity and building synnergistic teams who embrace cultural differences

through communication and inclusion, while management provides frameworks for job function

and needed training/education, we ensure that teams operate as one cohesive unit rather than a

dysfunctional group.

After initial needs for R&D, technology and costs are analyzed, we will be able to see the

visibility in establishing a presence in india while simultaneously providing for educational and

life sustainability needs of the people in the cities we establish within through our CSR policies

and what we give back to the communities at large. These CSR’s will also improve the public’s

perception of our company and help them see us as a company that cares about our employees,

the residents of the communities we establish in as well as furthering the opportunities of those

who may not otherwise have any job training or education through those programs we offer.

When we combine diversification, effective management teams, products geared for the

market and budget of the consumers in those emerging markets and the general well being of the

people in the towns we reside in, we reestablish ourselves as a major force in the automotive

industry and, thus, regain our market share beyond our expectations.

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References

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Enderwick, P. (2007). Understanding Emerging Markets in China and India. (Pages 13-14). New York: Routledge Publishing. Retrieved from https://books.google.com/books?id=mldw2_kWVAYC&pg=PA13&lpg=PA13&dq=why+small+cars+are+favored+in+india&source=bl&ots=h1Gwi665r4&sig=cfCYSfgd2dlO7Pb4KQJ9XqMUeiM&hl=en&sa=X&ved=0ahUKEwip3-_yl8nQAhXLJCYKHWS3Dv4Q6AEIRTAF#v=onepage&q=why%20small%20cars%20are%2

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Smith, MBA, H. (2016, 07 27). Why India is the Most Promising of All Emerging Markets. Retrieved from The Globe and Mail: http://www.theglobeandmail.com/globe-investor/investment-ideas/the-most-promising-of-all-emerging-markets/article31143218/

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Vaxman, A. (2014, 12 19). 5 Common International Expansion Mistakes and How to Avoid Them. Retrieved from Entrepreneur.com: https://www.entrepreneur.com/article/240966