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EAST INDIA COMPANY

K L N Santosh,

1301091,

Section B

Porter’s Five Forces for the Indian Market when the British invaded India: 

This framework is generally used for business strategy development. When a company is planning to

enter into a new market, this model is used to study the attractiveness of the Market. When we try to

analyze the feasibility of Indian Market from the Porter’s five forces framework, we find that:

1.  Threat of New Entrants: The threat of New Entrants was high as the company was preceeded by

several other countries for trade like Dutch, Portuguese etc.

2.  Competitive rivalry: The Competitive rivalry was very high  as the East India Company had

struggled in spice trade from the already present Dutch, Portuguese, French and Danish

companies.

3.  Threat of Substitutes: The threat of substitutes is low as the economy of India was a closed one

by then. We neither had exports nor imports.

4.  Bargaining Power of Consumers: The bargaining power of Consumers is low as the East India

Company emerged as a Monopoly so that they were the regulators of the market economy.

5.  Bargaining Power of Suppliers: This was very low  as the suppliers were the suppliers of

monetary capital which was the British Parliament. The human capital was the cheap Indian

Labor which was subject to British rule (HUMAN RESOURCES).

Indian

Subcontinent

Threat of

New Entrants

Threat of

substitutes

Bargaining

power ofcustomers

Bargaining

power ofsuppliers

Competitive

rivalry

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With four of the forces being highly favorable for entering into the market, India might have appeared

very lucrative for the East India Company as a trade destination.

The English East India Company was founded in the year 1600. However, it was initially called as The

Company of Merchants of London Trading into the East Indies. The permission for East India Company to

establish their factory was granted by the then Mughal Emperor Jahangir.

STRATEGY:

The East India Company established its trading posts chronologically in the following order:

  Southeastern Coast – Madras

  Western Coast – Surat/ Bombay

  Eastern Coast – Calcutta

However, after the victory in the battle of Buxar in 1773, they became the de facto rulers for lower

Gangetic plains. By the end of Anglo-Maratha wars in 1818, British became the supreme power in India.

The British strategy for proliferation on the Indian soil was two-folded:

1.  Outright annexation of the rulers who opposed the British rule in India by defeating the ruler in

a war. For example, Gorakhpur, Doab, Delhi etc.

2.  Entering into treaties with rulers for a limited internal autonomy so that British hegemony could

continue in the country under the company’s rule. For example, Cochin, Travancore etc. 

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FINANCE:

The East India Company had always had the official backing of the Queen Elizabeth I and was funded by

Her Majesty to sail to the Indian Ocean. In 1598, they have raised £ 30,133 in capital, followed by an

increase to £ 68,373 by the next year.

When the country its first factory in South India on the Coromandel Coast yielded high profits, King

James I granted subsidiary licenses to all other England trading companies and later on extended them

to an indefinite period until and unless the company made losses for three consecutive years.

However, with the increasing expanse, it became difficult for the company to maintain the vast empire.

When the Bengal famine occurred in 1770, one-third of the local population died. This soared the

military and administrative expenses of the Company and they resorted to the Parliament for help. This

led to the passing of Tea Act in 1773 from American Colonies.

MARKETING:

The Officers of the Company began earning huge amounts and started acquiring estates and other

buildings back in their home country. The company soon began to lobby the Parliament. To boost the

trade, the Parliament had passed a de-regulation act in 1694. Soon the Company has grown to be a

Monopolist in India. This proved advantageous to the company as they did not have to incur any

Marketing expenses. All the raw materials were bought at lower prices and were sold at higher prices

back at the homeland.

TECHNOLOGY:

The only archrival of the Company was the French. Wars were waged between the two countries and

the Pratte-Yorke opinion was given in favor of the Britain. The advent of Industrial Revolution furtherenhanced Great Britain’s trade with India as Britain grew far ahead of its competitors in the availability

of raw materials and efficiency of production methods. As it is the home of the revolution, it had even

higher standards of living. This led to a spiraling cycle of the prosperity, demand and hence production.

OPERATIONS:

With greater access to modern technology, the British rule proved to be more efficient than the then

prevalent system in India. Railways, which began under the Company’s rule, decreased the

transportation time and increased the reach of raw materials throughout the country.

The Company also adopted the Divide and Rule Policy which is analogous to the decentralization ofdecision making authority in Corporate Governance. This decreased the lag in the legislation and

enforcement of the reforms that were planned by the Company for its benefits in India.

References:

1.  http://history1800s.about.com/od/thebritishempire/tp/indiatimeline01.htm 

2.  http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1