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Global sourcing is a term used to describepractice of sourcing from the global market
for goods and services across geopolitical
boundaries. Global sourcing often aims toexploit global efficiencies in the delivery of a
product or service. These efficiencies include
low cost skilled labor, low cost raw material
and other economic factors like tax breaks and
low trade tariffs.
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Common examples of globally sourced products
or services include :
1. labor-intensive manufactured products produced
using low-cost Chinese labor.
2. call centers staffed with low-cost English
speaking workers in the Philippines and India,
and IT work performed by low-costprogrammers in India and Eastern Europe.
3. clothing and shoes manufactured in China and
Thailand.
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Global GDP Growth 2% In 2003, 2002 And
2001 While 4% In 2000 And 1999
World Trade Growth Has Slowed
Every country wants to improve GlobalTrade
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Some advantages of global sourcingare:- Learning how to do business successfully
in a new market.
Finding and developing alternate suppliersources to reduce costs and stimulatecompetition.
The opportunity exists to locate scarce
skills and resources not available orunproductive at home thereby increasingmanufacturing capacity and other technicalcapabilities.
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. Monitoring costs go up and there arehidden costs relating to the effort and timespent learning about different cultures andtime zones.
especially in the beginning. There isexposure to financial, political and legalrisks, often in emerging economies
. In the service industries there is also a realrisk in losing a grip on your intellectualproperty.
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India Went Through Economic ReformsFrom
1991. The major ones are: Reductions In Import Duty Removal of restrictions on imports Devaluation of Currency Removal of permissions on setting up
enterprises and expansion of capacity Removal of permission of Controller of
Capital on Share Premium Account on issuesof Shares
Privatization of Public Sector UnitsMembership of WTO
Easier entry of multinationals
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Visualization of Six Major Global Players U.S.A. Japan Europe Russia
China India
Goldman Sachs Report (Brazil, Russia, India, China BRIC major players). Projects India as a potentialwinner ahead of China and would overtake U.S.A. and
China by 2025 in terms ofReal GDP.
India huge market population of 1 Billion with at least250 Million middle class with tremendous buying powerEconomy with 6% Growth Post Liberalization
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High growth but problem of
unemployment.
Need to generate 10 million jobs per
year.
Multi party rule, hence need toaccommodate political ideology with
economic reality (reservation, labour
law reforms).
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Beverages (Coke, Pepsi) Fast Foods (McDonalds, Pizza Hut, KFC) Coffee (Barista, Caf Coffee Day) Sports Wear & Goods (Nike, Adidas)
Apparels & Garments (Levis, Reid & Taylor) Cosmetics (Revlon, Oriflame, Maybellene) Two/Four Wheelers (Honda, Toyota, Suzuki, Hyundai,
General Motors, Ford, Mercedes) Computers (Del, HP, IBM, Samsung, Sony, Compaq) White Goods (LG, Samsung, GE)
Construction Engineering Companies Pharmaceuticals (US, Europe, Britain) Music (Sony, BMG, Warner) Entertainment Channels (Star, National Geographic,
Discovery, Sony)
Sourcing (IKEA, Adidas, Nike, many others)
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Enterprises In Wealth Creation
Government In Revenue And Employment
Employees In Development And Increase InStandard Of Living
Customers - Value For Money (Choice,
Affordability And Speed)
Stakehoders profit
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Easy Availability Of Imported/ForeignCollaborated Locally Produced Consumer
Items Plus Consumer Durables.
Reliable Communication System Of
Telephone (Landline And Mobile), E-mail
Availability Of Large Number Of Qualified
Youth In Most Disciplines
State Governments Trying To AttractInvestment By Offering Incentives / Benefits
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Speedy Mode Of Travel AndTransportation
Economic Growth Of 6%MNCs Have Entered The Market Both For
Sourcing As Well As Selling Their Products
Well Established And Developed Stock
ExchangeGrowth In Automobile, IT, Construction,
Pharma, Telecom, Energy, EntertainmentAnd Service Sectors
Foreign Exchange Reserves Presently AtUS$ 120 Billion With US$ Pegged BetweenRs. 45/- And Rs. 46/-
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Presently No Change In Existing Labour
Laws
Manufacturing Companies have
restructured and downsized (Engineering,
Metals, Cement, Electrical Machinery,
Textiles)
Lot Of Companies Offered Voluntary
Retirement Schemes (VRS) And Reduced
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Shift In Employment From Large
Companies To Medium And Small
Companies
Shortage Of Power Continues In Spite of
Investment in Power
Qualified Persons Are Prepared to Work at
Lower Level Jobs
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Threat Of Imports Easy Availability Of International BrandMNCs Have Deeper Pockets
MNCs R&D, Systems Pressure To Improve Operational
Efficiency Business Houses Also Expanding (Reliance,
Adity Birla, M&M, Tata Motors, AsianPaints, Ranbaxy, Cipla, Dr Reddys) Export Market Potential Innovative Marketing Strategy
Innovative IR
AndHR
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1. Strategy To Be Effective, Price Sensitive,Market Adaptive And Customer FriendlyThrough :
Restructure Sources And Uses Of Funds No Place For NPAs
Tight Control On Working Capital
Efficient Management OfRaw Material, WIP, FinishedGoods
Suppliers And Subcontractors
Utilization Of Manufacturing Plants
Distribution Channel
Manpower
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Collaborations, Mergers, Acquisitions (Eg.
Pharma, Cement, Aluminium, Telecom)
Niche Markets. World Class Manufacturers
(Titan, Sundaram Clayton)
Tackled Onslaught Large Companies
(Reliance, Nirma, Piramal Health Care, Dr.Reddys Laboratories, Ambuja Cement, Bajaj
Auto, Jet Airways, NTPC, BHEL, L&T,
Aditya Birla Group, Asian Paints)
Strong Brands (Wagh-bakri, Vadilal, Frooti,
Real, Rasna, Bisleri, )
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Companies in India That Have Successfully
Met Competition by Multinationals &
Domestic Companies Had A Spirit OfInnovation Not Only In Their Products And
Services But Also With Reference To All Their
Resources And Effectively Restructured Them
In A Time And Cost Frame And MetCustomer Needs And Improved Their Top
And Bottom Line
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