Business Negotiation With India

Introduction

India has veered sharply away from its former command-economy path to pursue market economics. The change has been bumpy but steady. It is likely to continue, despite misgivings from some quarters and opposition from others, gradually increasing in strength as the benefits of market economics manifest themselves in the real incomes of more and more citizens.

Market economics is likely to change India more dramatically than any other economic theory in recent history. The main reason is not so much that more people are becoming more content, but that it is removing their economic fate from the hands of politicians. Economic liberalism means deregulating the economy at home and more investment—and ideas—from abroad. Even after only a half-decade after adoption, the results have been impressive: the rapid rise of a middle class that largely ignores caste boundaries, an economy stabilizing at a new and much higher level, and the eviction from office of the corrupt remnants of political ideals gone sour.

From the overseas investor’s point of view, India has emerged as the most promising mass market in Asia, surpassing China’s in sophistication, openness, internationalism, and transparency. India’s institutional structure and national psychology is based on political and economic freedom tempered with more limited social mobility. The country has an uninhibited press, a judiciary that can (and often does) overrule the administration, a modern if slow legal system, international standards of accounting, and a strong research and academic infrastructure. India’s itchily competitive private sector is the backbone of its economy. Private business is 75 percent of the GDP. There is considerable opportunity for partnerships, joint, and share-based ventures, although sole proprietorships owned by foreigners are presently more limited.

India’s economic future transcends the parochialisms of the country’s political parties. So separate are business and politics that Indians see little conflict when its communist parties invest surplus funds in the shares markets.

CHAPTER I. Business and Negotiation in India

1.1. Basic Indian Business Law;

Today’s legal system in India is largely of British parentage. It originated in two charters granted in 1600 by Queen Elizabeth I and in 1609 by King James I of England to the East India Company (EOC). The Company was authorized to “make, ordain and constitute such and so many reasonable laws, constitutions, order and ordinances as to them…shall seem necessary…so always that the said laws, orders, ordinances, imprisonments, fines and amercements be reasonable and not contrary or repugnant to the laws, statutes, customs of this Our realm.”

The EOC established trading outposts or factories in various places in India with the approval of the Moghul rulers of the time. According to a 1618 treaty between England and the Moghuls, the EOC was also given the authority to adjudicate disputes between its British employees and other Englishmen living in the company’s first factory at Surat. Over time, the EOC expanded its commercial and political interests until they were tantamount to sovereign powers over the territories under its control. The EOC lost this status with the British Parliament’s Government of India Act of 1858, which transferred to the Crown the Company’s sovereignty over large tracts of Indian territory. In 1947, the British Parliament enacted the Indian Independence Act under which India and Pakistan were declared to be separate and independent dominions.

1.2. India’s Constitution

The Constitution of India came into force on January 26, 1950. It provided for a federal structure with the Westminster form of Parliamentary democracy at the central and provincial levels of government. The Constitution deals with the structure, functions, and powers or the organs of the Union and the States, and their interrelationship with each other. The Indian Federation consists of the Union of India—the Central Government—with the capital at New Delhi and twenty-five states, each with its own capital. In addition, there are seven self-governing union territories.

Legislative powers are divided between the Centre and the states. List I (the Union List) of the Seventh Schedule describes matters over which the Parliament of India has exclusive jurisdiction to enact laws. List II (the State List) consists of matters over which State legislatures can only enact laws. List III (the Concurrent List) is composed of the matters over which the Centre as well as the States may legislate. Certain Residual Powers are reserved for the Parliament. In the event of a conflict between the federal and provincial laws, the former prevail.

The regulation of foreign and interstate commerce falls within the exclusive domain of the Parliament. This is the root cause why commercial and political affairs are so inextricably mixed in India. The executive power of the Union Government extends over matters that are within the competence of the Parliament of India and the executive power of the states.

Indian states are delineated mostly along linguistic lines—hence the phenomenon of Malayalam speakers being mostly in Kerala, Tamil speakers in Tamil Nadu, Kanada speakers in Karnataka, and so on. States are entitled to have their own government-owned and -operated industrial development corporations, which some states like Gujarat do extensively, while others such as Bihar have lower profiles. Generally, an industrial enterprise may be opened only within the territorial limits of a state.

After the 1991 liberalization of the industrial policy these industrial development corporations began offering incentives for investment within their states.

1.3. Commercial Law

Commercial law during the British rule gradually assimilated English law as an integral part of Indian law. When India became independent there was nothing distinctive in Indian commercial laws. Most of them, for example the Indian Contracts Act 1872 and the Sale of Goods Act 1930, were codified Common Law. The laws relating to banking, negotiable instruments, insurance, and carriage of goods by sea were counterparts of the English laws.

Today these basic laws have not been modified to a very great extent. However, new direction and purpose have been imparted to them according to economic exigencies. Lawyers familiar with the English commercial laws will readily see the similarities between the English and Indian commercial laws, most notably that freedom of contract is not impaired.

Post-1991 Commercial and Investment Law

According to the Constitution, regulation of foreign commerce is within the competence of the Government of India. By virtue of the government’s Statement of Industrial Policy, substantial changes have been effected in the laws relating to (1) industrial licensing, (2) foreign investment, (3) foreign technology transfers, (4) monopolies and restrictive trade practices, and (5) taxation.

1.4. Industrial Licensing

The Industries (Development and Regulation) Act 1951 (IDRA) regulates industrial licensing. Its First Schedule lists thirty-eight industries whose manufacture of any of the items specified in this schedule is regulated by license. License is also mandatory for (1) establishing a new industrial undertaking, (2) an existing industrial undertaking to manufacture a “new article,” (3) substantially expanding the capacity of an existing industrial undertaking, (4) carrying on the business of an existing industrial undertaking that was originally exempt from the licensing provisions but which later lost this exemption, and (5) changing the location of an existing industrial undertaking.

The Industrial Policy Resolution of 1956 classified industries into three categories: (a) those whose future development will be the exclusive responsibility of the state; (b) those that would be established in the private sector under the initiative of the state but would progressively become state owned; and (c) those that would be permitted to be developed through private enterprise.

Industrial licensing is now required only for fifteen industries of strategic, social, or environmental concern enumerated in Schedule II. Even in these industries compulsory licensing is not required in respect of the small-scale units. Listed industries may also be exempted from licensing requirements. Recently the government liberalized the medical drugs policy by abolishing production and supply restrictions on foreign drug companies. This placed them on an equal footing with domestic companies. The government also abolished the licensing requirements in regard to all drugs, barring only five basic drugs (consisting mainly of vitamins). All other industries are exempted from licensing provided that they are not located within 25 kilometers of the periphery of twenty-three listed urban metropolitan areas having a population of more than 1 million. This condition does not apply to electronics, computer, software, printing, and nonpolluting industries that may be notified from time to time, and “small-scale and ancillary industries” (i.e., undertakings with investment less than 6 and 7.5 million rupees, respectively).

2.1. Foreign Trade

The interdependence of technology, investment, productivity, and an outward-looking trade policy is an integral part of India’ s economic reform program. Sweeping changes such as scaling down tariff barriers, virtual abolition of import and export licenses, simplification of procedures, and the liberalization of the exchange rate mechanism have been effected as a consequence of the new trade policy announced in July 1991. Under the Foreign Trade Development and Regulation Act 1992, the Central Government provides for the development and regulation of foreign trade by facilitating imports and increasing exports. It may regulate the import or export of goods and grant exemptions. An Importer-Exporter code number issued by the Director General of Foreign Trade is needed for the import and export of goods. The Central Government may formulate and announce export and import policy and amend previous policy.

For the purposes of accelerating the integration of India with the global economy, the Export and Import Policy for 1992–1997 was announced on March 31, 1992 for promoting greater freedom of trade, fewer restrictions, and administrative controls. This policy was revised on March 31, 1993 to add these features:

It will remain stable for five years. Changes expedient for liberalization or responding to emergencies will be made , as far as possible, only quarterly.

Goods can be imported freely, except for a limited negative list of imports. Only three items ( tallow, animal rennet, and unmanufactured ivory) are prohibited.

Capital goods are not restricted; second-hand goods may be imported in certain sectors.

The definition of “capital goods” is enlarged to include capital goods used in agriculture and allied activities; actual-user conditions for import of industrial inputs are removed.

The maximum import duty on raw materials and components has been reduced to 85 percent.

2.2. Trade Practices Act Amendments

In order to prevent the concentration of economic power in too-few hands, the Monopolies and Restrictive Trade Practices Act (MRTPA) 1969 came into force in 1970. Its provisions applied only to private enterprises, not to government-owned or controlled companies.

The Act sought to control the activities of (1) “dominant undertakings,” that is, enterprises that either by themselves or with interconnected enterprises control not less than one-third of the total goods or services of any description, and also possessing assets of not less than 10 million rupees; and (2) “monopolistic undertakings,” that is, enterprises that together with not more than two other enterprises controlled one-half of the total goods or services of any description, ept for a limited negative list of imports. Only three items ( tallow, animal rennet, and unmanufactured ivory) are prohibited.

Capital goods are not restricted; second-hand goods may be imported in certain sectors.

The definition of “capital goods” is enlarged to include capital goods used in agriculture and allied activities; actual-user conditions for import of industrial inputs are removed.

The maximum import duty on raw materials and components has been reduced to 85 percent.

2.2. Trade Practices Act Amendments

In order to prevent the concentration of economic power in too-few hands, the Monopolies and Restrictive Trade Practices Act (MRTPA) 1969 came into force in 1970. Its provisions applied only to private enterprises, not to government-owned or controlled companies.

The Act sought to control the activities of (1) “dominant undertakings,” that is, enterprises that either by themselves or with interconnected enterprises control not less than one-third of the total goods or services of any description, and also possessing assets of not less than 10 million rupees; and (2) “monopolistic undertakings,” that is, enterprises that together with not more than two other enterprises controlled one-half of the total goods or services of any description, and whose assets exceed 200 million rupees. The Act required these undertakings to register with the Department of Company Affairs. Prior governmental approval was necessary for expansion of capital or assets and setting up or acquiring new units. The MRTP Commission was established to monitor and prevent monopolistic and restrictive trade practices.

After the announcement of the 1991 Industrial Policy the Act has been amended effective September 27, 1991, first by an ordinance and later by the enactment of the Monopolies and Restrictive Trade Practices (Amendment) Act l991. Government owned companies are now subject to the Act. The law aims at consumer protection and at controlling only restrictive trade practices, not the size of an enterprise. All acquisitions and mergers no longer require governmental approval and are governed by the guidelines issued by the Securities and Exchange Board of India.

3.1. Negotiation in International Business

They report that Indian companies deemphasize shareholders and quarterly profits and describe and analyze special management practices of Indian businesses with respect to human resources and social responsibility. They discuss the "five pillars" that characterize Indian firms and drive competitive advantages, which focus on values and vision, resilience and adaptability, holistic engagement with employees, the creation of strong value, and the creation of culture. Three appendixes present economic growth statistics, interview and survey methods and details, and information on India's cultural roots and consequences.

Given India's position as one of the fastest growing economies, this is a valuable book for business professionals interested in doing business in India and a useful resource for academics studying Indian business practices or international business more broadly.

Many organizations engage in international negotiations. In the auto industry, all major US manufacturers have discussed joint venture with Asian firms and acquisitions with Europeans. Such negotiations tend to involve “a large number of parts that interact in a non simple way” . Carried out over many months, sometimes achieving agreement, sometimes not, these complex, international negotiations are a challenge to manage and to understand.

Existing research on the international business negotiation specifically, and on negotiation generally, provides an important base of knowledge, yet there is more to learn about complex negotiations. No-agreement outcomes remain relatively unexplored. For the process – and structure – of negotiation, existing frameworks and models differ widely in their foci , while relevant empirical studies have concentrated on a few aspects at a time. As a result, it is not clear from existing work how the pieces fit together , or which ones might still be needed to describe the dynamic whole of a complex international negotiation or to explain its outcome. It also leads to the conclusion that an approach to complex negotiations, even if motivated by international concerns, should be designed for general, including international use. The new perspective then developed focuses in three essential facets of negotiation – parties’ Relationships, parties’ Behaviors, and the influencing Conditions (RBC) – and their casual interaction in a core, logic.

R

B C

The RBC Framework for Complex Negotiations and accompanying Basic Model not only integrate a number of existing perspectives; they carry several distinctive features. They include:

A relationship orientation that emphasizes the interactive nature of negotiation process;

Multiple levels units for behavior analysis;

An internationally-applicable representation of influencing conditions

Conjoint consideration of behavior and conditions , and structure and process, for multilateral as well as bilateral negotiations.

This perspective can significantly advance empirical and practical endeavors in international business.

There are very few definitions of international business negotiation in research literature. Stoever (1981, p.1) confined his definition to negotiations between foreign investors and governments concerning direct investment. A more straightforward inclusive meaning based on the conduct of business across national borders combined with Walton and Mc’Kersie’s widely-cited conceptualization of labor negotiation, leads to a more suitable working definition: the deliberate interaction of two or more social units (at least one of them is a business entity), originating from different nations, that are attempting to define or redefine their interdependence in a business matter. This includes company-company, company-government and solely interpersonal interactions over business matters such as sales, licensing, joint ventures, and acquisitions.

The negotiations between organizations can be viewed as a subset of international business negotiations. When organizations are the primary parties to a negotiation, proceedings are often, if not always, complex.

3.2. Frameworks for international Business Negotiation

Following the premise in Fayerweather and Kapoor’s (1976, p.26) seminal work that international business negotiation is “unique”, researchers in the US and elsewhere have developed dedicated perspectives for it. Basically, they fall into two categories: stage models of negotiation process and behavior motivated by cultural concerns, and broad international frameworks or schemata.

Graham’s (1987, p. 168) process(stage) model for all cultures keys on the purpose or nature of negotiation’s successive interactions. Its four phases are nontask sounding, task-related information exchange, persuasion, and concession and agreement.

Among broad frameworks, Fayerweather and Kapoor’s (1976, pp. 29-45) contribution highlights the “wide varieties of environments” in international business. Their framework comprises: the negotiation situation, functional areas (e.g. finance), “four C’s” (common interests, conflict interests, compromise, and criteria for undertaking negotiation), the environment (political, economic, social and cultural systems) and “perspective” (broad factors such as previous experiences that influence the negotiation at hand). Though not all clearly defined , these “lenses” would discern still more facets of the CGE-ITT case: for example, the activities of the companies’ financial, legal and operations representatives, and common interests such as improved competitiveness and standing in the telecom equipment market.

Most recently, the “ conceptual paradigm” of international business negotiation set forth by Tung(1988) clearly describes environmental factors only alluded to in its antecedents. In addition to this environmental context (political, economic, institutional-legal, cultural), the paradigm consists of the negotiation context, negotiator characteristics, strategic selections and process, and the negotiation outcome.

3.3. Bases for further development

As the foregoing has shown, existing frameworks and models project considerably different views of the same phenomenon. What one perspective makes obvious may remain hidden from another. Granted, some of these models (e.g. the intra-organizational bargaining model) were not originally intended for more than a limited set of aspects. But there is no framework that satisfactory situates or “synthesizes” them.

Notwithstanding their original intent, a number of these models have come to be treated as competing alternatives. Empirical research on international business negotiation has long been split between two uncommunicative streams (despite their common footing in a strategic perspective): a macro-strategic stream, and a micro-behavioral stream directed at bargaining between individuals in different cultures. Many writers distinguish international negotiation from domestic ones from the basis of the former’s “complexity”. The evidence cited includes cultural differences, legal pluralism, monetary factors, ideological diversity, and uncertainty.

There are two important reasons to develop an analytic approach not rigidly bound to an international context.

First, the traditional criteria for distinguishing international from domestic are difficult to operationalize, even questionable in their validity. As defined earlier, international business negotiation is not always complex: bargaining between an American tourist and a street vendor in India over the price of a T-shirt may (or may not) present some hurdles in language and custom, but rarely entails information overload and other features of complexity. And not all domestic negotiation is contrastingly simple. More poignantly, when the focus from the outset is on complex negotiation, “complexity” offers little leverage for distinguishing between domestic and international arenas.

The two arenas have also been analyzed differently on the assumption that the international arena involves greater variation, especially with respect to “national cultural differences”. It seems more prudent, however , not to make on a priori “assumption of large difference” and to allow for similarities and for small as well as large differences. Besides the international negotiations in which a party’s behavior differs markedly from the counterpart’s (e.g., typically Americans and Soviets), there are negotiations between parties who have much in common (e.g., Americans and Canadians). In the same vein, the “assumption of similarity” concerning parties and conditions within a country, which lies implicit in much literature on international negotiation, does not stand up against studies of heterogeneous countries like the US.

Contemporary international business has blurred many of the traditional lines between national cultures contexts. Some parties and their contexts are easily identified and located, but many others are not. A French-born, US educated businessperson working in Paris for a subsidiary of an American firm may negotiate with an American employed by a French company, or with any one of numerous other types of counterparts. Besides, the effect of cultural factors on negotiation outcomes may be overwhelmed by international or global factors such as industrial competition.

Second and most importantly, an internationally-motivated but generally-applicable framework represents a more powerful analytic tool than one limited to international business negotiation.

3.4. The RBC Perspective

The RBC Perspective introduced below is intended to be an inclusive, analytic perspective that furthers broad understanding of complex negotiations. More specifically, it aims to enhance the meaningfulness and validity of descriptions and explanations of negotiation process and outcomes, and ultimately, to enhance the effectiveness of prescriptions for negotiators. It applies to all negotiations, not only the international ones of interest.

Mnemonically labeled after its three key facets (Relationship, Behaviors, Conditions), the RBC Perspective directs attention to parties’ relationship as the crux of a negotiation and its analysis. This perspective incorporates the behavioral trust pf the strategic bargaining model and the contexts attended in Thomas’s(1976), Kochan and Katz’s (1988), and aforementioned international business negotiation framework.

A “relationship” denotes two or more parties being connected.

The RBC Framework for Complex Negotiation

Analytic focus (facet)

Level/Set

RELATIONSHIPS BETWEEN PRIMARY PARTIES

Inter-organizational

Intergroup

Interpersonal

Cross-level

BEHAVIORS OF PRIMARY PARTIES

Organizations

Groups

Individuals

CONDITIONS

Circumstances

Capabilities

Cultures

Environments

Pre-negotiation Negotiation Post-negotiation

Time Period

Focusing on “the space between” is central to meaningful analysis of negotiation, as a growing number of writers have asserted (e.g. Fisher and Brown 1988; Saunders 1990), for three major reasons. First, negotiation, by definition, concerns a relationship between two or more parties. Its vicissitudes and potentialities generate the issues to be negotiated and the target sought.

Second, from a methodological point of view, describing and explaining the ensuing negotiation process as an essentiality interactive, jointly determined phenomenon requires an analytically complementary approach.

Third, the outcome of a negotiation usually has multiple attributes, many of which go unattended in the absence of an overarching, relationship-based perspective. Existing frameworks set the outcome apart from the negotiation process and the parties’ relationship, define it in terms of each party’s payoff or tangible gain, and treat those gains as the parties’ only purpose for negotiating. In many non-Western cultures and arguably in many Westerns ones, negotiators’ paramount concern is the nature of the interaction or the broader relationship. Some negotiations are simply not aimed at explicit or tangible outcomes.

There are three types of parties to negotiation: primary, secondary and third. Primary parties have interrelated goals and have become or plan to become engaged in direct talks. Secondary parties have an indirect stake in the outcome but do not consider themselves directly involved. Third parties neutrals – those who work between primary parties toward an agreement satisfactory to all – did not play a regular role.

An important aspect when talking about negotiation at la large scale in the culture. Cultures refers to both the acquired knowledge used by a people to interpret their world and to act purposefully and to the set of learned behaviors they share. The internationally-oriented negotiation framework that include a cultural component tend to refer solely to national groupings of people, but primary parties to a negotiation also belong to ethnic and organizational cultures. All such cultures can shape a party’s basic concept of the negotiation process, expectations concerning aspects of interaction with a counterpart, and their actual behavior.

4.1. The Negotiation process

It is predicted that, like dancers from different cultures, negotiators from different cultures share a holistic view of the negotiation process that will lead them through similar cooperative and competitive stages. We also expect negotiators from different cultures to enact different behavioral sequences at the bargaining table, leading to difficulty in synchronization and inefficient deals.

Transactional negotiation is mixed-motive: on the cooperative or integrative side, parties are independent and must work together to discover a mutually acceptable solution; on the competitive or distributive side, parties represents distinct entities and want to get a good deal for themselves. Several lines of negotiation research attempt to understand the complex and dynamic interplay between cooperation and competition at the negotiation table. Most suitable for that, are two of the research streams: negotiation evolution and negotiation process. These offer evidence suggesting that transactional negotiations typically pass through four key stages: relational positioning; identifying the problem; generating solutions, and reaching agreement. Early theorists hypothesized that most negotiations begin with a focus on power, with one negotiator trying to sway the other party (Stevens, 1963). Empirical studies, however, showed that successful negotiators eventually move away from power and focus their efforts on coordination and cooperation.

4.1.1. Culture and the Negotiation “Battle”

Culture is a socially shared meaning system ; it is complex; it consists of a group’s subjective characteristics, for example, artifacts and institutions. The many sides of culture are evident in implicit theories about negotiation that guide what strategies and avenues are available to negotiators. For example, both cultural values and norms are evident in a negotiator’s implicit theory that distinguishes the relative priority of individuals versus organizational goals or the appropriateness of asking the other party for sympathy.

Communication norms in Western cultures emphasize direct communication and are thus, considered low-context. In contrast, communication norms in Eastern culture are indirect and high context. Low-context communication is more explicit, with meaning clearly contained in the words or the surface of the message. High-context communication is more implicit, with subtle meaning embedded behind and around the spoken or written words. For example, if one will make a multi-issue proposal, a low-context negotiation partner will hear his explicit words and extract direct information about what he wants. In contrast, a high-context negotiation partner may use information in the one’s specific multi-issue proposal along with indirect information. Thus, it takes no special inferential skills to understand meaning in low-context cultures.

One way to measure success in transactional negotiation is to tally the net value of the deal for the buyer and seller to calculate joint gains. Joint gains are a measure of the entire pool of resources negotiators created, not just how well one party did. Prior research suggests two ethic steps in negotiation that may help generate joint gains: reciprocal priority information sharing and structural sequences of affective persuasion and priority information.

4.1.2. Culture and international business

In this new millennium, few executives can afford to turn a blind eye to global business opportunities. Japanese auto-executives monitor carefully what their European and Korean competitors are up to in getting a bigger slice of the Chinese auto-market. Executives of Hollywood movies studios need to weigh the appeal of an expensive movie in Europe and Asia as much as in the US before a firm commitment. The globalization wind has broadened the mindsets of executives, extended the geographical reach of firms, and nudged international business (IB) research into some new trajectories.

One such new trajectory is the concern with national culture. Whereas traditional international business research has been concerned with economic/legal issues and organizational forms and structures, the importance of national culture – broadly defined as value, beliefs, norms, and behavioral patterns of national group – has become increasingly important in the last two decades. National culture has been shown to impact on major business activities, from capital structure to group performance.

An issue of considerable theoretical significance is concerned with cultural changes and transformation taking place in different parts of the world. If cultures of the various locales of the world are indeed converging, IB-related practices would indeed become increasingly similar. Standard, culture-free business practices would eventually emerge, and inefficiencies and complexities associated with divergent beliefs and practices in the past era would disappear.

Globalization refers to a growing economic interdependence among countries, as reflected in the increased cross-border flow of three types of entities: goods and services, capital, and know-how. Few spoke of “world economy” 25 years ago, and the prevalent term was “international trade”, however, today, international trade has culminated in the emergence of a global economy, consisting of flows of information, technology, money and people, and is conducted via government international organizations such as the North American Free Trade Agreement (NAFTA) and the European Community; global organizations such as the International Organization for Standardization (ISO); multinational companies (MNCs); and cross- border alliances in the form of joint ventures.

Yet, globalization is not without its misgivings and discontents. A vivid image associated with the G8 summit s is the fervent protests against globalization in many parts of the world. Strong opposition to globalization usually originates from developing countries that have been hurt by the destabilizing effects of globalization, but in recent time we have also seen heated debates In Western economies triggered by significant loss of professional jobs. People are beginning to question whether globalization will bring benefits greater than regionalization of trade.

In recent years, Japan and India, for example, has expanded trade activities with China and other East Asian countries. These trends might indicate that globalization and great market business is being impeded by tendencies toward country-specific modes of economic development, making the convergence of international business-related values and practices more possible.

India’s pluralistic population consists of about 80 percent Hindus , 12 percent Muslims , and 8 percent members of other ethnic groups. Among the Hindus, the oft – quoted caste system plays only a small role in business. The business culture can be quite diverse and regional style differences may be significant. While Southern Indian companies, especially those around Bangalore and Hyderabad , tend to be progressive in some ways, southern Indians are oft en more sober and conservative than the more extroverted Northerners. Another factor that influences styles is whether people work in the government or traditional manufacturing sectors, versus the more flexible and faster-moving technology and service sectors.

Outside of the country’s business centers, such as Bangalore, Chennai , Hyderabad, Mumbai , New Delhi , or Kolkatta , businesspeople and officials in India usually have only limited exposure to other cultures. When negotiating business here, realize that people may expect things to be done ‘their way.’

Most Indians are proud of their country’s progress, its achievements, and its dynamism. India’s culture is generally group-oriented. Building lasting and trusting personal relationships is therefore very important, though to a lesser degree than in several other Asian countries. Some Indians may engage in business while the relationship building process is still ongoing.

This is especially the case with internet-based businesses. Others in the country may expect to establish strong relationships prior to closing any deals, though. Generally, it is beneficial to allow some time for your Indian counterparts to get to know and become comfortable with you prior to proceeding with serious business discussions. Talking about your friends and family is an important part of establishing a relationship with those involved in the negotiating process. Many Indian companies are still family businesses.

Relationships are based on mutual trust and respect, which can take a long time to establish. Business relationships in this country exist both at the individual and company level. Indians usually want to do business only with those they like and trust. However, if your company replaces you with someone else over the course of a negotiation, it may not be overly difficult for your replacement to take things over from where you left them. Likewise, if you introduce someone else from your company into an existing business relationship, that person may quickly be accepted as a valid business partner when investing time and energy into nurturing his or her relationships.

Though not quite as critical as in most Far East countries, ‘saving face’ is very important in India’s culture. Showing respect for others is essential. Causing embarrassment to another person may cause loss of face for all parties involved and can be detrimental for business negotiations. It is best to control your emotions and remain friendly at all times. If you have to bring up an unpleasant topic with an Indian, never do so in public and always convey your message in ways that shows respect for the other person.

Indians are usually very friendly and polite. They prefer to do business with others who treat them with deference and genuinely like them, and it is important to demonstrate similar behaviors yourself.

These factors do not affect anybody’s determination to reach business goals, though, and your counterparts will patiently and persistently pursue their objectives. It is in your best interest to do the same.

In Indian business culture, the respect a person enjoys depends primarily on his or her age, status, and rank. There is also a deep respect for university degrees. Within family-run businesses, there is a common belief that ‘outsiders’ are not to be trusted. The head of the family may even keep information from family members. Admired personal traits include friendliness and sociability, flexibility, humility, compassion, resilience, and an ability to find common ground between opposing positions.

Before initiating business negotiations in India, it is highly advantageous to identify and engage a local intermediary, especially if you represent a small company. This person will help bridge the cultural and communications gap and maneuver within India’s intricate bureaucracy, getting the necessary papers signed and stamped.

Negotiations in India can be conducted by individuals or teams of negotiators. Teams should be well aligned, with roles clearly assigned to each member. Changing a team member may require the relationship building process to start over and should be avoided. If possible, schedule meetings at least four weeks in advance. Agreeing on an agenda upfront is useful, even though it may not be strictly followed. While meetings may start considerably late, Indians generally expect foreign visitors to be punctual. Avoid being more than10 to 15 minutes late. It is best to be on time, as Indians are generally impressed with punctuality. After the introductions, offer your business card to everyone present. It is not necessary to have it translated into an Indian language. Show advanced degrees on your card and make sure that it clearly states your professional title, especially if you have the seniority to make decisions.

Meetings start with some small talk intended to establish personal rapport. This may include some personal questions about your family and allows participants to become personally acquainted. It is important to be patient and let the Indian side set the pace. People enjoy some friendly humor, but avoid appearing sarcastic or cynical. The primary purpose of the first meeting is to get to know each other.

Presentation materials should be attractive, with good and clear visuals. Indians are oft en impressed with technical expertise. Having your English-language handout materials translated to Hindi or another Indian language is usually not required.

5.1. Foreign direct investment

International competitiveness generally refers to the ability of a country to expand its share in world markets. It is well known that most of the developing countries export mainly primary commodities (agricultural products and minerals), which have been facing a long-run decline in prices in the world market (this is the Prebisch-Singer thesis). Thus, it is being increasingly recognised both among academicians and policy-makers that the capacity of a country to increase its standard of living in the long term depends on the competitiveness of the manufacturing sector.

At a fundamental level, the competitiveness of a country in a particular commodity depends on the price at which it delivers the commodity in a foreign market in comparison with the price offered by competing countries for that commodity in the same market. At an analytical level, the evolution of overall competitiveness of a country over time depends on both macroeconomic and microeconomic factors.

Compared to most industrialized economies, India followed a fairly restrictive private investment policy until 1991 – relying more on bilateral and multilateral loans with long maturities. Inward foreign direct investment (FDI, or foreign investment) was perceived essentially as a means of acquiring industrial technology that was unavailable through licensing agreements and capital goods import. Technology imports were preferred to financial and technical collaborations. Even for technology licensing agreements, there were restrictions on the rates of royalty payment and technical fees. Development banks largely met the external financial needs for importing capital equipment. However, foreign investment was permitted in designated industries, subject to varying conditions on setting up joint ventures with domestic partners, local content clauses, export obligations – broadly similar to those followed in many rapidly industrializing Asian economies.

Foreign Exchange and Regulation Act (FERA), 1974, stipulated foreign firms to have equity holding only up to 40%, exemptions were at the government’s discretion. The law also prohibited the use of foreign brands, but promoted hybrid domestic brands (Hero-Honda, for instance).

Such restrictive policy is believed to have retarded domestic technical capability (as reflected in the poor quality of Indian goods); it also meant a loss of export opportunity of labor-intensive manufacturers. This popular perception was perhaps best illustrated by the passenger car industry that produced obsolete (and fuel inefficient) models at very high costs in small numbers.

However, the 1980’s witnessed a gradual relaxation of the foreign investment rules – perhaps best symbolized by the setting up of Maruti, a central government joint venture small car project with Japan’s Suzuki Motors in 1982.

5.1.1. Reforms in 1990’s

Till the 1980s, as in many other developing countries, Indian policy-makers had a generally pessimistic assessment of export prospects. As a consequence import substitution was considered the prime means of achieving self-reliance which was one of the primary objectives of planning. This is amply borne out by the nature of industrial, trade and financial policies followed in this period. While generally conservative macroeconomic policies were followed till the mid-1980s there was a gradual erosion in macro economic discipline subsequently. The resulting deficits of the central government were financed both by monetary expansion and through borrowings from the public. The balance of payments (BOP) crisis of 1991 could be linked to the large and growing fiscal imbalances witnessed in India since the mid-1980s. The structural adjustment programme initiated in 1991 involved a significant change in the emphasis placed on market forces as opposed to centralised planning in allocating resources. The elaborate controls on industry, trade and the financial system were gradually dismantled. In the new regime international trade in general and exports in particular were given much greater emphasis. Self-reliance was no longer a major policy goal and the emphasis shifted to achieving higher rates of growth of GDP.

All this changed since 1991. Foreign investment is now seen as a source of scarce capital, technology and managerial skills that were considered necessary in an open, competitive world economy. India sought to consciously “benchmark” its policies against those of the rapidly growing south-east Asian economies to attract a greater share of the world FDI inflows. Over the decade, India not only permitted foreign investment in almost all sectors of the economy, but also allowed foreign portfolio investment. Further, laws were changed to provide foreign firms the same standing as the domestic ones.

Much of the currently held perceptions of foreign investment’s role essentially take a macroeconomic view; it is a source of additional external finance (and a risk capital), augmenting fixed investment, potential output and employment. Foreign firms seek not only the domestic market, but also provide access to external markets by sourcing manufactured products from domestic firms.

The crux of the policy, therefore, is how the benefits of such investments are distributed between the foreign firms and the host country, as also between the various factors of production within the host country. In industrial organization literature, from a variety of analytical perspectives, foreign firms are seen as having firm-specific advantages – including significant market power that they seek to exploit in many countries.

FDI into India 1992-2000

1992 1993 1994 1995 1996 1997 1998 1999 2000

Historically in India, the capital market has been weak and played a very small role in financing corporate activities. Up until 1950s the number of shareholders remained but a very small function of the population. This situation was not ameliorated very much by the establishment of the institution of the Controller of Capital Issues (CCI) 1947. Significant changes in the financing of the industry were to occur in 1969. First, the government nationalized the commercial banking system. Nationalized banks were now required to make decisions nor exclusively on profit calculations, but also according to government directives designed to promote economic development.

In recent years India has been moving further in the direction of adopting an Anglo-American model of corporate governance. This decision, the result more of international economic and political pressures than public debate, in effects represents a new development strategy for the world’s most populous democracy.

It has become the accepted practice during recent years for developing host nations to impose ownership restrictions on foreign companies as a means of exerting greater control over their national economies, technology and development plans. Understandably, such restrictions have created tremendous pressures on the multinationals, particularly those operating in the host countries manufacturing sectors, and have faced dilution of corporate ownership in favor of either the host government or national enterprise.

The reduction in the level of corporate ownership and management control in the light of host nation’s localization policies has been the cause of much controversy, and became a major source of conflict and many misconceptions among host nations and multinationals.

Although the public sector continues to retain a monopoly in defense, atomic energy, rail transport, and five other basic industries, and a certain number are still reserved for the small-scale private sector, liberalization dramatically opened India up for private-sector investment. Today the most notable conditions on governing foreign investment are as follows:

The limit for foreign equity participation was raised to 51% from 40% in thirty-five high-priority industries, including industrial and agricultural machinery, chemicals, and hotels and tourists facilities. This limit also applies to trading companies engaged in export activities.

Foreign companies may conduct oil exploration, development, and refining.

Up to 100% foreign equity is allowed in the power sector, electronic hardware technology and software technology.

Importation of capital goods and plant machinery is automatically approved.

The requirement that foreign investment must be accompanied by technology transfer has been abolished.

Foreign technicians may be freely hired to engage in foreign development of indigenous Indian technologies.

India’s business climate is now largely conditioned by these main features:

The third largest pool of technical and scientific personnel in the world (after the United States and the former Soviet Union).

An English-speaking professional work force.

A strong entrepreneurial mentality.

Highly attractive wages by international standards.

A large and diverse manufacturing sector.

A widespread trade and distribution network.

A strong, if time-consuming, legal framework.

In sum, India’s 1991 reforms largely accomplished their goal of rejuvenating the country’s business environment and opening the economy to foreign investment. Most important, they firmly established a sea change in thinking that is unlikely to be shunted aside by India’s endlessly parochial political squabbles.

CHAPTER II Volvo and Ericsson in India

2.1. Commercial Vehicle Industry in India

Industrial growth in the country has, in terms of long run trend, remained aligned with the growth rate of gross domestic product (GDP). The long-term average annual growth of industries comprising mining, manufacturing, and electricity, during the post-reform period between 1991-2 and 2011-12, averaged 6.7 per cent as against GDP growth of 6.9 per cent. Inclusion of construction in industry raises this growth to 7.0 per cent. The share of industry, including construction, in GDP remained generally stable at around 28 per cent in the post-reform period. The share of manufacturing, which is the most dominant sector within industry, also remained in the 14-16 per cent range during this period.

The automobile industry is a leading sector in the economic development. Its most obvious benefit is its input into the motor transport industry, and, in the ferrying of goods and people from one place to another in a more flexible and very often more efficient manner than by other forms of transport. Road vehicles can penetrate into area where other forms of transport cannot, thereby contributing towards the integration of backward areas into the national mainstream. A specially critical linkage is with the machine tools sector, of which automobiles are the largest users. The automobile industry is also important from the strategic viewpoint, as it strengthens national security.

The Indian automobile industry has had a pale history for more than six decades. The industry started in a humble way. Until the end of the 1940’s motor vehicles were fully imported or assembled from parts imported in a completely knock-down conditions. General Motors and Ford imported some 20.000 vehicles during this time for Indian market. Basically, the auto sector can be divided into two segments: vehicle manufacturing and component manufacturing. Initially, for historical reasons, the activity of component manufacturing was taken care of by the vehicle manufacturers either inside their plant or through import. Examples are: HML(Birla), TELCOT(Tata), M&M(Mahindra), BTL(FIRODIA). Later on, with the advance of technology, vehicle manufacturers found it difficult to manage the whole show and started concentrating more on vehicle assembly.

The Indian auto components industry, which played a rather insignificant role before economic liberalization, has now carved out a niche for itself. According to trend analyses by the Automotive Component Manufacturers Association (ACMA), the industry recorded a 20 per cent growth in production during financial year 2002-2003 and a 38 per cent growth in exports. The strong growth in the domestic market can be credited to the good performance of the Indian vehicle sector in which production grew by 18,6 per cent in 2002-2003 over the previous fiscal year. Barring tractors, two and three wheeler vehicle production grew by 20 per cent while four-wheeler production grew by 11 per cent.

Like the automobile sector of any country, the Indian vehicle industry’s growth is critical. But despite ups and downs, growth has been fairly stable over a longer period in a number of segments. According to ICRA- Society of Indian Automobile Manufacturers analysis, the compound annual growth rate of passenger cars has been 14 per cent over the past two decades, for commercial vehicles 4 per cent and motorcycles 12 per cent.

Exports during 2002-2003 are estimated to be $800 million, as against $578 million in fiscal year 2000-2001. Exports were expected to rise to $ 1 billion in 2005, and to $ 2,5 billion in 2010. And they achieved this numbers. This is because primary cost pressures are driving vehicle-makers and renowned tier companies, mainly in the US and Europe, to source components from India.

According to authoritative sources, this remarkable performance of the Indian auto industry is not a temporary phenomenon, and the future of the industry is bright. Despite the challenges that the industry is facing in terms of competition and operational factors, it is expected to emerge as a leading player in Asia. In fact, the speed at which Indian auto component manufacturers are progressing in improving their capabilities has been encouraging. Of course, India will have to continue to face stiff competition from countries such as Thailand, Malaysia, Brazil, Mexico, Turkey, China and some east European countries.

Industry sources say that though the sector is less dependent on government’s policies than it was a decade ago, it will still need a push in terms of a conductive business environment which the government could provide along with market forces. This will boost investments in the industry and allow companies o better utilize their capacities across a wide product range, leading to employment generation and foreign exchange earnings through exports.

In a background paper presented at the 42nd ACMA annual session, David Friedman, managing director and president of Ford India, said the business environment India needed, in order to be a low-cost global source for auto components was a qualitative improvement in infrastructure, comprehensive labour law reforms, rationalized tax structure, investor-friendly and consistent policies in states, encouragement at all levels from the international standards. On the plus side, he felt India had an advantage in its educated and skill labour, low-wage structure, strength in engineering and remote services, strong service industry. He felt that a focus area for Indian suppliers should be the development of product design and low-cost testing capability, creating high quality input sources and evolving globally competitive costs. He also felt that India’s supply base strengths consisted of low-cost sourcing for low volume speciality models and low automation technology based components. Friedman also said the Indian consumer is representative of the global customer – if the product is right for India, I is right for any other market.

As the vehicle industry keeps growing worldwide and the growing competitiveness of the industry and cost pressures push developed countries to shift production to low-cost countries , India is likely to be a major beneficiary. The auto components industry is slowly taking on the shape of a major industry in India – one that is finding its true place under the sun.

2.1. Volvo – THE brand

Founded in 1927, Volvo is one of the leading heavy commercial vehicles manufacturer in the world. The trucks of Volvo are sold in more than 130 countries. Volvo Truck Corporation is the third largest heavy-duty truck manufacturer in the world. Apart from trucks, the company makes city buses, intercity buses and coaches.

The Volvo Group also offers a comprehensive range of customized solutions in financing, leasing, insurance and service, as well as complete transport systems for urban traffic.

Volvo has more than 100.000 employees, production in 19 countries and operates in 180 markets.

Volvo in India has its operations across trucks, buses, construction equipment, marine and industrial power systems. India is also emerging as a sourcing base for the group, with a focus to support the growth in the Asia region, and this is reflected in Volvo’s local establishment in the areas of IT sourcing, global component sourcing, product development along with exports of its trucks & buses to selected markets. Volvo and its products are increasingly regarded as the changing face of the Indian commercial vehicle industry – marked by a series of new concepts and modern technology over the last 8 years.

Volvo cabs are manufactured in the north of Sweden in Umeå and Ghent, Belgium, while the engines are made in the central town of Skövde. Among some smaller facilities Volvo has assembly plants in Sweden (Gothenburg – also the Head Office), Belgium, USA, Brazil, South Africa, Australia, China, India and Russia, making it a truly global producer. Some of the smaller factories are jointly owned. Its main parts distribution centre is located in Ghent, Belgium. The sales side is split into three areas – Europe and the Middle East, the Americas, and Asia Pacific. The offices and dealers are set up worldwide in Europe, North America, Latin America, Africa and Middle East, and Asia.

When a company truly integrates a brand principle, the principle drives it to new investments that it might not otherwise make. For example, since 1970, Volvo has used an internal Traffic Accident Research Team to analyze tens of thousands of accidents to get a better understanding of how to protect its customers. The company continually wins top honors in safety worldwide and, on many of its innovations, has been ten-plus years ahead of meeting local governments' safety legislation. Volvo invests 10 percent of its revenues in R&D annually and is spending $84 million on a new accident laboratory to be opened in the year 2000.

Volvo Auto India Pvt Ltd, a part of Swedish luxury car maker Volvo, is planning to explore the Indian market with a target to grab 15 per cent of the Indian luxury car market by 2020. The company is planning to expand its presence in India and would launch new models to achieve the target, said Tomas Ernberg, managing director, Volvo Auto India Pvt Ltd. The company, which sold around 320 cars last year, is expecting to sell over 1,000 cars this year in India.

Speaking on the sidelines of the inauguration of Volvo’s 8th car showroom in India, in Chennai, Ernberg, said, “The luxury car market in India would grow to 150,000 units by 2020 and we are targeting 20,000 units out of it.” The market share of luxury car segment is expected to go up from the present 1 per cent of the car market and this is expected to go up to 3 per cent by 2020.

He said that as part of meeting the target, the company is expanding rapidly and would double the number of showrooms from the present eight to 16 in next 18 in next 18 months. It would also double the dealerships from present seven to 14-16 by 2013. In February, this year, it has launched three diesel variants (D3) of the existing variants, S60, S80 and SUV-XC60, in India. Almost 95 per cent of the units sold in India are diesel variant and the company see the trend to continue, he added. It would launch new models in India from beginning of 2013. The company expects the Chennai showroom to sell around 500 units from 2013.

Volvo Buses has been in India for 10 years and has the richest experience when it comes to high-performing bus applications. With a state-of-the-art factory near Bangalore and overall profile of being a complete transport solutions provider, Volvo has a unique ability to understand the needs of the Indian market and configure products accordingly. Volvo Buses today has attained a leadership status in the coach and city bus segments in India. The company also exports to Bangladesh, Sri Lanka and South Africa.

Volvo’s plant at Hosakote, Bangalore is one-of-its-kind facility which has incorporated the best practices from the Volvo Bus Corporation plants in Mexico, Poland and Finland. With over seven decades of experience, Volvo Buses have globally developed the principles of bus building. This includes:

– Methods and Processes for bus body building
– Training of people on specialized skills
– Production management that incorporates Visual Management, 5 S Processes, Safety and Ergonomic Work Environment
– Material handling practices

The success story of Volvo Buses in India would not have been possible without the support of customers over the last 10 years. From the latest global concepts to class-defining technologies – at each stage we took the initiative to incorporate technology that enhanced the quality of life for scores of passengers in India keeping in mind their expectations of comfort, safety and luxury.

Today, the Volvo intercity coaches traverse all major routes in India. In the city bus segment, Volvo buses operate across 12 cities in India. Volvo Buses in India also exports to South Africa, Bangladesh and Sri Lanka. At present, there are about 5,000 Volvo buses operating in the SAARC region, both in the city and inter-city segments.

The company recently unveiled its New Range of Buses. With this Volvo has become the only bus manufacturer in India with the largest range of high-performing buses comprising 10 models and variants. Customers now have the Power of Choice in high-performing buses like never before.

3.1. Indian software industry

The rise of the IT software and service industry during the 1990s represents one of the most spectacular achievements of the Indian economy. The industry has grown at an incredible rate of 50per cent per annum over the past few years, is highly export-oriented, has established India as an exporter of knowledge-intensive services, and has brought in a number of other spillover benefits as creating employment and a new pool of entrepreneurship.

The evolution of India as an exporter of these services has also created much interest in the development community worldwide. Encouraged by the Indian success, a number of other developing countries are trying to emulate it in entering the industry. There are questions on the sustainability of the high growth of Indian exports in view of the emerging competition. To put this growth performance in an international perspective, the Indian software industry would account for roughly 2 per cent of the US $ 400 billion global software industry.

An interesting feature of the Indian industry is the relatively large and growing number of companies participating in development and export. One indicator of the supply base in the membership of the industry body, Nasscom , that has grown from just 38 members in 1988 to 850 members in 2001.

A technological revolution is transforming society in a profound way. If harnessed and directed properly, information and communication technologies (ICT) have the potential to improve all aspects of our social, economic and cultural life. ICTs can serve as an engine for development in the 21st century, yet the majority of the world's population has yet to benefit from the new technology.

The ways in which information and communication technologies (ICTs) can be used to help transform regional economies and communities is the major theme of any country in the world. Thus, India is one of the most eager countries in adopting such solution of developing communication.

In many ways small market towns have become the forgotten players in regional economies. Much of the work on innovation and regional development focuses on the dynamics and synergies that exist between cities and the surrounding rural areas. Yet the experiences of some small towns in India and elsewhere demonstrate that there are ample opportunities to play an active and significant role. The need to exploit the potential of both community and place in the digital world is becoming increasingly clear. The challenge for policymakers lies in effectively balancing and integrating “top-down” strategic approaches with community development perspectives.

In the early 1970s, when India had been an independent country for some time, a jointly owned production company, Ericsson India Pty Ltd, was formed that sold manual switching equipment to customers that included the Indian defense authorities.

The growth of mobile business requires the ability to provide context-aware services when and where needed, the development of trust relationships between trading partners, and the ever-expanding capability to reconfigure value chains. These issues are becoming more prominent with the emergence of converged architectures for next generation public networks. The integration of the Internet, traditional telephony networks, and consumer electronics brings mobile business to the forefront. In this context, mobile identity management can play a central role in addressing usability and trust issues in mobile business. Widening the discipline boundaries for future research on identity in mobile business will be essential for the development of effective mobile service provision systems.

The government has unveiled a telecom policy that allows private participation in basic and value-added services. Global telecom players like Motorola, Fujitsu, Alcatel, Ericsson, and AT&T have already established a manufacturing presence in the country and are awaiting normalization of the policy.

The Indian government was composed of many factions (parties) which had different ideologies. Some of them were willing to throw open the market to foreign players (the centrists) and others wanted the government to regulate infrastructure and restrict the involvement of foreign players. Due to this political background it was very difficult to bring about liberalisation in telecommunications. When a bill was in parliament a majority vote had to be passed, and such a majority was difficult to obtain, given to the number of parties having different ideologies.

Liberalization started in 1981 when Prime Minister Indira Gandhi signed contracts with Alcatel CIT of France to merge with the state owned Telecom Company (ITI), in an effort to set up 5,000,000 lines per year. But soon the policy was let down because of political opposition. She invited Sam Pitroda a US based Non-resident Indian NRI to set up a Center for Development of Telematics(C-DOT), however the plan failed due to political reasons. During this period, after the assassination of Indira Gandhi, under the leadership of Rajiv Gandhi, many public sector organisations were set up like the Department of Telecommunications (DoT), VSNL and MTNL. Many technological developments took place in this regime but still foreign players were not allowed to participate in the telecommunications business. India has opted for the use of both the GSM (global system for mobile communications) and CDMA (code-division multiple access) technologies in the mobile sector. The mobile tariffs in India have also become lowest in the world.

The demand for telephones was ever increasing. It was during this period that the Narsimha Rao-led government introduced the national telecommunications policy [NTP] in 1994 which brought changes in the following areas: ownership, service and regulation of telecommunications infrastructure. They were also successful in establishing joint ventures between state owned telecom companies and international players. But still complete ownership of facilities was restricted only to the government owned organisations. Foreign firms were eligible to 49% of the total stake. The multi-nationals were just involved in technology transfer, and not policy making

3.2. Mobile telephony in India

In 2010-11 Indian IT & ITeS industry has performed remarkably well. The (National Association of Software and Service Companies NASSCOM) data estimates suggest that the Indian Software and Services Industry aggregated revenues of US $ 76 billion in 2010-11.

The main growth drivers of the IT and ITeS industry are cost efficiencies, utilization rates, diversification into new verticals and shifting business & pricing models. India is a preferred destination for companies looking to offshore their IT and back-office functions. It also retains its low-cost advantage and is a financially attractive location when viewed in combination with the business environment it offers and the availability of skilled people.

Mobile telephony was introduced in Indian markets in mid- 1990s. In the last few years, the sector has witnessed tremendous growth. The subscriber base is adding more and more customers every year. Mobile telephony recorded more than 52.2 million users in FY 2004-05, exceeding fixed line telephone subscriber base. Also, mobile segment has welcomed more and more players every year. Liberalized policies have ensured lower tariffs and reduced roaming rentals. This will lead to increased usage of mobile phones. Mobile telephony can be further categorized into WLL, CDMA and GSM. The much-awaited 3G mobile technology is going to enter soon in Indian telecom sector.

Mobile telephony provides services such as messaging- text and multimedia- mobile commerce through GPRS enabled mobile Internet, with local calls and long distance calls- national and international.
Not only service providers but also equipment manufacturers are contributing towards the growth of the sector. Mobile telephony started up with bulky handsets and has now reached to smart phones with cameras, radio facility and lots of other multimedia applications. Also, PDAs have entered Indian markets with operating systems that make it a pocket PC.

Both Public Players and Private Players are competing hard to capture more and more market share. Leaders in Fixed Line Telephony have now started providing mobile services, such as MTNL's Garuda and Dolphin. Private Players capture most of the market share in Indian mobile segment.

In the United States, Ericsson partnered with General Electric in the early nineties, primarily to establish a US presence and brand recognition. Ericsson had decided to obtain chips for its phones from a single source—a Philips facility in New Mexico. In March 2000, a fire at the Philips factory contaminated the sterile facility. Philips assured Ericsson and Nokia (their other major customer) that production would be delayed for no more than a week. When it became clear that production would actually be compromised for months, Ericsson was faced with a serious shortage. Nokia had already begun to obtain parts from alternative sources, but Ericsson's position was much worse as production of current models and the launch of new ones was held up.

Ericsson, which had been in the mobile phone market for decades, and was the world's third largest cellular telephone handset maker, was struggling with huge losses. This was mainly due to this fire and its inability to produce cheaper phones like Nokia. To curtail the losses, it considered outsourcing production to Asian companies that could produce the handsets for lower costs.

Speculation began about a possible sale by Ericsson of its mobile phone division, but the company's president said it had no plans to do so. "Mobile phones are really a core business for Ericsson. We wouldn't be as successful (in networks) if we didn't have phones", he said.

Sony was a marginal player in the worldwide mobile phone market with a share of less than 1 percent in 2000. By August 2001, the two companies had finalized the terms of the merger announced in April. The company was to have an initial workforce of 3,500 employees.

Following the creation of the joint venture, Ericsson's market share actually fell, and in August 2002, Ericsson announced that it would cease making mobile phones and end its partnership with Sony if the business continued to disappoint. However, in January 2003, both companies said they would inject more money into the joint venture in a bid to stem the losses.

Sony Ericsson's strategy was to release new models capable of digital photography as well as other multimedia capabilities such as downloading and viewing video clips and personal information management capabilities. To this end, it released several new models which had built-in digital camera and colour screen which were novelties at that time. The joint venture, however, continued to make bigger losses in spite of booming sales. The target date for making a profit from its first year to 2002 was postponed to 2003 to second half of 2003. It failed in its mission of becoming the top seller of multimedia handsets and was in fifth-place and struggling in 2005.

On January 2, 2007, Sony Ericsson announced in Stockholm that it would have some of its mobile phones made in India, and that its two outsourcing partners, Flextronics and Foxconn would manufacture ten million mobile phones per year by 2009. CEO Miles Flint announced at a press conference held with India's communications minister Dayanidhi Maran in Chennai that India was one of the fastest growing markets in the world and a priority market for Sony Ericsson with 105 million users of GSM mobile telephones.

Figure 1

Annual net income or loss 2003 to 2009

During 2010, in 11 months, Sony Ericsson's Facebook fan count rose from 300,000 to 3.9 million to become the 40th-largest brand on the social networking site. The company aims to capitalise on this fanbase and increase engagement by profiling these fans and matching them to dedicated content. It will also analyse the top commenters on the Facebook page and ensure engagement through special content and offering these fans the chance to visit Sony Ericsson offices.

The Swedish vendor, which nearly doubled its India workforce last year to 12,000, is also undertaking a major "people competence" mapping exercise in the country to weed out non-performers.

An Ericsson India spokesperson said the present exercise is aimed at aligning the Swedish vendor's India operations in terms of people, processes, customer focus and diverse skill sets within the organization. However, the company stressed that there would be no further layoffs in the ongoing performance review.

Under Ericsson's exercise, internally dubbed as the `India transformation' process, the company will centralize all customer support functions instead of separate units for top customers like Bharti Airtel, Vodafone or Idea at present.

Figure 2

Bharti Airtel has expanded its managed services agreement with Ericsson India Private Ltd. for its India operations. Under this new five-year multi-vendor, multi technology managed services agreement Ericsson will operate, maintain and provide services across 70% of BhartiAirtel's network in India. In addition to the standard portfolio of managed services, Ericsson will also take responsibility for the Intelligent Network that manages BhartiAirtel's prepaid customer base.

By the turn of the century, Ericsson's operations in India included 700 employees at 13 locations throughout the country and with head offices in Delhi. Business operations comprise sales and marketing of infrastructure, installation and service, customer training, software development and distribution of mobile phones.

Telephone penetration in the country, which has a population of one billion, is less than two percent, as measured in the number of lines. In Sweden, telephone penetration is nearly 80 percent. This says something about the potential for Ericsson to expand its business in India.

3.3. Telecom Firms Lobby with Indian Government

The chiefs of Indian and foreign mobile-phone companies Wednesday met with top government officials to press their views against the telecommunication regulator's recent bandwidth auction proposals such as a steep base price.

The meetings come a week after the Telecom Regulatory Authority of India proposed starting prices for the bandwidth sale several times higher than what operators pay currently, and also the auction of only one slot of bandwidth, among others.

Local operators have called the proposals "regressive." Analysts say the suggestions, if accepted by the government, will increase operational costs for companies and call tariffs for consumers.

Monday, the government said it was referring back the bandwidth auction proposals to the regulator for a review, and expects TRAI to revert by May 14. India plans to take a final decision on the auction process by the end of May.

After the meetings Wednesday, Jon Fredrik Baksaas, chief executive of Norway's Telenor ASA (TEL.OS), which runs its Indian operations through a joint venture, said that the auction proposals weren't as per the Supreme Court's directions and that the regulator completely ignored the views of all operators while framing the proposed rules.

"India must remain an attractive destination for all foreign investors across industries, not only because of the growth potential it indeed offers, but also its predictable, logical and investor-friendly policy environment," he added.

4.1. India – Friendship with other countries and trust building

The index of industrial production (IIP), released each month, is the key indicator of industrial performance. The new IIP series with 2004-5 as base was released in June 2011 replacing the earlier IIP series with base 1993-94.

Since the IIP is a fixed weight and fixed base series, a dated base often has limitations in reflecting the industrial scenario. The new series not only has a more recent base, it has a larger and more representative product basket and weights that appropriately reflect the relative importance of the sectors, products, and product groups.

The cases of successful economic development in other developing countries are often cited in Indian policy debates. It is, in general, appropriate to do this: many countries have achieved much more than India has been able to do, and it is natural to learn from the accomplishments of these countries. The countries frequently selected for comparison (such as South Korea and the other three of the so-called 'four tigers', and also Thailand and post-reform China) are indeed among the countries from which India can expect to learn greatly, since they have, in different ways, done so very well. To claim that ' India is unique' would be true enough in itself but thoroughly misleading as an alleged ground for refusing to try to learn from other countries.

The sense that there is much to learn from China's experience was immediate and powerful. The radicalism of Chinese politics seemed to many to be deeply relevant to India, given the enormity of its poverty and economic misery. China was the only country in the world comparable with India in terms of population size, and it had similar levels of impoverishment and distress. The fact that as a solution China sought a revolutionary transformation of society had a profound impact on political perceptions in the subcontinent. Similarly, later on, China's choice of market-oriented reform and of a policy of integration with the world economy has given those policies a much wider hearing in India than they could have conceivably had on the basis of what had happened in countries that are much smaller and perceived to be quite dissimilar to India: Hong Kong, Taiwan, Singapore, even South Korea.

Indians tend to trust only when convenient. This is more likely to occur in the internal relationships between your working partners, who may not have worked together until you came along. It is relatively easy for you as a foreigner to become accepted and trusted, assuming that you do not ask anyone to do something unscrupulous. In India, mistrust is easily acquired and almost impossible to eradicate. It never hurts to quietly ask your colleagues what is the pukka, or proper thing to do, in a situation that is unfamiliar to you.

It is very helpful to socialize fairly often with your Indian counterpart and their families. To Indians trust is a personal bond that spills over into business life. Most Indian professionals perceive it an honor to conduct business with foreigners. However, one must be wary of some types who talk a good deal but never sign one—some people relish the prestige of appearing familiar with foreigners and love to “talk deal.”

CONCLUSION

India is attempting a transformation few nations in modern history have successfully managed: liberalizing the economy within an established democratic order. It is hard to escape the impression that market interests and democratic principles are uneasily aligned in India today. The two are not inherently contradictory, but there are tensions between them that India’s leaders will have to manage carefully.

India’s development experience is also likely to be distinct from East Asia’s. south Korea and Taiwan embraced universal-franchise democracy only in the late 1980’s and the mid-1990’s, two decades after their economic upturn began. Other economically successful countries in the region, such as China and Singapore, have yet to became liberal democracies. Democratic policies partly explains why, for example, privatization has gone so slowly in India compared to China. In India, workers have unions and political parties to protect their interests. In China, labor leaders who resist job losses due the privatization are tried and jailed for treason and subversion, something entirely inconceivable in India’s democracy.

So far, the reform process of the last fifteen years has had positive results: by most conventional standards, India’s economy is booming. After registering a 6 per cent average annual growth rate for nearly a quarter century, the Indian economy has picked up even greater speed. Over the last three years, it has grown at over 8 per cent annually and forecasts for the next few years promise more of the same. Investment has been steadily climbing, exceeding 30% lately and raising hopes of an investment boom like that which propelled East Asia’s economies. Total foreign direct investment for the current financial year is likely to exceed $10 billion (compared to $100 million in 1990-1991) and is rising.

The manufacturing sector, like the service sector, is becoming a key engine of the economy, and India’s world-class information technology sector continues to grow exponentially.

Mobile business will be the main driving force for the next phase of electronic commerce growth because the rapid adoption of second-generation mobile telecommunication systems has created a market opportunity of several hundred million consumers worldwide. The growth of mobile commerce is expected to accelerate with the emergence of converged Internet-telephony networks.

Vision India 2020 is a visionary romp through a possible new future for India. It looks back over a decade-long transformation of the country from its current status as "back office for the world" to that of world leader through the application of the principles of visionary entrepreneurship.

"In 2020, I envision a more international India," writes Sramana Mitra, technology entrepreneur and Silicon Valley strategy consultant. The India of the future will have grown more open and engaged with the world, yet is "not imperialistic, but diplomatic and benevolent. An India capable of complementing its natural strengths with those of its international collaborators. A high-velocity India unencumbered by mindless bureaucracy. A thinking India that can envision its own products, rather than blindly executing on American specs. And finally, a bold, confident India, having shaken off centuries of servility to stand on its own two feet and look out upon its own infinite possibilities."

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