Junior, Best and Cotter (2014) are of the viewpoint that the process of globalization and the also the emergence of different kinds of technologies have drastically changed the nature of the existing business world in a substantial manner. As opined by Visser and Tolhurst (2017), the extensive usage of these technologies by different organizations has not only improved their production capacity but at the same time their profitability as well. The net result of this is the fact that the business enterprises are no longer content being operational in one particular nation and global business expansion has become the new catchphrase within the cannon of the contemporary business world (Gay 2016). However, there are various factors that these international business enterprises need to take into effective consideration like the business environment of the host nation, GDP of the host nation and other for the process of their business in these host nations (Laszlo and Cescau 2017). In addition to these, the organizations at the same time need to take into account the natural resources, foreign currency exchange and other factors that affect the business operations of the business enterprises in these nations. This report will analyze the impact of the external environment and other related factors on the business enterprises in particular context of the nation of India.
The nation of India, located in the southern part of the continent of Asia, is one of the largest developing nations of the world (El Ghoul, Guedhami and Kim 2017). In addition to this, the nation ranks on the 2nd position in terms of the total population that it has and this high population of the nation ensures the fact that the business enterprises which are operational in the nation have access to the required number of labors that are needed for the purpose of their business operations (India.gov.in 2018). Pick and Nishida (2015) are of the viewpoint that the process of globalization has both positively and negatively affected the business environment of the concerned nation. For example, it is seen that following the path of globalization and also lured by the 5.9% GDP of the nation many international organizations has established their business in the concerned nation (India.gov.in 2018). In this regard, mention needs to be made of organizations like HDFC Bank, Starbucks, Spencer’s and others which has not only helped to improved the economic condition of the nation in a positive manner but at the same time created adequate number of job opportunities for the people of the nation as well (El Ghoul, Guedhami and Kim 2017). The net result of this is the fact that the unemployment rate of the nation is 3.52% which is the lowest one among the different developing nations of the world and the per capita income of the nation is $7,795 (India.gov.in 2018). However, the process of globalization has at the same adversely affected the nation as well since it is seen that the different nations of the world taking advantage of the cheap labor that the nation offers different international organizations are outsourcing their manufacturing and other business processes to the nation (Hallward-Driemeier and Pritchett 2015). The net result of this is the fact that despite having all the necessary resources as well as technologies the nation under discussion has not been able to become one of the major economic hubs of the world.
Chittoor, Kale and Puranam (2015) are of the viewpoint that the business prospects of a particular business enterprise depends greatly on the macro as well as micro business environment in which it is operational. As opined by Gay (2016), a stable as well as congenial business environment is one of the most basic requirements of the different business enterprises since it directly affects the different facets of the business of an enterprise. In this regard, it needs to be said that the nation of India has one of the most stable democratic governments of the world. More importantly, it is seen although the general elections for the central as well as local governments are held every five years yet the nation is not tormented by different kinds of political turmoil, struggles and others like the other developing nations had to deal with (Pradhan 2017). Moreover, it is seen that the national government of the nation under discussion here takes various kinds of initiatives for the enhancement of trade as well as commerce which in turn facilitate the growth of trade and commerce in the concerned nation. Thus, it can be said that the stable political environment of India actually acts an opportunity that the different business enterprises can utilize for the enhancement of their business prospects in the nation under discussion here.
Wilson and Wilson (2017) are of the viewpoint that the business style of a particular nation is directly dependent not only on the national culture of the concerned nation but at the same time the nature of society which is existent within the nation as well. In this context, it needs to be said that the people of the nation are highly individualistic and the factors like “achievement, success and competition” are likely to motivate them to perform in a better manner (Hofstede’s Insights 2018). In addition to this, the nation scores very high on the power distance index as well as long-term orientation index (Hofstede’s Insights 2018). On the other hand, the score of the nation under discussion here on the uncertainty avoidance and indulgence sections are very low (Hofstede’s Insights 2018). The below given graph indicates the key features of the national culture of India on Hofstede’s model of national culture-
Figure 1: Hofstede’s analysis of India
Source: Hofstede’s Insights 2018
The society of India is greatly influenced by the traditional religion of Hinduism which is being followed by the majority of the people of the nation (Singh and Agrawal 2017). However, in the recent times it is seen that the people of the nation are coming out of the orthodoxy which had dominated their nation and are adopting the liberal culture which is being followed in the western nations (Hamilton and Webster 2018). The net result of this is the fact that the different international business enterprises would have to modify their business style on the basis of the national culture and also the societal framework of the nation under discussion here.
The nation of India is not known for its technological advancements because of the limited amount of technological resources that are available to the nation (Ahmed and Alamm 2017). The end result of this is the fact that the nation had to depend on the technological resources of the other nations of the world for the effective functioning of different business enterprises which are a part of it. However, in the recent times, it is seen that the nation is taking stringent strides in the technological sphere because of the advancements made by the nation in the sphere of education (Wilson and Wilson 2017). More importantly, in the recent times, it is seen that the nation is actively indulging in various kinds of research and development projects with the different First World nations of the world which in turn has positively affected the technological landscape of the nation under discussion here (Hamilton and Webster 2018). Thus, it can be said that the different business enterprises of the nation under discussion here can utilize these technological resources of the nation for the process of their business.
As opined by Chittoor, Kale and Puranam (2015), the Heckscher-Ohlin theory of international trade states that a country specialises in the production and export of such goods as conform to its factor endowment. More importantly, the theory states that the factors of labour, land, natural resources and other remained unchanged between different countries but they change significantly within the diverse nations (Laszlo and Cescau 2017). In this regard, it can be said that the high population of the nation actually acts as a resource for the nation of India since the different business enterprises of the nation can utilize this resource of the nation to meet their production, manufacturing and other kinds of needs (Junior, Best and Cotter 2014). In addition to this, large land area of the nation under discussion here also offers the right kind of land area to the organisations wherein they can establish their business enterprises so as to meet their diverse requirements. Furthermore, the nation of India has large quantities of other natural resources like coal, mica, graphite and others which are needed by the different organisations for their manufacturing and other kinds of needs (Chittoor, Kale and Puranam 2015). These factor endowments of the nation had enabled it to gain competitive advantage in comparison to the other nations of the world. For example, these resources as well conditions that the nation of India offers to the different business enterprises are not only the unique features of the nation but at the same time had helped the different organisations to gain success as well.
As opined by Junior, Best and Cotter (2014), the rate of inflation within a particular nation can have a significant impact on the foreign currency as well as exchange rate of the concerned nation as well. For example, it is seen that the nation of India has a high inflation rate of more than 5.3% because of the unstable economy of the concerned nation (India.gov.in 2018). This in turn adversely affects the foreign currency and exchange rate of the concerned nation and the net result of this is the fact that the different international currencies like Dollar, Euro and others score very high in comparison to the Indian currency, that is, Rupee (Visser and Tolhurst 2017). This aspect of Indian economy adversely affects not only the growth rate of the different business enterprises which are currently operational in the nation of India but also the other facets of their business as well.
The nation of India currently follows a free trade policy wherein all the business enterprises of the nation have access to the same kind of opportunities for the effective conduct of their business and also for their growth (Chittoor, Kale and Puranam 2015). El Ghoul, Guedhami and Kim (2017) are of the viewpoint that this free trade policy followed by the national government of the nation in turn gives rise to the high competition which is being faced by the different business enterprises in the nation for the conduct of their business operations. However, at the same time, it needs to be said that there are various barriers that the organizations face for the conduct of their business operations. The major barriers that the different organizations face for the conduct of their business operations in the nation of India are the unstable economy of India, the strained relation that the nation has with its neighbors like Pakistan, Bangladesh, China and others (Hallward-Driemeier and Pritchett 2015). However, there are various incentives for the various international business enterprises for establishing their business in India like the unique position of the nation, the untapped resources of the nation, the emergence of the nation as one of the major business markets of the nation and others.
Hamilton and Webster (2018) are of the viewpoint that the Foreign Direct Investment or FDI have helped in a substantial manner towards the economic development of the Indian nation by means of direct monetary investments in the nation. For example, one of the most important trends, which are being seen within the Indian business sphere, is the fact that the different international business enterprises are actively investing in the diverse business enterprises of the nation (Singh and Agrawal 2017). In this regard, mention needs to be made of the organizations like Tata Steel, Kingfishers and others which have formed collaborations with the different international organizations so as to get the right kind of investments to enhance the prospects of their business (Ahmed and Alamm 2017). This in turn has helped the different organizations of the nation to attain a higher level of growth and at the same time has helped to stabilize the national economy of India as well.
There are several measures that the nation of India can follow to make the environment of the nation more congenial for the different organizations of the nation. In this regard, the most important ones are-
Conclusion
To conclude, the business environment of a particular wields a significant impact on the business enterprises which are operational in the concerned nation. In this regard, it needs to be mentioned that the political, socio-cultural, technological and others are the most important ones which affect the business operations of the different organizations significantly. In addition to these, the FDI, inflation rate, currency exchange rates of the concerned nation also affects the business operations of the different organizations substantially. Thus, it becomes important for the different international business enterprises to analyze these factors before expanding into the business market of any nation.
References
Ahmed, F. and Alamm, M.A., 2017. Business Environment: Indian and Global Perspective. PHI Learning Pvt. Ltd..
Chittoor, R., Kale, P. and Puranam, P., 2015. Business groups in developing capital markets: Towards a complementarity perspective. Strategic Management Journal, 36(9), pp.1277-1296.
El Ghoul, S., Guedhami, O. and Kim, Y., 2017. Country-level institutions, firm value, and the role of corporate social responsibility initiatives. Journal of International Business Studies, 48(3), pp.360-385.
Gay, R.D., 2016. Effect of macroeconomic variables on stock market returns for four emerging economies: Brazil, Russia, India, and China. The International Business & Economics Research Journal (Online), 15(3), p.119.
Hallward-Driemeier, M. and Pritchett, L., 2015. How business is done in the developing world: Deals versus rules. Journal of Economic Perspectives, 29(3), pp.121-40.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University Press.
Hofstede Insights. 2018. Country Comparison – Hofstede Insights. [online] Available at: https://www.hofstede-insights.com/country-comparison/india/ [Accessed 10 Dec. 2018].
India.gov.in. 2018. National Portal of India. [online] Available at: https://www.india.gov.in/ [Accessed 10 Dec. 2018].
Junior, R.M., Best, P.J. and Cotter, J., 2014. Sustainability reporting and assurance: A historical analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), pp.1-11.
Laszlo, C. and Cescau, P., 2017. Sustainable value: How the world’s leading companies are doing well by doing good. Routledge.
Pick, J.B. and Nishida, T., 2015. Digital divides in the world and its regions: A spatial and multivariate analysis of technological utilization. Technological Forecasting and Social Change, 91, pp.1-17.
Pradhan, J.P., 2017. Emerging multinationals: A comparison of Chinese and Indian outward foreign direct investment. Institutions and Economies, pp.113-148.
Singh, V. and Agrawal, A., 2017. Impact of business environment on balancing innovation process in Indian SMEs. International Journal of Business Innovation and Research, 12(2), pp.224-239.
Visser, W. and Tolhurst, N., 2017. The world guide to CSR: A country-by-country analysis of corporate sustainability and responsibility. Routledge.
Wilson, C. and Wilson, P., 2017. Make poverty business: increase profits and reduce risks by engaging with the poor. Routledge.
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