Doing Business in India: Outsourcing Manufacturing Activities of a New Tablet Computer to India

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Table of Contents

Introduction
The Requirements for Choosing the Country
Conclusion
References

Introduction

The main aim of the report is to explore and state the conditions according to which it is possible to choose India as the most appropriate country for outsourcing in relation to the tablet computer industry. The justification of the choice is provided in the report with references to the criteria which are significant for operating within the industry successfully.

India can be discussed as the most suitable country for outsourcing because its labour market is characterised by the highly educated and skilled work force, high quality services provided, possibilities for cost savings, and developed technologies along with favourable government policies, and the fast growing infrastructure, and these factors can be considered as beneficial for implementing effective outsourcing policies (Bullen, LeFave, & Selig, 2010; Thite & Russell, 2007). Moreover, India’s location is strategic for transporting the materials and products easily.

The report also includes a study on suppliers and competitors as well as the nature of the market, and it provides the expert recommendations on these aspects in relation to the specifics of the industry’s micro- and macro-environment. Another aim of the report is to analyse the requirements for the establishment of the company in India, studying the competitors in the industry and their experience.

The study can show the level of the technology required and accentuate the particular features of the capital project. Presenting the analysis of the correlation between the company’s required characteristics of outsourcing effectively and India’s market’s possibilities, this report aims to convince the Board to choose India as the country for outsourcing the company’s production activities.

The Requirements for Choosing the Country

Socio-Economic Requirements

To make the process of producing goods profitable, the companies’ leaders are inclined to orient to outsourcing to the countries which can provide the lower costs in relation to labour costs and production. To compete within the industry successfully, it is necessary to reduce labour costs. Thus, cost saving is one of the main reasons for companies’ seeking for outsourcing services from India.

Furthermore, there are significant differences between labour costs in India and in the other third world countries (Bullen, LeFave, & Selig, 2010). The producers expect to obtain benefits from hiring the Indian population because of the Indians’ level of education and their competence in the English language (Davies, 2004). Moreover, the companies in India have the definite freedom to manage their own budgets and gain huge profits (Thite & Russell, 2007).

India can be also discussed as the attractive destination for companies willing to offshore their IT operations and manufacturing processes to other countries in order to lower the costs (Vestring et al., 2005). The particular features of the high technology industry are the orientation not only to the cheap labour and pricing flexibility but also to the highly skilled worker to operate the equipment, machinery, and other technologies (Lacity & Rottman, 2008).

The country’s labour market consists of engineers of different specialisations who can work with high technologies and of a large number of highly skilled and educated people who can perform the various technical activities (Thite & Russell, 2007).

The fact is important for companies producing tablet computers because they need skilled labourers to manufacture the innovative products which can compete favourably with the competitors’ goods. Moreover, the Indian government worked out the acts on the intellectual property to guarantee the absence of the information’s leakage to the competitors because of members of the staff (Chesser & Cohen, 2006).

Demand/Buyer Characteristics

To organise the production of the tablet computers in India successfully, it is necessary to refer to such aspects as proximity, ethical issues associated with the working conditions, infrastructure, and buyers’ attitudes to the other brands. According to the first point, the location of the country provides the company with opportunities to organise quick transportation of the materials and products within the country and from the countries-suppliers (Bullen, LeFave, & Selig, 2010).

Thus, the country’s closeness to Korea and Taiwan, the major suppliers of processor chips and memory cards for the industry, is advantageous for producing the tablet computers in time according to the quality standards and the company’s expectations (Salwan, 2007). Furthermore, the developed transport connections with the mentioned countries make the distribution of the product more efficient, faster, and cheaper.

The next point of the discussion is the working conditions. The third world countries are often considered to be the territories with the worst working conditions round the globe (Lacity & Rottman, 2008). In spite of the fact India has the reputation of the country where foreign companies can find the highly skilled labourers, it is important to pay attention to the issue of contributing to the satisfied working conditions in order to meet the ethical requirements.

During the last decades, the Indian government tries to control the situation in the labour market, supporting the companies invested by the foreign corporations. New regulations and ethical laws were developed to protect the labourers’ rights and provide the satisfied working conditions for the labour force (Davies, 2004).

It is important to note that buyers’ brand associations are based on the success of the advertising campaigns and on the quality of the producing goods. The tablet computer industry is highly competitive, and the role of the buyers’ interest in the product is significant.

Today, the tablet computers are at the ‘growth’ stage of the development cycle (Thite & Russell, 2007). That is why, the present situation in the economic and technological spheres is the best time to operate within the industry and try to gain the great profits, competing in the market. The following graph illustrates the potential growth of the tablets’ sales.

The graph illustrates the potential growth of the tablets’ sales. — *Figure 1 (Tablet Sales Trends, 2010).*

In spite of the fact the large percentage of the company’s products should be oriented to the international market and Western countries, Indian people can be also discussed influential consumers of the tablet computers with references to the latest tendencies.

The Indian government has offered subsidies for college students to buy the tablet computers at a lower price in comparison with the average price set for the other countries’ markets (Akash tablet’s commercial variant, 2011). Thus, it is possible to discuss India not only as a producing country but also as a potential consumer. This fact can encourage firms to seek for outsourcing services from India.

Barriers to Entry into the Market

The company, which orients to producing the new tablet computers, operates within the developed Hi-Tech and IT industry. The problem is in the fact the success of the company depends on capitals investing into the production (Thite & Russell, 2007). The establishment of factories in India specialised in producing tablet computers requires much financing, and it is the first barrier to entry into the industry.

The first barrier is closely associated with the fact that the production of a tablet computer is very intensive in relation to labour and capital issues. The production is based on using expensive equipment and machinery along with hiring highly skilled workers (Vestring et al., 2005).

However, today the contribution to the development of the Hi-Tech and IT industry in India is a top priority of the Indian government, which offers the attractive and effective IT policies to support the industry by giving tax-related and other benefits to the company which is inclined to invest in the industry (Chesser & Cohen, 2006). The government also continues to improve infrastructure and communication networks (Thite & Russell, 2007). From this point, India is the best variant for outsourcing to it.

Economies of scale can be also analysed as the important factor for the company’s progress. The scales’ principle can be used to reduce the company’s costs and increase the productivity. The availability of the technical staff allows speaking about maximising the company’s profits through economies of scale.

The costs’ minimisation is the main reason for outsourcing and it provides the firms in India with the possibility to gain from the industry’s competition (Thite & Russell, 2007). It is important to not that there will not be significant retaliation from competitors against a newcomer because the size and competitiveness of the industry reduce the retaliatory reactions of the already established companies such as Apple and Samsung (Sonaje, 2012).

There are very little or no protectionist policies in the High-Tech and IT industry in India. No tariffs are applied to companies willing to export their products (Thite & Russell, 2007). It reduces the cost of production leading to the companies’ gaining profits (Gay & Essinger, 2000).

Supply Issues

It is possible to determine such important supply issues as the transportation of processor chips, memory cards, display screens, and GPS trackers significant for producing high-quality tablet computers from different countries.

The factory located in India can have the opportunity to discuss its location as the advantage in relation to the question of transporting the necessary components from Korea and Taiwan as the major suppliers within the industry. Thus, few big suppliers for the mentioned components are located in Korea and Taiwan, and these manufacturers have the bargaining power in the industry (Chesser & Cohen, 2006).

Technological Requirements

The production of the tablet computers requires the orientation to using the developed technologies. The contemporary tendencies to support the progress of the Hi-Tech and IT industry in India are important for organising the production of the tablet computers which can be discussed as a high-tech consumer product (Thite & Russell, 2007).

The advantages of India for being chosen for outsourcing are in the quality of the labour force and a number of highly skilled and experienced engineers who are ready to work within the industry (Davies, 2004).

In spite of the fact the research and development can be based on the human resources of the head company, the qualification of the workers is important for producing the new tablet computers and for controlling the process organised according to the innovative technologies’ improvements (Chesser & Cohen, 2006). Thus, to produce the tablet computer, it is necessary to hire highly skilled workers to operate the machinery and equipment and follow the instructions.

Competitors

There are few suppliers of the tablet computers and a relatively large number of buyers that is why the market can be discussed as Oligopolistic. This means that a new company in the industry can develop in the market with references to competitive pricing and controlling quality to entice the large number of consumers and win the industry’s rivalry (Vestring et al., 2005).

The main company’s competitors are Apple, Samsung, Amazon, ASUS, and HTC. These companies offer tablet computers in a number of different sizes and functionalities. The share of ASUS in the market is 2.3%, RIM presents 2.3%, Amazon -4%, Samsung – 7.5%, Apple – 63% (Sonaje, 2012).

These companies are some of the largest multinational companies in the world, and there are challenges for the successful entry to the industry (Chesser & Cohen, 2006). The accents should be made on the non-price competition as effective in the tablet industry. That is why, it is important to implement innovative technologies to follow the world tendencies and compete successfully.

Other Important Factors

To provide the complex analysis of the industry and determine the advantages of choosing India as a country for outsourcing the manufacturing activities, it is necessary to pay attention not only to political, economic, socio-cultural, technological, and legal aspects but also to the problem of the environmental sustainability as the key factor of the industry’s macro-environment (Bullen, LeFave, & Selig, 2010).

It is important to note that the issues of the environmental sustainability are traditionally accentuated by Western companies, and the main methods to solve the problem can be also used in India in relation to following the government’s recommendations in the field (Chesser & Cohen, 2006). Thus, the problem of the environment protection is urgent for India that is why the technological processes should be organised to meet the government’s requirements and the principle of the environmental sustainability (Davies, 2004).

Conclusion

To conclude, it is possible to note that India can be chosen for outsourcing the manufacturing activities in relation to the tablet computer industry because the conditions provided in the country meet the basic requirements stated by the company. Thus, the characteristics, which are required by the producer, are the supporting micro- and macro-environment.

The company pays attention to such forces typical for the macro-environment as political, economic, socio-cultural, technological, environmental, and legal factors and to the components of the industry’s micro-environment where the accents are made on the role of competitors, suppliers, partners, and customers.

The findings of the industry’s analysis and the position of India in relation to the Hi-Tech and IT industry allow speaking about India as the beneficial variant for outsourcing.

It is possible to determine such reasons as the favourable government policies developed to respond to the contemporary intellectual property issues, the orientation to the highly-skilled labourers with references to the engineers and technical workers, the availability of cheap labour while reducing the labour and production costs, the advantageous location of the country to contact with the suppliers and customers successfully, and the presence of the ethical laws and labour regulations controlled by the government.

Modern India is oriented to the progressive participation in the foreign business with references to providing the sources for offshore manufacturing because of the variety of benefits for the companies-producers and for the development of the Indian economy.

References

Akash tablet’s commercial variant in November. (2011). Web.

Bullen, C., LeFave, R., & Selig, G. (2010). Implementing strategic sourcing. Zaltbommel, Netherlands: Van Haren Publishing.

Chesser, W. L., & Cohen, S. A. (2006). Outsourcing in India: Practical approaches to intellectual property issues from the Indian company perspective. The Indian Journal of Law and Technology, 2(1), 65-86.

Davies, P. (2004). What’s this India business? London: Nicholas Brealey International.

Gay, C. L., & Essinger, J. (2000). Inside outsourcing. London: Nicholas Brealey Publishing.

Lacity, M., & Rottman, J. (2008). Offshore outsourcing of IT work: Client and supplier perspectives. London, UK: Palgrave Macmillan.

Salwan, P. (2007). Best business practices for global competitiveness. New Delhi: Sterling Publishers Pvt. Ltd.

Sonaje, H. (2012). Top 5: World’s tablet PC manufacturing companies till 2012. Web.

Tablet Sales Trends. (2010). Web.

Thite, M., & Russell, R. (2007). India and Business Process Outsourcing. In J. Burgess & J. Connell, (Eds.), Globalisation and work in Asia (pp. 38-59). Oxford: Chandos Publishing.

Vestring, T., Rouse, T., Reinert, U., & Varma, S. (2005). Making the move to low-cost countries. Web.

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