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Factory Operations

• According to Company A, labor employment at Neemrana is inexpensive, despite the expenses such as bus fares for training and commuting. Indian factory worker capacity is not very different from its Chinese counterparts, and Company A considers worker quality as satisfactory. The company uses local suppliers for some raw materials, although most of it is imported from countries like Japan, and aims to increase the percentage of locally sourced parts.

• Before beginning operations in its Neemrana factory, Company B produced materials in Thailand, which it then supplied to a finished goods manufacturer in India. These materials entered the country at the Mumbai port, which were then transported by rail. The company currently imports most of their raw materials, but finds the need locally procure so as to strengthen its future cost competitiveness. The company employs 46 Indians and six Japanese workers, and plans to become more localized by gradually reducing the number of Japanese expatriates. Ceasing operations according to Indian law is complicated for companies with more than 100 employees, inhibiting the company's progress as it considers expansion.

• Company C procures almost none of its materials locally, but instead imports them from countries such as Japan, Thailand, and China. Thus, the need to begin sourcing them locally is felt; however, they find it difficult to do so because of quality and other issues.

Risk Factors in Indian Industrial Parks and Expansion into the Indian Market

1. Company A was aware of the issues related with electricity, water, and sewerage when it conducted a feasibility study on entering the Indian market. It had already determined and created a budget to prepare and handle such issues.

• According to Company A, several reports must be filed with various departments of the Indian government, and the use of a local consultant is mandatory. Inquiries and requests are compiled during information sharing meetings and are submitted to RIICO. A Japan desk has been created within RIICO, which has proven invaluable by providing a one-stop service.

• Company A also notes that local negotiations are difficult for Japanese companies, making it important to hire quality locals as heads of general affairs and other positions.

• Groundwater was the biggest issue for Company A, the first company to begin operations at the Neemrana Industrial Park. Water shortages were evident with the second company setting operations in the park, and conditions on methods for drawing water, and the amounts they could draw became more stringent. Company A negotiated with the government agency having jurisdiction over water through JETRO and RIICO.

2. Company B conducted a feasibility study before its entry into India, analyzing labor management (union issues), infrastructure (e.g., focusing on electricity and water issues, and incorporating in-house power generation into their plans), and other issues.

• Company B was not of the notion that water-related issues would pose a potential problem. Because of no wastewater facilities, the company took it upon itself to process its own wastewater, using it in a garden. It thus feels that factories with large amounts of wastewater will have problems. Receiving approvals for water was most cumbersome. Water harvesting regulations required the company to replace groundwater used in excess of the amount of rainfall. However, the region is a desert receiving little rainfall.

• Company B also reports of complicated taxation policies. Cases of double taxation, as well as several different types of taxes, such as duties, state taxes, excise taxes, and inter-state taxes, are imposed and are understood only by Indian consultants. The company has trouble understanding refunds such as incentives.

3. Company C also notes of a severe water-related problem. They were unaware of rainwater harvesting before setting up operations; however, they are able to comply with regulations because they own an expansive property. All companies in the park have water-related issues, and are working in association with JETRO to resolve them. As a result, RIICO is in the process of constructing a reservoir, and the water stored there will be distributed to each company. In addition, inhouse power generation via diesel is expensive.

 
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