Strategic Sourcing Analysis: India

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Strategic Sourcing Analysis India

• Nathan Babcock
• Ronald Myers
• Justin Vanstry

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Quick Facts

• Flag
• Emblem

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Quick Facts

• Four religion origins Hinduism, Jainism,
  Buddhism and Sikhism
• Gained Independence in 1947
• Official National Language Hindi
• Capital New Delhi
• Largest City Bombay

Source Wikipedia
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Quick Facts

• Population 1,192,225,812 people (2006)
• National Symbols
• Animal Royal Bengal Tiger
• Bird Indian Peacock
• Flower Lotus
• Tree Banyan
• Fruit Mango

Source Wikipedia
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Current News

• Asian Development Bank to Double Lending to India
• US and India agree upon a nuclear deal
• Germany and India try to forge a deal

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Geographic Information

• 7th Largest Country in world in size
• 7000 km (4350 miles) of coastline
• 1.1 billion people (2nd most in world)

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Geographic Infrastructure

• Very poor and basic infrastructure
• Antiquated transportation system (roads, rails,
  etc)
• Antiquated and poor port system
• Large growth opportunity if some of these systems
  were improved

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Geographic Infrastructure

• There are many corporations currently in India
• Ex. Ford Motor Co has a factory near the south
  Indian city of Chennai, which makes Ikon and
  Fiesta sedans. It requires its engine supplier in
  central India to fit delivery trucks with global
  positioning system devices so it can locate
  vehicles stuck in traffic and adjust production
  schedules. According to Arvind Matthew, managing
  director of Fords Indian unit, in order to hedge
  against delays, the Chennai factory must stock
  more parts than needed.

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Another Example Heinz

• Heinz Co pays youths, some of them barefoot, to
  carry tomatoes from farms that arent accessible
  by road to collection points where they are
  loaded onto trucks. Niles Patel, the head of
  Heinzs Indian unit, stated that Indias
  incomplete road network boost freight cost by a
  fifth.

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Geographic Infrastructure

• India increased the spending on roads, ports,
  power grids and telecom networks to 992 million
  rupees
• Aiming to boost the economys growth by 10 with
  the increased spending

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Domestic Infrastructure

• Favorite country for IT outsourcing but lacking
  on manufacturing
• Spent only 6 of GDP (31 billion) on
  infrastructure improvements
• Private corporations and people are finally
  allowed to invest in the Indian government

Source Wikipedia
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Domestic Infrastructure

• Key problem Lack of adequate energy
• High numbers of blackouts and power outages
• Solution Large investments to improve the power
  stations and grids

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Domestic Infrastructure

• In 2004, Indian roads carried 85 of passenger
  traffic and 70 of freight traffic (India Budget)
• 3.3 million km of roads
• Rural or urban roads 3 million km
• State highways 200,000 km
• National highways 58,000 km

• Source (India in Business)

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Domestic Infrastructure

• 40 of traffic is on the national highways
• Solution Converting 14,000 km of national
  highway into 4-6 lane highways

Source (India Budget)
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Domestic Infrastructure

• 12 major ports and 180 minor ports
• The 12 major ports handle 75 of the traffic
• Port traffic growth is currently at 11
• Problems Long berth times, long turnaround times
  and long lead times (India Budget)

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Social Infrastructure

• Large differences in the land
• Rural, Tribal, Urban
• Poor water and sanitation systems
• High ratio of slum settlements
• Reason Poor roads system

Source www.dfidindia.org
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Social Infrastructure

• Poverty is a big problem
• 53 of the children under age 5 are malnourished
• 20 of deaths are from anemia
• Solution Improve the roads system

Source (India Watch, http//www.wakeupcall.org/ed
ucation_policy/nri-participation.php ).
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Cultural Infrastructure

• Ministry of Culture
• The mission of the department is to preserve,
  promote and disseminate all forms of art and
  culture.
• Cultural Agreements
• Over 100 countries

Source (India Culture, http//www.indiaculture.ni
c.in/indiaculture/index.asp).
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Cultural Infrastructure

• Cultural Exchange Programs
• Part of the agreement
• Allows students to experience life outside of
  India
• Suppression of females
• Males dominate most of the leadership and
  decision making
• Females head 9 of the households

Source (India Culture, http//www.indiaculture.ni
c.in/indiaculture/index.asp).
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Political Infrastructure

• Sovereign, socialist, secular liberal democracy
• Quasi-federal republic with a bicameral
  parliament
• 3 branches of government the Legislature, the
  Executive, and the Judiciary

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Political Infrastructure

• The current Prime Minister Manmohan Singh said
  the following in regards to allowing foreign
  retail chains to establish a presence in India
• We will examine this issue in all its
  dimensions, including its effect on livelihoods,
  and discuss this widely before taking any
  decision. There is no hurry in this.

Source The Times of India, Feb 23, 2006
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Political Infrastructure

• Agreed upon a nuclear deal with the US
• The partnership between India and the United
  States is a strategic one for both countries

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Political Infrastructure

• Condoleezza Rice called India a Multi-ethnic,
  multi-religious democracy that is characterized
  by individual freedom and the rule of law.
• She also stated India is a rising global power
  that we believe can be a pillar of stability in a
  rapidly changing Asia.

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Educational Infrastructure

• 94 of students between 1st and 12th grade drop
  out
• Reason India is focused on higher education
• 5 choose Arts, Commerce, or Science in their
  higher education

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Educational Infrastructure

• The ratio of scientists and engineers with more
  education and the technicians and mechanics is
  highly lopsided
• Solution More vocational and technical training

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Educational Infrastructure

• Only 68 of India is literate
• Problem Lack of investment (2.5 of GDP)
• Solution Increase investment to roughly 10 of
  GDP

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Economic Infrastructure

• Fourth Largest Economy in the world
• GDP 3.36 trillion
• In the first quarter of 2005-06, Indias economy
  is growing at a 8.1 (2nd fastest growing)
• Low per capita income 3,100

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Economic Infrastructure

• Made up primarily of agriculture and industries
• Two-thirds of the people work in agriculture
• Agriculture sector 21 of GDP
• Service sector 51 of GDP

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Economic Infrastructure

• Imports
• 2004 99,836 million
• 2003 79,658 million
• Exports
• 2004 76,345 million
• 2003 62,952 million
• Source India at a Glance

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Economic Infrastructure

• Starting a business
• In India
• On average it takes 70 days and 61.7 of income
  per capita
• Business license takes 270 days
• In Southeast Asia
• it takes 35 days and 40 of income per capita
• Business license takes 195 days

Source Explore
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Recommendation

• Pros
• Advances to improve some critical areas
• Promised increased spending on the roads system
• Nuclear agreement should improve the energy
  problems

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Recommendation

• Cons
• Overwhelming infrastructure problems
• Delayed shipments due to transportation

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Recommendation

• Conclusion
• We have decided to recommend against investing in
  India as a source or procurement at this time.
  There is huge potential in the future for India
  and this is why we would consider sourcing from
  India in the next 5-7 years, just not right now.

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The End This is the last time you have to hear
my voice!