Sample Essay: International Business

Introduction

This report was prepared independently by me and was commissioned by BT as part of their expansion plan in India.

Internationalization was a restricted enterprise for most of the companies till very recent times. Only big firms could afford to go international for the enormous cost involved in international ventures. However, the process of globalization, and coming in existence of regional and global trade bodies have created a level playing field for the companies to enter into global business. The entire world has become a common market with dilution of cross-national trade barriers. As a result the companies – big and small – are globalizing at an unprecedented scale.

There are a number of factors that have made the task of internationalization easier. The nations across the world are constructing duty free zones, and exclusive economic zones offering unmatched infrastructural facilities to foreign and domestic businesses. The internet technology combined with revolutionary advances in telecommunications has facilitated the task of international marketing as never before. Small and medium businesses can now take full advantage of these technologies at a very low cost. However, going international despite the political, social, and technological changes in recent years, needs careful planning and strategizing to avoid unexpected and unforeseen consequences.

We have prepared a strategic business plan for a British telecommunication company venturing into a culturally different territory.

As an international business consultant, I have been commissioned to evaluate the business opportunities for BT Group Plc also referred to as British Telecom that wishes to expand its operations in India. We have made a detailed strategic plan for its venture in India.

BT Group Plc is the privatized telecommunications operator and internet provider in the UK. The company has already established its presence in global markets across the world. This report assesses the feasibility and attractiveness of its operation in the Indian market.

Stages of Internationalization: Overcoming cultural barriers

Companies today recognize that international opportunities can ultimately define success or failure. However, there are cultural and psychic barriers to international marketing. Nonetheless, our project defines the stages through which BT can successfully internationalize their operations in India.

In context of international business, while cultural assimilation may be difficult, if not impossible, it is more important to avoid cultural blunders. The identification of cultural distance/difference might help the executives to avoid these blunders, while identifying the cultural similarities can enhance closeness to the market. Consequently, culture becomes the site of both bridge and barrier in off shore market penetration. Most of the sources acknowledge similarities of cultural background leading to greater likelihood of achieving market closeness. According to Swift, if a relationship between cultural closeness and cultural liking could be shown to exist or proven, it would validate the hypothesis that cultural closeness (indirectly) determined psychic success. His study found “a moderate, but statistically significant positive correlation between a respondent’s liking for a particular culture, and the degree to which they perceive the overseas market culture to be similar to that of Great Britain. This being the case, it can be claimed that cultural similarity or closeness is a contributory factor to cultural affinity. It is likely, therefore, that those countries which engender the greatest level of psychic distance as far as British executives are concerned, are those that are culturally most different to Great Britain. Broadly speaking these are to be found in the Far East (Asia), the Middle East (the Arab world), and the “Latin” cultures of Southern Europe and America.” (Swift 196).

Culturally, India and Britain are quite unlike that is likely to hinder cross-cultural business relationship. However, commitment, trust and empathy can be developed in gradual stages. In other words, it will take some time before a high level of trust develops between BT and their customers in India.

Scazoni (1979) postulates three stages of development, while Levitt (1983) and Dwyer et al (1987) offer five stages of development of a relationship. The three stages of involvement include: (1) Exploration (2) Expansion; and (3) Commitment

While the five stages are: (1) Awareness (2) Exploration (3) Expansion (4) Commitment and (5) Dissolution.

While India and Britain are culturally different, British companies may have certain advantages in India in comparison to the cultures they are completely unaware of. Britain had the colonial experience in India as a consequence of which there has been much cultural exchange between the two nations for over a century. English is among the official languages in India.

Along with these, some variables go on to determine relationship. These variables are Commitment, Trust, Customer Orientation/empathy, Experience/satisfaction, and Communication (Conway & Swift, 1999:1393).

Psychic distance itself is a consequence of a number of factors among which perception is of critical significance. However, perception is highly subjective and a result of value system associated with culture. In other words, culture plays a crucial role in determining psychic distance (Swift, 1998:182). Hallen and Weidershiem-Paul (1984) have explored the concept of ‘cultural affinity’ as one of the three key determinants of psychic distance. According to Holden and Burgess (1996, p.33) ‘psychic closeness’ is achieved through cultural affinity, trust and experience. “…cultural affinity is an important determinant of a firms’ ability to estimate the needs and requirements of the other party. High cultural affinity is a major factor in reducing psychic distance between two parties…” (p.33). Trust, at the organizational level is an important an important consideration in business. “…many aspects of relations between customers and sevice providers  cannot be formalised or based on legal criteria. Instead relationships have to be on mutual trust. Experience operates purely at the cultural level and is not necessarily an expression of cultural factor. None the less, it is a powerful determinant of psychic distance as it influences attitude formation. “Individual experience can result in preconceptions regarding suppliers and customers…These prejudices will affect attitudes and behaviours towards those suppliers and buyers (Hallen and Weidershiem-Paul: 1984: 18)

According to Swift (1998:184), culture has a pre-eminent role in determining psychic distance and comes prior to trust and experience. Interaction is presupposed in trust and experience. Trust develops through interaction and experience comes through repeated interaction. Cultural affinity, on the other hand, can be significant even before interaction begins.

The term ‘affinity’ has been interpreted to mean ‘liking’ and ‘empathy’ i.e. the ability to see something from the perspective of the other.

Cultural empathy, according to Phillips et al (1994, 104) is defined as: “…the ability to place yourself in the position of the buyer from another culture. In this way a strong attempt is made to the thinking approaches, the decision making process and the interaction between this and the cultural and other forces influencing the buyer.”  The International Marketing and Purchasing group found “liking” as a major factor in the development of business relationship, as for instance, 31 percent of French buyers did not like dealing with UK suppliers (Swift 185). Therefore, a correlation may be said to exist between cultural similarity and cultural affinity.

In context of international business, while cultural assimilation may be difficult, if not impossible, it is more important to avoid cultural blunders. The identification of cultural distance/difference might help the executives to avoid these blunders, while identifying the cultural similarities can enhance closeness to the market. Consequently, culture becomes the site of both bridge and barrier in off shore market penetration. Most of the sources acknowledge similarities of cultural background leading to greater likelihood of achieving market closeness. According to Swift, if a relationship between cultural closeness and cultural liking could be shown to exist or proven, it would validate the hypothesis that cultural closeness (indirectly) determined psychic success. His study found “a moderate, but statistically significant positive correlation between a respondent’s liking for a particular culture, and the degree to which they perceive the overseas market culture to be similar to that of Great Britain. This being the case, it can be claimed that cultural similarity or closeness is a contributory factor to cultural affinity. It is likely, therefore, that those countries which engender the greatest level of psychic distance as far as British executives are concerned, are those that are culturally most different to Great Britain. Broadly speaking these are to be found in the Far East (Asia), the Middle East (the Arab world), and the “Latin” cultures of Southern Europe and America” (Swift 196).

While cultural differences emerge as barriers to success, it is probably the only major barrier for BT’s operation in India. Moreover this barrier can be easily overcome through strategies outlined above. Also, the British Telecom has the experience of operating in more than 150 nations which is a distinctly positive factor in overcoming the cultural barrier.

India offers a big market

India is on a high growth trajectory even during the current recession. The telecom segment – third largest network in the world after USA and China – is among the fastest growing sectors in India with nearly 200 million telephone lines. And yet, this sector is not saturated as it enjoys a growth rate of 45 percent, the highest in the world. Moreover, of the 1.5 billion people with internet access by 2011, according to a new report, the biggest growth rate will be witnessed in Russia, India, and China (Aun, Fred 2007).

Other factors: PESTEL Analysis

Political: There exists the threat of political instability in India. However, on the positive side India is the largest democracy, and politically the most stable nation in south Asia. There is the fear of law and order in India among investors. However, India has a strong military, paramilitary, police, and administrative systems. Since its independence, India has successively elected representative governments through democratic process, and there was only a brief phase of internal emergency in India for 18 months during 1975-77. The Indian call centre industry has the complete backing of the government  that has initiated a slew of political and economic measures to protect and encourage this industry.

Economic: Economically, India is among the fastest growing nations today with its economic growth rate at 8 to 9 percent. Only China has a higher economic growth rate than India. India has a sound industrial infrastructure, a vibrant public and pricvate sector co-existing on the model of mixed economy. The telecom revenue in India was $19.5 billion in 2006 up from $17.5 billion a year earlier and is poised to touch $30 billion by 2013. The growth rate of telecom revenue was 14.7 percent. There were 100 million telephone subscribers growing at 66 percent and 1.47 million broadband subscribers growing at 56 percent in financial year 2007-08 in India (Source: Voice & Data, TRAI).

Social: India is a plural and multicultural society. The Constitution of India has recognised English as the second language and it also serves as a link language between the centre and states, and among the states for administrative purposes. The multicultural and plural background will tend to promote call centres in India. However, there are cultural aspects in India that doesn’t go well with call centre Industry. Nevertheless, culture exists at various levels in India such as ‘universal’ and ‘parochial’. The culture in India is characterised by tolerance and accomodation. Therefore, foreign companies should not be seen as hindrance to Indian society and cultural values.

Technological: India is among the top IT and software powers in the world. Telecom Industry is highly dependent on IT. Therefore, technologically India is conducive for the growth of telecommunications. On the negative side, however, Indian software industry is not acknowledged for its innovativeness, and that could be a concern for Indian telecom industry. Nevertheless, Indian telecom industry is more human resource driven rather than technologically driven. This means India cannot offer state of the art communication technologies but can make the best use of these outside technologies because Indian telecom workforce is known for easily learning and adapting the world class technology.

Environmental: India faces environmental challenges in the forms of lack of sound infrastructure, and technology. However, since the government of India is focused to rapid infrastructural advancement, and support to IT industry there appears likelihood of India soon catching up with the world class facilities. India has already developed world class facilities in its various technoparks. The IT offices and call centres are located in these zones in Indi’s best cities. However, the challenges are likely to be faced in the second-tier cities where the telecom centres in India are moving today.

Legal: India has a separate ministry of law and company affairs. It boasts of a three-tiered modern judiciary that is independent. In recent years India has passed a series of laws against cyber crimes that ensures safety and privcacy of clients interests. A lot of legal measures have been initiated in India in keeping with the WTO requirements that is comparable to the best in the world. However, law enforcement machinery is not as pro-active in India as law themselves. The judiciary is over burdened and it takes years for cases to be legally resolved. Nonetheless, all necessary legal frame work that might promote call centre industry exist in India.

British Telecommunication is a well established brand. Its current logo “connected world” gives it a brand personality that would be acceptable abroad. The success of any international marketing campaign depends on how cross cultural research insights translate into cross cultural strategies that can be effectively used. A new brand positioning strategy designed to assist international managers is based on globally shared meaning in an increasingly competitive market place (Alden, Steenkamp, & Batra 1999). Brands such as Sony and Philips have used such strategies. McDonalds also uses similar strategies. Their slogans emphasize globally shared meaning in their advertisements.

Indian Networking Industry

However, Indian networking industry may be said to have entered the global intelligent network era in a big way when Tata Teleservices, Ltd., a leading wireless operator in India,  selected Telcordia to support its long-term evolution of prepaid and postpaid convergent solutions effectively jumpstarting the global telecommunication industry’s move toward convergence in 1995. Tata Teleservices, was the first company in India to launch CDMA mobile services. Even today it continues to be at the forefront of technological roll-outs (findarticles.com).

Even prior to Tata Teleservices, Ericsson was awarded a contract in 2004 by Bharti to supply India’s first nationwide single vendor Intelligent Network (IN) solution and prepaid system to provide functionality such as realtime cost and spending control. The agreement covered all of Bharti’s existing as well as soon to be launched mobile systems in India (www.ericsson.com).

BT’s partnership recommendations

Bharti Enterprises is among the top telecommunication players in Indian market. BT can enter the Indian market in active collaboration with the Bharti group. Bharti group of companies has Internet division and Cellular operations. Since this Indian company is actively looking forward to collaborative expansion within the country, BT can take advantage and enter into partnership with them.

BT is in an advantageous position compared to the other telecom majors as it has its own presence in India through its branch office of BT Worldwide. This office may  support the current joint ventures in India and look for new business opportunities in India for BT. BT may undertake studies and pilots for outsourced Call Centres and back office operations based on its experience of software outsourcing in India.

Strategic benefits: Some of the strategic benefits BT joint venture will have in their India operations are as under:

- Free up resources to focus on the core business

- Guarantee significant cost reductions for the duration of the contract

- Guarantee performance levels based on service level agreements (SLAs)

- Lower upfront investment required

- Faster time to market/steady state than in-sourcing

- Gain increased access to innovative technology without major capital investment

- Maintain flexibility in tight labor markets

- Ability to leverage multi-client scale advantages

SWOT Analysis of BT’s India operation

Conclusion and Recommendations

At the end of this project, we are in a position to take a broader look at India’s telecom sector and their strengths and weaknesses. Thomas Friedman’s bestseller The World is Flat published in 2005 speculated upon the rapidly shrinking and flattening globe. It proved to be a sky-rocketing success. The author appeared pro-Indian right from the beginning. He clearly demonstrated a penchant for India and for things ‘Indian’. He was moved by the success of India and viewed his journey to telecommunication in the high-tech city of Bangalore as emblematic of a major shift in global economic processes. Friedman, came to witness a resurgence or renaissance in India based on his experience. India to him was the ‘land of jewels’ in the past but presently hindered by third world characteristics. Nonetheless, the nation was on rise once again as it came to share “the same level playing field as the other global giants. The global economic progress has in the language of Friedman, meant the world has ‘flattened’.

Friedman may be right in one sense that globalization has meant globalization of businesses as witnessed through expansions to underdeveloped  nations like India. There is a stiff competition among even the developed world to corner the most of the jobs.

India took the first mover advantage in this industry and the global business leaders acknowledged Indis’s intellectual capital in IT sector. India has several advantages appropriate to this industry as:

English Speaking pool of labour

Quantitative and qualitative superiority

Developed IT sector

Governmental and institutional promotion

And several others including time-zone advantage, cultural affinity due to British colonial experience, etc.

There are however, glaring deficiencies with India as a destination that too must be acknowledged. These include:

Fledgling industry

Mediocre talents

Cultural and value system clash

High turnover

Health related insecurities

Emerging health problems.

However, despite all the drawbacks with the Indian market there is no denying that India is the fastest growing market next only to China in terms of revenue in telecom and growth. However, China poses severe cultural and political challenges to a British company, in comparison to which Indian destination is politically, culturally and economically more safe,

References

Alden, S., & and Batra, R. (1999). Brand positioning through advertising in Asia, North America and Europe: The Role of global consumer culture. Journal of Marketing, 63, 75-87.

Aun,Fred “Brazil, Russia, India and China to Lead Internet Growth Through 2011″

Jun 26, 2007. Retrieved on July 31, 2009 from http://www.clickz.com/3626274

Conway, T. & Swift, Jonathan S. (1999) “International Relationship Marketing: The importance of psychic distance” European Journal of Marketing, Vol. 34 No.11/12, pp.1391-1413

“Ericsson Awarded Nationwide Intelligent Network Contract in India by Bharati” June 22, 2004. Retrieved on July 31, 2009 from http://www.ericsson.com/ericsson/press/releases/20040622-949772.shtml

Hallen, L. & Weidershiem-Paul, F.(1984) “The evolution of psychic distance in international business relationships in Haag, L & Weidersheim-Paul, F. (eds.) Between Market and Hierarchy, University of Uppsala, Department of Business Administration, pp.15-27.

Levitt, T.(1983), “After the sale is over” Harvard Business Review, Vol.61. No.5, pp.87-93

Phillips, C., Doole, I. and Lowe, R. (1994), International Marketing Strategy: Analysis, Development and Implementation, Routledge, London.

Scanzoni, J. (1979), “Social exchange and behavioural independence”, in Burgess R.L. and Hudson T.L.(eds.), Social Exchange in Developing Relationships, Academic Press, New York, NY, pp.61-99

Swift, J.S. (1998), “Cultural closeness as a facet of cultural affinity: a contribution to the theory of psychic distance in international marketing”, International Marketing Review, Vol. 16, No. 2/3, pp. 182-201.

“Tata Taps Telcordia Intelligent Network Evolution; First Major Transformation Deal in India Inked”. Business Wire. Sept 14, 2005. FindArticles.com. Retrieved on July 31, 2009 from http://findarticles.com/p/articles/mi_m0EIN/is_2005_Sept_14/ai_n15389225