Business Proposal for a New International SME

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Executive Summary

This is a business proposal for Practicus, a UK based recruitment consultancy. The study has looked into the business prospect for Practicus in the Indian market. India, as an emerging economy is increasingly attracting investors throughout the world. The service sector which is one of the most attractive sectors in India in terms of FDI inflows provides immense opportunity for Practicus. The business proposal has investigated and analyzed the various aspects in relation to doing business in India such as, economic, political, legal, trade, culture, as well as competitive advantages and disadvantages. The theoretical models underpinning the proposed business are highlighted in the recommendations.

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Table of Contents

Executive summary.. 2 1 2 2.1 2.2 2.3 3 4 Introduction4 Analysis of the International Business Opportunity. 6 Trade Area and Cultural Analysis 8 Competitive Advantages and Disadvantages of the Proposed Business 9 Operation of the Proposed Business 10 Conclusion 13 Recommendation 13

References ... 17 Bibliography18

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Introduction

The rapid growth of globalization combined with increased computerization and advanced transportation systems has forced the small and medium sized enterprises to look beyond their domestic borders. (Suh & Et. Al., 2008) Small and medium size enterprises have increasingly been involved in international markets thus contributing to employment, economic growth, and the balance of payments of their respective home countries (OECD, 1997). Practicus is an international SME of a UK based recruitment consultancy, formed by three founders: Jason Luckhurst, managing director Boyd Kershaw and Paul Wandless in 2004. The heart of the proposed business proposition lies in the endeavor of Practicus to become synonymous with any successful change in any organization, i.e. to become Outcome Delivery Partner. This initiative will go a long way in helping them to achieve success in the global market in their venture of entering new market. The firm in the year 2010 was listed at the 13th position by Sunday Times in terms of best companies to work for among the SMEs in the UK (Times Newspapers Ltd, 2010). At present the sectors that receive services from Practicus are banking financial services, central and local governments, construction & engineering sectors, energy & utilities, healthcare, insurance, leisure & tourism, public sector as well as pharmaceutical sector. Therefore, it can be recognized that there are plethora of opportunities for Practicus to step into a new market with varied assortment of services towards their impending clients and consumers (Practicus, 2011). A decision related to selecting a foreign market for a proposed business venture should consider Foreign Market Selection Model in order to properly assess the scenario related to the intended market. These are: developing appropriate indicators, collecting data and

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converting appropriate comparable indicators, analyzing the collected data and selecting the suitable market with reference to the market rankings. Thus, taking into consideration the above mentioned factors the market which can be selected for Practicus is the Indian market. The organization is practically in its sixth year of business growth, and at present it has its operations only in the UK, Australia and the Netherlands. Therefore, expanding their operations in the ever-growing market of India would provide them immense scope of growth. India is a diverse country with multifarious growth prospects in various business sectors. In recruitment consulting and change management sector in which Practicus operates, there are quite less number of competitors present in India. Various services that the organization provides to its clients will make them a unique status in the Indian market. India can be considered as a prospective market for Praticus because despite the recent global economic downturn, India has been referred as one of fastest growing markets in various business sectors (TIA, 2009). Moreover, various researches revealed that India has the maximum number of younger population in the world. Furthermore, it will be the largest manpower resource country in the world within 2020. Thus, the market of India is going to be large in the coming future. The competition among the people will lead them to associate with the most successful recruiters. On that strength Practicus would excel in its operations in India market. In order to have business in India, an organization has to take into consideration a few trade barriers to properly regulate their business in India. There are certain high tariff barriers in India. Apart from that there exist certain non-tariff barriers such as import licensing, quantitative restrictions, mandatory testing procedure related restrictions and lengthy customs procedure among others (The Economic Times, 2011). The trade between the UK and India had been expected to reach $40 billion by the year 2015 according to an industry lobby report. Thus, it can be deduced that there is positive relationship in terms of foreign trade

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between India and the UK. Therefore, Practicus can also acquire this benefit when they start up their business in India (The Economic Times, 2009). 2. Analysis of the International Business Opportunity

Economical, Political and Legal Analysis of India Economically, the second fastest growing economy of the world is India. The impact of globalization has immensely helped the Indian economy to a larger dimension. The foreign investment in India has increased. Indian economy is considered as a rising economy and has seen unparalleled levels of expansion in the economy. India is considered as a cost effective as well as labor intensive economy. It is a strong export oriented and manufacturing based industrial framework. Global trade has seen a growth in India. GDP growth rate in India as of 2011 first quarter figure is at 8.2%. Commencement of free market principle in 1991 for foreign investment and international competition had aided a rapid rate of growth in the Indian economy (EconomyWatch, 2010).

Source: (Trading Economics, 2010).

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The sector that Practicus is dealing with is service sector. India is at the 13th place in terms of services output. This sector provides employment to around 23% of the overall workforce. This sector is also growing at a rapid rate. Few of the benefits that India provides are availability of large collection of educated, highly skilled, low cost and also English speaking workforce. These factors can provide positive growth opportunity for Practicus in their venture to India. (CIA, 2011) India in terms of foreign direct investment (FDI) is considered as a preferred destination. India is recognized as a growing consumer market having skilled technical expertise and managerial capabilities. During the period of April 2000 January 2011, India had attracted cumulative US$ 1, 89,848 million in flow of FDI. Service sector in which Practicus is going to operate has attracted the topmost FDI equity inflows in terms of 2010-11 figures, i.e. US$ 2,987 million (Department of Industrial Policy & Promotion, 2011). Indian government is a federal republic. Indias central union government is divided into primarily three separate but interconnected branches namely legislative, judiciary and executive. The government of Indias structure resembles the British parliamentary model. In terms of stability, the government is led by the prime minister who is elected for 5-year term through electoral procedure (Indianchild, 2000). Moreover, being one of the biggest political democratic country, political instability always possess as a threat to the Indian industries. The political unrest in India had not affected the rise of service industry in the country. Being an agricultural based country, only 4% of the economy is supported by it. Service sector contributes maximum to the economy of the country. An entrepreneur has to consider main regulations of a country before looking to expand their business in that country. In India, there are various acts and regulations related to ensuring safety and health of an employee such as Factories Act, 1948, Mines Act, 1952

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among others. There is government policy related to competition which comes under Competition Act, 2002. In India, the regulations in relation to import and export of goods and services come under the purview of Foreign Trade (Development and Regulation) Act, 1992 as well as the EXIM policy Legal issues of India are the most complex in the world. The country has Minimum Wages Act 1948, Contract Labor Act 1970, Payment of Wages Act 1936 and others. Prime Minister had said that labor laws are to be re-structured. According to a survey, India would be the country which will deliver 25% of the worlds total workforce in 2025. 2.1 Trade Area and Cultural Analysis

Geographic and Demographics India is the 7th largest by area in the world and has 2nd highest population. It supports about 16% of the worlds population and more than 2.4% of the Worlds land. Its capital, New Delhi has population of 1.16 billion. The national language is Hindi and English is the Business language. Moreover, there are 21 other official languages. Major cities are New Delhi, Mumbai, Kolkata, Chennai, Pune, Bangalore and Kanpur. Its time zone is 5 hours 30 minutes ahead of the GMT. Its Currency Unit is Indian Rupee (INR). Broadly Indian climate is classified as a tropical climate. In India population growth rate is 1.5%, birth rate is 21.7 and death rate is 6.2 per 1000 population. Life expectancy is 70 years. Sex ratio of India is 1.06 males per female. India has a young population of 64% between the age group of 15 and 64 years. The median age in the country is around 25.3 which is lower than most of the country in the world. Culturally India is divided into mainly four religions namely Hinduism, Islam, Christianity and Sikhism. Education rate is 64.8% in India shared by 75.3% male and 53.7% female. India has the

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largest school age population in the world. India has over 400 Universities, 7,000 technical institutes and 20,000 colleges (BUYUSA, 2011). In the cultural dimensions provided by Geert Hofstede, India has highest dimension in power distance (PDI), in which Indias ranking is at 77 as compared to global average of 56.5. This signifies that there exists a high point of inequality of wealth as well as power in the society. This aspect is subverted in among the population of India and is considered as a cultural norm. In terms of Long Term Orientation (LTO), Indias rank is 61 compared to 48, the world average. Therefore, Indias culture is parsimonious and perseverant. Masculinity dimension ranking of India is 56 compared to 51 of world average. A high score in this dimension signifies a larger gap between men and women. Uncertainty avoidance aspect rank is lowest in India (40) compared to 65 of global average, which signifies that culture is quite open to unstructured situations and ideas. Population generally tends to have lesser rules as well as regulations. Therefore, these aspects will play a major role in the business prospect of Practicus in India (ITIM International, 2009). 2.2 Competitive Advantages and Disadvantages of the Proposed Business

The advantages which can be gathered from proposed business opportunity and taking it to the Indian shores are that the services that Practicus provides is quite unique in nature and new in India. The growth of economy coincided with increase in FDI in Indian market has helped India to emerge as a booming market for starting a business. Practicus renders their service offerings on values-led businesses. Therefore, they will have less difficulty in adjusting with the Indian culture and traditions as Indian culture also values similar factors. Honesty and integrity, passion for doing work, empathy and going an extra mile for delivering result will entice the Indian business fraternity towards Practicus (Practicus, 2011).

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The growth in India in the service sector will enable Practicus to enter into a relatively growing segment in India. Practicus believes in achieving outcome for their clients which are aligned with their need. This can be a competitive advantage as in the modern dynamic business environment, there are certain unique challenges faced by business organizations which requires a flexible partner. Practicus can provide just this right impetus to a business organization to overcome their ensuing difficulties and achieve success and growth worldwide. At present, Practicus provides support to various sectors in the UK, Australia and the Netherlands (Practicus, 2011). The disadvantages which can pose difficulties in initial phase of the business may come from the already existing competitors in the market. Spreading name and their unique values in a somewhat traditional Indian market could take time. They might also face certain regulations and laws with which they are quite unfamiliar. Therefore, these minor aspects can pose certain disadvantages, but the advantages certainly weigh heavy as compared to disadvantages in the Indian market for Practicus. 2.3 Operation of the Proposed Business

A) Organization: Practicus, to start up a business it will very helpful to have partnership style business of FOCO i.e. franchise owned and company operated. It will help to operate in the market without setting up of a unit of the company of its own. The manpower need for the company for its operation would be of local workforce and the top level management would be appointed by the direct company. Mostly the preferred location of the corporate and the presence of the large pool of candidates are to be targeted for the operations. With respect to these, the parts of northeastern India and the central part of the country are the prime target.

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In order to handle the various functions such as marketing, financial, legal aspects as well as providing services to the clients a senior level manager can be selected to run the operations in India. Under him other required staffs would be there like marketing and financial executives to handle the daily activities. A project manager, finance expert and HR specliast should be put in place to look after the operations. At the inception, the organization should look to target private sector as their prime clients as this sector is a growing avenue for generating business growth.

B) Service/ Product: In the Indian market, the services which can have a positive growth prospects for Practicus can be project & programme management, outcome healthcheck, communicating change, outcome risk and reward. The services such as outcome risk & reward can benefit a business organization by highlighting the benefits and prospects of an impending business venture. Similarly services such as project management can provide unique opportunity for Practicus to provide value added services to Indian business fraternity (Practicus, 2011).

C) Market Entry Strategy: For Practicus, a prudent market entry strategy, keeping in view the Porters generic strategies, would be the differentiation strategy. The services and products which are offered by Practicus are quite unique in Indian market. The ever-growing business segment is expected to reap tremendous benefits from the services provided by Practicus. Therefore, their unique value propositions stand them in good stead to grow in India.

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Source: (VectorStudy, 2008).

D) Marketing Strategy Plan: In the initial phase of business, the prices of offered services will be kept quite moderate to attract clients towards their services. The currency for business transactions will be Indian rupee (INR). Markdown pricing strategy could help in initial stage to attract clients. Practicus, through their unique valued offering can look to create their niche in the market. As there are quite less competitors in the market in the field for Practicus in Indian market, therefore they can look to follow a set plan to penetrate the Indian market. Various local media such as television, newspaper can be considered to create awareness about the existence of Practicus in India. A budget can be set aside in the initial phase for promotional activities in which arranging seminars, presentations for the business segment can be considered to attract the intended clients towards Practicus. In the later phase, e.g. after 4-6 months of initiation, the promotional activities can be altered according to the response of the target market clients.

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Conclusion

Practicus, as an SME has seen noteworthy growth and have in recent times expanded to Australia and the Netherlands from their home market in UK. The business proposal if implemented will provide Practicus innumerable opportunities to explore and also gain the benefits from Indian market and economy. They can gain the benefits from the first-mover advantage aspect as their rendered service is quite unique to the Indian market. They can also look to utilize the differentiation strategy to attract clients in the ever-emerging business market of India. 4 Recommendations

This recommendation is based on the theory underpinning the proposed study Michael Porters Five Forces Model:

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Source: (Lima, 2006).

Barriers to Entry: In the recruitment consultancy and change management segment in the Indian market the barriers to entry are low. Proprietary product difference aspect of services provided by Practicus would enable to create appeal for their targeted market. The crucial aspect of product differentiation which Practicus possess will lower the barrier to entry. Bargaining Power of Suppliers: In Indian market, the bargaining power of suppliers is low in the recruitment consultancy and change management segment. The suppliers for Practicus would be mainly the manpower resources that they would need for conducting their business. The abundance of educated, qualified manpower resources in India would enable Practicus to lower the bargaining power. Threat of Substitutes: Threat of substitutes is quite low. The competitive markdown pricing along with superior quality of service would enable Practicus to alleviate the threat of any substitute service provider. Bargaining Power of Buyers: Bargaining power of buyers is comparatively low. In the existing market scenario, the services provided by Practicus are quite unique and expected to attract a large number of clients. The availability of quite less substitute services with the level and range of service that is expected to be provided by Practicus makes the bargaining power of buyers quite less. Rivalry Determinants:

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Rivalry among the competing firms in the industry is low, as the industry is quite unexplored. There is quite less number of rivals existing in the industry to pose a significant threat and create rivalry among the competitors. In future also rapid growth in market is expected, which renders the possibility of increase in the competitive rivalry quite less as rapid growing market generally provides less incentive to a firm to compete aggressively (Lima, 2006). Practicus should look to position their service as unique and different from their competitors. Pricing and promotional strategies has to be made in a way which enables them to show the benefit of their service to their intended clients. The strengths of these initiatives will be that it would enable Practicus to explore a new economically growing region of the world. This growth prospect is also expected to be quite high. The influx of FDI in Indian industry and an ever-increasing economic growth would pose massive growth prospect for Practicus. The weakness can be considered the relatively unfamiliar segment that Practicus belongs to. In this context, the IP model can be taken into consideration to recommend a few factors for Practicus. The IP (International Process Model) posits the fact that internationalization process can be considered as the interplay between the state as well as the change aspects related to internationalization variables such as market knowledge, commitment decisions, current activities and market commitment.

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Source: (Thai, 2008). The prime essence of this model is self-reinforcing cycle related to knowledge acquisition, increased market commitment and risk reduction. The model also suggests that as firms gather knowledge they look to increase their commitment. Thus, internationalization process is apparently progresses slowly. They should look to increase their market knowledge at first by taking a relatively small number of services in India. As they gain further knowledge about the existing market and growth prospect they should look to increase their commitment with more assortments of services. This proposal offers a forward look of possibilities in India market.

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References BUYUSA, 2011. Doing Business In India. India at a Glance. [Online] Available at: http://www.buyusa.gov/india/en/motm.html [Accessed April 24, 2011]. CIA,2011.India.Economy.[Online]Availableat:https://www.cia.gov/library/publications/theworld-factbook [Accessed April 24, 2011]. EconomyWatch, 2010. Indian Economy Overview. Home. [Online] Available at: http://www.economywatch.com/indianeconomy [Accessed March 14, 2011]. Indianchild, 2000. The Structure of Government of India. Indian Government Structure Government of India.[Online]Available at http://www.indianchild.com/indian_government [Accessed March 21, 2011]. India Travel Agents, 2008. Indian Customs. Travel to India. [Online] Available at: http://www.india-travel-agents.com/india-guide/customs.html [Accessed March 12, 2011]. ITIM International, 2009. Geert Hofstede Cultural Dimensions. India. [Online] Available at: http://www.geert-hofstede.com/hofstede_india.shtml [Accessed March 14, 2011]. OECD,1997. Globalization and Small and Medium Sized Enterprises. Paris: OECD. Practicus,2011.CompanyValues.Hom. [Online]Available:http://www.practicus.com/company-values [Accessed March 24, 2011] Patel, F., 2005. Indo-UK Body to Reduce Trade Barriers. Business Standard. [Online] Available at: http://www.business-standard.com/india [Accessed March 28, 2011]. Suh, T. & Et. Al., 2008. Smaller Firms Perceived Cost and Attractiveness in International Markets. Journal of Global Marketing, 21: 1, 5 18. TIA,2009.India.Documents.[Online]Availableathttp://www.tiaonline.org/gov_affair [Accessed April 14, 2011]. The Economic Times, 2009, 2011.India-Britain Trade Could Reach $40 Bn By 2015: Industry. News. [Online] Available at: http://economictimes.indiatimes.com/news/economy [Accessed April 12, 2011]. Trading Economics, 2010. India GDP Growth Rate. Indicators. [Online] Available at: http://www.tradingeconomics.com/Economics [Accessed April 22, 2011]. VectorStudy, 2008. Porter's Generic Competitive Strategies. Management Theories. [Online] Availableat:http://www.vectorstudy.com/management_theories/porters_competitive[Accesse d May 2, 2011].

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Bibliography Hisrich, R. D., 2009. International Entrepreneurship: Starting, Developing, and Managing a Global Venture. SAGE Publications Inc.

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