A Comparative PESTLE Analysis Of India And China For Internationalization

Analysis

Internationalization has become an important strategy for most of the companies in order to expand their business in the foreign market and increase the brand loyalty (Brandenburg and De 2015). It helps in generating more revenue and producing the products at a cheaper cost of labor. The companies are facing various problems regarding the decisions of investing in the foreign market. The report has taken the situations of two countries China and India and an overall analysis of the two countries has been conducted which can help the companies in formulating the expansion strategies.

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The analysis of two countries, India and China, can provide a good idea about which one is better for internationalization by any other foreign countries of the world. A macro analysis has been conducted on the two notable countries that can provide an overall scenario of the two countries.

India is the largest democracy in the world and is the second largest country in terms of population after China (Hopewell 2015). The economic sector of the country has a contribution to the service sector with about 69% of the total GDP, retail trade and wholesale with about 23% and the real estate and financial institution contributing to 17%. These sectors have significantly contributed to the economic development of the country. The country has a huge population and is focusing on the education and development of information technology (Venkatesh, Sykes and Venkatraman 2014). Various other sectors are also on the verge of rapid growth and is becoming one of the favorite foreign market for investors. 

The political system of the country is very noticeable and strong since the independence of the country. The political situation in India is very complex due to the presence of different political parties who are actively participating (Weiner 2015). Various aspects like different ideologies of different political parties, interests of the politicians, policies of the governments in the state as well as in the central level are noteworthy. Different actions taken by them for the betterment of the general public is also considered significant. The taxation system of the government is very well developed and people need to pay various types of taxes like income tax, property tax, service tax and sales tax (Gupta 2016). Privatization has been adopted for the purpose of improving the efficiency and productivity of the government. Certain decisions like deregulation policy, government stability, international stability and international trade regulations have lead to the economic development of the country.

PESTLE Analysis of India

The economic condition of India is very strong and takes into consideration inflation, exchange rates, interest rates and taxation changes (Rajan 2015). The country has earned a GDP of $9,490 billion in 2017. Many popular brands are doing their business successfully in India for a considerable period because of its popularity as a business market.

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(Source: Statistics Times 2017 )

India has a huge foreign exchange reserves and massive natural resources like titanium, iron ore, manganese, coal and chromites. It has always encouraged foreign investment. The government is planning for attracting more investors, foreign product manufacturers, executives and material suppliers.

The social factors of India are very interesting and attracting the attention of many foreigners. It includes values, varieties of languages, many traditional things, and lots of festivals, demographic features, customs and lifestyles of different communities. The majority of the population of India is Hindu but there are people of different religions also like Muslims, Christians, Jain and so on (Smith 2015). There are various regulations in the society that act as the mobility of the income distribution, attitude of working, demographics of population, standard of education and skills.

India has made some remarkable technological advancement that has attracted the attention of the whole world (Telfer and Sharpley 2015). Many Smartphone companies are operating in the country with popularity. Many IT companies are taking projects from the outside world. The country has made advancements in the research and development and introduced some cost cutting techniques. Some telecom companies of India are able to provide 3G and 4G technologies to the users and help in facilitating them. Other noticeable technological products manufactured here are high definition TVs, MP3 players and computer games. Many online shopping companies are coming up every year. There has been software up gradation, speed of technology transfer and technology funding by government.

India is a country that is having different climatic conditions in different parts of the country. It is bearing different problems due to various climatic problems that affect the tourism, business, farming and insurance. Global warming is responsible for affecting the industries. Rapid industrialization and urbanization have severely affected the environment of the country. Green bench and government are working hard to reduce the environmental degradation through various means. They have enacted stringent laws to protect the nature.

India is a country with a stable constitution and recently there have been many amendments in various laws. The minimum wage has been increased in the country. The latest amendments regarding wages have the possibility to affect the demand and costs of many firms but can boost the production of the companies. The government of India has successfully implemented different laws like the Employment Law, Monopolies Commission, Health & Safety regulations and various international laws (Blanpain and Bisom-Rapp 2014).    

Political

China is a country that is quickly growing in Asia and also competing in the world (Mahbubani 2014). It has a very strong economy. It has many industries and attracting many foreign companies for doing business. There is a huge amount of efficient and skilled workforce who is able to give a huge labor throughout the day. There is a huge growth potential in the country and has a low labor cost. The macro-environment analysis of China shall give us an insight about the country’s overall condition.

The political system of China is extremely strong that has helped it to boost the economy of the country (Lo 2014). New regulations have been passed recently in their congress and the formal and informal rules have strengthened the economy. The country has an effective policy for the investor from domestic as well as international to make investments in various sectors. The Chinese government has put its focus on the development of e-commerce. The government is trying to flourish various types of businesses and enhance the production of different products and commodities. The industrial sector is getting continuous support from the political parties and the government. This has helped to boost the economy of the country.

During the last few years, there has been an excellent growth in the GDP of China. The country is having a large number of skilled people, high rate of savings and an extensive export business. The growth in GDP is adding values to the society and increasing the purchasing power of the consumers. The labor cost is very cheap compared to other Asian countries but higher than India. The companies are getting boosted due to the cheap labor cost. Many foreign companies are hiring the Chinese labors due to this reason. The growth rate is remarkable but certain corporate trends may affect the business which may be high rate of inflation or high prices of property. The rate of interest is growing and the reserves of different banks are also getting higher now.

The fluctuations in the distribution of age and demographics of the growth of population have changed considerably and play significant role on the cultural and social aspects of the country. The size of the family and social behavior has contributed to certain social factors like religion, emigration, lifestyles and education. The literacy rate in China has increased up to 90% (Taylor and Taylor 2014). This has significantly contributed to the economic development of the country. The people in China use internet and social networking sites and shop online. Taobao is the largest e-commerce site in China and have become popular in the country (Hu et al. 2014).

Economic

Some technological factors are responsible for the development of new things, new technology regarding production, purchase of new and innovative mechanisms and new distribution mechanisms like the internet and new ways of working that include mobile telecommunications. The country is suffering as it does not have a concrete online payment system. The Chinese buyers are facing high level of uncertainty and experiencing long term orientation. The credit card penetration is also very less in the Chinese market.

The people in China are very aware about the environmental factors and the protection norms. The emergence of advanced technologies has made everything very fast and easy. The coming up of more online shopping sites has helped the consumers to place orders sitting at home itself and not visiting the stores. Thus, less number of vehicles are being used that lead to less emission of pollutants. China has become the most impressive country for the foreign investors.

As more and more e-commerce companies are coming up in China and the industry is flourishing, the government has started helping the companies to expand and formulating strategies for the legal frameworks to promote the e-commerce industry. The rules and regulations are very stringent in China. The government has not formed any regulations to protect privacy, recognition of the digital signatures, and protection of the consumer rights and validation of electronic contracts. Prevention of cheating and theft in business and in e-commerce has not been supported by any legislations of China. This has been a great matter of concern for the e-commerce as well as the businesses. The legal factors have the capability to provide better products at a lower cost. The working capacities of the industries will increase with the exercise of more and more legislations.

From the above macro-environment analysis of the two countries, India and China, I as an international business manager of  Nuttelex, would look forward to invest in India because of the low cost of labor and better industrial relations with other major countries than that of China. The legislations in China are not so good and pollution rate is very high in China compared to India.

Fig. 1                                                               

(Source: Autospost 2016)

Fig. 2

(Source: Boesler 2013)

The figure 1 shows the labor cost of different cities in India and China that gives us a clear indication that India is the favorable country for production of any products than that of China.

Social

The figure 2 shows the overall wage rate of the different countries in the world where India is well below than that of China which compels me to start my business in India.

Another factor to consider is the continuous decline of GDP of China that has the greatest chance of affecting the business in the communist nation.

Fig. 3

(Source: Numbernomics 2017)

The above figure 3 has helped me in taking the decision about choosing the foreign country for the production of snacks and markets them all over the world. On the other hand, the geographical convenience of India much more than that of China in terms of shipping and movement of cargoes for the purposes of distribution.

Another point to consider is that the rate of corruption and theft is much more in China than that of India and people would like to do business in a safe environment.

Fig. 4

(Source: The Conservation 2014 )

Shows that the population of male is more in India than in China which is the main workforce for the production purposes.

All the above factors have helped me to take a decision about choosing the right country for the business expansion of Nuttelex.

Conclusion

The report has helped to infer about choosing the right country for internationalization of the snack company of Australia, Nuttelex. The macro-environment analysis of India and China has helped us to understand the overall scenario of the two countries. India is ahead of China in terms of growth in GDP and demographical convenience required by the companies to do business in an effective way. Various studies have revealed that India is the best choice than China as the corruption level is very high in China and legislations to protect the companies are not good in the country. The labor cost which is the primary concern for the companies going for expansion strategies is very less in India compared to China. The company should be recommended to take care of the employees and abide by the policies of India which can improve their distribution channels with other countries in the world.

References

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Blanpain, R. and Bisom-Rapp, S., 2014. Global Workplace: International and Comparative Employment Law Cases and Materials. Wolters Kluwer Law & Business.

Boesler, M. 2013. Here’s How America’s Minimum Wage Stacks Up Against Countries Like India, Russia, Greece, And France. [online] Business Insider. Available at: https://www.businessinsider.in/Heres-How-Americas-Minimum-Wage-Stacks-Up-Against-Countries-Like-India-Russia-Greece-And-France/articleshow/21922146.cms [Accessed 8 June 2017].

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Gupta, A., 2016. Problems Of Double Taxation In India-A Case For Progressive GST (Goods and Services Tax). Journal of Commerce and Management Thought, 7(3), p.599.

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Hu, J., Holt, S., Marques, J. and Camillo, A., 2014. Marketing channels and supply chain management in contemporary globalism: E-commerce development in China. Handbook of Research on Effective Marketing in Contemporary Globalism, 325.

Lo, K., 2014. A critical review of China’s rapidly developing renewable energy and energy efficiency policies. Renewable and Sustainable Energy Reviews, 29, pp.508-516.

Mahbubani, K., 2014. The great convergence: Asia, the West, and the logic of one world. PublicAffairs.

Numbernomics, 2017. Reshaping the World. [online] Available at: https://www.numbernomics.com/nomicsnotes/?m=201511 [Accessed 8 June 2017].

Rajan, R., 2015. Competitive Monetary Easing: Is it yesterday once more?. Macroeconomics and Finance in Emerging Market Economies, 8(1-2), pp.5-16.

Smith, D.E., 2015. India as a secular state. Princeton University Press.

Statistics Times, 2017. GDP Growth of India. [online] Available at: https://statisticstimes.com/economy/gdp-growth-of-india.php [Accessed 8 June 2017]

Taylor, I. and Taylor, M.M., 2014. Writing and Literacy in Chinese, Korean and Japanese: Revised Edition (Vol. 14). John Benjamins Publishing Company.

Telfer, D.J. and Sharpley, R., 2015. Tourism and development in the developing world. Routledge.

The Conservation, 2014. What you can tell about a country’s future by looking at its gender balance. [online] Available at: https://theconversation.com/what-you-can-tell-about-a-countrys-future-by-looking-at-its-gender-balance-30987 [Accessed 8 June 2017].

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