[ RFL’s Emerging Market in India ]
Executive Summary
The chapters contain how RFL can make profit and expand their market in India, so on the perfect strategies can be apply for winning the project. Moreover how RFL can understand the pressure for cost reductions and local responsiveness that influence strategic choice in India. Also how RFL can identify the different strategies for competing in Indian market and their pros and cons.
The chapters also contain the architecture of the organization (RFL). The different organisational choices that RFL can make in India and how RFL can matched to strategy to improve the performance in India, also what is required for Indian market to change its organisation so that it better matches its strategies.
The chapters will also include, which markets to enter, when to enter and on what scale, so on the entry modes that RFL will use to enter in India and the factors that will influence RFL’s choice. The recognization of the pros and cons for acquisitions versus Greenfield ventures as an entry strategy. The evaluation of pros and cons of entering into strategic alliances.
The chapters finally contain the summarization of the strategic role of human resource management in the international business. The identification of the pros and cons of different approaches to staffing policy in the international business. Explanation of why managers may fail to thrive in foreign postings. Recognization of how management development and training programs can increase the value of human capital in the international business firm. Explanation of how and why performance appraisal systems might vary across nations. Understanding how and why compensation systems might vary across nations. And understanding how organized labor can influence strategic choices in the international business firms.
Introduction
Objectives
How RFL can successfully subsidize their market in Tripura India.
Methodology
Secondary data has been collected from the internet, as primary data is unavailable. Some books are also been used to review the literature.
Literature review
Chapter – 1
Value creation of RFL:
Figure-1
RFL must also focus on the value creation activities like:
Figure-2
1. Primary activities: Primary activities have to do with the design, creation, and delivery of the product; its marketing; and its support and after ‘ sale service. Following normal practice, in the value chain illustrated in Figure – 2, the primary activities are divided into four functions: R&D, Production, marketing and sales, customer service.
2. Support activities: The support activities of the value chain provide inputs that allow the primary activities to occur (see figure – 2). In terms of attaining a competitive advantage support can be as important as, if not more important than, the ‘primary’ activities of the firm. (Hill, 2012, pp. 421 – 424)
Global Expansion:
Strategy and the firm: A firm’s strategy refers to the actions that managers take to attain the goals of the firm. Firms need to pursue strategies that increase profitability and profit growth.
Profitability is the rate of return the firm makes on its invested capital.
Profit growth is the percentage increase in net profits over time. (Hill, 2012, pp. 418 – 419)
Figure – 3
Leveraging Subsidiary Skills:
Managers should recognize that valuable skills that could be applied elsewhere in the firm can arise anywhere within the firm’s global network – not just at the corporate centre. Establish an incentive system that encourages local employees to acquire new skills. Have a process for identifying when valuable new skills have been created in a subsidiary. Act as facilitators to help transfer skills within the firm. (Hill, 2012, pp. 430 – 431)
Local Responsiveness:
Pressures for local responsiveness arise from differences in consumer tastes and preferences, infrastructure, accepted business practices and distribution channels, and from host government demands. Strong pressure for local responsiveness emerge when customer tastes and preferences differ significantly between countries, as they often do for deeply embedded historic or culture reasons. (Hill, 2012, pp. 432)
Organizational structure
Organizational structure can be thought of in terms of three dimensions:
1. Vertical differentiation – the location of decision-making responsibilities within a structure.
2. Horizontal differentiation – the formal division of the organization into sub-units.
3. Integrating mechanisms – the mechanisms for coordinating sub-units. (Hill, 2012, pp. 450)
Chapter – 2
Organizational culture it means that the values and norms express the employees as the behaviour patterns or style of an organisation that employee are automatically encouraged to follow by their fellow employees. (Hill, 2012, pp. 469)
Strategy and Architecture:
Firms pursuing a transnational strategy focus on simultaneously attaining location and experience curve economies, local responsiveness, and global learning (the multidirectional transfer of core competencies or skills.) (Hill, 2012, pp. 475)
Organizational Change:
Multinational firms periodically have to alter their architecture so that it conforms to the changes in the environment in which they are competing and the strategy they are pursuing. (Hill, 2012, pp. 476)
Chapter ‘ 3
Entrance Strategy in International Business:
There are three types of strategic decision, basic entry decisions are which markets to enter, when to enter those markets and on what scale. (Hill, 2012, pp. 486)
Regarding this strategy RFL should carefully enter in Indian market with an entry mode of wholly owned subsidiary.
There may be some influences that RFL may face during entry like political risks but we know each and every country has some political imbalance so RFL must not consider it as a major risk.
Entry mode Advantages Disadvantages
Exporting Ability to realize location and experience curve economics High transport cost
Trade barriers
Problems with the local
marketing agents
Turnkey contract Ability to earn returns from process technology skill in countries where FDI is restricted Creating efficient competitors
Lack of long-term market presence
Licensing Low development cost and risks Lack of control over technology
Inability to realize location and experience curve economics
Inability to engage in global strategic coordination
Franchising Low development costs and risks Lack of control over quality
Inability to engage in global strategic coordination
Joint ventures Access to local partner’s knowledge
Sharing development costs and risks
Political acceptable Lack of control over technology
Inability to engage in global strategic coordination
Inability to realize location and experience economics
Wholly owned subsidiaries Protection of technology
Ability to engage in global strategic coordination
Ability to realize location and experience economies High costs and risk
Chapter ‘ 4
Strategic role of international HRM:
A large and expanding body of academic research suggests that a strong fit between human resources practices and strategy is required for high profitability. It must be the right people in the right postings. Those people must be trained approximately so that they have the skill sets required to perform their job effectively, and so that they behave in a manner that is congruent with the desired culture of the firm. (Hill, 2012, pp. 617)
Role of human resources in shaping Organisation architecture:
Types of staffing policy:
The ethnocentric approach fill key management positions with parent-country nationals
The polycentric approach recruit host country nationals to manage subsidiaries in their own country, and parent country nationals for positions at headquarters
The geocentric approach seek the best people, regardless of nationality for key jobs
Recommendations
RFL plastic is a very well known company in Bangladesh; currently they are exporting plastic household products more than 36 countries and as well as they have some international distribution channels. Currently they are also working with some established companies in India like Disney, Walmart, etc and also they have technological and strategic partners SP Berner, Bangla CAT, Mitsubishi etc. RFL mainly export their plastic household products with their own brand name only in India, Nepal, Dubai, South Africa and Bhutan (Das, 2014), but RFL has no wholly own subsidiary, so as RFL is a established company since 2003, this is the perfect time for RFL to enter in the Indian market as wholly owned subsidiary.
Chapter ‘ 1 Strategic Options for International Business
To increase profitability, RFL need to create more value. The RFL’s value creation will be the difference between V (the price that the firm can charge for that product given competitive pressures) and C (the costs of producing that product).
A firm has high profits when it creates more value for its customers and does so at a lower cost. (Hill, 2012, pp. 419 – 420)
According to (Hill, 2012, pp. 430 – 431) I would like to suggest RFL, as they are going to enter a new market in Tripura, India, they should trained their local staffs about the culture of RFL and simultaneously the staffs who will be taken as managerial level from Bangladesh, they also must be well trained about the Indian culture and local demand so on the coordination between Indian staffs and Bangladeshi staffs.
The perfect Strategy for international business for RFL: To subsidise their market at Tripura, India RFL should follow one strategy:
Figure – 4
RFL must follow Transnational strategy (Hill, 2012, pp. 437) because RFL must consider China, as their major competitor, where China can able to produce same product at same cost, that is why RFL must follow Transnational Strategy (Hill, 2012, pp. 437) to minimize the cost and to survive in the Indian market after subsidizing.
According to (Hill, 2012, pp. 432), a very important policy I would like to suggest, RFL should research the customer’s demand, as per their culture and pricing, at least once in a month in the Indian market and as well as to compete in the local market in Tripura.
Reasons for choosing Indian market
As Bangladesh is situated in between West Bengal and Tripura, India. As shown in the figure below:
Figure ‘ 5
The great advantage for RFL is that, all the plastic producers in Kolkata cannot easily distribute their products at Tripura, India, because of many reasons like high transportation cost, have to cross Bangladesh border etc. Regarding this advantage this is a big opportunity for RFL to enter in the Indian market and subsidising. As well as the distribution channels will be spread as shown in the Figure ‘ 4 as marked (red circled).
So RFL have to consider the Core competencies (it refers to skill within the firm that competitors cannot easily match or imitate) (Hill, 2012, pp. 424 – 425) which will allow RFL to reduce the costs of value
According to (Hill, 2012, pp. 450) For subsidizing, I would like to suggest RFL to use this Integrating mechanism, for coordinating the sub-units in Tripura, India because their product lines and amount of production may vary from the home country to the host country or the operation process may not be the same as in the home country.
Chapter ‘ 2 Organization of International Business
RFL must use Output control system which is setting goals for subunits to achieve and expressing those goals in terms of objective performance metrics. And Incentives system where devices used to reward behaviour act that may vary depending on the employee and the nature of the work is being performed. (Hill, 2012, pp. 463 – 464)
RFL must also consider Performance Ambiguity Performance it happens when the causes of a subunit’s poor performance are not clear and it is highest in transnational firms. (Hill, 2012, pp. 466 – 467)
Chapter – 3 Entry Strategy and Strategic Alliances
Chapter – 4 Global Human Resource Management
Appendix:
RFL – Rangpur Foundry Ltd
Economic information of the chosen country – India
India is developing into an open-market economy, yet traces of its past autarkic policies remain. Economic liberalization measures, including industrial deregulation, privatization of state-owned enterprises, and reduced controls on foreign trade and investment, began in the early 1990s and served to accelerate the country’s growth, which averaged under 7% per year from 1997 to 2011. India’s diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Slightly less than half of the work force is in agriculture, but, services are the major source of economic growth, accounting for nearly two-thirds of India’s output with less than one-third of its labor force. India has capitalized on its large educated English-speaking population to become a major exporter of information technology services, business outsourcing services, and software workers. India’s economic growth began slowing in 2011 because of a decline in investment, caused by high interest rates, rising inflation, and investor pessimism about the government’s commitment to further economic reforms and about the global situation. In late 2012, the Indian Government announced additional reforms and deficit reduction measures, including allowing higher levels of foreign participation in direct investment in the economy. The outlook for India’s long-term growth is moderately positive due to a young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. However, India has many challenges that it has yet to fully address, including poverty, corruption, violence and discrimination against women and girls, an inefficient power generation and distribution system, ineffective enforcement of intellectual property rights, decades-long civil litigation dockets, inadequate transport and agricultural infrastructure, limited non-agricultural employment opportunities, high spending and poorly-targeted subsidies, inadequate availability of quality basic and higher education, and accommodating rural-to-urban migration. Growth in 2013 fell to a decade low based on weak fundamentals, and India’s economic leaders are now struggling to improve the country’s wide fiscal and current account deficits. Improving conditions in Western countries have led investors to shift investment away from India and prompted a severe depreciation in the rupee. (Cia.gov, n.d.)
Conventional Republic of India
Local Republic of India/Bharatiya Ganarajya
Currency Indian rupees (INR)
Exchange rate per US dollar -58.68 (2013 est.)
GDP (ppp) capita $4,000 (2013 est.) note: data are in 2013 US dollars
GDP growth rate 3.8% (2013 est.)
Industries textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, pharmaceuticals
Industrial production growth rate 0.9% (2013 est.)
Land use arable land: 47.87%, permanent crops: 3.74%, other: 48.39% (2011)
Demography of India:
Population 1,220,800,359 (July 2013 est.)
Age structure 0-14 years: 28.9% (male 187,236,677/female 165,219,615)
15-24 years: 18.2% (male 117,385,009/female 104,516,448)
25-54 years: 40.4% (male 253,642,261/female 239,219,931)
55-64 years: 6.9% (male 42,307,170/female 41,785,413)
65 years and over: 5.7% (male 32,992,850/female 36,494,985) (2013 est.)
Dependency ratios total dependency ratio: 52.4 %
youth dependency ratio: 44.3 %
elderly dependency ratio: 8 %
potential support ratio: 12.4 (2013)
Median age total: 26.7 years
male: 26.1 years
female: 27.4 years (2013 est.)
Population growth rate 1.28% (2013 est.)
Birth rate 20.24 births/1,000 population (2013 est.)
Death rate 7.39 deaths/1,000 population (2013 est.)
Net migration rate -0.05 migrant(s)/1,000 population (2013 est.)
Urbanization urban population: 31.3% of total population (2011)
rate of urbanization: 2.47% annual rate of change (2010-15 est.)
Major cities ‘ population NEW DELHI (capital) 21.72 million; Mumbai 19.695 million; Kolkata 15.294 million; Chennai 7.416 million; Bangalore 7.079 million (2009)
Sex ratio at birth: 1.12 male(s)/female
0-14 years: 1.13 male(s)/female
15-24 years: 1.12 male(s)/female
25-54 years: 1.06 male(s)/female
55-64 years: 1.01 male(s)/female
65 years and over: 0.91 male(s)/female
total population: 1.08 male(s)/female (2013 est.)
Mother’s mean age at first birth 19.9 (2006 est.)
Infant mortality rate total: 44.6 deaths/1,000 live births
male: 43.28 deaths/1,000 live births
female: 46.08 deaths/1,000 live births (2013 est.)
Life expectancy at birth total population: 67.48 years
male: 66.38 years
female: 68.7 years (2013 est.)
Total fertility rate 2.55 children born/woman (2013 est.)
Contraceptive prevalence rate 54.8% (2007/08)
HIV/AIDS – adult prevalence rate 0.3% (2009 est.)
HIV/AIDS – people living with HIV/AIDS 2.4 million (2009 est.)
HIV/AIDS – deaths 170,000 (2009 est.)
Drinking water source improved:
urban: 97% of population
rural: 90% of population
total: 92% of population
unimproved:
urban: 3% of population
rural: 10% of population
total: 8% of population (2010 est.)
Sanitation facility access improved:
urban: 58% of population
rural: 23% of population
total: 34% of population
unimproved:
urban: 42% of population
rural: 77% of population
total: 66% of population (2010 est.)
Major infectious diseases degree of risk: very high
food or waterborne diseases: bacterial diarrhea, hepatitis A and E, and typhoid fever
vectorborne diseases: dengue fever, Japanese encephalitis, and malaria
water contact disease: leptospirosis
animal contact disease: rabies
note: highly pathogenic H5N1 avian influenza has been identified in this country; it poses a negligible risk with extremely rare cases possible among US citizens who have close contact with birds (2013)
Nationality noun: Indian(s)
adjective: Indian
Ethnic groups Indo-Aryan 72%, Dravidian 25%, Mongoloid and other 3% (2000)
Religions Hindu 80.5%, Muslim 13.4%, Christian 2.3%, Sikh 1.9%, other 1.8%, unspecified 0.1% (2001 census)
Languages Hindi 41%, Bengali 8.1%, Telugu 7.2%, Marathi 7%, Tamil 5.9%, Urdu 5%, Gujarati 4.5%, Kannada 3.7%, Malayalam 3.2%, Oriya 3.2%, Punjabi 2.8%, Assamese 1.3%, Maithili 1.2%, other 5.9%
note: English enjoys the status of subsidiary official language but is the most important language for national, political, and commercial communication; Hindi is the most widely spoken language and primary tongue of 41% of the people; there are 14 other official languages: Bengali, Telugu, Marathi, Tamil, Urdu, Gujarati, Malayalam, Kannada, Oriya, Punjabi, Assamese, Kashmiri, Sindhi, and Sanskrit; Hindustani is a popular variant of Hindi/Urdu spoken widely throughout northern India but is not an official language (2001 census)
Literacy definition: age 15 and over can read and write
total population: 62.8%
male: 75.2%
female: 50.8% (2006 est.)
School life expectancy (primary to tertiary education) total: 11 years
male: 11 years
female: 10 years (2010)
Child labor – children ages 5-14 total number: 26,965,074
percentage: 12 % (2006 est.)
Education expenditures 3.3% of GDP (2010)
Maternal mortality rate 200 deaths/100,000 live births (2010)
Children under the age of 5 years underweight 43.5% (2006)
Health expenditures 3.9% of GDP (2011)
Physicians density 0.65 physicians/1,000 population (2009)
Hospital bed density 0.9 beds/1,000 population (2005)
Obesity – adult prevalence rate 1.9% (2008)
Source: website (Indexmundi.com, n.d.)
Sub-units can be integrated in this way:
A Simple Management Network RFL may use:
Bibliography:
Das, M. K. 2014. RFL International Business Information. Interviewed by M. K. Das [in person] 105, Progoti Shoroni, Middle Badda; 1212 Dhaka, Bangladesh, 09.03.2014.
Rflplastics.com. n.d. RFL Plastics Ltd. | RFL is a nationally recognized brand in Bangladesh for Plastics, Furniture, Table ware, House ware, Outdoor furniture, Kitchen ware, Hanger, Bathroom ware, Plastics converter, Shopping bag products. RFL Plastics, a subsidiary of RFL Industries, is the largest manufacturer of indoor and outdoor plastic products for domestic and export markets.. [online] Available at: http://www.rflplastics.com/ [Accessed: 18 Mar 2014].
Cia.gov. n.d. The World Factbook.[online] Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/in.html [Accessed: 18 Mar 2014].
Mapsofindia.com. n.d. Tripura. [online] Available at: http://www.mapsofindia.com/tripura/ [Accessed: 18 Mar 2014].
Indexmundi.com. n.d. India Demographics Profile 2013. [online] Available at:
http://www.indexmundi.com/india/demographics_profile.html [Accessed: 27 Mar 2014].
Hill, C. W. L. 2012. International Business. 9th ed. New York: McGraw-Hill.