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Home Depot in India

 Alexis Salas

Donitza Tirado

Brianna Chavez

Anna Carrillo

Paul Thomas

 Bad Caviar

International Marketing 4325

October 18, 2018

Table of Contents

Title page……………………………………………………………………….………..pg 1

Table of contents………………………………………………………………….……..pg 2

Executive Summary………………………………………………………………….…..pg 3  

First section: Question 1-2 ………………………………………………………….…...pg 4

Second section: A) Political Environment …………………………………….... pg 5

      B) Social Cultural People……………………………………......pg 6

      C) Economic Environment …………………………………...…pg 6-7

      D) Legal System ………………………………………………...pg 7-9

      E) Technology…………………………………………………...pg 9-11

Third Section:    A) Market Environment …………………………………..…….pg 11

    B) Entry Strategy …………………………………………...…...pg 12

List of references.………………………………………………………….………...…pg 13

Appendices…………………………………………………………………………..….pg 14

Executive Summary

Home depot is a home improvement and building supply retailing store that provides a variety of products and services. It is the largest home improvement store in the United States and what makes their brand so successful is that they have the same goal in helping people and having the highest quality in every location and in every country that they are in. This is why we think it is a good idea to bring Home Depot to India. Our goal is to help customers to the best of their abilities and offer them the best help when it comes to their home improvement needs. India is a pro-business country, and is the largest trade and investment partner in the U.S. We expect the people of India to be a tough market but in recent years, India has shown a great deal of progression in both technological advances and communications. India also has the second largest population in the entire world with an estimated population of 1.3 billion people. We plan on putting our brand in one of India's growing cities. We plan on proposing a joint venture with UrbanClap, a home service company in India that will be responsible for giving valuable insight on the local consumer base, as well as delivering and assembly of our products to consumers.

Home Depot is a home improvement and building supply retailing store that provides numerous products and services to its consumers. It is also the largest home improvement retailing store in the united states. Their competitive edge and group of benefits that make them so successful is that they have the same goal for every location in any city or country. “In every store, our goal is the same: to earn our customers' respect by offering the highest level of service, the broadest selection of products and the most competitive prices” (Home Depot, 2018).

In order for Home Depot to be successful in other countries, their mission is to help their customers to the best of their abilities and offer them the best help when it comes to their home improvement needs. If they keep this mission and always hire the best, knowledgeable, and helpful employees then there does not need to be such a huge modification for Home Depot to be successful elsewhere.  There would need to be a small modification for it to go international because there's different people whose needs are different than in the United States. Home Depot would need to provide some supplies and products built in that specific country. It would need to make sure that those products and services are dependable and will promote customer appreciation towards the store as a whole. It can be successful because it will tailor to that country's highest quality supplies and products, which can show that Home Depot does their research and cares about the market they are entering for the customers.

  “A firm's organizational culture is the system of traditions, habits, values, and expectations that affect the behaviors of employees and customers” (Thompson, 2017). This is important because if they care so much about their organizational culture, it will strive to many other locations all over the world because Home Depot differentiates themselves from other competitors and supports success and leadership in the market. If they do expand internationally they need to look at the cultures and markets they enter to tailor to their lifestyles in that country.

Second Section

India is a pro-business country, and is the largest trade and investment partner in the U.S. The Indian government is an overall stable federal republic with goals of free trade. While they are in favor of businesses in the country, there have been companies that acquire land forcefully for mining and infrastructure project that sparks unrest in the people. Their bad corporate experiences have left a bad taste in the people's mouths about corporations establishing themselves in their country.

There is currently legislation in place to prevent child labor called, the 2009 Right to Education Act. In these labor laws, the Indian government states that children from the ages of 6-14 have the right to free, obligatory and quality education. While there are these labor laws in place, the participation varies from state to state. In more rural areas child labor is very prominent, especially in the textile industry (Department for International Trade, 2017).

In India, their tariff and fees system are not very transparent, which leads to a complex structure and lack of understanding. Terms are not clearly defined which leaves them open to interpretation for customs officials who have been known to take advantage of these situations, and they are able to tax companies however they please. Overall, as reported by the World Bank, their average applied tariff has been 6.3 percent (U.S. Embassy, 2018).

While some urban cities in India follow modern day culture and customs, most of the country still primarily consists of rural areas which are still ruled by their religious beliefs and Hindu Law. They have a high context culture and they are known to be low risk-takers since they usually abide by their traditions. Since the majority of the cities in India are rural and traditional, it would be a good idea to target advertising towards men since they are the ones with the purchasing power in the family, and family values have a very high importance in their culture. They have a hierarchy based on income first, then gender, then age. The eldest male is known to be the governing member in the family and the eldest female is in charge of other females in the family, she shows them the ropes in a sense. Their customs follow those that Hindu Law dictates such as the veiling and seclusion of females in public settings, as well as the females not having as much monetary or executive family within the family as males. This thought and Hindu ideals have been scarce in more urban cities within the country, which is why many companies opt to build their locations in more populated areas where the culture is much more westernized.

Their tourism is very popular in more urban cities where many ventures to see the modern marvels within these cities. Companies have been known to establish their brands in these urban areas not only for the more westernized culture, but also for the likelihood that their country's natives will come across their brand to purchase their product since tourism is very high year-round (U.S. Embassy, 2018)

India has a high country-of-origin effect. They prefer items that they know have been made by the people of their country as opposed to imports. They do not necessarily think poorly of western made products, but they think poorly of people who sell or make western products which makes them less inclined to buy them (Jacobson, 2004).

India has seen growth and sometimes decline economically over the past several years. It's one of the fastest growing economies out there. India currently has a GDP or gross domestic product per capita rate of 2.6 trillion U.S. dollars in 2017, according to the World Trade Organization. India's GDP when up grew 8.2 percent in the quarter that ended in June of 2018. India's PPP, purchasing power parity, GDP is 7.2 trillion (Central Intelligence Agency, 2018). However, inflation is on the rise compared to last year and the rupee, India's currency, is very low compared to the U.S. dollar. While it's one of the poorest countries in the world with 176 million poor people, India is hoping to become a high middle-income country by 2030 (World Bank, 2018). Some of India's major imports and exports are agricultural products such as rice, cotton, and oils. Non-agricultural imports and exports include petroleum oils, diamonds, gold and other articles of jewelry (World Trade Organization, n.d.).

India has the second largest population in the entire world with an estimated population of 1.3 billion people. Almost 80 percent of the population believe in Hinduism. Muslim is second at 14.2 percent and Christianity is third at 2.3 percent. At least three ethnic groups make the Indian population -- Indo-Aryan makes up 72 percent of the population, Dravidian makes up 25 percent and Mongoloid and other ethnicities make up the remaining 3 percent of the population.  41 percent of the population ranges from the ages of 25 to 54 years old. Children ages 0 to 14 make up 27.3 percent of the population, while young adults ages 15 to 24 make up almost 18 percent of the population. Adults ages 55 to 64 rank fourth at 7 percent, and men and women 65 and older make up 6 percent of India's age range (Central Intelligence Agency, 2018).

India has over 1.5 million schools throughout the country and has the second largest school system after China. Children between the ages of six to 13 are required by law to go to school (World Education Services, 2018). About 127 million students are in primary school, 176.5 million in secondary, and a little over 120 million students are in tertiary school meaning college or trade school. (UNESCO, 2017). India's life expectancy in 2016, according to World Bank was 69. The degree of risk for major infectious diseases are very high in India. Hepatitis A and E, malaria, dengue fever, leptospirosis are just some of the few common disease throughout the country (Central Intelligence Agency, 2018).

India has one of the oldest legal systems in the world. The legal system in this country is a unique feature of the Indian Constitution. It relates to system of courts that administer both state and union laws. Although it is common law system based on the English model. The Indian penal code provides a penal code for all states in India. The code applies to any offence committed by any citizen of India anywhere and on any Indian registered ship or aircraft. This Indian penal code came into force in 1862 during the British rule and is regularly amended and went into full force in 1993. Based on British criminal law, the code defines basic crimes and punishments, applies to resident foreigners and citizens alike, and recognizes offences committed abroad by Indian nationals. Civil matters like murder, assault, physical injury, economic offences, medical negligence, drugs or narcotics, harassment, sexual abuse, domestic violence, corruption, extortion, cheating, immigration, human rights violation, and more. The civil procedure codes (C.P.C.) regulate the functioning of civil courts. This code lays the procedure of filing the civil case which includes specific rules for proceedings of a case, rights of appeals, review or reference etc. Indian civil law is complex, with each religion having its own specific laws to follow, after independence Indian laws are changing. According to the modern world example, Indian laws started changing after their independence. Just recently, the Domestic Violence Act was passed in the year 2005.

The first legislation in India relating to patents was the Act VI of 1856. The objective of this legislation was to encourage inventions of new and useful manufactures and to induce inventors to disclose secret of their inventions. After Independence, it was felt that the Indian Patents & Designs Act, 1911 was not fulfilling its objective. Intellectual Property India site (2017) shared that it was found desirable to enact comprehensive patent law owing to substantial changes in political and economic conditions in the country.

 Accordingly, the Government of India constituted a committee under the Chairmanship of Justice (Dr.) Bakshi Tek Chand, a retired Judge of Lahore High Court, in 1949 to review the patent law in India in order to ensure that the patent system is conducive to the national interest. The last changes were made effective in 2006. The Trade Marks Act 1940 was the first statute law on trademarks in India. Prior to that, protection of trademarks was left to the governed by Common Law. The current law of trademarks contained in the Trade Marks Act, 1999 is in harmony with two major international treaties on the subject, namely, Paris Convention for Protection of Industrial Property and TRIPS Agreement. India is a signatory in both.   

Technology substantially improves the standard of living and increases development. Currently, the new government has unleashed a series of initiatives and programs to boost infrastructure development and connectivity across the country. This includes economic corridors connecting major cities, the development of inland waterways, the improvement of road and rail connectivity, and the development of more airports and ports to deal with the growth of air and sea traffic. The government has prioritized road infrastructure development with a special focus on three key areas specifically in rural roads, national highways, and the expressways.

The government hopes to achieve 100 percent rural connectivity by next summer and they are progressing at a fast past! In 2016, India jumped 19 places in World Bank's Logistics Performance Index 2016, to rank 35th amongst 160 countries.  According to the United States Central Intelligence Agency site (2018), India ranks second in roadways in comparison to the world, right underneath the U.S. India is expected to invest highly in the infrastructure sector, mainly highways, renewable energy and urban transportation. India Brand Equity Foundation (2018) wrote how some steps are starting to be taken such as, railways receiving the highest ever budget of $22.86 billion (US), $2.47 billion (US) towards the aim to achieve universal household electrification in the country, $648.75 billion (US) to increase capacity of Green Energy Corridor Project along with other wind and solar power projects, and $1.55 billion (US) to boost telecom infrastructure. The increasing development of technology shows that the country is open to progression and the willing to help the environment while still being contentious of money.   

A national survey on the status of research and development in the country has shown that India's gross expenditure on Research and Development has more than tripled in the decade from 2004-2005 to 2014-2015. The survey, conducted by the National Science and Technology Management Information System under the Department of Science and Technology, shows that the per capita R&D expenditure is increasing. It concluded that the growth was driven mainly by the government. The number of scientific publications and E-Commerce has also been on the rise. The image below shows retail e-commerce revenue in India from 2015 to 2020. In 2015, mobile retail e-commerce sales in India was around 6.02 billion U.S. dollars and is expected to reach 37.96 billion U.S. dollars by 2020 (The Statistics Portal, 2018).   

India being a price and value-conscious market, consumers typically look for cues that indicate assurance of value. A strong brand is important for furniture manufacturers in this respect, to increase customer awareness and trust.

Third section

     India provides a very rich market for furniture because of the amount of people that populate the country. According to a World Bank study, the organized furniture industry is expected to grow twenty percent each year globally. The reason for this substantial growth is based partly on the rapid growing consumer markets of Asia, including India. India's growing population not only affects the furniture market but other markets as well, such as the housing market and hotel business, all of which go hand in hand with furniture. This makes India very appealing in terms of setting up a retail outlet to provide quality furniture and assembly that will be in demand for years to come. Taking all these factors into account, it is certain that the stage of the life cycle for quality furniture in India is at the growing stage.

India is also abundant in raw materials that are used by local manufacturers to make furniture products. Eighty-Five percent of the furniture market in India is currently in the unorganized sector, meaning furniture usually comes from small local businesses. These businesses do not incur fixed cost at the level of organized firms, nor follow government regulations. This provides a slight advantage as the majority of India is below poverty level; therefore do not have the means to visit organized retailers nor the funds. Our biggest competition will arise from the unorganized sector along with the only other major furniture outlet in the region, Ikea.

One advantage Home Depot Furniture will have over unorganized furniture outlets is our assembly component of the store. India's “Do it yourself” culture is not like the United States. The majority of Indian society relies on after-sale assembly services to put together their furniture and make home improvements. Home Depot Furniture will offer its own component of assembly for the furniture consumer's buy, which will ensure quality assembly in a timely manner for consumer. This will be a huge advantage over not only the unorganized sector, but Ikea also, as they have relied heavily on “Do it yourself”' assembly throughout their history and do not have an assembly component for consumers.

Although the majority of India's furniture market is in the unorganized sector, the growing population and tourism of the country are making it more and more appealing to other competitors as well. Competition will be fierce in the coming years, as this is a desirable market for domestic firms to arise. Home Depot already has a globally known brand name, so this will already provide a slight advantage as far as perception of prestige, but domestic firms will know the servicescape, consumer habits, and products preferred by the local market. This is why we propose a joint venture with UrbanClap, a home service company in India that will be responsible for giving valuable insight on the local consumer base, as well as delivering and assembly of our products to consumers. This joint venture will prove valuable as we strive to understand our consumer market in India and compete with domestic firms.

The decision to joint venture with UrbanClap as opposed to other forms of entry was mainly because of the level of commitment we wanted in India. We have confidence in the market and believe UrbanClap is the most promising local home assembly service in the country. UrbanClap also will help with insight on which local firms we will source 30% of our inventory from, as there is a government mandate that we do so. The government of India is very open to joint ventures and other types of foreign direct investments as they encourage the growth of foreign firms.

References

Brand Equity Foundation. (2018). Retrieved from   

http://www.ibef.org/industry/infrastructure-sector-india.aspx

Department for International Trade. (2017, August 4). Overseas Business Risk - India. Retrieved from https://www.gov.uk/government/publications/overseas-business-risk-india/overseas-business-risk-india#human-rights

Home Depot. (2018). Retrieved from https://corporate.homedepot.com/about/history

Intellectual Property India. (2017). Retrieved from http://www.ipindia.nic.in/patents.htm  

Central Intelligence Agency. (2018). Retrieved from  

https://www.cia.gov/library/publications/the-world-factbook/geos/in.html

Jacobson, D. (2004). Indian Society and Ways of Living. Retrieved from

https://asiasociety.org/education/indian-society-and-ways-living

Thompson, A. (2017). Home Depot's Organizational Culture. Retrieved from  

http://panmore.com/home-depot-organizational-culture-analysis

World Bank. (2018, October 7). India Overview. Retrieved from

https://www.worldbank.org/en/country/india/overview

World Education Services, B. (2018, October 01). Education in India. Retrieved from

https://wenr.wes.org/2018/09/education-in-india

World Trade Organization. (n.d.). India Country Profile. Retrieved from

http://stat.wto.org/CountryProfiles/IN_E.htm

UNESCO. (2017, April 12). India. Retrieved from http://uis.unesco.org/en/country/IN

U.S. Embassy. (2018, October 10). India - Import Tariffs. Retrieved from

https://www.export.gov/article?id=India-Import-Tariffs

Appendix

Retail m-commerce sales in India from 2015 to 2020 (in billion U.S. dollars) [Digital image]. (2018). Retrieved 2018, from https://www.statista.com/statistics/266119/india-retail-mcommerce-sales/

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