Market entry barriers for German small and medium-sized companies in India E-Book

Diana Bednarek

• Herausgeber: GRIN Verlag
• Sprache: Englisch

Veröffentlichungsjahr: 2013

Beschreibung

Bachelor Thesis from the year 2012 in the subject Business economics - Miscellaneous, grade: 1,7, University of Applied Sciences Essen, course: International Management, language: English, abstract: The identification, analysis and evaluation of market entry barriers for German small and medium-sized companies in India are the objective of this bachelor thesis and will be developed within six chapters. Moreover, recommendations to minimize or overcome those barriers are provided. Small and medium-sized companies are increasingly confronted with new issues, but also with chances due to the persistent internationalisation of the markets. New markets are not only entered to guarantee existing competitive advantages and to expand. Furthermore, companies can benefit from substantial incomes and synergy effects. Entering new markets harbour different risks whereupon the market environment such as customers, products, competitors as well as fiscal and legal conditions needs to be analysed. In comparison to large concerns, small and medium-sized companies are facing issues of less financial and human resources, absent experience abroad, the ignorance of the respective national language and costs for the international market development. On the other hand, small and medium-sized companies are using individual manufacturing processes or design niche products to compete in international markets. India is characterized by its huge complexity of different races, languages, caste and religions as well as of its ancient cultural and social history. Detailed knowledge about the Indian culture and market is required to increase the success when entering the Indian market. The provided overview of those conditions is necessary to understand the characteristics of the Indian market and to consider this knowledge in daily business operations. The topic “market entry” is covered in numerous reference books and studies about the market entry in India can also be found. These studies are discussing the market entry of big companies such as of Siemens AG and Robert Bosch GmbH in India, but issues of small and medium-sized companies are neglected. This academic void is closed by this bachelor thesis with the help of the implementation of questionnaires and interviews. Based on these primary sources, market entry barriers for German small and medium-sized companies in India are identified as well as analyzed and recommendations to reduce or even overcome them are presented.

Leseprobe

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Index of contents

List of abbreviations

List of figure

1. Introduction

1.1. Problem description and objectives

1.2. Scope of work

2. Terminologies

2.1. Definition of small and medium-sized companies

2.2. Market entry barriers

2.2.1. Definition of market entry barriers

2.2.2. Classification of market entry barriers

3. Analysis of the market environment

3.1. Economic conditions

3.1.1. Economic reforms since 1991 and India’s actual economic structure

3.1.2. Foreign Direct Investment (FDI) and German-Indian relationship

3.2. Political and legal conditions

3.3. Socio-cultural conditions

4. Methodologies

4.1. Quantitative and qualitative research methods

4.2. Methods of collecting data

4.3. Question types

4.4. Designing and dispatching of the questionnaire

4.5. Practical implementation of interviews

4.6. Data analysis and quality criteria

5. Market entry barriers in India

5.1. Tariff barriers

5.1.1. Tariff barriers for foreign investors in India

5.1.2. Tariff barriers for German small and medium-sized companies

5.2. Non-tariff barriers

5.2.1. Impediments resulting from India’s high bureaucracy

5.2.2. Import regulations and permitted economic sectors for FDI’s

5.2.3. Impediments resulting from the Indian law

5.2.4. Non-tariff barriers for German small and medium-sized companies

5.3. Market-related barriers

5.3.1. Impediments resulting from India’s infrastructure in relation of transport, communication and estate

5.3.2. Impediments resulting from water and electricity supply

5.3.3. Impediments concerning the Indian labour market

5.3.4. Impediments resulting from climatic and environmental conditions

5.3.5. Impediments resulting from corruption

5.3.6. India’s worldwide reputation and Germany’s image in India

5.3.7. Market-related barriers for German small and medium-sized companies

5.4. Company-related barriers

5.4.1. Impediments concerning the personnel recruitment and human resource management

5.4.2. Impediments resulting from the collaboration with other companies and from the quality of customers

5.4.3. Impediments concerning the marketing mix

5.4.4. Company-related barriers for German small and medium-sized companies

5.5. Recommendations, success factors and key challenges for German small and medium-sized companies in India

6. Conclusion

6.1. Target achievement

6.2. Prospects

Bibliography

Declaration in lieu of oath

List of abbreviations

List of figure

Figure 1) Source: Own representation

Market entry barriers for German small and medium-sized companies in India

1. Introduction

Freedom of the press and a reliable democracy, the demographic development with a youth and consumer-oriented middle class, increasing investments in education and infrastructure, an effective finance market with comparable low rates of non-performing loans as well as a dependable legal system are the foundation of India’s economic revival within the last years and will ensure that this dynamic will continue. Therefore the foreign trade between Germany and India increased within the last years and German companies started their business in India. Entering new markets harbour different risks whereupon small and medium-sized companies are facing additional issues of less financial and human resources, absent experience abroad, the ignorance of the respective national language and costs for the international market development.

The expenditure of time for building up new businesses is often underestimated by German companies. In conjunction with the market entry, the requirements for sales, multitude bureaucratic pitfalls and the inexperience of employees are frequently misjudged. Therefore many companies indicate that two up to three years should be scheduled until a company is marketable. Initially, the profitability is hindered by high investments for infrastructure, human resources, transport, logistic and sales.[1] Companies operating in India should have enough power of endurance in regard of establishing business relationships and of being successful in the Indian market as frequently higher than expected expenses have to be spent in the first years.[2]

Within the literature market entry barriers are described whereupon analyzes for small and medium-sized companies have not been conducted. The most important market entry barriers for large concerns are the insufficient infrastructure, the high bureaucracy, the forbidden corruption, the antiquated caste system, the confusing import regulations, high tariffs and taxes, the insufficient skilled labour force as well as the Indian mentality and diversity. Within this bachelor thesis these impediments are analyzed to identify if they also affect small and medium-sized companies.

1.1. Problem description and objectives

The identification, analysis and evaluation of market entry barriers for German small and medium-sized companies in India are the objective of this bachelor thesis and will be develop within six chapters. Moreover, recommendations to minimize or overcome those barriers are provided.

Small and medium-sized companies are increasingly confronted with new issues, but also with chances due to the persistent internationalisation of the markets. New markets are not only entered to guarantee existing competitive advantages and to expand. Furthermore, companies can benefit from substantial incomes and synergy effects.

Entering new markets harbour different risks whereupon the market environment such as customers, products, competitors as well as fiscal and legal conditions needs to be analysed. In comparison to large concerns, small and medium-sized companies are facing issues of less financial and human resources, absent experience abroad, the ignorance of the respective national language and costs for the international market development. On the other hand, small and medium-sized companies are using individual manufacturing processes or design niche products to compete in international markets.

India is characterized by its huge complexity of different races, languages, caste and religions as well as of its ancient cultural and social history. Detailed knowledge about the Indian culture and market is required to increase the success when entering the Indian market. The provided overview of those conditions is necessary to understand the characteristics of the Indian market and to consider this knowledge in daily business operations.

The topic “market entry” is covered in numerous reference books and studies about the market entry in India can also be found. These studies are discussing the market entry of big companies such as of Siemens AG and Robert Bosch GmbH in India, but issues of small and medium-sized companies are neglected. This academic void is closed by this bachelor thesis with the help of the implementation of questionnaires and interviews. Based on these primary sources, market entry barriers for German small and medium-sized companies in India are identified as well as analyzed and recommendations to reduce or even overcome them are presented.

1.2. Scope of work

The first chapter is dedicated to the problem description, objectives and the scope of work.

In the second chapter the terms small and medium-sized companies as well as market entry barriers are defined. As no general accepted definition for both terms exists, both will be specified for this bachelor thesis. In addition, different forms of market entry barriers are categorized.

The third chapter analyzes the Indian market and its environment to provide a basis to understand the sources of existing market entry barriers.

Chapter four informs about information related to the choice of taking questionnaires, the structure as well as the interpretation of them. On this basis, interviews were conducted and analyzed to validate the information provided in the questionnaire. The presented findings are the basis for the evaluation of market entry barriers and offer recommendations to minimize or overcome them.

Within the first chapters the theoretical and informational basis for the main chapter is presented. Systematically, existing market entry barriers for German small and medium-sized companies in India are identified in the fifth chapter. Initially, impediments for large concern are named and explained according to the literature. Subsequently, the relevant market entry barriers for German small and medium-sized companies are described. This evaluation is based on results of the questionnaires and the conducted interviews. Concluding, the impediments for large concerns and small and medium-sized companies are compared. Additionally, suggestions to minimize or overcome market entry barriers as well as the key success factors and challenges are presented.

The results are compromised in the conclusion whereupon target achievements and prospects complete this bachelor thesis.

2. Terminologies

The relevant terminologies “small and medium-sized companies” and “market entry barriers” are defined in this chapter. A standardized definition for both terms does not exist thus the underlying comprehension of them will be specified for this bachelor thesis in this chapter. Additionally, a classification of market entry barriers is presented.

2.1. Definition of small and medium-sized companies

Günter Verheugen, Member of the European Commission stated that “Micro, small and medium-sized enterprises (SMEs) are the engine of the European economy”.[3] In 2005, 23 million small and medium-sized companies offer about 75 million jobs and represent 99 per cent of all companies in Europe.[4] In Germany, 99.3 per cent of the companies are small and medium-sized enterprises in 2009.[5] As various data about the number of German small and medium-sized companies in India exist and different sources have been compared, this amount is stated to be about 2,000.[6]