A Match Made In Heaven: Dixie Electronics And India Market Assessment And Analysis
Dixie’s Market Expansion to India
Market Assessment
Geography
India is an Asian country located in the southern part of this continent. It borders Nepal, China, and Pakistan to the North, the Arabian Sea to the West, the Laccadive Sea to the South, and Bangladesh, Bhutan, and the Bay of Bengal to the East (The World Fact Book, 2021). The total area of this country is 3,287,263 square kilometers, with water bodies taking 314,070 square kilometers. Compared to the United States, India is slightly more than a third of the land. The country has a long coastline of 7,000 km with seaports in the various coastal towns.
Political and Legal Environment
The structure of the Indian government is a federal parliamentary republic. It has a central union government headed by the Prime Minister and 28 state governments overseen by chief ministers. The legal model follows English law with the judiciary arm of the government having the power over all the legal systems in the country. According to Kumar (n.d), the 2013 New Companies Act is the prime law that regulates all aspects of a company including its formation and operation. Besides, the taxation laws dictate the amount of income that a business has to pay to the government in taxes. The taxation system in this country is complex since local, state, and national governments levy taxes at different levels. The types of tax that businesses must pay include corporate tax, goods and services tax, and professional tax, among others (Kumar, n.d). However, the type of tax depends on the nature of the businesses conducted. In addition to the tax and business laws, the human resource and employment laws regulate the conduct of business in India. Being a member of the International Labor Organization, India enforces laws such as the Trade Union Act 1962, The Workmen’s Compensation Act 1923, and the Minimum Wages Act 1948 (PricewaterhouseCoopers, 2012).
Economic Environment
India is one of the fastest growing international markets in the world. It is a member of the BRICS trading block comprised of Brazil, Russia, India, China, and South Africa (Nayyar, 2016). Besides being a growing market for goods, it is also a manufacturing powerhouse with a high amount of exports to various countries including the United States. According to the CIA World Fact Book, the 2019 Indian GDP was $2,835,927,000,000, translating to $6,700 per capita GDP. The three major contributors to this national income are agriculture, industry, and service in that order. The household consumption of the national GDP is 59.1%. In 2019, India exported goods worth $572.073 billion. The three leading export destination countries are the United States, United Arab Emirates, and China (The World Fact Book, 2021).
The economic environment of India is friendly to foreign investment. The country boasts of an elaborate electricity connection system that can support the establishment of industries. According to the CIA World Fact Book, India produced 1.137 Trillion Kilowatts in 2016 from its various energy generation centers. In 2019, 99% of the Indian urban and rural population was connected to electricity. The friendly economic environment in India is attractive to foreign investment. The bilateral trade between the US and India stands at 3%. According to Kronstadt and Akhthar (2020), the US-India trade agreements have never materialized due to ideological differences between the two countries. For example, the US had placed India in the Generalized System of Preferences (GSP) but removed it in 2019 after failing to comply with certain key provisions. India has also shown interest in joining the Regional Comprehensive Economic Partnership (RCEP) and Asia-Pacific Economic Cooperation (APEC) but failed due to its rigid economic policies. Nonetheless, various US companies have set their feet in India to capture this massive market for goods and services.
Social and Cultural Environment
The purchasing power of the Indian society is influential in the decision to extend a small-scale American company to India. Studies have shown that cultural values specific to society shape the principles of its members. This theory, also known as the Hofstede Cultural Model, implies that members of a country have a shared set of values that is usually consistent with the national ethos (Jackson, 2020). In the context of global expansion to India, the country’s economic status will determine the purchasing power of Indian households. According to the CIA World Fact Book, India has a per capita income of $ 6700 which is moderately high and consistent with the national GDP. The spending tendency of the Indians will therefore be moderate in line with the national income.
Analysis
The political and legal environment in India will have a significant impact in deciding on Dixie’s expansion to this Asian market. The taxation, labor, and corporation laws in the country do not have a significant variability with those in the US. Therefore, the major hindrance to this step is the political uprisings in Kashmir and other parts of the country (Sithemsetti & Borstorff, 2012). The economic environment is equally attractive to foreign investors. The high electricity connectivity means that Indian consumers will find Dixie’s products suitable in their homes. This connectivity will also facilitate the establishment of production plants when it comes to this stage. The high purchasing power of the Indians as indicated in the assessment will enable them to buy household equipment manufactured and distributed by Dixie.
Action Plan
Opening a manufacturing plant is the best option in the case of Dixie’s desire for global expansion. Since the aim of the company is to increase its revenue, the reverse innovation will help Dixie to capture both Indian and American markets. The primary step is adjusting the company’s mission statement to indicate that the company can manufacture goods outside the USA. Dixie will start by hiring a local business consultancy firm in India. This firm will take the company through legal steps, registration, banking, and asset acquisition. Dixie will then buy land, build a plant, and begin manufacturing. It will then assemble a team of local plant workers and marketers.
After the company begins operations in India, it will market itself as an American firm producing goods for local consumption. The marketing campaign must be vigorous to reach out to many people in a short time. This campaign should go hand-in-hand with brand promotion where Dixie items will be displayed in exhibitions and offered at a discount in major malls and markets. The company will then open distribution centers where the products can be sold to customers. The distribution centers will also act as service stations where faulty products can be repaired. After two years of manufacturing and sales, the company would have established itself in India, and can, therefore, manufacture goods for export. To effect reverse innovation proposed by one of the company’s top management officials, the company can export some of the goods to the US where they would be sold cheaper, meaning that Dixie will remain competitive even in the home market.
