The Auto Industry comprising of Automobile manufacturers and Auto component manufacturers, the industry is a prime driver to boost

up the Indian economy contributing 4.7% of countrys GDP in the year 2003-04.The industry has sustained a longer struggle behind its admirable way of detonating success. Presently we see the Joint ventures or own foreign subsidiaries in automobile as well as auto component industry, the foundation for Indian Automobile industry laid by Hindustan Motors and Premier Automobiles Ltd in 1942 and 1944 and further various manufacturers clustered the industry such as Automobile Products of India Ltd (APL), Mahindra & Mahindra, Tata Motors, Ashok Leyland in 1970s till then the policy framework for the industry was very stringent, and there was very limited scope for expansion, the Research and Development was also far behind, the Industry was less complicated in technology, hence there was low investment in Research and development, the Joint venture of Maruti and Suzuki initiated a substantial growth in the industry and after the liberalization policy adopted by India in 1990, the scenario of industry went on changing, the industry gained a upthrust impetus. The liberalization allowed MNCs such as Ford, Toyota, and Hyundai to set up facilities in India. However the arrival of MNC auto manufacturers revealed the incapability of local auto component suppliers to the global players, due to lack of technology and change in requisites. On other side the import of auto components were highly price sensitive and the huge import tariffs, this intended the MNCs to convey their traditional suppliers to set up in India

An auto component industry can be segmented on the basis of the production of component types as below Engine Parts Drive Transmission and Steering Parts Suspension and Brake Parts Electrical Parts Equipments Other Parts In India the auto component industry is structured in three basic categories. Indian companies without any collaboration or having very minimal collaboration with any foreign companies for e.g. Sundram BrakeLining, Sundram Fastners. Indian companies with foreign collaboration, such as Indian Nippon Electricals, Hinoday etc.

 MNCs completely owned subsidiaries or the units in which they have major control. For e.g. Delphi, Visteon, Denso, MICO etc. Global Trends and challenges There is a global overcapacity problem, which is forcing the vehicle industry to restructure. The strategy of the OEMs conditions the whole supply chain. There is a strong trend to increase the outsourcing globally. The Component sector is totally influenced by the vehicle assemblers and the local parts industry is becoming more critical to location decisions of assemblers. The World trade and investment in automotive and auto parts has become liberalized with Tariffs going down Internationally. MNC assembler source parts from cheapest quality source in any part of the world. Local suppliers are being linked into the global supply chain and they have to compete with regional players. Rapid changes in information and communication technology are reshaping the way auto industry is doing business. The OEM is passing its responsibility of developing manufacturing and assembling sections of vehicles on to the suppliers. The globalization offers a great opportunity for the Indian Auto component manufacturers. There are certain strengths of the industry that attracts the global buyers and there are certain weaknesses, which can eliminate the local auto parts manufacturers, and the advantage shall go to global manufacturers who shall have local capabilities in India. Indian Auto Component Industry Summary of strengths The auto Component industry in India has the potential of becoming the export driver of the auto industry due to: A/ Increasing globalization of the auto industry supply chains B/ Cost advantage in many component groups supported by relatively (compared to other developing markets) well-developed labour skills and engineering base. there are a number of favorable factors, which are 1. Trained and skilled human resources 2. Wide Industry base manufacturing 97% of component required 3. Growing entrepreneurship 4. Growing domestic market 5. Expanding global markets 6. Transnationalisation of world economy 7. Investments by non-resident Indians

8. Economic liberalization Challenges: There are several challenges, which the industry has to overcome at industry level and organizational levels. Few of these have been briefly described here with. Small in size: The Indian auto component industry is wide with over 400 firms in the organized sector, but small in sales turn over which is estimated to be less than Rs. 15000 Crores for the organized sector. This sector is the fastest growing sector in Auto industry growing at the rate of 28%. The industry also exports close to RS 180 Crores at around 12% of combined sales. It is currently a Small and fragmented industry by global standards. Inferior Quality: Based on interviews in the component industry Sources: JICA Mining and industrial development studies department of Japan Quality focus required Quality up gradation presents the most important challenge for Indian component suppliers. Lower labour productivity: The advantage of low cost labour is negated due to lower productivity level of Indian work force. Indian Labour productivity is lower relative to the rest of the world

India's pharmaceutical industry has been growing at record levels in recent years but now has unprecedented opportunities to expand in a number of fields. The domestic industry's long-established position as a world leader in the production of high-quality generic medicines is set to reap significant new benefits as the patents on a number of blockbuster drugs are scheduled to expire over the next few years. In addition, more and more governments worldwide are seeking to curb their soaring prescription drug costs through greater use of generics The Indian pharmaceutical Industry has witnessed a robust growth of around 14% since the beginning of the 11th Plan in 2007 from about Rs 71000 crores to over Rs1 lac crores in 200910 comprising some Rs62,055 crores of domestic market and exports of over Rs 42,154 crores. This also amounts to around 20% of total volume of global generics. However, the Industry is quite fragmented and comprises of nearly 10,500 units with majority of them in unorganized sector. Of these, about 300400 units are categorized as

belonging to medium to large organized sector with the top 10 manufacturers accounting for 36.5% of the market share. As regards the Bulk drugs component of the industry, the market is around Rs 42,000crores giving it a share of around 50% of the total domestic market. This gives the Indian Bulk Drug industry a share of about 9% of the global bulk drug market. India is among the top 20 pharmaceutical exporting countries and the exports have grown very significantly at a CAGR of around 19% in the 11th plan period. Indian drugs are exported to around 200 countries in the world with highly regulated markets of USA, UK etc. The major therapeutic categories of export are anti infective, anti asthmatic and anti hypertensive

This analysis has revealed the following strengths: (a) Strong Low cost manufacturing sector (b) Significant breadth and depth of product expertise (c) Low cost of growing Human resources in the Pharma sector. The major weaknesses are (a) High emphasis on generics both for domestic and international markets where filing and approval of ANDAs and DMFs have left little room for R&D on drugs development (b) Inadequate R&D Infrastructure (c) Poor IndustryAcademia linkage (d) Lack of required highend product development capable human resources (e) Lack of time driven regulatory infrastructure (f) Poor SME base for highend manufacture. The major opportunities available are (a) Global opportunity for increasing Generics and iii biogenerics market both in developed and emerging countries due to pressure on budgetary limitations of these countries as well as emergent patent cliff due to off patenting of major highvalue drugs (c) Low cost good skill destination for contract research and manufacturing and resultant opportunities in drug discovery as well as clinical trials (d) High growth of domestic market attracting multinationals both for brown field and green field investments in production and capacity building. The threats to the industry are from (a) Evergreening strategy of MNCs for denying and limiting the patent cliff opportunities with debatable recourse to TRIPs and FTAs (b) Increasingly stringent regulatory and nontariff barriers to generics markets in developed countries (c) Increased competition for generics and biogenerics production in terms of high capacity

and production costs (d) Highentry barriers to enable market share in development of new drugs Question 2. Technological developments have been revolutionizing the business scene.In the light of the above statement, discuss how technological environment is changing rapidly and is having a major impact on international business. Technology can be classified in several ways. For example, blueprints, machinery, equipment and other capital goods are sometimes referred to as hard technology while soft technology includes management know-how, finance, marketing and administrative techniques. When a relatively primitive technology is used in the production process, the technology is usually referred to as labour-intensive. A highly advanced technology, on the other hand, is generally termed capital-intensive. Changes in the technological environment have had some of the most dramatic effects on business. A company may be thoroughly committed to a particular type of technology, and may have made major investments in equipment and training only to see a new, more innovative and cost-effective technology emerge. Indeed, the managing director of a multinational organisation manufacturing heavy machinery once said that the hardest part of his job had nothing to do with unions, pay or products, but with whether or not to spend money on the latest technologically improved equipment. Computer technology has had an enormous impact on education and health care, to name but two areas affected. The advancements in medical technology, for example, have contributed to longevity in many societies. In addition, the introduction of robots in many factories has reduced the need for labour, and the use of VCR's and microcomputers has become commonplace in many homes and businesses. Unfortunately, there is a negative side to technological progress. The introduction of nuclear weapons, for example, has made the destruction of the human race a frightening possibility. In addition, factories using modern technologies have polluted both air and water and contributed to various environmental and health-related problems. The type of technology in use, the level of technological developments, the speed with which new technologies are adopted and diffused, the type of technologies that are appropriate, the technology policy etc are important to business. Advances in technology may also cause relocation of production. For example, several companies in the advanced countries had shifted the TV production to developing countries to

take advantage of the cheap labor. However, when further technological development reduced the labor content of the TV some firms relocated their production back to the developed countries. Some labor abundant countries have a preference for labor intensive technology. Mechanization and automation may be opposed in such countries. Such a situation may adversely affect the business. Particularly in the past, several countries, like India did not have a favorable attitude towards foreign technology. The overemphasis on the development of technology indigenously had led to high costs and distorted developments. Again, the policy bias in favor of small business has resulted in production units of uneconomic size in a number of industries. Further, the reservation of certain products exclusively for the small scale sector promoted several companies, including multinational, to resort to such strategies as franchising and contract manufacturing in some of these industries in India. The reservation of products for the small scale sector some times comes in the way of adoption of modern technology if it involves capital investment higher than the specified. In many developing countries, including India, the TV arrived very late. Although the color TV had become quite common in the advanced and even in some developing countries when the telecast started in India, in the early period there was only black and white telecast. The cable TV came to India only by about the beginning of the 1990s. The late introduction and the slow expansion of the telecast affected not only the TV business but also the advertising industry and product promotion. The time lags in the introduction of technologies may even result in some products not being able to reap the market. The electronic typewriter became popular in India before the electric typewriter could penetrate the market. The electronic typewriter could not achieve growth because of the advent of the computer. Many companies in advanced countries have considered the developing countries as a market for their obsolete technology. Several developing countries even import second hand plant and machinery 22222Technology has had a tremendous impact upon the global business environment. Communication, transportation and production efficiency are various

areas of business which have been enhanced by the development and improvement of technology. As continual enhancements are made, the world continues to "grow smaller" and businesses have further reach than ever. Computers

The most important technological development to impact the global business environment is the world of computers. There are various programs which help maintain records of inventories and shipments. Email allows for instantaneous communication almost anywhere in the world. Besides its speed, email is easily forwarded and retained. The communication in the global business environment is improved with the use of email.

The impact of computers on the global business environment is wide-ranging and also includes the Internet, which is a useful tool for international companies. By using the Internet, companies across the world can perform research and learn more about partners and suppliers. Conference Calls and Video Conferencing

Conference calls allow people in multiple locations to be involved in the same conversation. Video conferencing provides the same service, but with the added benefit of all parties being able to actually see each other. Both of these forms of communication have a definite impact on the global business environment. With either form of technology, a parent company in Norway can have a conversation with a raw material supplier in Brazil and a manufacturing plant in Taiwan. This improves communication on a global scale and enables all parties to understand specific plans and agreements.

Transportation The shipment of raw materials and finished products is absolutely vital to any business, but particularly those with an international scope. Transportation technology enables a company on one continent to send its raw materials or products to another company in a different continent. Technological advancements in airplanes, cargo ships and railways allow for quicker, cheaper delivery, which impacts business by making global distribution more feasible.

Manufacturing Technology Increased efficiency of manufacturing plants has a certain impact on the global business environment. By having the capacity to produce materials and products more quickly and efficiently, a company is able to produce quantities needed to supply global demand. Robotic technologies and factory lines have enhanced the speed at which materials and products are manufactured. For a company to be a player in the global business field, it must be able to keep up with demand.

Shipment Tracking Corporations now have the ability to track shipments virtually anywhere across the world. Global Positioning Systems (GPS) allow accurate tracking. The implication of this technology on the global business environment is the ability to let customers know exactly where their shipments are at any given time. This technology creates secure relationships within the global business field. Question 3.Identify major non-tariff barriers to international business. Suggest alternative foreign market entry modes to overcome such barriers

Foreign market entry modes differ in degree of risk they present, the control and commitment of resources they require and the return on investment they promise.[1] There are two major types of entry modes: equity and non-equity modes. The non-equity modes category includes export and contractual agreements.[2] The equity modes category includes: joint venture and wholly owned subsidiaries.[ Exporting is the process of selling of goods and services produced in one country to other countries.[4] There are two types of exporting: direct and indirect. Direct exports[edit] Direct exports represent the most basic mode of exporting made by a (holding) company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism. The main characteristic of direct exports entry model is that there are no intermediaries.

Indirect exports[edit] Indirect exports is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the foreign market. Licensing[edit] An international licensing agreement allows foreign firms, either exclusively or non-exclusively to manufacture a proprietors product for a fixed term in a specific market. Summarizing, in this foreign market entry mode, a licensor in the home country makes limited rights or resources available to the licensee in the host country. The rights or resources may include patents, trademarks, managerial skills, technology, and others that can make it possible for the licensee to manufacture and sell in the host country a similar product to the one the licensor has already been producing and selling in the home country without requiring the licensor to open a new operation overseas. The licensor earnings usually take forms of one time payments, technical fees and royalty payments usually calculated as a percentage of sales. Franchising[edit] The franchising system can be defined as: A system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system. [12] Compared to licensing, franchising agreements tends to be longer and the franchisor offers a broader package of rights and resources which usually includes: equipment, managerial systems, operation manual, initial trainings, site approval and all the support necessary for the franchisee to run its business in the same way it is done by the franchisor. In addition to that, while a licensing agreement involves things such as intellectual property, trade secrets and others while in franchising it is limited to trademarks and operating know-how of the business.[13] Turnkey projects[edit] A turnkey project refers to a project when clients pay contractors to design and construct new facilities and train personnel. A turnkey project is way for a foreign company to export its process and technology to other countries by building a plant in that country. Industrial companies that specialize in complex production technologies normally use turnkey projects as an entry strategy.[15]

One of the major advantages of turnkey projects is the possibility for a company to establish a plant and earn profits in a foreign country especially in which foreign direct investment opportunities are limited and lack of expertise in a specific area exists. Joint venture[edit] There are five common objectives in a joint venture: market entry, risk/reward sharing, technology sharing and joint product development, and conforming to government regulations. Other benefits include political connections and distribution channel access that may depend on relationships Strategic alliance[edit] A strategic alliance is a type of cooperative agreements between different firms, such as shared research, formal joint ventures, or minority equity participation.[32] The modern form of strategic alliances is becoming increasingly popular