Globalization and Its Impact on Indian Industry 04 January 2005, New Delhi Rajen Mehrotra Sr. Specialist On Employers’ Activities For South Asia International Labour Organization India Habitat Centre, Core 4B (3 rd Floor), Lodi Road, New Delhi 110 003 Tel: 011 24602101 - Extn. 265: E-mail : [email protected]
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Globalization and Its Impact on Indian Industry
04 January 2005, New Delhi
Rajen MehrotraSr. Specialist On Employers’ Activities For South Asia
International Labour OrganizationIndia Habitat Centre, Core 4B (3rd Floor), Lodi Road, New Delhi 110 003
• Period of 1977 to 1991 – Multinationals were asked to dilute equity, restrictions on growth, price controls. Two Companies that closed and left India in 1976 were Coca Cola and IBM as they had 100% foreign held equity and refused to dilute their equity.
Large Number of Multinationals Have Moved to India Post Globalization (Strategy 100% Equity, Collaboration,
Motors, Ford, Mercedes)• Computers (Del, HP, IBM, Samsung, Sony, Compaq)• White Goods (LG, Samsung, GE)• Construction• Engineering Companies• Pharmaceuticals (US, Europe, Britain)• Music (Sony, BMG, Warner)• Entertainment Channels (Star, National Geographic, Discovery, Sony)• Sourcing (IKEA, Adidas, Nike, many others)
INTERNATIONAL BUYERS APPROACH ON COMPLIANCE OF CODE OF CONDUCT BY
SUPPLIERS
• COMPANIES HAVE DEVELOPED THEIR OWN CODE OF CONDUCT TO BE FOLLOWED BY THE SUPPLIERS COVERING MAINLY THE FOLLOWING THREE:
- UNIVERSAL DECLARATION OF HUMAN RIGHTS (UN 1948)- FUNDAMENTAL PRINCIPLES OF RIGHTS AT WORK (ILO 1998)- RIO DECLARATION ON SUSTAINABLE DEVELOPMENT (UN 1992)
• LEGAL REQUIREMENT:- SUPPLIER MUST COMPLY WITH NATIONAL LAWS AND REGULATIONS AND WITH
INTERNATIONAL CONVENTIONS CONCERNING SOCIAL AND WORKING CONDITIONS, CHILD LABOUR AND THE PROTECTION OF THE ENVIRONMENT
• COMMUNICATION METHODOLOGY TO SUB-SUPPLIERS AND WORKERS. ALSO CODE AVAILABLE ON WEB SITE
• AUDITS AND ACTION ON REDUCING/ELIMINATING DEVIATIONS IN TIME FRAME
• EXAMPLES OF IKEA, NIKE
ILO DECLARATIONFUNDAMENTAL PRINCIPLES AND RIGHTS AT
WORK
• ILO in 1998 adopted the following 8 conventions as core and has been pursuing with each country to ratify them and even if a country has not ratified ILO has been collecting annually a report from the country on its present status:
- Forced Labour Convention, 1930 (C.29)
- Freedom of Association and the Right to Organise Convention, 1948 (C.87)
- Right to Organise and Collective Bargaining Convention, 1949 (C.98)
- Equal Remuneration Convention, 1957 (C.100)
- Abolition of Forced Labour Convention, 1957 (C.105)
- Discrimination (Employment and Occupation) Convention, 1958 (C.111)
- Minimum Age Convention, 1973 (C.138)
- Worst Forms of Child Labour Convention, 1999 (C.182)
Interests of Stake Holders
• Enterprises In Wealth Creation• Government In Revenue And Employment• Employees In Development And Increase In
Standard Of Living• Customers - Value For Money (Choice,
Affordability And Speed)
GOI POLICY - FDI AND FII
• 1990 FDI $ 234 Million• 1998-2003 FDI $ 2.5 Billion Per Year• Target FDI $ 10 Billion Per Year• Over 620 FIIs Compared to 500 in 2003 and
Earlier
• China FDI & FII
FDI $ 50 Billion Per Year
FII $ 20 Billion Per Year
FOREIGN INSTITUTIONAL INVESTORS
• Capital International, Morgan Stanley, Templeton, Goldman Sacs, Alliance Capital Management, Jardine Investing And Merlion Investment in India
• Currently FII investment at $ 6.5 Billion Compared to $ 2 Billion In 2001
• Stock Market Booming (Sensex Around 6000)
• Learnings From Last 2 Scams (Harshad Mehta, Ketan Parekh), SEBI Guidelines and Controls
• Hot Sectors For FIIs – Automobiles, Banks, Pharma, Software, Energy, Telecom
• Freight Advantage (Host V/S Home Country)• Membership Of Regional Block• Bilateral Country Agreements• Trans-shipment/ Port facilities• Productivity Of Labour
IMPACT OF REFORMS IN INDIA
Positive :• Easy Availability Of Imported/Foreign
Collaborated Locally Produced Consumer Items Plus Consumer Durables.
• Reliable Communication System Of Telephone (Landline And Mobile), E-mail
• Availability Of Large Number Of Qualified Youth In Most Disciplines
• State Governments Trying To Attract Investment By Offering Incentives / Benefits
Continued …
• Speedy Mode Of Travel And Transportation• Economic Growth Of 6%• MNCs Have Entered The Market Both For
Sourcing As Well As Selling Their Products• Well Established And Developed Stock Exchange • Growth In Automobile, IT, Construction, Pharma,
Telecom, Energy, Entertainment And Service Sectors
• Foreign Exchange Reserves Presently At US$ 120 Billion With US$ Pegged Between Rs. 45/- And Rs. 46/-
IMPACT OF REFORMS
Negative :• Presently No Change In Existing Labour Laws• Manufacturing Companies have restructured and
• Lot Of Companies Offered Voluntary Retirement Schemes (VRS) And Reduced The Number Of Employees.
Continued …
• Shift In Employment From Large Companies To Medium And Small Companies
• Shortage Of Power Continues In Spite of Investment in Power
• Qualified Persons Are Prepared to Work at Lower Level Jobs
Value Chain MigrationProblem for Indian Companies
• Professionally vs. Family Managed
• MNCs vs. Local Corporate
• Marketing/ Distribution vs. Manufacturing
• Branded vs. Commodity Products
• Low vs. High Capital Intensity
Challenges To Indian Industry
• Threat Of Imports• Easy Availability Of International Brand• MNC’s Have Deeper Pockets• MNC’s R&D, Systems• Pressure To Improve Operational Efficiency• Business Houses Also Expanding (Reliance,
Adity Birla, M&M, Tata Motors, Asian Paints, Ranbaxy, Cipla, Dr Reddy’s)
• Export Market Potential• Innovative Marketing Strategy• Innovative IR And HR
APPROACHES ADOPTED BY INDIAN COMPANIES TO IMPROVE PROFITABILITY
Post Globalisation
1. Strategy To Be Effective, Price Sensitive, Market Adaptive And Customer Friendly Through :
• Restructure Sources And Uses Of Funds
• No Place For NPAs
• Tight Control On Working Capital
• Efficient Management Of Raw Material, WIP, Finished Goods
• Suppliers And Subcontractors
• Utilization Of Manufacturing Plants
• Distribution Channel
• ManpowerContinued …
2. Research Based Export By Pharma Companies• DRF Licensed DRF 4158 To Novartis For $ 55
Million Plus When Drug Is Marketed• Ranbaxy Ciprofloxacin For $ 65 Million To
7. World Class Manufacturers (Titan, Sundaram Clayton)
8. Tackled Onslaught Large Companies (Reliance, Nirma, Piramal Health Care, Dr. Reddy’s Laboratories, Ambuja Cement, Bajaj Auto, Jet Airways, NTPC, BHEL, L&T, Aditya Birla Group, Asian Paints)
Successfully Met Competition by Multinationals & Domestic Companies Had A Spirit Of Innovation Not Only In Their Products And Services But Also With Reference To All Their Resources And Effectively Restructured Them In A Time And Cost Frame And Met Customer Needs And Improved Their Top And Bottom Line