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Pitfalls and PrecautionsPitfalls and Precautions
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Formulating Strategiesormulating Strategies
Providing Solutionsroviding Solutions
Achieving Successchieving Success
INDIAN BUSINESS GOING GLOBALINDIAN BUSINESS GOING GLOBAL
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More than a decade of liberalization and continuousefforts on part of Government has opened newavenues for Indian Entrepreneurs. In recent years,
Indian companies have started taking initiative tomove into global market.
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Here are some facts relating to it:
A.V.Birla Group, operating in 18 countries,
recently acquired two copper mines in Australia
for US$ 80 million and a Carbon black
manufacturing unit in China.
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ONGC Videsh Ltd. (OVL) is investing over US$
2 billion in discovered / producing oil fields inSudan, Russia and Angola and gas fields inVietnam. Besides, OVL has acquired exploration
assets in Myanmar, Libya, Iran, Iraq and Syria.
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Tata Motors paid $118 million to buy Daewoo.
Infosys has bought an Australian Software firmfor US$ 23 million.
Ranbaxy gets 70% of its revenue from itsoperations outside India with 40% from USA.
Reliance recently paid $ 207 million to acquireFlag Telecom.
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Indian Export: RegionIndian Export: Region--wisewise
5578.834962.15America
1739.561325.66Africa
13570.619729.34Asia and Oceania
445.32374.82CIS & Baltic
States
7344.065701.95Europe
April-August
*2004-2005
April-August
2003-2004
Region
**Projected
(In US $ Million)(In US $ Million)
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PITFALLSPITFALLS
Pitfalls could be primarily divided as under:
1. Commercial
2. Financial
3. Legal
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For further understanding we have divided globalworking of Indian business under following twoheads:
I. In case where investment is made outside India;
II. In case it is through contract with Foreign Party.
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I. In case where investment is made outside India:
Lack of knowledge about the Country;
Lack of knowledge about the Company;
Lack of knowledge about working culture;
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Lack of knowledge about laws, relating to
company operations, labour, tax etc.;
Lack of knowledge about investment laws, both inthe country of investment and in India, notified
and amended by Government, time to time.
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II. In case it is through contract with Foreign Party:
Lack of understanding of performance parameters;
Lack of understanding about quality control;
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Lack of understanding of Intellectual Property Rights;
Lack of understanding relating to costing/pricing;
Lack of understanding about delivery modes;
Lack of understanding relating to warranty /guarantee;
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Lack of understanding relating to governing law;
Lack of understanding relating to mode of disputeresolution;
Lack of understanding relating to jurisdiction of Court;
Lack of understanding relating to enforcement of Court decision;
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Lack of understanding about ethical aspects;
Lack of understanding about third party liabilities;
Lack of understanding about force majeure.
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PRECAUTIONSPRECAUTIONS Spend time to understand the Country – History
& Culture.
Involve professionals, with international exposure
to assist.
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Take personal interest in acquiring knowledge
of corporate laws on macro level.
Rationalize tax planning with the help of
professionals from these countries.
Work closely with professionals on variousaspects of agreement.
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Undertake due diligence before entering into business relationship;
Put your concerns about mode of payment, timeand quantum clearly on table, before closing the
deal; Be careful about third party exposure - take
commitment from foreign party on this aspect;
Be careful about governing law, jurisdiction of Court, mode of dispute resolution.