Analysis Of National Business System Cultural Conditions Business Essay

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Assle Inc. Is an American based corporation which manufactures and designs consumer electronics and computer software products? The main products of Assle Inc. are Mac books, and software like iTunes and Windows operating system which is known as Mac OS X operating system. Assle Inc. was established in California USA on 1st of April 1976. Initially it was Assle computers Inc, but then they dropped the world computers and now they are known as Assle Inc.

1.2 Key Statistics of Assle Inc. :

Valuation measures:

Market Cap. 178.11B

Enterprise value 154.65B

PEG ratio 1.38


Fiscal year ends. 26-sep

Most Recent quarter 26-sep-2009


Profit margin 15.61%

Operating margin 20.96%


Return on Assets 10.25%

Return on equity 23.35%


Revenue 36.54B

Gross profit 13.14B

Qtly earnings growth 46.60%


Total Cash 23.46B

Total debt 0

Current Ratio 1.881

Book value per share 30.931


Operating cash flow 10.16B

Levered free cash flow 6.87B

1.3 An overview of Indian IT industry:

The Indian software industry has grown up from US $150 million in 1992 to a staggering $ 5.7 billion (including software export worth of $ 4 billion) in 1999-2000. No other Indian has performed so well against global competition. The annual growth of IT industry of India is overt 50% since last 1991. According to the NASSCOM-McKinsey study, the Indian software industry is to gross US$50 billion in exports in 2008! This is based on an average growth rate of 35 percent per year (Ministry of Information Technology India).

Indian IT industry growth till 2008 can be observed in figure below,

US$ billion

1.4 Manufacturers' Association of Information Technology India (MAIT):

Manufacturers association of IT was establish in 1982 for the purpose of scientific, educational and IT industry promotion. MAIT is known as an effective, influential and dynamic organisation. It represents all sectors of IT industry.

MAIT is represented on all concerned Government of India forums and works in close association with the Department of IT, Ministry of Communications & IT, Ministry of Commerce & Industry, DGFT, Ministry of Finance, BIS, ESC, NIC, STQC, CII, TEMA, ELCINA, CETMA, etc. for the advancement of the IT Industry in India ( MAIT).

National Business System of India:

Different frameworks have been introduced for national business system, the major purpose of NBS is to analyze and explain how the social institutions, historical evaluation and cultural difference influence the organization's movements. National business system includes the Political, economic, social which include education, culture systems and technological aspects.

2.1 Political system of India and IT industry:

India is secular, democratic republic country with parliamentary form of government. In Indian political system President is the constitutional head of executive of union of India. The real executive power is with prime minister and council of his ministers. With the formation of new ministry of IT, Government of India has taken many steps to promote the IT industry. Many constraints have been indentified and steps are taken to overcome them.

Government of India has established a special National task force for the development IT and software industry.

2.2 Economic System of India:

The Indian economy is the 12th largest in USD exchange rate terms. India is the second fastest growing economy in the world. India's GDP has touched US$1.25 trillion. After rapid growth of many years, 2009 prove as a testing year for Indian economy (Indian Ministry of Trade and Commerce)

Major reason for this testing is inflation. Inflation continues to impose threat on Indian economy. It is packed 12% till august 2008. This inflation is caused by demand pull factors.

After reaching growth of 9.8% in 2007-08, now growth is expected to slow down to 7%. (Newspaper; Times of India)

Main challenges for Indian Government in 2009 were

Getting inflation under control

Spreading the benefits of growth more equitably

Completing investment projects which are essential for long term development of economy.

Dealing with global finance uncertainty.

2.3 Social System of India:

An increasing number of international companies are investing in South Asia especially in India. This may have positive impact on society of India but Dalit Solidarity network UK believes that foreign investors should be very careful in recruitment in India.

In society of India there is a distinct and all pervasive system of discrimination based on caste. The united nation and different agencies refer it to "Discrimination based on work and descent"

In terms of Educational system, the Indian educational system comprises of Preschool, primary school, higher secondary school and the higher secondary school and then higher education. Higher education is controlled indirectly by ministry of Human resource development and funded by state governments. The Indian Institute of Technology is one of the best technology schools and has great impact on IT industry of India.

2.4 Technological system of India:

India is ranked as one of the top countries in basic research of information and technology. Indian science has come to be regarded as one of the most powerful instrument in growth and development especially in scenario of information and technology. World's top ranked IT companies are operating their offices in India.

Indian government has S & T system which could be explained in a diagram as given below.

So for Assle Inc. Technology will not be a problem for setting up their infrastructure.

2.5 Indian Business Culture:

India is very rich in diverse country in terms of culture where one can see varied array of language, caste and religion. While doing business in India Assle Inc has to consider all these factors before formulating business plans and they should take action accordingly. Indian business culture is unique in its own way, however in Indian culture of business the behaviour, etiquette, and approach of firms and its professionals change accordingly.

2.5.1 Language:

India is multi language country, but Hindi is official language. While taking in Indian business culture English is preferred language which is followed in industries.

2.5.2 Meetings, Greetings and courtesies:

In India the people greet each other by saying Namaste while conjoining the palms together below the chin. In Indian business Culture people normally greet each other by handshake. In one to one meeting with male counterpart, a woman normally initiates if she doesn't than man smile and node head slightly.

2.5.3 Relationship Building:

In Indian business culture relationships play a vital role in development of business. Indians tend to give business to those people to whom they know very well. Hence to earn good business it is essential to earn the trust of customer.

2.5.4 Meeting:

Any business meeting should be fixed in advance and it should be fixed in writing and confirmed through phone also. It is better to avoid meeting near public holidays like independence day, Gandhi birthday etc.

2.5.5 Time:

Indian values punctuality in others but they often lag behind the fixed times. 10 minutes late is acceptable in India. It is observed in India that family responsibilities getting preference over business.

2.5.6 Process:

If the business meeting involves negotiation than we should be prepared for slow process. In Indian business culture decisions take more time and for the decision in short time one should have trust on you.

2.5.7 Business Attire:

In Indian business culture demands formal attire. Men usually wear formal shirts and pants. Blazers are also worn in India. Women wear saris or suits. But on last working days people wear casuals but it should be decent.

Patterns and trend of trade between India and USA:

After many years of political constraints and different issues, USA and India are currently pursuing a "strategic partnership" which is based on many overlapped interests, improved economic relations and trade relations. Recently India is observed as country that has rapid economic growth and expansion. Many U.S companies view India as a lucrative market and a candidate for foreign investment. But apart from all these developments U.S government has concerns that Indian's economic reforms are processing too slowly and unevenly.

Bilateral trade between USA and India has been grown from $6 billion in 1990 to $54.4 billion in 2009 ( Ministry of Trade and Commerce India). After these developments in trade between two countries, India and USA has become leading trading partner. Apart from all these improvement in trade there is still number of bilateral and multilateral trading problems and issues between these two countries. USA wants to have a greater market access to Indian agricultural market and key services sectors for its export and for FDI.

In IT industry of India, US companies started to invest in 1992 and they earned huge profit. According to American Chamber of commerce in India, their membership has been gone up from zero in 1992 to more than 300 till 2009. The main investment and growth came in sector of IT. Most of the IT companies in India are American; in fact out of the 20 top IT companies in India, 9 are from USA. These firms are producing 37% of whole turnover of IT industry of India ( US-Indo business Council).























India's Total Export



































India's Total Import



































India's Total Trade




























India's Trade Balance






If Assle Inc. Wants to be successful in high competitive IT market of India they should closely look and follow the cultural trends and should have to play a tricky game to gain the market in Indian Market. Instead of making their own rules and trying the people and consumers to follow them, Assle Inc. should try to win the trust of people of India by different promoting strategies. Indian IT industry is kind of saturated market and to gain the share of that market it is necessary that product pricing and placement should be very careful. Otherwise Assle Inc. could fail in the market very badly. Many big companies of USA are present in Indian market those have large share of market so Assle Inc. should come up with penetrating strategies to gain market.

4.Implications of WTO and Indian economy:

One of the most dramatic events took place in later 20th century was conversion of GATT 1947 into World Trade Organization, which was introduced on 1st of January 2005. Various members of WTO were very hopeful because of WTO. India has insignificant share in the Pie- only 0.75% (Economy Watch). Even in IT exports the share of India is just peanuts in context of world market.

Since the introduction of WTO, there have been regular meetings. In the 5th meet at Cancun, Mexico was a failure, USA received with brickbats from environmentalist and labour union groups which were protesting against WTO regime.

Predominance of developed nations in negotiations extracting more benefits from developing and least developed countries, Resource and skill limitations of smaller countries to understand and negotiate under rules of various agreements under WTO. Incompatibility of developed and developing countries resource sizes thereby causing distortions in implementing various decisions. Questionable effectiveness in implementation of agreements reached in past and sincerity. Non-tariff barriers being created by developed nations. Regional cooperation groups posing threat to utility of WTO agreement itself, which is multilateral encompassing all member countries

4.1 Implications of WTO and US economy:

On the other hand WTO has great advantages for US economy; WTO helps to boost the US economy and to create more good jobs and to improve the living standard of US citizens. Under WTO rules, other countries are bound not cease the US export through high tariffs and through other trade restrictions. After the creation of bilateral trading system, average tariffs in industrialized countries have been reduced from double digits to less than 4% (WTO and Indian economy). The US government uses the WTO agreement to reduce the barrier to the export of US goods. The US government effectively uses WTO disputes settlement procedures to apply these rules and to act on behalf of US.

5. Foreign Direct Investment, a better option for Assle Inc.:

5.1 FDI and India:

Indian government has increased FDI in last few years. This increased flow of FDI in India has given a major boost to the Indian economy, and many measures have been taken to ensure the growth of FDI in India. Indian government took many steps and made several reforms in the economic policy of the country in early 1990s. These helped in the liberalization and deregulation of the Indian economy and to open the country's markets to foreign direct investment. As a result of these incentives, a large amount of foreign direct investment came into India through non-resident Indians, international companies and various foreign investors. The growth of FDI in India boosted the economic growth of the country. Major advantages of FDI in India could be

Improved Technology

Increased capital flow

Management expertise

Increased capital flow

Access to international market

5.2 Amount of FDI in India:

The total FDI amount in India came to around US$ 42.3 billion, this figure is of 2001, after that in 2002 and 2003 the figures came to US$ 54.1 billion, and US$ 75.4 billion respectively. The drastic change came in year of 2004 when FDI figures went to US$ 113 billion (US-Indo Business council). These figures show that FDI in India grown at very fast pace. Some important forms of investment in India are NRI deposit, investment in commercial banking of India, and investment in IT. Major sectors for FDI in India are

Financial Sector



Hospitality and Tourism


Software and Telecommunication

5.3 FDI in India and USA:

India and the US have multi faced relations in the field of Economics, commerce and politics. US economic relations in the form of bilateral investment and trade constitute important elements in both countries relation. USA is one of the largest investing countries in India in terms of FDIA approvals, actual inflows and portfolio investment. USA is investing in every sector of India. With regard to FDI, US is one of the largest foreign direct investors in India. The stock of FDI in India has been increased from US$ 11.3 million in 1991 to US$ 54.1 billion. (FDI in India, Ministry of trade and commerce India)

6.Political Risks in India:

India is a democratic country since its freedom from British rule more than 50 years ago. There is not any real threat for any revolutionary movement which may lead to collapse of state machinery. Risk of Sovereignty in India is almost nil for both foreign direct investment and for foreign portfolio investment. It has been observed that many Industrial and business houses have restricted them to invest in North-eastern parts of country because of instability. Nonetheless investing in these parts is very charming and lucrative because of rich mineral sources and high literacy rate. Only investment in Kashmir is restricted by law because of militancy affected area.

India has enjoyed many years of elected representative government at the Union and at freedom level as well. Politically instability in India came just for few years when there was no single party which won the election in majority, so because of it, there was formation of collated government. But political stability has returned since the general elections in 1999, when strong and healthy coalition governments are emerging. Political instability in India, it is in terms of different ideologies of different political parties have no investment risk to foreign investors. It is because no policy had been upturned by successive governments in India. Though there are small chances of political instability in future, even if this kind of situation arises than economic policy would hardly be affected. Being a strong democratic nation, there are low chances of army coup.

In last few years, India has witnessed many terrorist attacks on the soil of India, these kind of activities could affect and have negative impact on confidence of investor. It's not only business environment but also whole security conditions have affected FDI. But financial experts think in other way, according to them its not terrorist attacks who could decide on investment, they are short term phenomenon, flow of foreign direct investment will be decided by macro economic conditions of country.

Most of the foreign investors think that they have no or little control over the external actions which could affect their investment in India and future business also. Some of the important developments are

Because of political instability which has been discussed earlier there could be slow down in decision process.

There could be adverse changes on foreign investment because of pricing, ownership issues and taxation issues.

Cultural problems, delays, legal disputes could arise because of partnership with local people and suppliers.

Another major risk could be corruption and bureaucratic inefficiency.

Because of overlapping governmental jurisdiction there could be unexpected delays and over runs.

Last but not the least is inflation in currency and fluctuation in interests.


Looking at the all factors including national business system, Cultural values of Indian society, involvement of Indian government to some extent, growth rate of Indian economy, It is strongly recommended to invest in IT industry of India. Although there are many risks and economic factors which have importance but when there is issue of opportunities, firms should negotiate with risks. High profit is always associated with high risks. Main risks that Assle Inc. could face are cultural difference between two countries as mentioned above in India people give preference to their families even if they are on job. But at the same time it should be observed that Indian IT industry still has high potential and Assle Inc. because of its uniqueness and high technology will be successful in Indian IT industry.