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This report is based on the evaluation of the Indian fashion industry, in order for a French based company to open a production plant in India. To analyze if the opportunity is profitable you need to look at a PESTEL (political-, economical-, social-, technological-, environmental- and legal factors) analysis. These are the factors that influence the way of doing business in a foreign country. To ensure that the potential opening of the French based plant in India will be profitable you need to conduct an industry analysis, known as Porter's Five Force's. The French company need to also know that there are culture differences that can influence the why of doing business in the foreign market, it is important to analyze these issues via the Cultural Dimension Theory of Geert Hofstede. If these theoretical frameworks are not analyzed it can cost the French company million of dollars, as they will not know who to market their products and will offend the Indian culture without even noticing.
1.1 PESTEL Analysis (macro-environment)
The PESTEL analysis (political-, economical-, social-, technological-, environmental and legal factors) is all the factors in the external environment that can affect the operations of a business in a foreign country / market. These factors are mostly beyond the control of the organisation, it is therefore important for the organisation to do proper strategy planning and product development.
1.1.1 Political Factors.
For the fashion industry the Indian political structure is stable, however India experienced political volatility for a few years due to the letdown of any party to earn a total mainstream in Parliament. This has stabilised from the time when the previous general elections; the instability did not have an impact on the Indian economy, as they have postponed certain decisions related to the economy at that time. The political instability India experienced, in practical conditions, created no risk to potential foreign direct investors (FDI), as no structured government policies has been inverted by any consecutive government up to now.
1.1.2 Economical Factors.
"According to the Foundation Indian Brand Equity, India's economy indicated a 7.4 per cent growth in the financial year of 2009-10; this has exceeded the forecasting of 7.2 per cent by government for the year. The manufacturing industry has also shown a massive growth of 16.3 per cent in 2010. " (Foundation 2010) The growth is determined by forceful recital of the manufacturing industry on the back of government and end user expenditure. The deflation of the dollar due to the currency fluctuations in the most recent global recession as had an affect on the manufacturing industry. The Indian economic allure has made it easier in compelling investors due to low cost manufacturing advantage. The only legal currency excepted in India is the Indian Rupee. The Indian economy is mainly reliant on the manufacturing, commerce, export and services industries.India faces a rapid growing population and the dispute of plummeting economic and social disparity.
1.1.3 Social Factors.
The home language of India is Hindi; however there is an increase in most cities making more use of the English language. The mainstream of Indian people perceives Hinduism along with other religions such as Sikhism Christianity, Islam, and Buddhism.Â Making use of the English language has helped the fashion industry's relationship and dealings in India and on the international market. India is one of the small numbers of nations to have a growing segment of working inhabitants, as there is immense availability of jointly skilled and unskilled employees. Both the general public and business are tremendously hierarchically in order and several Indians find it particularly hard to work in a non-hierarchical business/social structure. Meetings can give the impression of being incredibly casual and it is likely for quite a few meetings to be accompanied by one person at the matching time and the room. It is not easy for Indians to indicate direct disagreement in business, so investors should not be surprised if they agree to everything they say. It may be seen as bribery by the potential investor, but they should be prepared to receive and give gifts, this is part of how Indians build their relationships with another person. It is important for a business to understand the culture of the country they want to do business with; it should be notable that there will always be difference in life style, culture and buying behaviours.
1.1.4 Technological Factors.
India's technology is not good, but they are still a developing country and are busy with technology development. The development in technology reduces the reliability of India through other countries. Technology enlargement is administered properly by the Department of Science and Technology which is emphasising on researching and renovating the perimeter of technology based on the population needs. "According to the national portal of India, the department has created a Technology Information Forecasting and Assessment council (TIFAC) to create technology forecasting's, assessments and survey the market for wants and needs." (NIC 2005) The (TIFAC) will support the most important sectors of the Indian economy such as agriculture, agro food, machinery as well as the textile industry. India is one of the key players in exporters of software and has the lowest cellular mobile tariffs. The technology developments can benefit the producer and user and it can save costs, lead to innovation and improve quality of products / services.
1.1.5 Environmental Factors.
The environmental issues in India are ministered by the Environment and Forest guiding principle. The principles is related to the conservation of natural resources such as prevention of pollution, safety of animals, forest, lakes and rivers. Organisations in the manufacturing industry need to focus on the reduction of carbon footprints, water usage as well as electricity usage. Organisations should keep in mind the global warming factor; in India there is laws regarding the amount of carbon emissions let out and organisation will be taxed a great amount if not adhere to the regulations.
1.1.6 Legal Factors.
To enter the fashion industry in India the organisation needs to register at the Indian Fashion Forum 11(ff11). "According to the Chairman of the ff11, Mr N. Meswani; the IFF11 is an initiative that can help the industry to integrate across value chains and give recognition in the International markets." (Forum11 2011) India also have rights and regulations regarding labour and human rights.
The external environment analysis given the detail of all the factors as mentioned above is all factors and issues organisations should address when entering the foreign market. The rapid growth of the Indian economy is a positive reference to making change in the current account deficits and liberalization, therefore it can be concluded that opening a fashion industry plant / investing in India will bring several opportunities and optimistic outcomes in regards to the international fashion industry.
1.2 Porter's Five Force's.
The framework is to help the manager understand the structure and profitability of an industry; to enter or not to enter the industry.
1.2.1 Bargaining power of buyers.
The buyer power in India is high, as the customers are value cognisant. The customer has the tendency to mainly buy according to price and convenience, the French should take note that India is still a developing country.
1.2.2 Bargaining power of suppliers.
Mostly the Indians fabric procured internationally and the number of suppliers is lofty. The total batch of the fabric for one brand is outsourced from one supplier to guarantee equality. The bargaining of suppliers is not high.
1.2.3 Threat of new entrants.
The fashion industry runs on a regional as well as national level with the same enthusiasm. While the entry barriers for regional fashion manufacturers is not lofty, the organisations functioning on a much elevated level have to have an wide distribution system and also have to toil a lot in acquire brand awareness amid the potential customers. Therefore the threat of new entrants in the Indian fashion industry is very high.
1.2.4 Threat of substitute products.
With escalating buying power and fashion consciousness, the young Indian buyer is quickly shifting away from the local fashion clothing and decides on luxury wear. This has reduced the threat from the substitutes.
1.2.5 Rivalry among competitors.
The fashion industry is characterized by lofty income margins. The marketplace as such is greatly segmented and there is an continuation of considerable numbers of brands in each sector. The rivalry in the Indian market is intense in each sector of the fashion industry.
The fashion industry in India is still in the developing stage, as analysed the industry is attractive and it will benefit the French company to open a plant in India, as they will have first- mover- advantage.
2.1 Hofstede's Cultural Dimension.
2.1.1 Power Distance
"According to the original website of Geert Hofstede the power index of India is the highest culture index at 77 %, compared to the world average of only 56,5 %." (Hofstede 1967-2009) The percentages indicated above divulge a lofty level of disparity in power, wealth and within the society. These circumstances are accepted by the society as an Indian culture mean. In reality, Hinduism has effect the social groups, which unbendingly divide the social classes in which constitutional rights and shortcomings are passed on by legacy. This is why the Indian society is familiar to power and wealth inequality and agree to them. The power distance is much higher than those of the French; this means that the Indian organizations centralize all their power in the organization, hierarchical and dictatorial organizations is easily accepted in India. The French should enter the Indian market with a top down management method.
2.1.2 Masculinity versus its opposite, Femininity.
"According to the Geert Hofstede website the masculinity index of India are 56, compared to the world average of that is a little less at 51." (Hofstede 1967-2009) This culture dimension indicates where the females fit into the working environment. It can be noted that there is a fissure between the Indian male and female culture values, as indicated by the lofty Indian index rate. It is important for the French company to note that the Indians have different culture when it comes to the Indian female, for example strangers should not speak to women if they are not familiar with her or her family, women are not allowed to dance with other men who are not married to her, and she would be dishonest. Foreign employees should be aware of the culture differences, so that they do not offend the society of India.
2.1.3 Individualism versus its opposite, Collectivism.
"According to the Geert Hofstede website the individualism rate of India is a low 42 %" (Hofstede 1967-2009) this indicates that India believes in working in a collective manner, they believe in the determination of the group rather to that of an individual. One the other hand French is rather individualistic society, this will mean that they have to adapt their management style to those of the Indian that particularly meditate in groups. Being a collectivist society, Indians fell disinclined to make decisions on their own; thy have been influenced by philosophy beliefs. The decisions that need to be made are mostly done by their managers as they believe they will make concise and clear decisions, whereas the French choose to delegate.
2.1.4 Uncertainty Avoidance.
"According to the Geert Hofstede website the Indians has a low rate uncertainty avoidance of 40 % compared to the world average of 65 % and the French 80 %." (Hofstede 1967-2009) This has a robust influence on the way to administer society. The Indian prefer countless rules enfold them. Indians are also forbearing to opinions which are different from their own values. It should be noted that a country like India with a low uncertainty avoidance index usually have no strict laws and organisations are not very structured. This can lead to issue such as employment instability.
2.1.5 Long Term Orientation
"According to the Geert Hofstede website the long- term orientation index for India is 61, whereas the world average is 48.'' (Hofstede 1967-2009) A country with a lofty index shows that the culture is that it is persistent and thrifty, they plan for the future. He long-term orientation is mostly based on Confucius beliefs, this is why India as so much respect for hierarchical managements. Sincerity, sense of duty, forbearance and education is all factors of Indian work values; whereas the French insist on effectiveness, self fortitude, productivity and human rights.
Based on the Hofstede Cultural Dimensions an analysis is made to emphasize the resemblance and dissimilarity between the Indian and French culture. This analysis is to guarantee a communal comprehension of the two cultures and to alleviate the changing business environment of fashion industry into a foreign environment.
Now understanding the different dimensions of culture it provides an preliminary acquaintance establish cultural intellect and experience for valuable business relationships. To help the international managers to be more knowledgeable with various cultures we recommend cross-culture training. This will help to better understand the culture environment they are entering. The attitude towards the fashion industry in India is very sanguine, it is most certainly expected that the fashion industry in India will continue to grow. Therefore we recommend that it is viable for the French based fashion company open their plant to manufacture products in India.