. Lack of tax incentives for infrastructure development including
broadband penetration. The key elements of the infrastructure
including electricity, telephone and internet service are at time
unpredictable in their performance. The biggest weakness of India
today is its infrastructure, and with only 30% of the workforce
relying on communications links to other nations, India will be forced
to spend greater and greater percentages of their GNP on making their
infrastructure world class.
. Growth of Instant Messaging and convergence applications may make e-
mail a secondary approach to communicating in India in the next ten
years. According to the (Internet in India Report, 2006) the
corresponding growth of the Instant Messaging and all other forms of
peer-to-peer communications from cellular and PDA devices is expected
to be dominated by the Chinese and Indian markets according to
(Tekelec, 2006) as well. The findings of Ovum Consulting are provided
in the white paper cited.
. Crackdown on the part of the Indian government requiring
identification of every Internet caf? user is drastically dropping
business in metro areas. According to the (India Times, 2006) metro-
based Internet cafes throughout India are facing a rapid decline due
to government officials requiring each person getting online showing
their identification. This is due to the fact there have been several
threatening e-mails to Indian government officials sent from these
cafes, and the fines to shop owners are expensive. The Internet cafes
in the rural areas however are continuing to grow as these areas of
India have little in the way of Internet access in homes today. The
Indian government is also cracking down on Internet caf? use as it
believes terrorists are using these cafes to communicate via e-mails.
b. Analysis of Social/Cultural Factors
Cultures influence and impact one another at a personal level first,
comprised by millions of moments of truth that over time define how
cultural values conflict or align with one another. As a result of these
moments of truth accumulating over time, cultures define their distances
from each other. In looking to develop Internet caf?s throughout India, the
cultural implications of bringing Internet access into both metro and rural
areas will require inordinate patience and understanding that India is a
nation known for slow, ponderous development. It is the antithesis of the
alacrity and speed of the United States, European nations or Australia for
example. The urgency in these more advanced nations is not present in
India, mainly as a result of the sporadic performance of its
infrastructure. It is common for electricity to not be available for
possibly days at a time. There is also the cultural attitude of working to
live as opposed to living to work, and in this difference is the cultural
dichotomy that will make the developing of Internet caf?s challenging for
any westernized companies.
Yet despite this different perspective on life, many Indian actively
emulate western cultural values. As Thomas Friedman notes in his book (The
World Is Flat, 2005) call center employees in India are taking voice
training and diction courses to deliberately sound more westernized to
inbound callers from the U.S., U.K., Canada and other English-speaking
nations. Experiences of call center representatives who have gone through
this training indicate that higher levels of customer satisfaction are
achieved and less derogatory comments made about outsourcing in general
occur when callers think they are more westernized. Just one of many
examples of the dynamics of the Indian culture being influenced by western
values and cultural norms, the ongoing training of Indians to sound more
like westerners casts an unflattering light on the entire aspect of
globalization. The elimination of regional differences in culture to "fit
in" globally also highlights how strong ethnocentric behavior influences
others, even half a world away, in a matter of minutes on a telephone call.
This reaction to the world shrinking in terms of who each of us interact
with every day to get things done personally and professionally is driving
changes in behavior no government, organization or company can dictate.
. The Internet is increasingly seen as a polycentric medium for
learning, communicating and entertainment. This is exemplified in the
early adopter statistics as shown (Internet in India Report, 2006).
The majority of Internet early adopters are students who are seeing
the Internet as a polycentric medium for communicating and learning.
. The Internet is seen as an equalizer to status differences and an
answer to the caste system in India. The egalitarian benefits of
having access to the Internet is equalizing the Indian society, and
making it possible for many students to pursue learning objectives
that would otherwise have been beyond their means to pursue. The use
of the Internet as a method for education is transforming the
structure of Indian society.
. Eroding the delineation of knowledge and learning between genders.
What is most promising for women is that the Internet is giving them a
means for increasing their educations and increasing their development
as professionals. In previous generations of the Indian culture, this
was not possible for the average Indian woman.
. India struggles with free speech that is anonymous over the Internet.
The Indian government reflects the broader cultural belief in conformity
and adherence to standards of respect for the government that is unlike
many other nations of the world where free speech is aggressively
. Westernization of students seen as a threat by previous generations of
Indians. This is a critical issue as many previous generation Indians
are fighting to keep the Internet out of the rural and more conservative
religious villages of India. There is a backlash of certain religions to
the rampant westernization of India. A case in point is the banning of
dancing in Bangalore night clubs.
. Extensive culture shock for those westerners going in to set these caf?s
up. There will be a major culture shock for any team of investors and
installers who go into India to set these up. It is advisable to allow
for several months of assimilation to get a sense of how to get projects
done in India.
c. Analysis of Political Factors
The political risks of beginning a new venture in India are several,
including the message voters sent in the last election of wanting to spread
the wealth obtained from services, privatization, deregulation and foreign
direct investment more evenly throughout the country. The Congress Party
won the last election, and relies heavily on Leftist parties located in
India's many provinces for support. As a result of these surprising
election results in 2005, there is a higher level of risk for companies
looking for start their own companies in India, especially if foreign
direct investment is involved.
Leaders of the Congress Party have warned however that taking isolationist
measures will only lead to India seeing a slow-down in economic growth.
India's recent experience-and that of its Asian neighbors-shows that
continuing rural poverty stems not from too much economic reform but rather
from too little (Di Lodovico , A., William, P., and Sanke, S. 2001) of
McKinsey and Company. Since more aggressive growth strategies have began
since 1991, annual GDP growth has been twice as high as it had been
previously. As a result, poverty rates have fallen by nearly a third in
both rural and urban areas. The highly successful software and outsourcing
industries are considered by many Indians to be the path out of poverty and
proof of the countries' ability to compete on a global scale.
The challenge facing the new political party in power is how to extend the
success of the IT and outsourcing industries into the broader Indian
economy and not leave the remainder of the populace feeling isolated and
disillusioned. To accomplish that goal, foreign investment and global
competition are being pushed into more sectors, including some in which the
government now plays a significant role. Although India has broadly cut
import duties and increased foreign-ownership limits over the past ten
years, large parts of the economy remain protected by high tariffs,
restrictions on foreign direct investment. In looking at interrelationship
between the Indian government and foreign direct investment, it's important
to keep in mind that to just 0.7 percent of India's GDP, compared with 4.2
percent in China and 3.2 percent in Brazil are comprised of imports
including the influence of foreign direct investment.
Clearly the Congress Party has to build on the current momentum of
outsourcings' contribution to the growth of the economy. McKinsey and
Company have found that product market regulations, the lack of clear land
titles, and pervasive government ownership were preventing India from
achieving 10 percent annual GDP growth. McKinsey & Company's economic
research shows that India must go further in lowering trade and foreign-
investment barriers if it is to continue integrating itself into the global
3. Analysis of entry mode to be…