“In India, 101 Employees Pose Big Problems”

In the January 17-January 23, 2011 issue of Bloomberg Businessweek, an article called “In India, 101 Employees Pose Big Problems” describes how government involvement in business is actually hurting the country’s economy and limiting its potential. The article states that there are over two hundred laws restricting employers in India, but the main law discussed is the one that prohibits employers of over one hundred workers to fire an employee without government permission. This causes employers to have to choose between limiting the amount of workers, and thus output, they can have, or risking having inefficient workers. Employees would not have much of an incentive to work hard if they knew that they could not be fired. In November 2010, even the Prime Minister voiced his concern that these laws might be “hurting the very workers they are meant to protect.” In 2001, some exceptions were made to the laws in order to encourage growth in IT companies, such as Tata Consultancy Services, so it can be wondered why the government does not amend these laws for all industries if leaders believe they are preventing the economy from growing. As the laws stand, employers are finding loop holes that allow them to have more workers without having to settle for inefficiency. Since it is easier to fire contracted labor, employers are hiring workers on daily wage contracts or three year contracts. This probably causes workers to constantly fear for their jobs and assume that they are going to be unemployed at the end of their contracts. A factory worker, Nazia Begum, is in the top 20 percent of wage earners, and she only makes $3.80 for each of her ten hour work days. These laws are ultimately hurting workers and preventing India from a surge of industrial growth similar to what China has experienced.

The United States has laws regarding business to ensure that employees are treated fairly and have a safe environment in which to work. However, when companies need permission before doing things such as firing employees, it slows production. The company must wait for permission to fire an employee that they know much more about than the government, all the while dealing with that inefficient employee in the workplace. There should be laws protecting workers from being fired unfairly, but managers also need to be able to run their businesses. This law has even prevented foreign investors from showing interest in Indian companies. Businesspeople looking to expand into India might be hesitant upon realizing all of the laws restricting business that may inhibit them from being successful. Managers should always know the political systems of the countries they want to expand into and the laws that might make it more difficult for their businesses to grow and be efficient.

Elena Rudzinski

Works Cited:

Srivastava, Mehul. “In India, 101 Employees Pose Big Problems.” Bloomberg Businessweek. 17-23

January 2011.

“Starbucks Brews Coffee Plan for India”

“Starbucks Brews Coffee Plan for India,” written by Paul Beckett, Vibhuti Agarwal, and Julie Jargon, is an article from the January 14, 2011 issue of The Wall Street Journal. It explains that Starbucks, a company from Seattle, is planning on expanding into India for the first time, using a strategic alliance with India’s Tata Group as an entry strategy. Tata Group owns a wide variety of companies in India, as well as Eight O’Clock Coffee Co. in the United States, and is also a big coffee producer in India. Although India has been viewed primarily as a tea-consuming nation, it is the fifth largest exporter of coffee in the world, and its citizens are beginning to consume more coffee themselves.Starbucks has a lot to gain by forming an alliance with Tata Group. The first benefit is that Starbucks can begin to use Indian Arabica beans in Starbucks stores worldwide. This alliance would allow Starbucks to open up in Tata locations, such as in retail stores and hotels, and strengthen the brand’s international presence. In turn, Tata Group hopes to learn from the unique experience that Starbucks possesses on store format. Starbucks is also trying to spread brand awareness using other methods, such as by selling its coffee in grocery stores and creating a new logo, but the key to success in India for foreign investors really lies in joint ventures. In India, a foreign single-brand retailer can only hold up to 51% of a joint venture with a local partner. Because of this, Starbucks is looking to form another alliance in order to do more business in the country. The article goes on to mention other companies that have expanded into India, including Yum Brands, Inc., Domino’s Pizza, and McDonald’s.

Even though Starbucks does not have much of a choice in entering India using a joint venture, it could result in positive consequences anyway. Many foreign companies fail simply because they have not performed adequate research on the country into which they are expanding. Starbucks has a lot to learn about India’s laws regarding business and culture if they are going to succeed in the new market. Tata Groups is already an expert on Indian business practices and can help Starbucks increase profits. By tying itself to a well-known organization like Tata Group, Starbucks ensures that people in India will already trust the brand name being introduced.

The article mentions some interesting failures and successes of businesses that began doing business in India. For example, Coca-Cola Co. was banned from doing business in India for sixteen years in the 1990’s because it refused to share its secret recipe. KFC was protested against, because the Indian people believed the company was a threat to India’s rich culinary culture. These companies can serve as a warning to Starbucks. Companies cannot go into a country thinking that they do not have to make adjustments. All governments have different rules and regulations that must be adhered to, and cultures should be respected.

Luckily for Starbucks, India’s demand for coffee has been increasing. In 2008, domestic consumption of coffee rose to 94,400 metric tons, which was up 90% since 1998. Since the demand for Starbucks’s coffee is already present, the efforts of marketers should be focused on positioning the brand against competitors and also adapting the products and shop environments offered to appeal to local tastes. All companies must make some adjustments to their original plans in order to succeed in a new market. Domino’s Pizza Inc. made a special pizza for India called the Peppy Paneer Pizza, which contains bland Indian cheese and spicy red peppers. McDonald’s cannot serve beef, because the Hindu people of India believe cows are sacred, so Chicken Maharaja Macs are made. Understanding this concept, Starbucks is considering offering  vegetable puff pastries for breakfast and chicken tikka sandwiches for lunch, both of which are popular in India. Starbucks is also trying to market itself to young Indians and make the local shops a great place to stop in between home and work.

Since Starbucks has a lot of experience marketing the brand name overseas, they will probably also succeed in India with the help of Tata Group. The company has a sound marketing strategy and has performed useful market research on the consumer culture and demand. It will be interesting to see what other products besides the vegetable puff pastries and chicken tikka sandwiches the company comes up with specifically for India and if the people in India will welcome the brand as part of their communities.

Elena Rudzinski

Source:

Agarwal, Vibhuti, Paul Beckett, and Julie Jargon. “Starbucks Brews Coffee Plan for India.” The Wall Street Journal. 14 January 2011.

Green logo used from 1987-2010, still being used as a secondary logo. (Photo credit: Wikipedia)