India Meets the World

As the third-largest economy in Asia, India is growing in importance, both as a market in itself and as a player in world markets. New Accenture research looks at the implications for companies striving for high performance, from the perspective of multinationals operating in India, Indian companies and low-cost-country sourcing.

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A new study by Accenture examines Asia's third-largest economy from three perspectives: multinational companies, Indian companies and low-cost country sourcing.

India is becoming an important consumer market for multinationals, while increasingly Indian companies are planning strategies to compete in global markets. A further factor is that India is becoming an important player in the low-cost-country sourcing market.

Consequently, Accenture conducted a survey of chief executives across 100 medium and large organizations, half of which were Indian companies and half multinationals. The research aimed to investigate three distinct areas:

• What are the obstacles and opportunities for multinationals in India?
• What are the obstacles and opportunities for Indian companies undergoing globalization?
• What is the current state of low-cost country sourcing by Indian companies?

Multinational perspective
Multinationals come to India for the following reasons, in decreasing order of importance:

• To tap the large and growing market (92 percent, with 54 percent wanting to establish or enhance an Asian presence).
  
  
• To tap the large pool of skilled manpower (36 percent).
  
  
• To source materials and components (11 percent).
  
  

Indian companies' perspective
Going global is becoming an integral part of strategy, with more than 30 percent of companies surveyed having export/turnover ratios of more than 50 percent.

Low-cost-country sourcing
Low-cost country sourcing features on the business agenda for a majority of companies operating out of India:

• 12 percent of current procurement spend is going to low-cost countries, with a target of nearly 17 percent in the course of the next three years.
  
  
• For countries operating out of India, the preferred countries for low-cost sourcing are China, Korea and Thailand.
  
  

Multinational perspective

• Multinationals are optimistic about Indian market growth rates over the next three years and are investing accordingly. A majority of investments in Indian operations have, in the past, broken even in fewer than four years.
  
  
• Multinationals recognize two key capabilities essential to success in India: access to talent, and an integrated and responsive supply chain.
  
  
• Multinationals are highly satisfied with the cost, quality and customer focus of their Indian operations.
  
  

Indian companies' perspective

• Indian companies recognize three critical capabilities for global success: flexible organizational structure, the ability to find the right partners and insight into global markets and consumers.
  
  
• Management and process immaturity are the biggest obstacles to the global aspirations of Indian companies.
  
  

Low-cost-country sourcing
The biggest challenge is the basic one of identifying the right supplier. Thereafter, companies must overcome significant barriers, such as:

• Obtaining customer approvals.
• Mitigating supply and quality risks.
• Integrating low-cost suppliers with the existing supply chain.

Most companies willingly assume the risks because the benefits are so substantial.

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