International Business Managers' Perspective of Doing Business with India.
| Author | Bhattacharyya, Som Sekhar |
Introduction
Historically the transitional economy firms from Baltic countries (Latvia, Lithuania and Estonia) like the Indian counterparts were inward looking and defined their strategic scope by focusing primarily on the domestic market (Fabry & Zeghni, 2006; Jalan, 2004). India adopted policies of liberalization, privatization and globalization (LPG) in 1991(Datt & Sundharam, 2004). Like other Central and Eastern European (CEE) countries, Latvia, Lithuania and Estonia in the early 1990s started their journey towards transitional economies after the collapse of Soviet Union (Fischer, Sahay &Vegh, 1996). Over a period of time Latvian, Lithuanian and Estonian firms accelerated their internationalization initiatives (Jansson & Sandberg, 2008). The present research examines how the internationalization initiatives of these three economies have been directed towards India. This study has been undertaken because there is a paucity of extant literature on the internationalization of transition economy firms towards emerging economies. An exploratory qualitative research study was carried out as advocated by Maxwell (1996).
Business Landscape in Lithuania
The major industries in Lithuania were pharmaceuticals, textiles, information technology and retail (Embassy of India, Warsaw, 2011). Lithuania has been recovering after the recession hit the economy in 2009 primarily due to a collapse in domestic and external demand (Baltic Business News, 2011a; 2011b). Lithuanian pharmaceuticals market was hit hard by the recession as the market was highly dependent on the import of drugs and this could be easily understood by the presence of few medicinal products manufacturers (like Sanitas, Aconitum) with low drug output (Embassy of India, Warsaw, 2011).
Lithuanian textile industry demonstrated competitive edge in the industry and this was possible because it was bestowed with several strategic advantages such as location, expertise and infrastructure (Balcius, 2012a; 2011a). Lithuania had the largest ICT industry in the Baltic States and out of the 20 largest IT companies in the Baltic States, 13 are based in Lithuania (Invest Lithuania, 2012a; 2010). IT services had been among the fastest growing industries in Lithuania during the past few years, and the number of individuals employed in IT services was 6,800 in 2006, and it had almost doubled to 12,000 in 2011 (Invest Lithuania, 2012b). However, Baltic economies still had some way to go to reach a high level of prosperity that was generally prevalent in the EU despite the tremendous on-going progress (Balcius, 2012b; 2011b).
Regarding the labor and talent pool of Lithuania, by the end of 2010s 40% of the population had completed higher education (Invest Lithuania, 2012b). Lithuania also had one of EU's most educated people and was also among the top 5 EU Member States with the best multilingual skills as 50% of the population spoke two foreign languages (Invest Lithuania, 2012a). Labor costs in Lithuania were half of other EU countries and the US, and the minimum monthly wage in 2013 being EUR 290 per month, the average gross monthly earnings had decreased due to the economic recession (Baltic News Service, 2012; 2013). According to EDI Intelligence from the Linancial Times Ltd, Lithuania offered one of the most attractive value-for-money business venues in Europe for establishing IT based technical support centres (Invest Lithuania, 2012c).
Business Landscape in Latvia
In Latvia, the timber industry had been the nation's leading exporter of merchandise which accounted for around 15% of total exports of goods and services (Strautiod, 2012). Food and timber processing together accounted for close to half of all manufacturing industries (Strautiod, 2012). Latvia has been worldwide recognized for its life sciences and ICT sectors. Latvia offered solid infrastructure, a skilled workforce, and a stable economic and political environment (Express Pharma- Financial Express, 2007). The success of Latvia's life sciences sector was attributed to Latvian Institute of Organic Synthesis, Super Cluster of Scan Balt Bio Region initiative and local Pharma companies (Express Pharma- Financial Express, 2007; Scan Balt Website, 2014).
From the year 2008 there was a steep rise in imports from Latvia into India and in 2009-10, India imported almost 3 times its exports, thus indicating that there exists an emerging market for Latvian products and services in India and the major exports from India to Latvia included tea, coffee, tools, pharmaceuticals, chemicals, garments, iron and steel, etc. (MEA India, 2013a). Due to the massive demand for products like chemical and allied products, foodstuffs and textiles, Latvian imports from India were expected to remain steady. Recently, oils and fats, rubber etc were in higher demand in Latvia, thus providing increased scope for Indian exports (Embassy of India, Sweden, and Latvia, 2013b; Business Maps of India.com, 2013). Significant imports from Latvia include chemicals, fertilizers, iron and steel, machinery, etc. (MEA India, 2012; 2013). India was seen as a prospective market for Latvia in areas like IT and telecommunications, biotechnology, education, transport, transit and logistics (Baltic News Network, 2013).
Latvian market has been characterized by growth in IT services exports, increased outsourcing services consumption in the internal market, growth in share of IT support services (IT infrastructure support) and market consolidation processes (mergers and acquisitions) (Central & Eastern European Outsourcing Association, 2010). The A.T. Kearney Global Services Location Index, 2011 ranked Latvia at 13th position, indicating it as the 2nd most preferred choice after Estonia for IT in Europe. The A.T. Kearney's Report mentions the primary reasons for Latvia climbing up the ranks is a direct consequence of the economic crisis and strong people skills which allowed for small but strong BPO and voice markets and internal devaluation which witnessed wage cuts of 35% and slashes in expenditure (Erik, Gott & King, 2011).
Business Landscape in Estonia
The economic policy goals of government of Estonia prioritized (set in the State Budget Strategy 2013-2016) achieving a general government surplus and increasing productivity to 73% of EU average by 2015 (Estonia.eu, 2013a). The banking system of Estonia was connected to Scandinavian banks which made the Estonian banks at par with the strongest and best-regulated banks in the region and further these efficient and sophisticated banks offered very competitive rates to both domestic and international services, including internet and telephone banking (U.S. Department of State Archive, 2007). Estonia had captured a considerable share of the rapidly growing transit trade through the Baltic Sea (Ernst & Young, 2012). Due to significant investments from Nordic investors into high technology and communication networks, the Estonian telecommunications sector was one of the most advanced in CEE and Estonia maintained its global competitiveness through advanced use of IT (Estonia.eu, 2013a).
Estonia's main trade partners were Finland, Sweden and Russia Latvia. Estonia's major exports were machinery and equipment, mineral products, agricultural products and food preparations, metals (metal products), and wood (wood products) while its main imports were machinery and equipment, mineral products, agricultural products and food preparations, and transport equipment (Estonia.eu, 2013a). The main import partners were Finland, Sweden and Germany (TradingEconomics.com, 2013)
Historically the key sectors in Estonia were ICT, electronics and components, machine building and metal working and to excel in the creation and production of innovative products in Estonia, the national policy was focusing on innovation targets in biotechnology, information technology and material technology, along with the...
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