Question

Read the “UPS in India” case

Answer the following questions fully and submit to this DropBox.

1. Why are foreign MNEs like UPS seeking to invest in India? (200 words minimum)? Please include a word count of your answer.

2. What advantages might accrue to local competitors? How might foreign MNEs gain a competitive advantage in the Indian market? (150 words minimum)? Please include a word count of your answer.

Please write in your own words

Answer 1

Why are foreign MNEs like UPS seeking to invest in India?

• India is one of the fast developing countries in the world with 7.9% as GDP during the global financial crisis. Indian economy is stable and liberalization in the economic policies has attracted more foreign investors to invest in the country. There is significant development in the trade and commerce both at domestic and international level. Demand for the logistics is significantly higher to support the growth in industry and requirement of people. There is an increase in demand for e-commerce business and it is the future of retail industry, current logistics of India is not sufficient enough to support such tremendous growth.
• Growth in air cargo is expected to be 11.2% CAGR and expects to increase by three times its present size by 2025. Tier-2 and tier-3 cities have become favorable destinations due to the availability of land at lower prices, connectivity to multiple markets, and the proximity to industrial clusters. It enable companies to make lower investments in establishing the business. Government is investing huge in infrastructure for supporting the growing demand for effective logistics. Expected growth in logistics by World Bank is an annual rate of about 15% to 20% in India. All these factors are the main reason for foreign MNEs to invest in India. It is the right time to grab the market share and to generate higher profits.

What advantages might accrue to local competitors? How might foreign MNEs gain a competitive advantage in the Indian market?

• Some advantage that might accrue to the local competitors is like multiple pricing, price lining advantage, increase in demand, more coverage and service. With the entrance of MNEs into the market, Indian market will have more expectation and will prefer private services over the Indian postal services. It provides great market for the local players and enable them to earn higher profits. It increases the demand for the service and it enables them in covering a larger spectrum. Foreign MNEs are experienced in the logistics business and it will enable them to attract more business customers.
• Foreign MNEs can easily conquer the import and export market because they have specialized seaway and airway logistics. Three other major advantages is that they can create a more specific value chain and it will enable them in reducing the overall expenses to these MNEs. First entrant benefits that is they can easily get more business contracts. E-commerce is in the developing stage, having tied up with these companies at the initial stage, it is easy for the company to obtain a contract at a lower cost. Finally, it will enable intensifying the competition and expanding the business. It will provide for rapid expansion and penetration into new markets. It will enable providing services to various locations that are considered remote and it will create a strong market for the company.