SEMINAR REPORT

ON

INTERNATIONALISATION OF SERVICE

FIRMS

A report submitted in partial fulfilment for the degree of Master

of Business Administration

Submitted To: SubmittedBy:

Dr. SAHIL RAJ HARKIRAT BRAR

M.B.A-Ist, SEC-F

Roll No. 120425709

SCHOOL OF MANAGEMENT

STUDIES

PUNJABI UNIVERSITY PATIALA

TABLE OF CONTENTS

1

ACKNOWLEDGEMENT……………………………………………………………………………………………………………..3

PREFACE…………………………………………………………………………………………………………………………………….4

INTRODUCTION…………………………………………………………………………………………………………………………5

WHAT IS INTERNATIONALISATION?................................................................................................8

SERVICE INDUSTRY…………………………………………………………………………………………………………………….11

SERVICE AND INTERNATIONALISATION……………………………………………………………………………………..13

THE CONTEXT OF SERVICE FIRMS……………………………………………………………………………………………15

GROWTH CAPABILITIES OF PROFESSIONAL SERVICE FIRMS………………………………………………………17

GLOBAL CAPABILITIES OF SERVICE FIRMS……………………………………………………………………………….20

DISCUSSIONs……………………………………………………………………………………………………………………………..22

ADVANTAGES OF GOING INTERNATIONAL………………………………………………………………………………..23

DISADVANTAGES OF GOING INTERNATIONAL…………………………………………………………………………..24

TEN COMMON INTERNATIONALISING MISTAKES…………………………………………………………………….26

IMPORTANT FACTORS FOR ACHIEVING SUCCES………………………………………………………………………26

OUTSOURCING CHALLENGES FOR 2013……………………………………………………………………………………27

NETWORK OUTSOURCING SERVICES INDIA………………………………………………………………………………29

CONCLUSION…………………………………………………………………………………………………………………………..33

REFERENCES…………………………………………………………………………………………………………………………..34

2

ACKNOWLEDGEMENT

This seminar report has been made possible through the direct and indirect Co-operation

of various persons, who have inspired me at every step of my work. It is a matter of pride

for me to acknowledge my profound gratitude to my respected guide who always

facilitates me in gaining practical knowledge.

I am very much obliged and thankful to my esteemed Guide MR.SAHIL RAJ for his

valuable Cooperation and Guidance.

HARKIRAT BRAR

3

PREFACE

The report provides an opportunity to a student to demonstrate application of his/her

knowledge, skill and competencies required during the technical session. Report also

helps the student to devote his/her skill to analyse the problem to suggest alternative

solutions, to evaluate them and to provide feasible recommendations on the provided

data.

The report is on the topic of “INTERNATIONALISATION OF SERVICE FIRMS”.

Although I have tried my level best to prepare this report an error free report every effort

has been made to offer the most authenticate position with accuracy.

4

5

INTRODUCTION

Effect of internationalization on Indian service industry has been very positive, though

some industrial firms with the baggage of high cost, inefficient plants and processes

inherited from the past because of closed economy's government dictated industrial

policies and priorities had to face serious problems in the beginning. But soon most of the

industries have become more and more efficient; customer focused and improved their

international competitiveness in terms of costs, prices, product quality and variety.

Industrial growth has been very high and strong during the past decade because of

globalization. Exports have increased tremendously. Indian industries are also expanding

abroad. Foreign companies have substantially increased their investments in Indian

industries. Wages of industrial labour has increased substantially as they have become

very productive. Lock out and strikes have declined to insignificantly low levels because

industrial labor is happy. Those who cannot be efficient and past their prime age to retrain

themselves in modern methods and processes have been retired with very attractive

voluntary retirement schemes. The trade unions are finding it difficult to influence

industrial workers into agitation because labor has started benefiting from the positive

fallout of globalization on the prosperity and growth of the industrial sector. Talented and

merited labor is commanding premium compensation in the labor market. Several new

type of industries have also come up. Small scale industries of the past has fast grown

into medium scale companies. Incidence of industrial sickness has gone done

drastically .However, the communists will not agree to this view because with industrial

workers becoming richer following increasing demand for and the wages of industrial

labour .resulting from liberalization and globalization.

India has done very little reforms in agriculture to enable private and individual economic

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initiative that would help harness the benefits of globalization. Despite this govt. created

hurdles to globalization, Indian agriculture has benefited substantially from whatever

little globalization that has been allowed in Indian agriculture. The farmers that got the

exposure to global links of markets, technology and investment, benefited in terms of

improving their yields, getting better prices and secured off take. In many areas of the

country, tomato growers, potato farmers and fruit growers farmers benefited from tie-up

and collaborations with ketchup, potato chips, fruit juices, etc. Indian agricultural exports

have grown where Indian farmers in selected pockets are competitive: these include

spices made from agricultural produce, flowers, mangoes, other fruits rice, vegetables,

pickels, papads, tobacco, etc. The e-choupals network created by an Indian company and

the spread of mobile telephones have provided on line market price and climatic

information on on-line real-time basis and helped them to get the best prices and sell to

the most attractive buyers and brought them freedom from the clutches of the middlemen

and traders. Because of the resistance from the traders and the politicians, more and more

farmers are not getting the benefits of globalisation: vested interests are stopping the entry

of more professional and honest buyers of agricultural produce of high quality for supply

to urban areas through network of malls. Fishermen in Kerala have increased their

incomes using mobile phones to find out the best mandis where the prices are the highest

on each day. There have not been any negative effect of globalization on Indian farming.

But faulty and restrictive policies of Indian politicians have made it difficult for farmers

to consolidate their holdings for larger scale commercial farming, access to large, high

paying buyers with retail chains, support of well-organized transparent mandis not ruled

by traders. As a result in many areas farmers have committed suicides because of crop

failures and high indebtedness. Using the old British Indian laws of land acquisition, the

state govts. are forcing farmers to sell their lands for industries at prices they consider

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justified rather than asking industrialists and companies to bid for agricultural land which

will increase the market prices of land,. Once these policy impediments are removed,

globalisation will proceed in Agriculture and farming in the proper way and benefit Indin

agriculture and farming throughout the country. India does not need all the land under

agriculture now for agricultural use: much less area would suffice to feed the nation and

export if agricultural productivity can be raise substantially through private investment in

agriculture by companies that need agricultural produce for their business growth and

India's economic growth.

WHAT IS INTERNATIONALISATION ?

Definition: The process leading to identifying and entering international markets

In real terms: Usually implemented by:

Firms acting alone – set up subsidiary (sales & production) production) by buying an

existing company or by buying an existing company or creating a new one

Firms acting with others – establish strategic alliance with one or more partners (local or with one or more partners (local or international) AN EXAMPLE OF INTERNATIONALISATION

A British Princess and her Saudi Arabian boyfriend died in Paris after being treated by

Swiss doctors with American medicines while their German BMW car driven by a

drunken Turkish driver consuming excessive French wine and chased by Italian Paparazzi

crashed against a river tunnel.

8

This news is being sent as SMS by an Indian journalist using a Chinese made Nokia

handset with a Singaporean Airtel simcard smuggled from Korea and using Orange

network of Thailand.

PROCESS OF DECIDING TO GO INTERNATIONAL

Answer the following questions:

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have you assessed prevailing conditions in home market (i.e. competition, trade policy,

regulatory (i.e. competition, trade policy, regulatory environment)?

would they support plans for overseas expansion?

have you conducted the necessary research to you conducted the necessary research to

confirm that real opportunities exist abroad?

If so, do you have the required resources (financial, technical & human) to go ahead?

are you really prepared to take the risk?

if yes, then proceed to planning stage

Developing an international perspective

Consider the following:

once you’ve decided where you want to go start researching the market

if necessary visit the location and find out first hand about potential customers,

markets, local about potential customers, markets, local conditions

satisfy yourself that positive factors outweigh negative factors before going ahead

do the financials – can you realistically make money by venturing into overseas

markets?

Then ask yourself:

is it the right time to enter your selected overseas market – i.e. economy sound,

politically stable?

do I have the necessary resources to implement an international marketing plan?

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have I clearly worked out how I’m going to get paid (and when) once goods / services

have been delivered?

am I prepared to take the risk having considered all the issues and ramifications of

going overseas?

Final steps:

prepare a step-by-step export plan to facilitate implementation

allocate roles and responsibilities

prepare an action plan outlining when things have to happen and deadlines for

completion of tasks

create a monitoring mechanism so that you can that you can follow up on how you’re

performing overseas

SERVICE INDUSTRY

The service industry forms the backbone of social and economic development of a

country. It has emerged as the largest and fastest-growing sectors in the world economy.

The service sector has shown a growth rate higher than that of agriculture and

manufacturing sectors. This sector covers a wide range of activities, such as

trading ,transportation, communication, financial, real estate and business services. In

India, the services sector, as a whole, contributed as much as 68.6 per cent of the overall

average growth in gross domestic product (GDP) between the years 2002-The most

important services in the Indian economy have been in the health and education sectors.

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These are one of the largest and most challenging sectors and hold a key to the country’s

overall progress. A strong and well-defined health care sector helps to build a healthy and

productive workforce. The era of economic liberalisation has ushered in a rapid change in

the service industry. As a result, over the years, India has been witnessing a transition

from agriculture-based economy to a knowledge based economy. The knowledge

economy creates, disseminates, and uses knowledge to enhance its growth and

development. One of the major functional pillars of this economy is Information

Technology (IT) and IT-enabled services (ITeS) industry. IT continues to be a dominating

sector in the overall growth of the Indian industry. Been one of the fastest growing

sectors both in terms of turnover and employment. Many national and global players have

been investing in the retail segment and making all out efforts to further expand the

sector. The service sector holds immense potential to accelerate the growth of the

economy and promote general well-being of the people. They offer innumerable business

opportunities to the investors. They have the capacity to generate substantial employment

opportunities in the economy as well as increase its per capita income. Without them the

Indian economy would not have acquired a strong and dominating place on the world

platform.

The service sector consists of the "soft" parts of the economy, i.e. activities where

people offer their knowledge and time to improve productivity, performance, potential,

and sustainability. The basic characteristic of this sector is the production

of services instead of end products. Services (also known as "intangible goods") include

attention, advice, access, experience, and discussion. The production of information is

generally also regarded as a service, but some economists now attribute it to a fourth

sector, the quaternary sector.

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The tertiary sector of industry involves the provision of services to other businesses as

well as final consumers. Services may involve the transport ,distribution and sale of

goods from producer to a consumer, as may happen in wholesaling and retailing, or may

involve the provision of a service, such as in pest control or entertainment. The goods

may be transformed in the process of providing the service, as happens in the restaurant

industry. However, the focus is on people interacting with people and serving the

customer rather than transforming physical goods.

For the last 100 years, there has been a substantial shift from the primary and secondary

sectors to the tertiary sector in industrialised countries. This shift is

called tertiarisation. The tertiary sector is now the largest sector of the economy in

the Western world, and is also the fastest-growing sector.

SERVICES AND INTERNATIONALISATION

Services, especially those requiring strong local know-how, are among the least global

industries. Historically, professional services were delivered locally, and thus most

professional service firms were small, local organizations. Technological advances and

deregulation in recent generations have enabled the emergence of ever-larger national,

and even global, professional service firms (PSF). Not only are these firms geographically

diverse, but they are increasingly diversified with respect to the variety of professional

specializations offered. Big accounting firms, for example, have diversified their

geographical presence and operational scope, moving from auditing to consulting to

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information technology management. The organizational challenges for firms growing,

diversifying, and changing from their traditional forms are obviously substantial.

International professional service firms sometimes have to battle the liability of newness

along with the liability of foreignness.

We begin this paper with a theoretical framework for understanding various aspects of an

effective globalizing professional service firm. We integrate aspects of transaction cost

economics (the resource-based view of the firm) and organizational learning to

understand what it takes for a firm to transfer its competencies from a national market to

an international market.

Services are generally described as being invisible, intangible, non-fungible, ephemeral,

non-storable, with a high fixed-to-variable cost ratio, and characterized by simultaneous

production-consumption that requires close interactions between producer and user .

Managerial responses to characteristics like invisibility and intangibility include investing

in branding and promoting a reputation, whereas characteristics like non-storability and

higher fixed-to-variable cost ratios imply relatively high pressures to sell (Porter, 1980).

Consequently, services tend to be highly dynamic industries, competitive, and with

intangible resources being the most likely to contribute to successful competition and

value creation . International professional services, such as accounting, consulting, and

law, are particularly difficult to manage because they embody additional knowledge

capital requirements, problems in transferring know-how across organizational and

national boundaries, and operations across distinctive institutional and legal systems for

which local knowledge is needed.A number of theories are useful to explain the

internationalization of professional business service firms. Transaction cost theory argues

that because organizations exist to provide a more efficient way (than markets) to conduct

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business, firms continuously need to strive for efficiencies in order to survive.

Efficiencies for internationally expanding firms may come from economies of scale,

economies of scope, and experiential knowledge. Larger professional service firms, for

example, are more likely to go global because they can achieve economies of scale and

accumulate resources, and experience diminished opportunities in their domestic markets

(Alon and McKee, 1999). However, a firm’s ability to succeed in foreign markets

requires an overall capability to achieve both revenue and cost benefits. This is a set of

dynamic capabilities that includes ongoing filtering and learning from new sources of

information about clients, competition, costs, and technologies. Experiential knowledge

is one of these capabilities that reflect the firm’s capacity to exploit such knowledge in an

ongoing and effective way. The firm's ability to accumulate and exploit these capabilities

necessarily varies with its degree of globalization.

THE CONTEXT OF SERVICE FIRMS

Professional services more likely to be customized from country to country to take the

local legal and other environmental conditions into account, but also there are minimal

economies of scale achievable by centralized production. One powerful pull to globalize

is from client demand for the service provider to follow them in overseas expansion

activities (Rose, 1998). Løwendahl (1997) presents three categories of clients that may

benefit from an internationalized PSF, namely

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(1) global clients that prefer the same service provider in the various country markets in

which they do business,

(2) local clients that require some globally standardized services, and

(3) local clients who simply prefer a global professional service provider for a variety of

reasons like perceived quality, global knowledge- sharing opportunities, or personal

preferences.

So there seems to be some combination of contingent financial rewards and pulls from

existing clients that induces PSFs to cross national borders. On the one hand, the vast

majority of professional firms are tiny, comprising perhaps a single professional or a

small partnership, and their work is mainly local, be it helping transfer a home from one

family to another, preparing tax returns, or designing residential buildings. On the other

hand, global PSFs tend to focus more on large corporate or governmental clients,

providing services like audits for global firms, designing commercial buildings, and

providing investment banking, major litigation, corporate consulting, and transactional

law. These large professional firms are highly competitive and profit-oriented, and they

place substantial emphasis on the annual ratings of the firms based on various

profitability and growth measures.

.

Why do PSFs become global?

Apart from the obvious perception that foreign markets present good business

opportunities, an important pull to internationalize is from clients who demand that the

service provider follow them in overseas expansion activities Further, a firm's proven

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ability to shift its product-market focus (i.e., diversify) is also a defensive foil against

possible invasion of its turf by competitors—a proven capability for retaliation against a

competitor entering a firm's home turf, or at least a credible threat of a counterattack, is a

signal that warns off the threat of new entrants (Porter, 1980). So there seems to be some

combination of contingent financial rewards, pulls from existing clients, needs for

specialized services in global markets, and deterrence that induces PSFs to cross national

borders.

GROWTH CAPABILITIES OF PROFESSIONAL SERVICE FIRMS

Early growth

The first step a PSF makes beyond its traditional domain (locality or product line) is to

test its legitimacy as it may suffer from a liability of newness. The liability of newness

suggests that newer organizations are at a greater risk of failure than older organizations

because they depend on others, have low levels of legitimacy, have loose structures,

suffer from the liability of smallness, and are unable to effectively compete. Thus, there

are significant challenges to the PSF’s marketing and PR functions to convey an

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appreciation of the firm’s competencies. The firm must learn to deal with growth, both by

implementing appropriate business systems and by learning to operate across multiple

locations.

These points are well illustrated by Segal-Horn and Dean:

“Whilst you are all … around the [same] table you can organise things, you know what is

happening, you can see what letters are coming in and going out. Once it gets to

something bigger you have to have proper systems….” (2009: 48).

This quote illustrates how small PSF companies have loose structures, but efficient ways

to make decisions that give them added agility in the marketplace.

At this stage we can consider two separate groups of growing firms: those that grow

by following clients and those that move unaccompanied to seek out new markets. The

former category (PSFs that follow clients) has major advantages during this early phase,

not only in the financial sense, but also in the legitimacy gained by association with an

established client in the new market. The early experiential learning may be less intense

for those firms with the initial advantage of followed clients, but those PSFs that survive

on their own will build better capabilities on which to base future growth success. In a

sense, they are tougher and able to take the competition head-on without the cushion of

established clients. For example, such a firm is more likely to invest in experiential

knowledge relevant to selecting suitable locations, suppliers, partners, and information

systems in cities that are remote from its home base.

To succeed, growing PSFs need the capability to constantly learn about their clients’

needs, develop their client services, and integrate these capabilities across their growing

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network of clients and professionals. For this growth to be profitable, a contemporary

knowledge-intensive service firm needs to "cross-sell" new services to existing clients

In order to achieve these capabilities, expanding PSFs employ a series of integrating

mechanisms to enable their professionals—some from newly merged offices—to get to

know one another in order to promote the crossselling of services. An example from

practice is cited by Brock et al. (2006: 487):

“After the recent merger between Reed Smith and Richards Butler, the top managers were

quick to stress cross-selling and client referrals. As part of this strategy a senior partner

was ‘made responsible for ensuring cross-selling between the firms Apart from setting

the overall structure to facilitate integration, successful firms use a combination of

communication strategies (Tursi, 2005) and integrative mechanisms to encourage and

enable cross-selling. Brock et al. provide the following examples:

“[A] leading global law firm, in partnership with a prominent Business School, has a

series of week-long training programs for its top lawyers. One of the exercises consists of

a cycle whereby each participant posts a sheet of paper listing the three or four things for

which ‘I need help’ followed by a rotation whereby they go around sticking yellow ‘I can

help’ stickers on the original sheets. Another exercise used in-house by the same firm is

called ‘speed-dating for lawyers’ that consists of brief, one-on-one sessions for people to

describe their practice, their clients, the possible opportunities, and to encourage other

participants to respond and to proffer their suggestions and opportunities”

Other integrative mechanisms suggested by Segal-Horn and Dean (2007) include the

creation of common IT platforms, HRM practices, training programs, partner retreats,

social events, and secondments as important managerial tools for growing and globalizing

law firms.

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Mature growth

By this stage, the PSF is dominant in its domestic market and it is likely to suffer the

diseconomies of scale mentioned especially if it either struggles to wrest clients from

established competitors or diversifies into service areas beyond its traditional capabilities.

There are managerial and organizational approaches to maintain profitability by

exploiting the partnership-professional nexus, including delegating routine work to lower

level employees and manipulating the non-equity partnership ratios. Additional growth

typically comes either from expanding markets or from taking market share from

incumbents.

We now turn our attention to the process of new market development and the

internationalization of PSFs, examining the three stages of development.

GLOBAL CAPABILITIES OF SERVICE FIRMS

Early Internationalization

Just as a growing firm in a domestic context deals with the liability of newness, so does a

firm entering a new market have to deal with the liability of foreignness. In their study of

experiential knowledge in small internationalizing firms, Michailova and Wilson (2008)

remind us that not all founders and managers of internationalizing firms are interested in

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and engage in learning. They go on to imply that ability and willingness to learn are key

success factors for internationalizing small businesses. Segal-Horn and Dean point out

that clients expect a sophisticated and seamless experience across borders, “…the client is

saying I want to operate at a level of granularity that makes it the same for me around the

world, standardizing things….” (2009: 48).

At this stage we need to distinguish among PSFs that begin in large countries that have

multiple business capitals—like Brazil, Germany, India, and the United States—versus

those that are born in smaller economies—like most European countries. We use the

“multiple business capital” distinction because internationalizing PSFs generally serve

governmental and large corporate clients, and these tend to be based in such business

capitals. The distinction is relevant because growing PSFs in these large economies

generally first build up their growth capabilities domestically, and later internationalize

their solid organizational foundations and capabilities.

Intermediate internationalization

The fact that several time zones, cultures, and legal systems may separate existing

clients, existing staff, new staff, and prospective clients in the global firm certainly

complicates implementation of PSF internationalization strategies. Global integrating

mechanisms like a common language can be important tools. In general, socialization

tactics, like expatriate assignments and exchanges, are effective for the exchange of

ideas and the easing of knowledge flows. This is illustrated by the following quote

“I spent a little while in Italy … but I met all the tax people, I could put names to faces,

and if you had a transaction with Italian tax advice, and you’ve got a face in your head,

it’s so much easier to pick up the phone and it’s so much easier if you think they’re not

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quite doing what they should be doing to say to someone if you’ve met them rather than

someone you don’t know”.

The importance of having personal contacts and relationships in the host market is

underscored here. Thus, we can identify an intermediate stage of internationalization

when the firm has committed substantially to its overseas offices, when about a third of

all professionals are based abroad. For those firms that continue to internationalize, we

can assume that the initial experience of internationalization was positive and that the

firm can now use this experience to continue to expand into attractive markets

Mature internationalization

The final phase would be when the firm reaches high levels of internationalization,

whereby more than half its professionals are outside the home country. The firm has

evolved away from its home country orientation to be truly multinational. However, the

relatively simple organization structure and infrastructure that served the firm when it was

primarily located in its home base, necessarily need to be replaced by more complex

systems to cope with the myriad legal, cultural, tax, and geographic contexts in which it

operates. At this stage, the firm would have to invest in separate international

management, IT, and control infrastructure, often with regional administrative offices

overseas as well.

DISCUSSIONS

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We discussed two liabilities associated with growth and internationalization, i.e., the

liability of newness and the liability of foreignness. These two liabilities can form the

basis for two key dimensions associated with a growing and internationalizing PSF. That

is, we can construct a pathway that captures the time dimension of growth and

internationalization. The size of the home country has been determined to have an impact

on the context of the internationalizing PSF and the internationalization-performance

results. It seems as though firms residing in small countries face intermediate

internationalization prior to facing intermediate growth (or scale) because their home

country potential is scant and growth can only be achieved by going global. These firms

will face a strong liability of foreignness and their ability to adapt will influence their

ability to grow. Negative profitability following internationalization is associated with

such a process. Over time, if the firm succeeds in entering the new market and in addition

captures the local knowledge, it is well positioned for growth globally. In contrast, a PSF

from a large country does not need to contend with internationalization until it has

exhausted the large domestic market potential. This domestic growth enables the firm to

devote resources to international expansion and to leverage its domestic market power,

brand, and know-how to operate across various locations. PSFs in large countries thus

first face a strong liability of newness and if they succeed against the competition, then

internationalization will follow.

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ADVANTAGES OF GOING INTERNATIONAL

Export Opportunities for Small Businesses

Going global is an important opportunity for small business owners in the United States.

Any entrepreneur can use the Internet to market products and services to buyers in foreign

markets. He must build a system for satisfying the needs of foreign consumers, such as

shipping goods overseas and paying appropriate export fees. Other types of businesses

that provide all of their services through the Internet can go global, marketing to foreign

consumers online, without some of the difficulties of creating a global supply chain and

different distribution networks.

Finding Successful Foreign Partnerships

Another benefit of going global is enjoyed by companies of different sizes, not just small

businesses.Your U.S. company can build relationships with local companies and

individuals in foreign countries. These business partners can help you increase the

company's global infrastructure. Many times, your company saves money because

expenses (such as labor costs) charged by business partners overseas are cheaper. Also,

foreign workers carrying out your company's operations are familiar with the needs of

local consumers; they live and work in the same foreign culture.

Diversification

Another benefit of globalization is that a company can diversify its consumer base and

revenue streams. A company that markets only to U.S. consumers is especially vulnerable

to domestic economic trends. With consumers in other countries buying your products

and services from the international division, your company can maintain revenue streams

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in foreign markets. Your company can stay afloat even when the U.S. economy fails to

provide enough consumers.

Attract Large Business Customers

When you take your company global, it increases the ability of your business to attract

large corporations as clients. These companies already have their own global operations,

and they need to give their business to globalized companies diversified and structured to

accommodate their needs. If you're trying to market products and services to large

companies, globalization will get their attention, showing big clients that your company

aggressively pursues growth in foreign market.

DISADVANTAGES OF GOING INTERNATIONAL

Cultural Barriers

One of the problems many businesses run into when going global is cultural barriers.

What sells well in one country may not necessarily sell well in another. If you do not

consider the culture of the country you are expanding into, it could backfire. Some

countries might take offense to your marketing efforts or your products. Companies must

conduct market research before venturing into another country.

Currency Exchange

Another potential problem when expanding globally is currency exchange issues. The

value of your country's currency can hurt your ability to trade with other countries. If you

are buying supplies from another country, you want your currency to be strong. However,

when selling products to another country, a weak currency can help you increase sales.

25

Since exchange rates fluctuate frequently, this can be a source of problems for many

businesses.

Regulations In some cases, you may run into regulatory issues. Countries often engage in free trade

agreements that make it easier for companies to sell to other countries. Other countries

make it difficult on sellers to move into their territory. You may have to pay unusually

high tariffs or taxes throughout the process, which can put your product at a disadvantage.

Companies will have to gauge whether the hassle of moving into certain countries is

worth it.

Product Customization

When selling to another country, you may find it necessary to customize your products.

For example, you may need to put labels on your products that are written in other

languages. If you have a limited budget, this can be difficult. Product customization costs

money and takes extra time to implement. If you have a global brand, you may not need

to customize anything, but without a sufficient amount of marketing, this can be hard to

achieve.

TEN COMMON INTERNATIONALISING MISTAKES

1) Insufficient knowledge of consumer’s behaviour, attitudes, values, wants and

needs in the foreign market.

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2) Failure to segment the market and target carefully

3) Lack of an international marketing planning process.

4) Using cost to set price rather than the product’s perceived market value.

5) Short term entry strategy rather than a long term entry strategy

6) Incompatibility of corporate’s organisation structure with international marketing

strategy.

7) Failure to have objective market based product/ service evaluation carried out in

the foreign market

8) Failure to market in the foreign country in the appropriate way instead of using the

marketing approach used back home.

9) Overestimating the company’s international strengths with respect to finance,

people, production and marketing

10) Failure to secure commitment from the top in international marketing.

IMPORTANT FACTORS FOR ACHIEVING SUCCES

1) TOP MANAGEMENT COMMITMENT

2) PRODUCT DEVELOPMENT CAPABILITY

3) MARKETING ORIENTATION OF THE COMPANY

4) DEDICATION OF CAPACITY FOR EXPORTS

5) SETTING UP OF A EXPORT DEPARTMENT

6) STRATEGIC ALLIANCES

7) MOTIVATED LABOUR FORCE

NOTE: Based on actual survey of assisted/ potential export companies in India by Exim

BankS

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OUTSOURCING CHALLENGES FOR 2013

With the economy paragliding in the winds of uncertainties, challenges are jetted out on

all major industries including the rapidly growing outsourcing industry. To be geared up

for the upcoming challenges of 2013 is definitely a pressing business need for both the

outsourcers and the service providers. So let's look ahead and see what challenges 2013

may dish out to the outsourcing industry.

1. Outsourcing giants like India and China are struggling

With an overall shaky economy there is dire need to check and analyze the vendor's

financial health and its ability to overcome the rough economic patch for a sustained

partnership. Outsourcers should be extremely cautious and follow due diligence while

choosing vendors, as small vendors may easily close their businesses if the situation

continues to be challenging. 

NASSCOM predicts slow growth for India IT-BPO Industry in FY 2012-2013 with a

lesser growth rate of around 14% with revenues of around US$115 billion in FY 2012-13

compared to revenues of around US$ 101 billion at 15% growth for FY 2011-12.

2. Changes in outsourcing laws

The economic crisis and local political changes may force changes to the outsourcing

laws in European and Asian countries. So as outsourcers you need to keep a check on the

same and act accordingly.

3. To outsource or not, in national interest

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This leads to another challenge, whether to outsource or to near-shore. This primarily

rests on two factors: one, to upkeep the national interest and economy by near-shoring,

which also has other cultural and geographic advantages; and two, to continue

outsourcing and ushering global economic sustenance at cheaper costs and

competitiveness, and at the same time embracing economic challenges that the Euro zone

and the other Asian economies are facing.

4. Greener partners

Ensuring that your service provider follows green norms for a greener environment is

partly your responsibility; you can also mandate them to follow environmental norms to

keep your partnership going. One of your challenges is to make your service provider

follow these norms and become a true global player.

5. Understanding new participating economies

As more and more emerging economies vie for a part of the outsourcing opportunity, the

competition mandates them to be more lucrative but with hidden challenges. So

exercising extreme care is really important when going for these new service providers.

You have to study their work culture, living standards, government policies, tax issues,

political stability, work experience, etc., before signing them in.

As per the global outsourcing report by Mark M and Dr. Frank, over 30 highly

competitive economies will compete for an outsourcing opportunity in the coming two

years.

6. Partnering with service providers

It is no longer outsourcing and getting relieved of the task, it's more about understanding,

partnering and expanding your business in the service provider's country. This is

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extremely lucrative and also challenging, but it's a challenge worth taking by partnering

with your offshore service providers, who with their nativity edge can help you expand.

Network Outsourcing Services India

Outsourcing network services to India is a relatively new practice, but there are a growing

number of companies providing quality network management services. Several North

American and European firms are realizing the potential of network outsourcing services

in offshore locations like India. Several well established Indian IT companies have

extended their gamut of services to include running networks operations centers for

global customers. These help to not only improve productivity and cut costs on the

infrastructure side, but establish that cost efficiency and quality are not mutually

exclusive.

Network Outsourcing Services in India

Traditionally network management services was a space dominated by names like IBM,

NCR, Compaq, and HP. Recently, however, there are several Indian companies that are

gradually building their skills in this area and offering great value to companies wishing

to outsource their network management services. Though this sector is still in it's nascent

stages, domestic demand has triggered the entry of local system intergrators, hosting

providers, and facilities management companies into this area.

Though there are apprehensions about security and loss of control in offshore outsourcing

network services, well established names like Wipro, Microland, Infosys, Bangalore

Labs, and others are creating a path for others to follow. By setting up world class

Network Operations Centers which handle monitoring networks, analyzing traffic,

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identifying bottlenecks, alerting and protecting customers from impending problems,

ensuring 99 percent uptime for client networks, and disaster recovery, Indian companies

are gradually convincing international companies that remote management from offshore

locations is a great option.

What is the potential for network outsourcing services in India?

Along with the well established names which currently dominate this sector, several other

small and medium size companies are getting into the business. They have good reason to

as IDC figures pegged the network infrastructure services market at Rs 753 crore during

2000-2001, and it is growing at 26 percent annually

Though there is still a long way to go before Indian companies make a dent in the global

market there are several companies attempting to show global customers the potential of

outsourcing network management.

Who are the Indian players?

Companies like Bangalore Labs and HCL Comnet have made significant investments in

setting up world class NOC Centers. Others like Wipro, Microland, Satyam Infoway, and

Global Telesystems, have added management services to their existing portfolios.

Who are their customers?

Though there are still not too many international customers, these companies cater to

some of the biggest names in the domestic sphere.

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Bangalore Labs now provides network management services to L&T Information

Technology; systems & application management services to Skumars.com; managed

security to Hathway and Cyquator.

HCL Comnet, is providing management services to Philips, Sanmar, Bajaj, IOCL, SBI,

3M, TVS-Suzuki, HomeTrade, IndiaTimes, CitibankOnline, HDFC Bank, ICICI Bank,

Fabmart, India Cements and others.

Microland manages one of the few NOCs in India that manages the infrastructure for a

BPO company. It set up it's NOC in 1999 and functions 24 hours a day all through the

year. Microland handles network management for customers like Blue Dart, Heinz, IDBI

Bank, NetCom Systems, and a Fortune 10 customer. Around a third of these customers

are in India.

Ramco Systems has established itself by catering to large customers like the Bombay

Stock Exchange, Indian Oil, Ericsson, Coca Cola, Oil and Natural Gas Commission, and

the Tata Institute of Fundamental Research.

Wipro started with domestic customers and then moved into the global market. Almost 55

percent of the infrastructure management services at Wipro are carried out offshore.

How do they address some of the main concerns?

Though the industry is still at a nascent stage there are efforts to keep abreast of changes

in the global market and cater to these.

Security: Companies like Wipro and Microland have stringent security rules in place to

guarantee confidentiality and as safe guards against theft of any information. For

example, Microland has everything from physical to network security managed to comply

with international standards. To monitor the network as well as physical security there is

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a specialized team whose main responsibility is to implement the BS-7799 security

standard throughout the organization.

Quality: All the vendors in the infrastructure management space are keen on following

quality practices, which are required to cater to global customers. For example, Wipro

follows the ITIL (IT Infrastructure Library) framework to develop its process framework.

Satyam Infoway's has the distinction of having the first TCP/IP based network in the

country, and the company has also earned the ISO 9001-2000 certification for a data

centre, network management and customer care

Changing Mindsets: Many companies are not comfortable outsourcing network security

management offshore. Companies like Wipro and Microland have tried to alleviate this

fear by combining onsite and offshore management before moving completely offshore.

For example, Wipro has NOCs in the US, UK, and Japan. Once the client is confident of

abilities, the work can be moved offshore.

There is also a tendency to outsource to cut costs. However, Wipro is trying to show

customers how with their expertise in this industry service levels and productivity levels

have been enhanced.

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CONCLUSION

The potential for globalisation as a competitive strategy available to service

industries is still poorly recognised. It is a view which attracts criticism and

hostility. Evidence remains piecemeal and often anecdotal. For every service company

which is reconfiguring its business globally, there remain a dozen which are not.

However it is the contention of this paper that the race for pre-eminence in

international services trade has &ready begun. The historical pattern of competition

in the manufacturing industries can be seen repeating itself in the service sector.

Those companies which have recognised at an early stage the trend to

internationalisation of services and have begun to reorganise their businesses

accordingly, are likely to be most strongly placed to meet future developments. The

service industries are going through a period of rapid evolution which is changing the

nature of competition in service businesses. This paper has considered changes in the

structure and environment of the service industries, which create potential for

globalisation strategies and global configuration to be adopted more widely by service

companies. Some service companies have already leveraged existing strengths to

establish identifiable worldwide market presence. It is argued here that this trend will

be accelerated by the combined impact on the service industries of global market

segmentation, reductions in structural barriers to international trade through

deregulation, growing concentration of service industries and the far-reaching effect

of IT on every aspect of service businesses.

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