Country Attractiveness Assessment Part 2

Introduction

India has become a potential as well as the diversified market for the western firms as well as foreign investors desiring to make investments in the country. The assertion is supported by the fact that in the earlier decades, there were significant challenges to the establishment of business in India, with owing to the economic reforms that have been implemented by the Indian government over a long period, the complexities have been resolved. Overall, one of the attributes that make India an attractive business environment for international business as Australian Craft Beer Company is because the country is seventh largest in the area furthermore second most crowded country in the world with more than 1.2 billion people. For more than a decade now, India has experienced significant growth in their GDP, in addition to the continued liberation of the business environment.

There additionally has been an increase in the rate at which the country has opened its doors to foreign investors as they seek to promote their growth. In this case, the reforms introduced by the Indian government have played a major role in smoothing the entry for western investments as Australian Craft Beer Company. It, however, follows that there are a few challenges in conducting business in the country mainly due to the diverse business as well as socio-economic cultures. Most of the businesses establishing their operations in India are forced to integrate significant changes to their operations style for them to serve their Indian customers effectively. While it is clear that the examination of the Indian situation makes it clear that there are challenges to conducting business in the country, the opportunities that are presented by trade liberation, ever-growing GDP and the consequent huge middle-class population make the situation better for Australian Craft Beer Company to invest in India.

Main Body

Macroeconomic Environment

The examination of India’s macro-environment leads to the realization that India is one of the fastest growing consumer markets. There is the issue of the additionally growing population and an emerging middle class that has high per capita incomes as well as the blossoming urban centers that are making the nation a powerful emerging market (Vashishth & Tripathi, 2016). The country has a young beer industry that is greatly dominated by international brands and although per capita is still low; the country is becoming more westernized as businesses like Australian Craft Beer Company continue introducing their products in the nation (Barlow, Verhaal & Hoskins, 2016). It, however, in those issues of regionalism, political challenges as well as possible growth undermining the attraction of the market.

While the financial crisis that occurred in the world in 2008 caused significant slowing of the industries, reflected the diminished rate of economic growth in the subsequent years compared to the earlier years in majority parts of the world, the situation was different in India (Das & Patra, 2016). It follows that the financial crisis did not impact India as the case was in the other parts of the growing economies due to their careful banking system as well as their low dependent on exports for growth (Yang & Mallick, 2014). The implication, therefore, has been that India has the second highest economic growth in the major world economies (Vagadia & Solanki, 2014). The main challenges that India has been experiencing however as they seek to sustain their fast economic growth and consequently use the advantages occasioned by their growth in an efficient manner (Mathur, 2014).

The assertion, in this case, is that for India to realize maximum economic growth; it is imperative that they make some reforms as improving the state of their infrastructure, their financial sector as well as addressing the pertinent labor regulations that are considered to be limiting their effectiveness (Sood, Nath & Ghosh, 2014). Through the assessment of these issues, it is evident that the Australian Craft Beer Company is going to face significant challenges as they seek to start importing their product into the Indian market (Chen, Chittoor & Vissa, 2015). The fluid financial sector coupled with the ever-improving state of the economy, in addition to the desire to change the economy is the core attributes accosting for the increased positivity in Australian Craft Beer Company investing their operations in India (Yang & Mallick, 2014).

The prevailing situation that characterizes their labor sector is the complexity of the labor market. The assertion, in this case, is supported by the fact that most of reforms and regulations adopted in the sector are targeted at the already employed people (Sood, Nath & Ghosh, 2014). The prevailing situation in India, however, is the fact that there are more unemployed people than those that are employed (Bayne &Woolcock, 2015). It thus follows that one of the main challenges that India needs to overcome as they seek to sustain their economic growth is in ensuring that they create superior working conditions as a way of reducing the unemployment (Ayyagari, Demirgüç-Kunt & Maksimovic, 2014).

In the assessment of the government sector, there is a prevailing assertion that the current Indian market economics is not effective for international businesses. The assertion, in this case, is that owing to economic liberalization, there has been a concentration of the country’s help in the hands of a few people rather than the whole society (Das & Patra, 2016). This is the issue that has been considered to be a major contributor to inequality and social differences in the country (Rice, 2016). It thus becomes imperative to acknowledge the fact that government control has become minimized compared to how the situation was in the earlier days.

It, however, is that the state should play a vital role in controlling the operations of the market in the economy. Through these attributes, it is evident that Australian Craft Beer Company may face a few challenges especially in the case of accessing the labor market and sales due to the high unemployment rate (Howard, 2014). However, the fact that the Indian government has some control of the sector implies Australian Craft Beer Company will enjoy sanity and fairness in the industry.

Micro-Economic Environment

While the Indian government has been planning stringent measures to curtail the liquor sales near the main highways as a way of curbing drinking and driving, there is an indication that there are increasing consumption levels to an average of approximately 8.9% annually in the past six years (Vashishth & Tripathi, 2016). It follows that the Indian beer market has prospects of growing and crossing the $430 billion by the end of the years 2017 according to research that has been done by all India breweries association (AIBA) (Kumar, & Dhanuraj, 2014). These predictions are based on the fact that tapping the brewed market at a cost-effective rate, coupled with an assortment of innovative startups that have plenty of ideas for flavors, events, as well as apps, the present unique attribute that could be used in attracting customers.

The assertion, in this case, is that Indians liked easy drinking and the next two years are going to record significant industry growth.  The assessment of the 2017 CPI in India indicates that there has been a persistent increase, averaging 113.82 index points from the year 2011 to 2017 (Trading economics, 2017). This progressive rise in CPI has made it imperative for the businesses in the Indian economy to charge more for their products as they seek to retain their profit margins.

The implications are thus that the consumer is forced with the challenge of making cuts to products and beer which makes the situation complex for Australian Craft Beer Company as they will have to compete with high prices from other operators while introducing their products (Argent, 2017). On the examination of India PPP, the assertion is that the Indian economy is the worlds, tenth largest regarding nominal GDP and the fourth largest economy by the assessment of the purchasing power parity (Trading economics, 2017). There has been a constant improvement of the economic factors in the Indian economy

The Indian beer industry is valued at INR 35 billion, having a volume of 172 million cases and at their current market trend; there is an expectation that the industry is going to increase at the rate of 17.2% (Trading economics, 2017). It is for this reason that foreign brewers as Australian Craft Beer Company have started eyeing the industry that to date has not been fully tapped and the fact that it has a significant growth potential. Foreign beer companies have all the reasons to advance their operations in India since their core markets as in America as well as Europe are either flat or declining (Ayyagari, Demirgüç-Kunt & Maksimovic, 2014).

Beer sales in India are presumed to increase at the rate of 7.5% over the next five years despite the increase in taxes, regulatory challenges as well as the increasing disposable income in the hands of the ever increasing middle class (Howard, 2014).The current local Indian beer market is controlled by the two main players who are the United Breweries and SABMiller India. There is an assertion however that the strong beer is going to realize faster since it is considered to offer value for money alternative to spirits (Fastigi, Esposti, Orazi, & Viganò, 2015). In this case, the future of the Indian beer markets has all the signs of positivity, with the entry of foreign beer firms as Australian Craft Beer Company considered as the main basis of changing the operation trend.

The main drivers of the perceived demand for the Indian beer include the young population that lives in the urban areas. The implication of this young population that lives in the urban areas has been the main driver for demand as they have disposable income in addition to the fact that they are more willing to try out new brands (Kumar, 2017). The increasing levels of income are the additional driver, with the assertion being that India has grown to become one of the most attractive markets for the foreign beer brand (Ramakhrishnan & Shaban, 2016). In this case, the growing levels of income have a direct positive impact on the beer sales in the Indian market.

Further, it follows that the urban consumers who are exposed to foreign brands as ones offered by Australian Craft Beer Company are more open to trying new brands (Argent, 2017). The dynamism that is evident in the Indian beer market, owing to the numerous foreign brands that have indicated their intentions to get into the Indian craft beer industry make up the additional attribute that makes the market more attractive.

Regarding the competition that Australian Craft Beer Company is going to face in the Indian market, United Breweries have crossed the 100 million case production capacities (Karki, 2014). The company enjoys approximately 57% of the Indian beer market, with approximately 200 million domestic cases annually being produced for the Indian market (The Economic Times, 2017). The company further controls approximately 60% of the entire manufacturing in the Indian beer market.

SABMiller as the other significant competitor is a subsidiary of the SABMiller PLC that is registered in India as SKOL breweries limited. SABMiller owns ten breweries that have been located strategically in India to ensure that they meet the market demand efficiently (The Economic Times, 2017). The company has leveraged its global packing expertise, pricing, occasion as well as product gaps that have been improved depending on input from consumers (Das & Patra, 2016).

The other competitors that Australian Craft Beer Company is going encounter in the Indian beer market include InBev India that operates in the country via a 49.5% joint venture with the soft bottler RKJ group (The Economic Times, 2017). The main strategy adopted by this company is that they have a production capacity of 1.9 million cases annually through contracts with two brewing firms in India (Karki, 2014). In considering these issues, it is evident that Australian Craft Beer Company is not going to have an easy time amassing its market share that is already possessed by these companies (Argent, 2017). The fact that these companies have been operating in the region for long and have already established reliable networks and infrastructure implies that Australian Craft Beer Company will have to make a significant investment to take away the market share from these companies.

Socio-Cultural Trends

Some of the reasons as to why changes in the economics results in change to the rate of beer consumption in an economy are associated with the cultural changes that are adopted by the population. One of these attributes follows that an increase in the wealth of the population makes them more susceptible to the marketing that is carried out by the beer companies aggressively (Johnson & Hill, 2014). In the Indian situation, the prevailing issue is that the contemporary Indian society is not one that the issue of religious attributes of the consumers has a huge impact on the beer market although the impact can exist (Chen, Chittoor & Vissa, 2015). The assertion is supported by the fact that Islam and Sikh religions which are predominant in the Indian society tend to prohibit consumption of alcohol (Gupta, Pettigrew, Lam, & Tait, 2017).  Christianity, as well as Hinduism which is also present in the Indian society, does not have the strict prohibition against consumption of alcohol although they do not encourage its consumption.

The additional social, cultural aspect in the consumption of beer in India is founded on the fact that there has been an increase in the rate of alcohol consumption in India that has consequently led to the emergence of the concern for the public health (Singh & Sailo, 2015). The increase in the purchasing power of consumers has consequently increased consumption, adversely affecting the health of the consumers (Singh & Sailo, 2015). The implication of the health concern has been the banning of direct as well as indirect advertisement of alcohol and other alcoholic products by the government as they seek to protect public health (Gupta, Pettigrew, Lam, & Tait, 2017).

The issue of ethics in the Indian beer industry is chiefly concerned associated with the legality of alcohol advertising considering that it is a controlled substance.  The ethical issues that emerge in this case include these advertisements are going to make people under the age of 21 start drinking, whether alcohol consumption is going to be made to be too fun among other issues (Singh & Sailo, 2015). Some of the interventions that have been adopted in India include self-regulation as well as stator legislation that is meant to regulate alcohol advertising in the country (Argent, 2017). There additionally is the assertion that these alcoholic companies have ethical responsibilities on issues of advertising in that they should not only act to promote public relations in the community but that they should serve to impart positively (Luthra, Qadri, Garg & Haleem, 2014). It thus follows that in as much as these companies would desire to make most sales through sales, it is imperative they manage the issues of advertising as well as the age to which they make their sales.

Environmental protection is the additional significant issue that is to be taken into consideration by businesses operating in India. Offering environmental solutions to the different parts of their production is valued by the administration (Mata, 2015). Attributes of promoting environmental sustainability are seen to address issues of ensuring there is the improvement of the quality of life for the Indians, with these businesses expected to avoid the unbalanced utilization of natural resources (Luthra, Qadri, Garg, & Haleem, 2014). Levels of carbon dioxide discharged by these businesses, levels of energy and water use are taken into conservation as the businesses are expected to use methods that promote quality of life for the local Indian (Mathiyazhagan, Govindan & Noorul Haq, 2014).

There is the additional requirement that these businesses have to meet specific industrial waste levels, with their bottling issues expected to be environmentally friendly.  How these dispose of their industrial waste is a major issue that these businesses have to address and ensure that they comply (Bayani & Dakila, 2017). From the assessment of the social, cultural trends of operating in India, Australian Craft Beer Company is going to be forced to take into consideration a host of issues in planning their entry. One of the main attributes that are going to be essential is the fact that the company needs to ensure that it is familiar with these issues and how they affect the life of the local Indian.

Interim Recommendation

The success of Australian Craft Beer Company is dependent on some attributes that will allow the company to increase their market share once they start operating in the Indian economy. It thus follows that selection of a partner who has the information and infrastructure about the Indian market will be central to the success of the company especially due to the existence of experienced competitors who already have the infrastructure and market share.

Further, Australian Craft Beer Company needs to ensure that they are conversant with the Indian laws regulating the beer industry regarding the advertisements and legal sales of their products in the region. Ensuring that they comply with the diverse regulations such as those on pollution will additionally serve as a significant way of advancing their efforts to maintain a good reputation with the authorities (Wales, 2014). It is imperative that Australian Craft Beer Company makes a thorough assessment of the different aspects on the Indian beer market, especially on the issues of supply and demand of their products; areas that have lowest unemployment rates those will offer a higher likelihood of making direct entry and attracting a market.

Forming partnerships for suppliers with a good reputation in the market will valuable to their successful entry as they will be in a position to access the necessary products to ensure the success of their operations in the region, with the reliability of these suppliers being central to the company’s ability to meet the demands of its clientele.

Implementing an effective corporate social responsibility strategy, that emphasizes on the protection of its clientele and environmental conservation. In this case, Australian Craft Beer Company needs to ensure that they portray the image of a responsible organization that is not just out to make profits by also improve the welfare of the local Indian.

Conclusion

The assessment of India has brought out interesting facts that Australian craft brewery has to take into consideration in their new adventure. One of these facts is that India is faced with an assortment of challenges as the strict regulation of the beer industry that may make it hard for the company to realize immediate profits. Issues as cases of political uncertainties, restrictive policies, and poor population are seen to affect sales of Australia craft beer negatively. Further, there is the additional issue of completion from the domestic and international beer companies that further complicate their ease of making profits in the country. These issues are however addressed in the fact that the operating environment is changing with the current administration in India introducing new policy measures to ease the operation of the beer industry. Further, the ever-growing Indian population, as well as the increasing working population, offers a good prospect for Australian craft brewery.

Other than these issues, it is evident that Australian Craft Beer Company will find it significantly difficult to make profits in the Indian market, especially due to the existence of a host of already established and experienced competition that has a firm grip of the market. With the ever-increasing rates of unemployment which imply less money supply and a labor sector that is riddled with challenges due to its sheer number of unemployment places some strain on the effectiveness of Australian Craft Beer Company. There is some encouragement in the fact that the social, cultural attributes do no impose significant challenges to the operations and consequent success of Australian Craft Beer Company. It is from the assessment of these factors that I conclude that while there are challenges in the Indian market, they would be common to any operator in any new environment. These challenges that exist in this market can be well managed by t Australian Craft Beer Company if they access a reliable supplier in India, with adequate infrastructure and information. Overall, I believe the examination of the critical factors supports Australian Craft Beer Company’s starting to export its products into the Indian economy.

References

Argent, N. (2017). Heading down to the local? Australian rural development and the evolving spatiality of the craft beer sector. Journal of Rural Studies.

Ayyagari, M., Demirgüç-Kunt, A., & Maksimovic, V. (2014). Does local financial development matter for firm lifecycle in India?.

Barlow, M. A., Verhaal, J. C., & Hoskins, J. D. (2016). Guilty by Association: Product-Level Category Stigma and Audience Expectations in the US Craft Beer Industry. Journal of Management, 0149206316657593.

Bayani, M., & Dakila, C. (2017). Repositioning in Furtherance of Future Strategic Direction: An Analysis of Cobra Beer. European Journal of Contemporary Research, 6(1).

Bayne, N., &Woolcock, S. (Eds.). (2015). The new economic diplomacy: decision-making and negotiation in international economic relations. Ashgate Publishing, Ltd..

Chen, G., Chittoor, R., & Vissa, B. (2015). Modernizing without Westernizing: Social structure and economic action in the Indian financial sector. Academy of Management Journal, 58(2), 511-537.

Das, M. K., & Patra, S. (2016). Productivity and Efficiency of Private Sector Banks after Global Financial Crisis: Evidence from India. Asian Journal of Research in Banking and Finance, 6(5), 1-14.

Fastigi, M., Esposti, R., Orazi, F., & Viganò, E. (2015, June). The irresistible rise of the craft brewing sector in India: can we explain it. In 4th AIEAA Conference—Innovation, Productivity and Growth, Ancona (pp. 11-12).

Gupta, H., Pettigrew, S., Lam, T., & Tait, R. J. (2017). How alcohol marketing engages users with alcohol brand content on Facebook: an Indian and Australian perspective. Critical Public Health, 1-10.

Howard, P. H. (2014). Too big to ale? Globalization and consolidation in the beer industry. In The Geography of Beer (pp. 155-165). Springer Netherlands.

Karki, S. (2014). Market Analysis Of Lager Beer In Kathmandu (Doctoral dissertation, Tribhuvan University).

Kumar, P. (2016). Characteristics of Domestic Service Sector and Financial Enterprises of India in the Context of Export Performance. Journal of International Economics, 7(2), 13.

Kumar, R &Dhanuraj, D (2014). Liberalizing Liquor Trade in India. Centre for Public Policy Research 

Kumar, S. (2017). Price elasticity of alcohol demand in India. Alcohol and alcoholism, 52(3), 390-395.

Luthra, S., Qadri, M. A., Garg, D., & Haleem, A. (2014). Identification of critical success factors to achieve high green supply chain management performances in Indian automobile industry. International Journal of Logistics Systems and Management 1, 18(2), 170-199.

Mata, R. (2015). Need of environmental protection in India. Asian Journal of Multidimensional Research (AJMR), 4(3), 317-330.

Mathiyazhagan, K., Govindan, K., & Noorul Haq, A. (2014). Pressure analysis for green supply chain management implementation in Indian industries using analytic hierarchy process. International Journal of Production Research, 52(1), 188-202.

Mathur, A. K. (2014). Alcoholic Beverages Industry in India: An Exploratory Study. Eduved Global Management Research ISSN, 2394-0085.

Ramakhrishnan, L., & Shaban, M. (2016). Advertising Media Efficiency of FMCG Firms in India: An Empirical Investigation Using Data Envelopment Analysis. IUP Journal of Management Research, 15(1), 37.

Carolyn Morgan is the author of this paper. A senior editor at MeldaResearch.Com in Online Paper Writing Service. If you need a similar paper you can place your order from Professional Custom Writing Services.