Executive Summary
The objective of this report is to carry out a macro-environmental analysis on global marketing, particularly the entrance into a new global market. The report focuses on the intended entrance of the Roswell Group into the Indian market to offer hospitality services through its Posh Hotels chain. The analysis investigates the factors that might impact this entrance. From the analysis, it is found that:
- India’s economy is expanding rapidly as evidenced by its GDP;
- The huge population presents a potential market and cheap labor for the Roswell Group’s entrance into the country;
- India has a well-developed transport and telecommunication network critical for advertising and easy movement;
- The country is peaceful and stable;
- Foreign investment is promoted by the government;
- Corruption is still a major issue in public procurement.
- Global marketing
Introduction
Background to the report
Global marketing is becoming increasingly important in many economies around the world as nations take advantage of the vast opportunities availed by globalization. The Business Dictionary defines the term as “the process of conceptualizing and then conveying a final product or service worldwide with the hopes of reaching the international marketing community” (Business Dictionary, 2011).
Global marketing has recently emerged to provide a single platform where all nations can engage in trade while eliminating the weaknesses associated with the earlier trade systems. This approach to marketing is becoming increasingly important and its immense growth has been pushed by developments in Information, communications technology (ICT), use of standardized measures around the world, the evolution and diversification of industrial economies, and emergence of a universal culture thanks to the introduction of television, computers, and the internet (Keegan, pp. 17).
Although global marketing can help an organization expand its operations into other areas, marketers must be cautious since such a venture carries high risks and challenges. These challenges may be in the form of differences in culture, demographic factors, government policies and legislation, and economic factors. Hence, before a marketer enters a new international market, factors than can both hinder and promote the entrance must be carefully assessed. The report assesses the factors that may affect Posh Hotels’ intended entry into the Indian market.
Aims
The objectives of this report are:
- To introduce Posh Hotels’ operations and the services it offers;
- To select an overseas market in which the firm wants to enter;
- To perform a macro-environmental analysis of the intended market- assess its suitability as a market for international entry from political, economic, socio-cultural, technical, and legal perspectives.
Background information
Posh Hotels is a worldwide hospitality company owned by the Roswell Group, a private investment company founded by Jack Roswell. The Roswell family takes part in running the company and in making major decisions that affect it. The company owns and operates more than 300 hotels located in many busy cities around the world and has a presence in all the five continents.
It was founded by Jack Roswell in 1957 and as of July 2011, the Posh Hotels line includes 347 hotels with more than 72,000 rooms in 36 countries. Locally, Posh Hotels are found in Melbourne, New South Wales, Queensland, and Victoria, and in international markets, the hotels are located in New York, Rio de Janeiro, Johannesburg, Paris, Arizona, Frankfurt, Seoul, Daegu, Osaka, Dubai, Nairobi, Sicily, and Beijing, among other cities. The company has its headquarters in Melbourne.
Since its founding in 1957, the Posh Hotels has become a dominant player in the hospitality industry. In Australia, where its operations began, the Roswell Group today runs or franchises 30 percent of all hotels. After satisfying the Australian market, the company shifted its focus onto the international market and has been entering new international markets since the late 1980s and this has resulted in immense growth. In continuing with the objective of serving the international market, the Roswell group intends to establish its presence in India through the Posh Hotels chain to serve the steadily rising population segment and visitors that require hospitality services.
Introduction to India
In the recent years, India has been experiencing a very impressive GDP growth to the point that many specialists predict that it will become one of the leading economies of the world shortly (Panagariya, pp4). It is the second-most populous country with a population of more than 1 billion persons, this population makes the country a huge potential for doing business. There are many opportunities in various economic sectors including construction services due to a high demand for infrastructure, telecommunication services, and hospitality services due to the ever-increasing population (Kotabe, pp. 12).
India enjoys an extremely vibrant democracy, which gives it the political stability required to do business. Its market, as confirmed by most entrepreneurs, is quite lucrative, giving it a position at the top of every other Asian country in terms of purchasing power. India’s foreign direct investment (FDI) has been rising steadily for the past five years and this points to the growing confidence of investors in investing in the country. The nation’s main import goods are crude oil, precious stones, machinery, fertilizer, iron and steel, chemicals while the main exports are petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, and apparel (Subramanyam, pp. 85).
Nevertheless, the country ranks poorly on corruption indices and although the ease of doing business has been improving, it has not reached desirable levels. The country ranks at position 134 globally (out of 183 countries) in the ease of doing business (The World Bank, 2011).
Macro Environmental Analysis
Economic analysis of India
To improve the prospects of success in global marketing, it is imperative to have a fine understanding of the economic factors that play a critical role in the creation of marketing strategies and the return for investment. An economic analysis enables an organization to have an insight into the economic factors and design the marketing plan to reflect on these factors. The economic environment entails the factors that affect the consumers’ purchasing power such as the country’s GDP, gross national income (GNI), purchasing power parity, per capita income, infrastructure, and so on.
India’s economy is ranked tenth globally by nominal GDP and fifth by purchasing power parity (PPP) (CIA, 2011). The nation’s per capita GDP in 2010 was $3,500, a significant improvement from the previous two years when the country registered per capita GDPs of $3,200 and 3,000 in 2009 and 2008 respectively. It is estimated that with the current economic growth, India’s economy will be third largest in the world by 2035 just after the US and China (CIA, 2011).
Following immense economic reforms from the socialist economy after its independence, India’s economic growth advanced at a rapid rate, as free-market principles were included in the reforms, thereby improving the country’s ability to compete in the international markets and encouraging foreign investments. Consequently, there has been a rise in foreign investments in the country. The World Factbook reports that as of 2010, India had a total direct foreign investment of $188.1 billion and is ranked 24th in this category (Ramesh, pp. 45). This ranking is an encouragement for foreign investments into the country. Services, industry, and agriculture make the bulk of the country’s GDP at 55.2%, 26.3% and 18.5% respectively (CIA, 2011).
With a population of 1.189 billion, India is the second-most populous nation after China and makes up almost a fifth of the global population. The high population is important in the provision of labor and acts as a potential market for Roswell Group’s potential entry into the market. New Delhi, the country’s capital city, has the highest population of 21.72 million followed by Mumbai, Kolkata, Chennai, and Bangalore. A greater proportion of the population (64.9%) lies between the ages of 15-64 (Gaur, pp. 10). This is the prime target in the hospitality industry.
Infrastructure is a very important aspect of marketing, especially in the hospitality industry. A robust and reliable infrastructure helps in movement and communication, elements that are core in the hospitality industry. India’s infrastructure was previously in the public hands and this led to poor quality and inefficiencies in this section. However, it has since been privatized. The nation’s road network is ranked third in the world, comprising more than 3.3 million kilometers and carrying nearly 70% of all freight and more than 80% of all passengers (Gaur, pp. 10).
Roads consist of expressways, such as the Mumbai Pune Expressway, national highways, state highways, district roads, and rural roads. The country has 352 airports that connect it to international destinations and link various cities (Study Group on Singapore-India Relations, 2011). The Indira Gandhi International Airport and the Chhatrapati Shivaji International Airport, situated in West Delhi and Mumbai respectively, are the busiest airports in India.
Railway transport is also well developed, covering more than 63,000 km and connecting Indian towns and neighboring countries. Transport is also provided by the country’s vast waterways and canals which cover 14,500 km (Datt and Sundaram, pp. 47). These transport systems are essential in movement between various towns and to international destinations and will provide the Roswell Group with the ability to move people and materials around easily. The good transport network has also improved tourism hence positively boosting the hospitality industry.
Benefiting from the recent liberalization of the Indian telecommunication laws and regulations, the country’s telecom system is one of the fastest-growing globally. Currently, the total mobile phone subscribership stands at 851.70 million with the figure expected to reach 1.159 billion by 2013. A further 34.29 million persons are connected to landlines (Gaur, pp. 10).
The countries have more than 100 million active internet users. However, internet penetration is still low as compared to other countries such as the US and China. India further has thousands of radio stations and ranks 4th in the number in the number of television stations, at more than 1,400 stations (CIA, 2011). The country consumes the second largest number of newspapers at more than 100 million annually. The developed telecommunications network is important in advertising and passing important information to the public, such as special offers and services.
Political & Legal Analysis
Political and legal factors have a huge significance when entering international markets. Political and factors include laws and regulations that govern the commercial sector, protection of local industries, government subsidies, and tax laws.
India’s government has always promoted the entrance of international businesses into the country and as a result, FDI indices have risen significantly in recent years, this growth has further been promoted by the liberalization of some sectors of the economy. The government allows 100% FDI on selected goods and services like tourism and hotel industry, exports, imports, and cash and carry wholesale trading. This factor will ease the entrance of Posh Hotels in the country as the Roswell Group will not have to partner with local investors to set up the hotels (Michell, pp. 69).
India’s constitution has been amended 94 times since its adoption in 1950, in contrast, the US’ had been amended 27 times and this points to the fact that India is more willing to alter and adapt its legislation to improve the well-being of the mainstream population and that of businesses.
The Indian government places restrictions on the types of goods that can be imported or exported out of the country. The import policy is aimed at encouraging domestic substitution of imports and independence. However, the government encourages exports and accords several benefits to exporters, such as zero tax on income tax, royalty percentages to exporters and charging no duty on imported goods used in the manufacture of export goods. Legislation on imports and exports will very least affect Posh Hotels’ entrance into the Indian market as this is a service industry with no exports or imports. Materials used in the hotels can be obtained locally and where they are not available locally, legally acceptable procedures should be followed in importing them.
Several labor laws have been enacted to protect workers and curb all forms of discrimination while ensuring that the workers in India are reasonably paid for their efforts. This legislation includes The Workmen’s Compensation Act (1923), The Payment of Wages Act, 1936, The Industrial Disputes Act (1947), The Maternity Benefit Act (1961), The Equal Remuneration Act (1976), and the Child Labor Act (1986). Roswell group must have prior knowledge of the provisions of these laws. There are also environmental control laws that aim to promote environmental management and include: the Environment (Protection) Act, 1986, The Factories Act and Amendment in 1987, and the Motor Vehicles Act, 1988 (Dickson & Littrel, 1996). Further, the Roswell Group must comply with the country’s taxation laws.
Analysis of cultural environment in India
Cultural factors that affect international business include language, attitude, religion, artifacts, and rituals. Roswell Group must study these factors and others as pertains to the Indian market so that marketing decisions are made from an informed perspective.
India has long been ranked as being one of the most corrupt countries, a measure that makes it difficult to do business in the country, especially for international investors. A report by Transparency International (2011) revealed that more than 45% of all Indians offered first-time bribes or engaged in similar activities in public offices (Dickson & Littrel, 1996). In 2010, TI’s report ranked India as the 87th most corrupt nation. The ease of doing business has been improving at a very slow pace, currently standing at 134 out of 178 countries (World Bank, 2011). The government has introduced anti-graft measures that the Roswell Group must be aware of.
Hinduism is the most predominant religion in India (at 80%) although other religions such as Christianity, Sikhism, Islam, and Jainism are also practiced. The cuisine is organized into three groups: balance, passion, and indulgence. Food consumption varies from person to person according to the lifestyle. The cuisine is characterized by stylish and delicate use of spices and herbs (Ramesh, pp. 45). Although many meals are of vegetarian type, traditional meals such as chicken, goat, lamb and other meats are still common.
Cultural values and attitudes also play a major role in the behavior of the people (Dickson & Littrel, 1996). Information on the Indian cuisine is vital as it will help the staff at Posh Hotels in India prepare meals according to the locals’ taste.
Conclusion and Recommendation
The report analyzed economic factors, political and legal factors and cultural factors that may influence the entrance of the Roswell Group into the Indian market. The report shows that India’s GDP has been registering rapid growth over recent years and this growth has impacted other economic measures such as per capita income and the purchasing power parity. Besides, the country has a well-established transport and telecommunications network that is very important in commercial activities. India has enacted several laws that will directly affect the operations of Posh Hotels that the management must be aware of. However, the analysis does not end here, the Roswell must undertake further analysis as some of the factors analyzed here change with time.
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