HOMEWORK
Comprehensive Case
NAME XXXX
India & Anheuser Busch
Executive Summary & Introduction
The country of India has one of the most densely populated regions in the world and boasts one of the most exciting emerging markets on the planet. For this reason, I wanted to look more in depth to this country of over 1.3 billion people. In addition to their massive population India’s economy has been booming the last decade. Other than 2020, do to global pandemic Covid-19, India’s real gross domestic product (GDP) has grown by an average of nearly 6% a year since 2016, and that trend is expected to continue at least until 2026 with no site of slowing down. In addition to being a massive merging market, India also has a very unique culture that leans heavily on religious faith. Because of this India has a number of Religious Laws, making it a theocracy, and will make it a very interesting region to study. India also has a political history with the British government, and has laws established from that era as well (Chapter 2) The large consumer market, newly urbanized cities, and unique culture make India a perfect country for this case study.
For my product I chose a “local” business, Anheuser-Busch, specifically their beer and seltzer products. I select alcohol products because I was curious about the alcohol sales in India. Knowing the country is heavily religious, 80% Hindu, I felt this may affect their alcohol sales and consumption rate. While Hinduism does not require one to abstain from alcohol, there are religious practices associated which discourage the usage of alcohol to an extent. However, after further research, I found that India consumes more than 663 million liters of alcohol, which is an astounding up 11% from 2017, and per-capita consumption is rising. Some experts attribute the rise in consumption rate to 2 things. The first, and most obvious, is the Coronavirus global pandemic. The entire world saw an uptick in alcohol purchases, as global residents were isolating in their own homes and local bar and restaurants were shut down. The second reason is due to the urbanization of India. As the country grows economically, residents are moving to big cities and are more commonly finding themselves with disposable income. This is going to drastically affect citizens purchasing habits, and experts believe alcohol sales have benefited because of this new trend. Apart from the Indian aspect just discussed, I chose Anheuser-Busch specifically because of its already global brand name. According to AB-InBev’s latest annual report, the company does business in over 50 countries around the world and is no stranger to entering new markets. The company boasts a workforce of approximately 170,000 employees. Anheuser- Busch experienced a total growth in revenue by 4.3%, which can be equated to over $21 million dollars. While the company is in a joint venture with Crown Beers, US products such as Budweiser, Bud Light seltzers, and bud select are not offered in India. Bringing a new alcoholic product to India could be a huge opportunity for the company.
Culture & Ethics
What are some of the key cultural, ethical, and social responsibility that you should be mindful of when developing the strategy for your country and product?
Indians are strongly guided by their respective religions and their shared values. Respect for elders and hierarchy are core values that permeate all aspects of Indian society. Indians also place huge importance on family and community. And as in many Asian cultures, the concept of saving face (avoiding blame or any type of shameful situation) can influence decision-making processes and affect your business dealings in India. These cultural values, I expect will impact the sale of Anheuser-Busch products in the country. However, the most practiced religion in India, Hindusim, does not ban the consumption of alcohol, and encourages followers to not “over-consume.” This may be an advantage for Anheuser Busch as the company has many products with low AVB and even non-alcoholic options.
India is a relatively conservative society, and it is important for visitors to be respectful of societal norms and traditional values, which continue to underpin many customs and business practices. Younger Indians are less particular about decorum than older generations, but will still adhere to many traditions and conventions, especially when around superiors or elders.
Positions of power and authority are highly valued and revered. At the same time, Indians are proud of being citizens of the largest democracy in the world and consider their rights under this system paramount. Key principles of democracy, such as the right to speak freely, can become exaggerated in a business context. It is not uncommon for middle managers to seek time with the CEO to air grievances – whereas in Australia, by contrast, it might only be appropriate to share grievances with a direct superior or a human resources
What social responsibility efforts are you going to pursue in your host country?
As India rapidly expands, they are experiencing several issues. Some of the largest issues in the country are, poor infrastructure, poor working conditions, a large number of illiteracies, and a lack of green business practices. All these issues should be addressed by Anheuser-Busch when setting up a new footing and distribution channel in the country. Assisting with an improved infrastructure, such as building and maintaining factories and roads around their operation centers, will benefit the local community, but also assist in faster distribution, lower risk associated with business, and allow for improved supply management.
Clean and safe working conditions are a huge issue in India, as their rapid economical expansion has not allowed firms to keep up with the new level of demand. Work conditions can have a significant impact on morale and productivity. In addition, healthy work conditions also protect the well-being of employees, reducing the chances of workplace injuries along with resulting financial liabilities and the need to take time off. Parallel to working conditions is practicing green and sustainable business. Businesses should have a social responsibility to make the world a better place, or at least not heavily pollute and damage the environment and country they operate in. In 2018, Anheuser-Busch launched ambitious sustainability goals, focused on four key areas where they believe they can have the most impact: renewable electricity and carbon reduction, water stewardship, smart agriculture, and circular packaging. These practices would benefit the country of India, as the country continues to struggle with high levels of pollution.
Advantages and Disadvantages to Business in India
One advantage to doing business in India for Anheuser Busch is the countries’ stable economy. Prior to the global pandemic, India’s economic growth had been exceptional in recent years. Buoyed by a robust democracy, key structural reforms, private consumption, and a rise in government investment, India has achieved a high macroeconomic stability ranking (with a score of 90 out of 100 and ranked 41 out of 141 economies) in the World Economic Forum’s (WEF) Global Competitiveness Index.
Another advantage of doing business in India is the countries technological and digital capacity. India has become a powerhouse in terms of technology innovation. High-tech companies in sectors such as telecommunications, information technology, pharmaceuticals, textiles, and engineering are equal in their sophistication and prominence to international counterparts. Indeed, India is now recognized as a major force in global technology innovation alongside the United States and China.
There are also risks of engaging in business in the country. The country unfortunately enforces high tariffs and protectionist policies. ndia’s tariffs and trade regulations were already non-transparent and often unpredictable, leaving many U.S. investors and exporters with limited access to the market. The country’s average applied tariff is the highest of any G20 country and among the highest bound tariff rates in the World Trade Organization (WTO). Those barriers to trade have not improved in recent years as the Indian government moves to protect domestic producers.
In fact, India has increased import tariffs to reduce the market for cheap goods from overseas and support small- and medium-sized manufacturers within its own borders. The country has also extricated itself from the world’s biggest regional trade deal, refuses to join the Regional Comprehensive Economic Partnership (RCEP), and the government plans to take measures to ban the import of any products that may be detrimental to domestic industries. Finally, India has placed limits on foreign ownership of businesses and has stringent local presence requirements for would-be investors.
India Currency- Anheuser Busch Business Financials
India is one of the largest economies on the globe and issued a currency called a rupee. The Indian rupee is the official currency of India. The rupee is subdivided into 100 paise, though as of 2019, coins of denomination of 1 rupee is the lowest value in use. The issuance of the currency is controlled by the Reserve Bank of India.
While India is a large economy the value of the rupee has steadily decreased in recent years. There are a number of reasons that could be to blame for the depreciation of this currency. The Covid-19 pandemic hit India hard, and impacted the country’s economy and buying power tremendously. While as of July 2021, the value is slowing reaching pre-pandemic levels, the value had plummeted at the beginning of 2020, to 75 rupees to a single US Dollar. While nearly all world currencies were affected by the global pandemic, India was hit the hardest out of all world emerging markets.
There are macro-economic reasons as well. A lower interest-rate regime is hurting the Rupee. The Reserve Bank of India (RBI), in a bid to support the Government borrowing, has announced massive bond purchases. This means, the system will be flooded with excess liquidity. Already, banks are parking money in RBI’s reverse repo basket. If Rupee liquidity goes up in the market, that puts pressure on the value of the Rupee. A strengthening dollar will add to this weakness. The value of Rupee against the dollar will erode as supply of the local unit increases. Also, by injecting abundant liquidity in the banking system, the RBI is signaling that interest rates will remain low for a long time. Because of these reasons, Anheuser Busch should continue to operate with their “home” currency; the U.S. Dollar.
International Finance Mitigation
What are the National Trade Policy risks in your host country that you must be aware of in developing your strategy?
India Was greatly affect by the Covid-19 pandemic and placed many temporary trade barriers in place to counteract the economic affect as well as for the nation’s health. On April 1, India was to unveil the Foreign Trade Policy 2021-2026. The existing policy was extended by a year due to Covid-19, which was to end on March 31. And the government decided to further extend it for 6 more months. The current policy will now be valid up to September 30.
Covid-19 was catastrophic for international trade. Indian exports fell by a record 60% and imports by 59% in April 2020. Though the situation has improved, the road to recovery is long and hard. That is why the new trade policy must deliver the goods. Based on inputs from traders, trade associations, members of Parliament and a government-appointed high-level advisory group, some key expectations are:
WTO-compliant tax incentives: With incentives under MEIS and SEIS under a cloud, the need of the hour is WTO-compliant tax benefits. To this end, the government has announced the Remission of Duties or Taxes on Export Products (RoDTEP) scheme, effective January 1, 2021. It replaces MEIS. Rates and conditions for the new scheme are yet to be announced.
Easy credit access: A long-standing demand of exporters, especially MSMEs, is credit access. Formal financial institutions such as banks are reluctant to lend to MSMEs due to their lack of adequate collateral. The policy can help open up alternate credit avenues, such as finance technology start-ups. The advisory group suggests raising borrowing limits at the Export Import Bank of India.
Infrastructure upgrade: One reason why China is a manufacturing and export powerhouse is its network of ports, highways and high-speed trains, which are among the best in the world. India needs to learn from its neighbor and improve its flagging infrastructure by upgrading existing ports, warehouses, quality testing and certification centers and building new ones. The Trade Infrastructure for Export Sector, a scheme for developing infrastructure to promote exports, was launched in 2017 for a period of three years. Many in the industry hope it will be extended.
Tax breaks: If India were to do away with subsidies, exporters would still need some form of government support. Easier and lower taxes are a way of filling this gap. The reduction of corporate tax rates and simplification of duty structures are long-standing demands. The Confederation of Indian Industry suggests simplifying the import duty structure by following “the general principle of higher duties on finished goods and lower/minimal duties on intermediates and raw material”. There are also demands for an overhaul/improvement of existing schemes such as the EPCG and Duty Drawback Scheme.
Digitization and e-commerce: With Covid-19 disrupting traditional supply chains, India needs modern trade practices. Digitization and e-commerce are two ways to go about this. Digitization can start with making common import-export processes paperless. Export awareness: At times, Indian exporters are defeated not by a lack of trade opportunities but by lack of awareness of the same. The trade policy can make a provision for government workshops and awareness programs that educate and inform traders about international laws and standards, global markets, intellectual property rights, patents and geographical.
What steps will you take to mitigate these risks?
While there are risks associated with India, such as tariffs and a poor infrastructure (currently). It seems the country is taking steps forward to bring business to the country, making now a great time to set up shop within India. Anheuser Busch would be able to take advantage of the tax breaks, and be able to work with local leaders to determine key areas where the countries infrastructure would need to be improved. Being an early entry to the country Anheuser Busch could build a relationship with local leadership and communities, as well as take advantage of the post-pandemic benefits the country is trying to offer. India lost 60% of its international business in 2020, and is desperate to attract new firms. This gives Anheuser Busch a lot of negotiating leverage and can set the company up for domestic success.
Managing International Business
Corporate Level Strategy: A corporate level strategy needed to be implemented, is to build domestic trust. In order for Anheuser Busch to do this in India, they will need to focus on improving to local infrastructure and focus on their digital reputation. As mentioned previously, India is willing to work with new businesses with tax breaks, and infrastructural improvements that will benefit new business. Not only is that a financial benefit for Anheuser Busch, but it can be good brand reputation in India, as the company will be making an important improvement in the country.
India is also a global leader in eServices and online business. Interactions and transactions today are becoming digital. This is especially true in India where the Government is aiming at empowering citizens by harnessing digital technologies. Several e-initiatives such as AADHAR, Smart Cities, e-Panchayat to name a few, under the aegis of infrastructure, services and empowerment, have been launched by the Government of India (GOI), and are seamlessly enabling digitization services across sectors. Proliferation of smartphones, social media and reduced data tariffs has further transformed India into one of the most digitally active and connected regions in the world. Over the last few years, we have witnessed a dramatic increase in the breadth and depth of digital services as organizations leverage game-changing technologies, such as cloud and Artificial Intelligence (AI), to digitally transform their business models, products and customer engagement approaches.
Business Level Strategy: A business Level Strategy Anheuser Busch will need to undergo is a complete product rebrand. Anheuser Busch will need to look at the changing beer scene in India. The beer market in India is currently in its growth stage. The market evolved from manufacturing usual beer products such as strong-lager beers to flavored beers owing to the adoption of trends and technologies from markets such as America and Europe. Today, there is a presence of more than 140 beer brands in the Indian beer market, which could address the palate of each customer segment.
The per capita beer consumption in India is still very low compared to other countries in Asia Pacific region and therefore the market could witness huge growth in the coming years owing to factors such as the shift from hard liquor to beer consumption by consumers in India, increase in disposable income, change in societal perspective and others.
Functional Strategy: At a functional level, Anheuser Busch will have to reevaluate their human resource and hiring methods. Recruitment in India has become challenging after the boom of technology. With the emergence of businesses, there is a need for skilled professionals. Millions of job seekers enter the job market every year. So, it becomes a daunting task for the recruitment consultant to find the right candidate for their organization. While the country boasts a large population and employment pool, the country has a serious illiteracy issue, which will play a problem in finding labor positions. IN addition, the country does not have a skilled labor pool of HR professionals. The company may need to outsource or relocate current HR professionals.
Entry Method: For Anheuser Busch I would recommend a direct export method of Entry in to the India market. The organization is already set up for international shipping, and has U.S manufacturing breweries that have the capacity to expand. In addition, the poor infrastructure in India, could pose to be a large risk for the company during their first few years of business in the country. The country should start with exporting form the U.S., then slowly evaluate the local infrastructure and work with the governing officials to make the needed improvements before setting up a domestic firm.
International Organization and Culture
India’s deep cultural roots play a huge part in the countries business practices and consumer and producer expectations. Doing Business in India is notoriously difficult. India scores badly on the ease of doing business index and a lack of investment in infrastructure over the past twenty to thirty years can test even the most seasoned of business travelers. Firstly, India stands poised to become one of the world’s largest economies over the coming years as economic liberalization kicks in after decades of political stagnation. It has a population of almost 1.3 billion of which 50% are under the age of 30 and therefore the consumer potential of the country is almost limitless. Secondly, the lack of historical investment in the country means that India needs everything. You cannot point to a sector which is not crying out for investment and new product ideas. Thirdly, and very importantly, India has a highly educated, aspirational workforce who can help you build your business on the ground.
When managing a business and a team in India, culture plays a big role. Business relationships are of the utmost importance. Indians will base their decisions on trust and intuition as much as on statistics and data, so be mindful of the importance of a good working relationship. Take the time to engage in small talk and get to know your prospective partner. Rushing straight into the business issue could be perceived as rudeness.
Another Cultural aspect of business in India is the role of hierarchy in business. Indian businesses are often very hierarchically structured. In negotiations, decisions are generally made at the highest of levels. Therefore, unless the company director, owner or a very senior manager is present at a meeting, a decision is not likely to occur at that stage. Roles are well defined and tasks such as manual labor will only be carried out by a specific person. An Indian manager is typically not expected to carry out tasks that could otherwise be undertaken by someone at a lower level in the organization.
When you choose to set up an India based office you will need to take into account these cultural differences. If your office does not follow a vertically structured hierarchy, with closely defined responsibilities, it will be important to create a dynamic feedback and communication mechanism between your UK and Indian employees to encourage collaboration. Interactions between UK and Indian staff may at times cause miscommunication. For example junior staff in India may not be used to making decisions or questioning senior staff with the same level of freedom as their UK counterparts.
India’s culture also plays an important part in managing a cross-cultural team. Things work differently in teams where the majority of the team are based in India, and especially in Indian teams who have less exposure to “foreign” ways of thinking and/or the head of the project is also from India. In these teams the lone foreigner can often get frustrated because things aren’t working the way he or she would expect – and they can even start thinking that nothing is happening or it is all out of control. This is often very far from the case, but you need to know a few things to help make collaborating with Indian teams the fun and exhilarating experience it can be. Here we aim to explain some of the differences to Western thinking and give some tips to help. In order to properly navigate this cross-cultural team, the team must be led by an experienced project manager with an understanding of international norms and Indian culture. The project manager must understand how to schedule work actives when working in multiple time zones significantly far apart.
Another aspect the project manager must take into account is the Indian hierarchy business culture. Hierarchies make things even more complex as many times you need buy-in from both the senior executive and the operational implementers to avoid either group blocking activities later. This means is that following due process and collaborating effectively may bring you to a perfectly good final product – but that product may get overturned at the very last minute because one person did not participate earlier and now points out that there’s a better way to do things. That view will need to be considered whoever they are, but if they are the boss it will overshadow all work already completed.
Managing International Marketing and Operations
While a standardized marketing approach would be economical and likely be a reduced cost, Anheuser Busch will need to deploy a customized marketing approach to sell their product in India. Before the Indian economy opened up in the early 1990s, “imported” goods were a sought-after commodity, their foreignness often being their most desirable attribute. Not surprisingly, then, many multinationals didn’t think success would require much effort when their brands finally entered the country after 1991. However, India has expected a shift in expectation, where Indian citizens expect goods and services produced domestically to be produced at that same high standard. Because of this shift, and the counties deep rooted culture, Anheuser Busch will need to develop a specific marketing campaign for India.
With India’s large population, the country has a diverse pool of consumers, each of with have different values and cultural beliefs. This is very prevalent in Indian foods and Beverage preferences and habits. For example; Across most of the world, Nestle’s Maggi is known best as a soups-and-sauces brand. However, in India, it has become the generic word for instant noodles. The product sold in India, though, bears little resemblance to the ramen of East Asia. It was introduced in 1982 with a masala flavoring and over the next 25 years, Nestle continued to launch variants that would appeal to local and regional tastes. This is a similar Approach Anheuser Busch will have to take in-order to make their product a staple of the Indian beer market.
The key element to Anheuser Busch’s success in India, and when viewing the 4 P’s of marketing (Price, Place, Product, Promotion), is understanding the counties many sub cultures and marketing specifically to each subculture. While this strategy would be costly, it would allow Anheuser Busch to weave their product in the cultural fabric of the Indian beverage industry. Whereas if the company deployed a standardized “One-size-fits-all” campaign, the company would have a high risk of not reaching the Indian market, and ultimately lose more money in the long run.
While creating a strong customized marketing campaign in India will be both difficult and expensive, that may not be the biggest challenge facing Anheuser Busch. The two largest challenges the firm may face when managing their international operations, will be logistics, and hiring manufacturing labor. While Anheuser Busch is no stranger to logistics, and boasts an impressive international portfolio, they may find India to be a huge challenge. As discussed previously, the country’s infrastructure has not been able to keep up with the population and business demands. In addition, simple utilities such as electricity can pose a challenge. While the cost of getting electricity is relatively cheap in comparison to the rest of South Asia, the number of procedures involved can be rather exhausting. What’s more, each procedure is in itself quite time constraining, taking around eight days to receive an external site inspection and three weeks to get externally connected, have a meter installed and conduct a test installation. If Anheuser Busch is not able to secure a site with good roads and an already updated infrastructure, they may be unable to meet demand, or even begin operations.
The second issue facing international operations would be hiring manufacturing labor. Similar to many other counties in the world, India is facing a labor shortage, and many companies are finding it difficult to fill key manufacturing roles in their firms and production lines. Human resource managers are looking at second- and third-tier cities as the labor pool in bigger cities gets tapped out, advertising on the radio and building strong relationships with colleges to ensure they get a hold of employees. On top of the labor shortage, unskilled laborers in India make up the largest percentage of the world’s illiterate population. Creating another hurdle for hiring managers at Anheuser Busch.
Conclusion and Recommendation
As an emerging market, India has its benefits and risks. The largest risk having to do with the counties’ poor infrastructure, followed by a slump in the manufacturing job market. However, with the new and consistently growing young and urbanizing population in India, now is the opportune time to introduce new Alcoholic products to the Indian market for Anheuser Busch. With the Indian government’s new incentives to push new business, and recover from the Covid-19 pandemic, Anheuser Busch is in a strong position to negotiate with the government and come up with a solution for the infrastructure problem. I recommend Anheuser Busch work with the Indian government to build a manufacturing and distribution channel in India, in a less developed area outside of an urban city. This will allow the Anheuser Busch to request new roads and better transportation routes, also giving the local community a positive image of the incoming foreign firm. This also allows Anheuser Busch to make a manufacturing floor specified to their Indian market strategy.
Works Cited
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