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Costco Case Analysis

India. Costco Case Analysis. Over View. Business Model and Customer V alue P roposition. Economy Government Market Access Infrastructure Real Estate. Summary Conclusion. Business Model. Customer Value Proposition. Economy.

jaime-mcdowell
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Costco Case Analysis

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  1. India Costco Case Analysis

  2. Over View Business Model and Customer Value Proposition • Economy • Government • Market Access • Infrastructure • Real Estate Summary Conclusion

  3. Business Model Customer Value Proposition

  4. Economy • GDP - 4.06 trillion estimated in 2010, ranked 5th in the world • GDP PPP - 3,560,000.000.000,ranked162nd in the world • Growth rate- 6.5 in 2009, 10.4 in 2010, and 6.9 in 2011 • Foreign reserve- 2.871 billion, 8th in the world • GDP per capita- 3,500 (needs to be 6,000) • Currency rate- 65.07 rupee to the US dollar as of January 13th 2012 up from 45.92 in 2010 • India is a mostly open market economy, however it still practices its autarkic policies which indicates it still has a self sufficient economy, mostly in agriculture with a combination of traditional family farming and modern agriculture. About 19 % of the GDP and 52 % of the labor force are in agriculture, 14% industry and 54.7 % service. Unemployment rate at this time is about 10 percent. Inefficiencies in government food distribution have caused high food prices and interest rates have increased from the RBI to about 9%. India is ranked as one of the fasted growing economies. It is a BRIC country, one of the “big four” with newly developing and newly advancing economies. It is projected that the BRIC will take over as the world leaders in the global economy in 2027. In a recent article by NPR stated that local farming families apposed the development of a steel plant that would take up precious farming land and change traditional ways of life centered on farming. The government has tried to break up the resistance movement and pressure the families to give up their 400 acres of land. The company believes it can provide 48,000 jobs directly and indirectly. The National Council of Applied Economic research states compensating the peoples lost livelihood yet developing new industry is the dilemma.

  5. Government • India’s government is a Federal Republic. Just like the United States, India has three branches of government, executive, legislative, and judicial. The three branches help separate powers. The ruling party is the Indian Congress Party which has been in power since the 1940’s. India has a stable government, but as with other countries, there are groups who oppose those in power and want bring about change. The President of India is President Pratibha Devisingh Patil (elected July 2009). President Patil is considered head of the state while Prime Minister is Manmohan Singh (elected May 2004). • India is making strides to bring foreign companies into the country. November of 2011, India put together a package of reforms to help bring foreign investments into the nation. Despite opposition from small shop owners and political groups, India announced January 10, 2012 that it will allow foreign companies to sell product under a single company name. Under the new regulations foreign companies must sell 30 percent of their products which are made by Indian shops and artisans. • The currency of India is called a Rupee. On average one Indian Rupee is equal to $.0914 US Dollar. The easiest way to transfer money out of India is through an Indian bank into a bank in the United States with an International Wire Transfer. Wire transfers are subject to fees from both sending money and receiving money.

  6. Market Access Regulations and Duties There are complex license and duties for most goods, some are in excess of 240%. There are special economic trade zones that do offer some tax breaks. They have been a member of the World Trade Organization since 1995. Acceptance of Goods A major concern is their policy on quantity. Some products, normally subject to license, are not authorized to enter the country when the authorities feel that the quantities bought were too huge. Distribution The primary factors here are organization and development for large structures. They are clearly dominated by small family owned business with the average size of 60 square meters. Level of Corruption Corruption seems to be wide spread with the highest being reported in the Police sector. A study conducted by Transparency International has found that corruption in public services affecting the day to day needs of citizens is far more serious than is commonly realized Local Competition The India market is dominated by small family owned businesses but has seen an increase in franchising. It Is key to note that on the commercial side the big players such as the US and the European Union are still having trouble with the governmental regulations.

  7. Infrastructure • India’s infrastructure can be broken down into two main types, and each type can be broken down further into separate categories within those types: • Hard • Transportation (road & traffic, railways, airports, mass transit, etc) • Energy (electric, oil, natural gas, etc) • Water (drinkable water, sewage, drainage systems, distribution systems) • Communication (postal service, telephone, television, the internet) • Soft • Governance (governmental systems, emergency services, military) • Economic (manufacturing, financial sector, imports and exports) • Social (healthcare, welfare, education) • Cultural (sports, museums, libraries, language, etc)

  8. Infrastructure • Hard • Transportation: Only 13 million cars exist in India, However annual automobile production grows by 2.6 million units annually, vehicle volume is expected to rise. Public transportation remains the primary means of transportation for the citizens. • Energy: India is ranked 3rd for coal producing countries in the world, however about 75% of the coal in the country is consumed in the power sector. poor quality of power supply and frequent power cuts and shortages impose a heavy burden on India’s fast-growing trade and industry. • Water: The situation of clean and drinkable water in India is one of the most concerning issues facing the country. India can still store only relatively small quantities of its fickle rainfall. Whereas arid rich countries (such as the United States and Australia) have built over 5,000 cubic meters of water storage per capita, and China can store about 1,000 cubic meters per capita, India’s dams can store only 200 cubic meters per person. Moreover, India can store only about 30 days of rainfall, compared to 900 days in major river basins in arid areas of developed countries • Communication:India has the world's second-largest mobile phone users with over 881 million as of October 2011.  It has the world's fourth-largest Internet users with over 121 million as of December 2011.  India has come to be regarded as the world's most competitive and one of the fastest growing telecom markets.

  9. Infrastructure • Soft • Governance: In addition to the usual police and military forces, other special task groups exist in India; Such as the Central Industrial Security Force, Central Reserve Police Force, Indo-Tibetan Border Police, and even an Internal Revenue Service. • Economic: Labor force of 473 million. Main industry is textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, and pharmaceuticals. Primary exports include petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, and apparel. • Social: 61% of the total population can read and write. The average school lifetime is 10 years, and unemployment is at a total of 10% • Cultural: Bollywood, The Indian film industry produces the world's most-watched cinema.Established regional cinematic traditions exist in the Assamese,Bengali,Hindi,Kannada, Malayalam, Marathi, Oriya, Tamil, and Telugu languages. Indian music ranges over various traditions and regional styles. Classical music encompasses two genres and their various folk offshoots: the northern Hindustani and southern Carnatic schools.

  10. Real Estate

  11. Summary Conclusion

  12. Citations (2012, 1 11). Retrieved from fita.org: http://fita.org/countries/indiaportal.html (2012, 1 11). Retrieved from Transparency International: http://www.transparency.org/regional_pages/asia_pacific/newsroom/news_archive2/india_corruption_study_2005 (2012, 1 11). Retrieved from World Trade Organization: http://www.wto.org/english/thewto_e/whatis_e/what_we_do_e.htm 2012, 1 13 – Indian energy sector, an overview: http://www.indiaenergyportal.org/overview_detail.php 2012, 1 13 – CIA world fact book India: https://www.cia.gov/library/publications/the-world-factbook/geos/in.html 2012, 1 13 – Worldbank.org: http://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN/0,,contentMDK:20668507~pagePK:141137~piPK:141127~theSitePK:295584,00.html 2012, 1 13 – Wikipedia Infrastructure Definition: http://en.wikipedia.org/wiki/Infrastructure The World Factbook; India;(Jan2012) www.cia.gov Flintoff C; “India’s Economic Battle: Development Vs. Tradition;(Jan 2012) NPR; www.npr.org “Indias Economy Slip-sliding away”; Dec 12, 2011 (Jan 2012) The Economist; www.economist.com India agrees to letforeign companies own 100 percent of single brand stores. (2012, January 10). Retrieved January 12, 2012, from The Republic: http://www.therepublic.com/view/story/f38870fdd4784fe79d65e3b46e5e0be4/AS--India-Retail/ INR-Indian Rupee. (2012, January 13). Retrieved January 13, 2012, from www.xe.com: http://www.xe.com/currency/inr-indian-rupee Petroleum subsidy dangerous as it’s uncapped: Ahluwalia. (2012, January 2012). Retrieved January 11, 2012, from http://www.firstpost.com/economy/petroleum-subsidy-dangerous-because-it-is-uncapped-ahluwalia-179090.html

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