Ans.4. India is the second largest producer of agricultural goods and agricultural items (form 17.9% of Indian GDP) in the world (“Sector wise contribution”, 2017)1. India also exports medicines, pharmaceutical products, gems/jewelry, petroleum products, garments, machinery, and transport equipment (source: Indiatoday.
intitoday.in-Made in India: Top 10 export products from India). Crude petroleum is the biggest import of the country (amounted to $155 billion in the year 2012).
Electronic goods, gold, silver, precious stones are other major imports of the country. India can export a variety of products because of its vast size, raw material/natural resource availability and because of cheap labor. While the above stated are the principal exports and imports of India according to India Today, the country also boasts of a vast healthcare sector, which is necessary for the country due to its abysmal size and population. The Porter Competitive Advantage Theory and its relevance (Porter, 1990) for Healthcare XYZ in Indian healthcare market context are summarized below.Porter’s Competitive Advantage Theory states that each nation has a special set of features (including location, natural resources, manpower etc) that provide it with a competitive advantage in the global marketplace.
While some advantages are inherited, others can be created (for instance skilled manpower). Some factors can boost business and others may hinder it. These regional factors can be analyzed by a business when it wishes to undertake a foreign investment, for the sake for forecasting success or failure, for deciding the extent of investment and operations and for other purposes. The advantages deriving from these factors can help a company attain competitive advantage as well, at the industry level (Riddle, 2016)3.Factor endowment: Cheap labor makes India one of most preferred destination for FDI that is especially directed towards manufacturing and services. The country attracted FDI worth 62.3 billion USD in the year 2016, according to FDI report, as is ahead of both China and US in the list of nations attracting FDI inflows, according to the Times of India (“India retains world’s highest”, 2017)4.
Healthcare XYZ can exploit the human capital in the country towards attaining operational goals at low costs. The country can provide a majority of natural resources as well. Factors such as infrastructure are lagging but government initiatives are on in the area, and the government has been especially stressing on the development of highways and power-plants in the past decade or so, according to Livemint. The development is so far enough to sustain the market industries. The country also has the 3rd largest higher education system in the world and special emphasis on technical/professional education is being given, according to a World Bank report.
Hence the country has no dearth of skilled professionals as well.Demand conditions: The more demanding the national market is, the better avenue it is for FDI inflow. India has a blossoming healthcare sector. Increase in per capita income post-1991 (the year of liberalization) has contributed positively towards the fact.
The USD 100 billion Indian healthcare market is projected to attain a value of USD 280 billion by the year 2020, according to Economic Times. The country has achieved a remarkable 25 percent growth in medical tourism, and it is also a major medicine exporter. India has a large population and there is a large space for the foreign investors and MNCs in the segment, as estimates reveal that only 20% of the domestic market is tapped as of now, as per the reports of India Brand Equity Foundation (IBEF). Firm strategy/structure rivalry: The competition within healthcare segment is increasing, as more and more investment is taking place in the segment (the FDI inflow has doubled in a past few years in healthcare alone). As per IBEF reports, the major players in the hospital segment include Max, CARE, Apollo, and Fortis among others. The fragmented market has been lately specializing and all existing brands are aiming to gain a larger portion. Still, as only 20% of the market poetical is exploited, there is lesser competition in comparison to other developed countries including the USA.
The competition amongst healthcare firms in India is more or less healthy and promotes competitiveness and innovation. The Indian government handles the unfair and monopolistic activities through the Competition Commission Act, 2002 (among other laws and acts) and checks activities including dominance abuse, agreements of anti-competition and others (source: Wikipedia). Healthcare XYZ can establish itself within the market through competitive pricing, offering a useful range of services, and should also gear towards future growth and increasing size of operations in due time.Related/supporting industries: The healthcare segment supporting industries include pharmaceutical, biotechnology, and life sciences. Industries including chemical (provide raw materials for pharmaceutical products) and electronic industry (for the manufacture of medical devices and equipment) may also relate to the sector both directly and/or indirectly. In India, the cost of producing medicines is 55% lower than the USA, and labor costs are as low as 55% when we compare it to the western countries (source: Bureau of Labour Statistics-US Department of Labor). The Indian pharmaceutical market is 3rdlargest (in volume terms), and 13th largest in terms of value, in the whole world, according to Wikipedia.
The country is also the largest generic drug provider in the whole world. Indian pharma industry is growing at a pace of 15%.annualy each year (source: EBAF). India has the largest number of USFDA approved plants, only after the USA itself. The country is also amongst the top 12 biotech destinations globally. Government educational universities/institutes and private institutions both create a skilled workforce for these industries.
Further, relaxation in FDI upper limit and adoption of policies that facilitate easy set up of business and promote FDI have also contributed positively towards growth in industries related to healthcare. The chart above shows the journey of USD versus INR since India gained independence in the year 1947 (Dixit, 2015)2. Currently, 1 USD equals 64.48 Indian rupees. 1 USD was worth 67 and 62 INR in the year 2016 and 2015 respectively/ India’s economic growth is consistent post year 1991 economic reforms. Successive governments have also taken measures to enhance cross-border trade and towards making the country more lucrative for FDI. INR-USD is an attractive trading pair amongst the forex traders as of now.
Multiple forecasts suggest that the exchange rate will not vary much in the next 6 months or 1 year unless something uncertain and unprecedented affects the capital and forex markets. The trends show that the exchange rate will be in between 65 to 63 in the coming months.For the past decade or so, INR has gained much more stability w.r.t. when compared to the previous years.
The stability is a positive sign towards investment and the investor can enjoy benefits including lower production/business costs among others. The stability of INR also provides the surety of returns to investors, who can raise capital easily for the overseas project. The low inflation rate, political stability, lesser deficits and relevant portfolio design improve the growth prospects of the Indian economy.