Saturday, July 13, 2013

Reflection: Cal Poly MBA Trip To India

            The Cal Poly MBA trip to India was an invaluable experience that offered me and the other nine attending students a unique opportunity to experience the culture and business practices of a rapidly developing country. We were immersed in a totally foreign environment, and in many instances, pushed outside of our comfort zone. I took this opportunity to challenge myself and resist the urge to play it safe. I ate food that I had never even heard of, I spoke with complete strangers on an overnight train ride, and I even rode on a reverse bungee ride at an Indian theme park. My peers and I are extremely lucky that we had the privilege to experience India in a way that most people never will.
            Throughout the trip, the most valuable thing I learned about India is that it has many ambitious entrepreneurs who are willing to work tirelessly to take advantage of emerging opportunities. These entrepreneurs know that Indians are not oblivious to the goods and services available in developed countries. They want these same goods and services, but with an Indian twist. The common factor among all of the businesses we visited was that their leaders figured out a way to bring in these outside goods and services in a way that appealed to the unique cultural needs of Indians. Big Bazaar is a great example of a company that imported a Western shopping style in a way that appealed to average Indian consumers. Prior to shopping centers like Big Bazaar, Indian consumers had to shop at several small establishments to purchase all of their goods and services. Big Bazaar brought new value to these Indian consumers by creating a more convenient shopping experience with their one-stop shopping design of their stores. Rather than just importing the floor model of a Wal-Mart supercenter, Big Bazaar knew it had to make a few adjustments in order to retain the appeal of Indian consumers. They did this by giving their modern stores the same traditional bazaar feel that Indian consumers were already used to. This was achieved by piling goods directly on the floor rather than neatly on shelves and even by not washing some of their produce, so that it retained a more natural earthy look.
Groupon was another company that brought an outside service to India by making a few necessary changes that made the service more appealing to Indians. Most traditional Indian consumers have the need to literally touch and feel what they are purchasing in order to assure themselves that they are buying a quality product. This presented a problem to Groupon, a site from which customers must purchase their goods via the Internet and not in person. To resolve this issue, Groupon India allowed its customers to pay by cash on delivery, so they could actually examine the product before placing their payment. It was this type of adaptive ability that really impressed me during my visits to these companies in India. In an increasingly globalized world, the ability to adapt to the needs of other cultures is becoming a crucial factor for success. This adaptive ability alone shows me that these Indian companies could easily expand to other regions and see the same success rates that they experience domestically. Being able to adapt their company’s offerings to meet the region-specific needs of various cultures is a monumentally important core capability that these Indian companies will surely leverage in the future.
One Western product that has the potential to be a successful venture in India is the concept of providing referrals and opinions about businesses. This has already been successfully accomplished in the U.S. through Yelp and Angieslist. While visiting Groupon India, the company’s CEO, Ankur Warikoo, explained to us that India’s retail and service markets are still very unorganized. He also mentioned that many local businesses are perceived as inferior quality, which can likely be attributed to a lack of adequate information. Many unsavory businesses in India also have the luxury of having little or no customer-accountability, which leaves future customers vulnerable to continued poor service simply due to a lack of awareness. All these factors cause Indian consumers to follow a herd mentality when it comes to choosing a retailer or service provider. They figure that if everyone is going to one place, that place must be the best. This is simply the result of a lack of information. This lack of information provides a huge opportunity for ambitious entrepreneurs who are able to find a way to provide that information in a way that is useful to Indian consumers. There is a real opportunity in India to solve a huge problem of misinformation that causes many Indian consumers to blindly choose where they will make costly purchases. A few young entrepreneurs have already begun to tackle this problem in India through their website, FRILP, which is a social media based platform that allows consumers to get trusted referrals from friends and colleagues. The website is derived from the concept of “FRIends heLP,” which is intended to make it easier for Indian consumers to find trusted businesses (i.e. doctors, plumbers, tutors, etc.). This organization is capitalizing on India’s lack of trustworthy data on businesses and service providers, which leads to many Indian consumers leaving it to chance when they choose where to spend their hard earned money. Once this company gains some momentum and better establishes itself in India, it would be a great company to visit during a future MBA trip.
One Indian business concept that could be brought to the U.S. is the Kingdom of Dream’s idea of creating a theme park that represents all of the different regions of the country. Kingdom of Dreams allows visitors to experience all of India in one entertaining stop. Visitors to the park can experience the culture, food, music, and art of each Indian state. This is a brilliant concept for a theme park because it appeals to local Indians and visiting foreigners, both of whom probably cannot afford to travel to all of the Indian states during a single vacation. Kingdom of Dreams makes it possible to at least get a sense of each Indian state’s differences and distinct cultures. Bringing this concept to the U.S. would mean creating a theme park that represents all fifty states. Although the extent of the differences between the U.S. states may not match the degree of differences between Indian states, it would be still be possible to represent some of the key characteristics of each state. This hypothetical American theme park would probably not appeal as much to U.S. citizens who tend to have higher disposable incomes, and therefore possess a greater ability to actually travel to each state. However, I can see this theme park being immensely popular among foreign visitors who simply don’t have the time or money to travel throughout the entire United States.
The most impressive business practice that I took away from India was the importance of being able to adapt. The companies we visited were successful because they were the best at adapting to changing economic conditions, cultural practices, and technological developments. Those who spoke at these companies made it very clear that even momentary complacency can lead to a business going under. This was especially true at the IT companies that we visited. Our visit to Cisco revealed several amazing technological developments that made communicating, shopping, and even receiving healthcare easier and more convenient. However, we were told that the company never stops innovating because they operate under the assumption that their current projects will become obsolete in the very near future. Puravankara, a construction and property management firm, was another example of a company that adapted its strategy to take advantage of India’s changing industrial conditions. The company realized that southern India was developing at a very rapid pace. They saw that industrial development in cities like Bangalore and Chennai was becoming very diversified. Puravankara was one of the few companies to capitalize on this by realizing that a diversified set of industries meant a diversified set of potential homebuyers. This in turn ensured that there would always be a steady flow of potential buyers even if one or two industries started to decline. Puravanakara’s decision to build affordable homes in these regions was a brilliant response to the changing industrial climate, which gave their company a huge advantage in the form of minimized risk and fast returns on their investments. Westerners could definitely benefit from adopting this mindset of adaptability. Many business owners in the U.S. refuse to accept the fact that developing countries are becoming increasingly competitive. This is causing them to remain complacent in their efforts to better compete on a global scale. Western business owners should observe the way many Indian companies are staying ahead of the game by constantly adapting their strategies to remain in front of their competitors.
Developing economies are showing developed nations that small companies with a little bit of ingenuity can perform just as well, if not better, than large companies with unlimited financial resources. Many of the companies we visited are producing high quality goods and services with a very limited set of resources that often appear improvised. Core Jewelry is an Indian company that operates on a global scale, offering a wide variety of high quality wholesale jewelry. During our visit to their manufacturing facility, it was amazing to see how this company was able to produce such large quantities of premium jewelry with so few employees and such makeshift equipment. Puravankara also demonstrated how its innovative thinking allowed it to cut costs and offer its premium housing at unbelievably affordable prices. Rather than pumping more money into each housing project, Puravankara focused on developing cost saving technologies that would allow it to gain a more sustainable competitive advantage throughout its future. Many of these Indian companies seem to excel because when they are faced with a challenge or an opportunity, they do not automatically throw money at the situation. Instead, they figure out a way to overcome the challenge or seize the opportunity through creative solutions that cost very little. While these Indian companies are undoubtedly being propelled forward by their internal strengths, they cannot avoid the constraints they face as a result of their developing nation’s poor infrastructure, overly burdensome bureaucracies, and lagging educational system. Poor infrastructure makes it difficult to transport goods, unprofitable to invest in underdeveloped regions, and troublesome to connect the rural and urban areas. India’s government remains largely decentralized, which makes it difficult to impose widespread economic or social policies. This hinders the country’s development in terms of passing progressive resolutions that would help the country better compete on a global scale. India also faces having a disproportionately large young population that currently does not have universal access to quality education. This means that India may face a potential shortage of skilled and educated workers in the future, which could hinder its economic development.
This trip tested my ability to adjust my way of thinking while living among a different culture. At times it was difficult to understand some of the differences between Indian culture and U.S. culture. One of the main differences I noticed throughout the trip was the appearance of disorganization that seemed to characterize many aspects of Indian society. The traffic in India seems to operate without any type of order or regulation. The buildings and neighborhoods seem to have developed organically without much city planning. The general manner in which average Indians go about their day seems much less structured than the way Americans live. Indians compensate for this lack of order by being more resourceful and more comfortable with the practice of figuring things out as they go along. As the trip progressed I began to focus less on these differences and notice more of the similarities between our cultures. Both Indians and Americans essentially have the same goals in life; we just differ a little when it comes to the path that leads to those goals. Overall, I was pleased with my ability to adjust to Indian culture. Throughout the trip, I kept an open mind and did my best to understand why things are the way they are in India. During a bus ride back to the hotel, I had a discussion with some of my peers about the problems of corruption in India. With such rampant corruption in India, it is easy to automatically look down on Indian society. However, our discussion on the bus opened my eyes as to why corruption is so widespread. If you are a police officer or a local government employee and you are barely making enough money to make ends meet, the temptation to accept a bribe is overwhelming. This made me understand that they don’t accept the bribes because they are inherently bad people. Rather, they accept the bribes because they are victims of unfortunate circumstances. I think this type of enlightening discussion and understanding were some of the biggest benefits of going on the trip to India.
During this trip, I was forced out of my comfort zone on several occasions. There were the mobile street vendors who would harass you while you were shopping. I was not used to this kind of interaction, and I wasn’t sure how to react. At first I got angry and annoyed with them, but as the trip went on, I got used to them and learned to just ignore them. The overnight train ride to Mumbai was another occasion where I was forced way outside of my comfort zone. The confined sleeping quarters and lack of personal space on the train were a very new traveling experience for me. This really opened my eyes as to how privileged Americans are and how we take for granted all of the seemingly small luxuries of American life. Surprisingly, the train ride actually turned out to be a fun experience. I talked with complete strangers from another culture and heard some of their life stories. I got past the lack of personal space and absence of privacy. This actually made the train ride more fun because it pushed everyone to interact more and get to know one another better. The overall trip itself was a huge push outside my comfort zone. Before this trip, I had never traveled abroad, so just getting to India was an intimidating feat for me. This trip showed me that I am capable of traveling to the other side of the world and enduring a rigorous course. With this experience, I am confident that I could travel abroad for a business trip and successfully perform my job.
Our trip to India was full of surprises and excitement that come with traveling to an entirely new culture. One thing that surprised me the most about India were the acts of goodwill being performed by a company we visited. With so much poverty, Indian society is often perceived as very competitive with a mentality of every man for himself. This perception was completely shattered during our visit with Lemon Tree’s upper management, where we learned about the company’s voluntary efforts to employ disabled people. A very good point was made during this company visit that discriminating against disabled candidates means that you are probably missing out on hiring some real talent. I was very pleased to hear that Lemon Tree is trying to open up a hotel where the entire staff will be comprised of disabled employees. This not only directly helps a historically marginalized group, it also sends a message to the public that disabled people can perform the same, if not better, quality work as everyone else.
After going on this trip, India holds a whole new meaning for me. This country is a growing buildup of potential that is beginning to show the world what it is capable of achieving. Having a first-hand look at the resourcefulness and drive of Indian companies really affirmed all of the reading I did about India becoming a rising power. Just having this awareness about India is the most important thing I took away from the trip. My trip to India was truly an eye opening experience that has provided me with a deeper understanding of our changing world and a newfound appreciation of a different culture. 

Friday, June 14, 2013

India's Twelfth Five-Year Plan

Marc O’Bryan

India Five-Year Plan Report

What are some of the main overarching implications of the most current Five Year Plan that are likely to affect businesses operating in India (both domestic and Western)?
India’s most current Five Year Plan aims to sustain India’s rapid economic growth through the continued implementation of comprehensive reforms. The country’s expanding economy, coupled with a recent global economic slowdown, has placed enormous strains on several of India’s already limited resources such as energy, skilled labor, natural resources, infrastructure, land, and innovative capabilities. In addition to addressing this myriad of problems, India is also attempting to reduce its widespread socioeconomic inequality that produces atrocious living standards and serious impediments to overall economic progress. India’s most recent Five Year Plan recognizes the importance of supporting a more inclusive growth in order to effectively address the root causes of these wide-ranging structural problems. Furthermore, this recent Plan also calls for actions that will open up the Indian economy in ways that will enable the country to better compete on a global scale. Most importantly, India’s current Plan involves reforms that develop its large pool of enterprising youths through a more committed investment in human development. This multitude of economic challenges, social problems, and resource constraints will have significant effects on business operations in India.
            India has a significant demographic advantage when compared to other developing countries, as well as more advanced economies. India’s disproportionately younger population is expected to provide the country with a potential 32% increase in the labor force, while most other countries’ labor forces are expected to decline by 4-5%, including China. This provides India’s business sector with a huge opportunity to narrow the gap between itself and the economies of more developed nations. However, the potential benefits of this large younger generation are entirely dependent upon India’s ability to achieve higher levels of education, skill development, and health standards. If the current and future Five Year Plans can implement effective reforms that improve these social conditions, then the country will gain a sustainable competitive advantage. The most current Plan attempts to improve the availability and quality of these basic services through collaborative efforts between the State and civil society organizations.  Indian businesses will potentially have access to a growing supply of skilled labor, while the rest of the world will see a decrease in domestically available labor. Western businesses may feel pressured to recruit a growing portion of its labor force from India if the country is able to adequately develop its human capital over the next twenty years.
            The current strain on India’s energy supply has become a huge issue for the country’s business sector and its ability to competitively operate. India’s most current Plan must address the rampant inefficiencies that plague the country’s energy use. In order to solve this problem, India’s current Five Year Plan must price energy in a way that discourages current wasteful practices and encourages innovations in energy efficiency. Additionally, India must implement alternative incentives, unrelated to price, that motivate its people to employ more efficient use of the country’s limited energy supply. Currently, most forms of energy in India are underpriced, due to misaligned State regulations, which promotes unnecessary waste and expensive inefficiencies. The most current Plan strives to increase domestic energy prices in order to promote more efficient energy use, decrease India’s reliance on foreign energy, and incentivize investment in more efficient methods of energy renewal. This will force businesses in India to cope with rising energy prices and hopefully encourage them spend more on energy saving investments or renewable energy sources. Western companies in India may also find it less to profitable to operate in that country unless they invest more in energy saving innovations. In a way, this may encourage more private investment from large corporations, both domestic and foreign, in energy efficient solutions.
            Transportation developments are another focus of the most current Five Year Plan, which will undoubtedly affect India’s appeal as a center of investment. Not only is there an increased demand for mass transit in growing urban centers, there is also increasing demand for more efficient and reliable connections between roads, railways, and ports. These large investments in transportation, as well as most other infrastructural improvements, will most likely be funded though Public-Private Partnerships (PPP), which showed positive results during the Eleventh Plan.
            Manufacturing is another focus of the most current Five Year Plan, which experienced an unexpected slow growth during the last Plan. India’s current manufacturing sector accounts for only 15 percent of its GDP, while this same sector accounts for double or even triple that amount for the GDP’s of other developing nations. India’s current Five Year Plan recognizes the importance of developing its manufacturing sector as a means of creating the additional employment opportunities that will be required to meet the expected increase in labor supply. Cost advantages are now derived primarily from well-executed supply chain management in which each activity on a business’ value chain is outsourced to wherever they can be performed at the lowest cost and most efficiently. This provides India with the opportunity to continue leveraging its past success with being able to engineer products quickly and at a lower cost. If it wants to continue enjoying this competitive advantage, India’s current plan must continue building upon its existing domain knowledge accrued through its past triumphs in auto manufacturing, electrical components, and IT services.   
            In summation, India’s most current Five Year Plan affords businesses the opportunity to capitalize on a potential growing supply of skilled labor, an improved system of infrastructural development, and new means of energy efficiency. These opportunities also pose challenges for these businesses in terms of doing their part in helping India improve educational and skill development programs, innovate new ways to efficiently use energy, and provide the public sector with financial support in constructing improved transportation systems.  
What are some of your key observations and takeaways from the 12th Five Year Plan?
            The main message of the 12th Five Year Plan is to develop India’s economy in a way that promotes inclusive growth, combats domestic resource constraints, and encourages entrepreneurial leadership. The mere fact that this Plan involved the inputs of over 950 civil society organizations speaks to the Plan’s commitment to promoting inclusive development. Following the path of the Eleventh Plan, India’s current Plan aims to more evenly distribute the benefits of the country’s emerging economy, so that historically excluded groups can start to realistically work toward a higher standard of living. The current Plan focuses heavily on developing the country’s most valuable asset, its people. India realizes that its future growth will depend heavily on its ability to improve its human capital through better education, health, and skill development. India is taking big steps toward achieving this goal. For example, India’s recent Right to Education Act provides children of certain ages the right to attend school; this limited form of universal education reflects the countries goal of achieving a more inclusive growth. Providing more universalized education is one of the best ways to help reduce poverty and shrink the current socioeconomic gap between the educated and uneducated in India. This goal of inclusive growth calls for the Twelfth Plan to more evenly allocate its resources among the different sectors of society. By doing so, India can engage in a structural transformation of its society.
The Eleventh Plan included several flagship development programs that aimed to improve rural and urban infrastructure, provide basic services to the poor to reduce poverty levels, and find ways to eliminate the bottlenecks that limit India’s growth potential. India’s inadequate infrastructure has proven to be a major constraint on its ability to achieve sustained rapid growth. A large focus of the Twelfth Plan is on developing the country’s infrastructure, particularly through the use of public-private partnerships (PPP). The use of this type of funding reflects India’s promotion of entrepreneurship. The government is encouraging private entities to take part in India’s rapid economic development by investing in infrastructure that will provide the country will long-term benefits. India knows that its future development will result in a rapid increase in urbanization. India’s past inability to meet the demands of its urbanization has led to the establishment of slums and extreme poverty. If India wants to achieve an inclusive growth, then it must focus heavily on expanding its infrastructure to meet future demands of urbanization. Consequently, India’s Twelfth Plan makes infrastructure development a top priority.
            Another primary constraint that seems to be holding India back is its energy challenge. Currently, India’s domestic energy supplies are severely limited and its dependence on foreign imports of energy is increasing. A big problem that the Twelfth Plan addresses is the rational pricing of energy. Currently, domestic energy prices are far too low, which dissuades companies from finding more energy efficient means of operating. The Twelfth Plan calls for a more competitive pricing scheme that will better align India’s domestic energy prices with global prices. However, the Plan recognizes that sustainable growth is only possible if India can establish for itself a more secure and cost-effective supply of energy. Mainly the Twelfth Plan aims to prepare India for its future sustained growth by creating a more equitable development program that betters the country as a whole.

Some economists argue that 10% GDP is the minimum growth floor India needs to achieve to create enough jobs for its markets and stability. The most recent plan appears to shoot for growth for most of 2012-2017 at 8.2%. Can India achieve such growth over the next four or five years? What may happen for them, and for us/the USA, if they come in lower than that number?
            The Twelfth Plan has several potential drivers behind it that make it possible to increase GDP past the 8.2% growth rate that was seen in the Eleventh Plan. There are a lot of uncertainties that plague the current global economy, which also make it possible that India will not meet its targeted growth rate of 9%. In light of the uncertainty surrounding the global economy, private investment in India has slowed down. This has contributed significantly to India’s decelerated economic growth. Also, after the recent global economic crisis of 2008-09, India’s government deficit sharply increased due to lower taxes and declining domestic energy prices. India’s Twelfth Plan addresses these issues through reforms that promote more fiscal discipline and create a more competitive market environment.
            Entrepreneurs are being given more flexibility regarding the investment decisions they make, which improves India’s productivity through a more efficient allocation of resources. Also, India is creating a more competitive market environment by making its economy more open to global competition. In doing so, India has been able to drastically increase its exports, which has played an important role in boosting the country’s GDP. Also, this new openness is attracting more foreign investment, which also helps India’s GDP. These increased competitive pressures on Indian businesses are forcing them to improve their production methods by producing better quality at lower prices. All of these factors contribute to a potential sustained increased in India’s GDP. Other major factors that will determine whether or not India is able to meet its target growth rate include the country’s ability to construct new infrastructure and provide better skill development programs.
            It is incredibly important that the Indian economy achieve these growth goals outlined in the Twelfth Plan. The aspirations of India’s population are positively correlated to the economy’s success. India is doing so much right now to promote inclusive growth through better education, health services, and skill development. This is galvanizing the younger population to better themselves in order to be able to take advantage of the future opportunities that they believe lay ahead as they expect their country’s economy to continue improving. If India’s economy underperforms, then the aspirations of this younger population will quickly disappear. They will feel cheated in the sense that they were given all of these opportunities to improve themselves in hopes of having access to better job opportunities only to have it all taken away due to an underperforming Indian economy. Therefore, a key goal of the Twelfth Plan is to make sure that India’s economic performance stays on par with what its people expect.
            If India does not meet its targeted growth rate, this could have serious negative implications for the U.S., who conducts a significant amount of trade with India. If India’s economy underperforms, it means Indian consumers will have less wealth on average. This means that they will be less willing to purchase U.S. goods/services and invest less money into U.S. assets. This of course will drive down America’s GDP. The U.S. also depends a lot on cheap skilled labor from India. If India’s youth suddenly loses its motivation to continue improving itself through education and skill development, then the U.S. loses a huge pool of low cost talented workers.

What are some of this plan’s targets and longer-term priorities? How do these differ from our priorities in the USA, and why?

            Inclusive growth is clearly one of this Plan’s long-term priorities. India is pursuing policies that actively aim to alleviate poverty across its entire country. The Twelfth Plan aims to decrease the rate of poverty through a “broad-based” improvement in education, health, and skill development. This is intended to provide India’s poorer population with better opportunities that will hopefully allow them to better their current standard of living. This type of resource allocation differs from priorities in the U.S., where resources are allocated in ways that do not promote an overall betterment of American society. Currently, the amount spent on education in the U.S. is declining, while programs that offer skill development are not widely and cheaply available. The current means of bettering oneself in the U.S. revolve around being able to afford increasing tuition rates at higher education institutions, which many believe are declining in quality. India, on the other hand, is taking active steps to improve its higher education, realizing that a large investment in this sector now will pay off big in the future. The Twelfth Plan recognizes that “education is the single most important instrument for social and economic transformation.”
            India is also taking a more proactive approach in its efforts to sustainably manage its limited natural resources. In particular, India is taking steps in its Twelfth Plan to implement long-term sustainable solutions to its current water management problem. India has a scarce supply of water, especially when one takes into consideration the amount that is required by a country that has 16% of the world’s population and access to only 4% of the Earth’s fresh water. India’s Twelfth Plan recognizes the urgent need to improve the efficiency of its water use and create sustainable solutions that will enable the country to expand its agricultural operations and meet the demands of increased urbanization. Currently, India’s primary use of water can be attributed to irrigation, which the Plan designates as a major area of reform in terms of ending its present unsustainable water usage. The fact that India is taking such a long-term view of how to manage one of its most scarce, yet vital resources speaks to the progressive nature that is embodied in each of its subsequent Five Year Plans. The U.S. does not place such a high level of importance on it need to come up with more sustainable means of managing its natural resources. As a developing nation that has never had the luxury to flippantly waste its resources, India’s perspective on sustainable natural resource management comes from a place of humility and an understanding of how important resources like water really are. For the most part, Americans have always had easy access to resources that we take for granted. This definitely plays a role in shaping how our country designs its policies regarding natural resource management.  
            India’s Plan aims to develop the country into a more egalitarian society through a State-sanctioned plan to redistribute wealth and opportunities. While this type of development is viewed as progressive in India, many in the U.S. would view this type of development as socialism. India’s current Plan takes an active role in shrinking the gap between advantaged and disadvantaged groups, recognizing that not everyone starts off on an even playing field. By helping historically disadvantaged groups become more active in India’s market economy, the country is promoting economic growth while also promoting social progression through empowerment.

What were some of the accomplishments (and failures) from some of India’s previous Five Year Plans?
India’s Eleventh Plan achieved its goal of empowering disadvantaged groups by encouraging them to learn more about their rights and entitlements as afforded to them by law. This helped to place pressure on the Indian government to improve its delivery of these public services and to hold itself more accountable for the welfare of its citizens. Another important achievement that took place during the Eleventh Plan that should be noted was the more even distribution of economic growth across the States. This shows that resources are being allocated more evenly and more efficiently. During the Eleventh Plan, poverty decline by just under 2% and wage rates increased by 16%. Education has improved due to the policies implemented by previous plans. As mentioned earlier, the Right to Education was passed in 2009, which guaranteed all children (6-14 years of age) access to schools. This has resulted in a huge increase in student enrollment, and consequently a marked decrease in the number of children who do not attend school. While investment in infrastructure is still not as strong as India would like it to be, the Eleventh Plan saw a sizeable increase in the percent of GDP that was invested in much needed infrastructure, including roads, railways, ports, electricity, etc. The Eleventh Plan called for enormous allocation of resources to rural and farm sectors, which has increased the number of job opportunities available and has improved their access to basic necessities like clean drinking water and electricity. Part of this effort was an attempt to promote agricultural development, which India views as a vital aspect of their overall future economic growth.
            One area where India continues to fall short is in regard to its attempts to prevent the misappropriation of funds through government scandals. This has been a longstanding problem in India, which does more than reduce the amount of money that is used to improve the economy or provide much needed social services. This type of devious behavior causes the public to lose faith in its government, which makes it several times harder for the government to promote social and economic improvement. India’s previous Plans also fell short in providing adequate health services to the public. This was made evident by India’s poor resulting health indicators, which still show high infant and maternal mortality rates. Also, the country’s drinking water continued to contain high levels of contamination, which led to several health problems primarily among children. Energy prices were a major problem during the last Plan, and continue to act as a constraint on India’s economic growth. With India’s energy prices remaining significantly below world prices, the country has no incentive to improve its energy efficiency, which is becoming a huge competitive factor in this increasingly globalized economy. Being able to produce quality goods at low prices will be essential for India to enjoy a sustained economic growth trend in the future, but this can only be achieved if the country can devise a more efficient means of energy use. Prior plans also did not do much to address the serious problems with India’s inferior transportation infrastructure, which is slowing down the country’s economic growth. Another huge let down of the Eleventh Plan was its inability to meets its targeted growth in manufacturing, which fell short by about 3%. India is depending on manufacturing to provide a sizeable number of additional job opportunities in the future, so its slow pace of growth does not bode well for the country’s up and coming youth population.

Do you think this type of strategic planning is possible in the USA? Would the pros outweigh the cons, and what would be some of the pros and cons of a Five Year Plan in the USA? If a Five Year Plan option was presented to American voters as a constitutional amendment, would you vote for or against it, and why?

            If we were to analyze this situation in terms of each country’s uncertainty avoidance, the results would actually show that the U.S. is more prone to avoiding uncertainty. While India scores a 40 on the UAI, the U.S. scores a 46. This suggests that the U.S. would be more amenable to a Five Year Plan because it would allow us a greater ability to prepare for the unknown. However, I think that U.S. citizens would be skeptical in having a Five Year Plan, especially since we have presidential elections every four years. A Five Year Plan devised by a Republican president may not sit well with Democrats, especially if there was an election coming up.
            There are several pros that could arise from having a Five Year Plan. Such a plan would give the country a well-defined direction that could resonate well with people’s ambitions. A Five Year Plan would also place emphasis on achieving long-term, sustainable goals. This would especially benefit the U.S. when it comes to environmental regulation policy, where the target dates are usually set too far off in the future to merit any immediate action. A Five Year Plan may encourage younger Americans to pursue higher education or vocational training if there were a realistic prospect of increased future employment opportunities. It is always motivating to have a goal that one can work toward rather than hoping for the best. A Five Year Plan would provide our country with more of a collective consciousness that may help to unify this country, and create a more egalitarian society.
            The negatives of a hypothetical U.S. Five Year Plan could stem from focusing too narrowly on pre-determined objectives, while ignoring relevant changes. This potential tunnel vision could distract the U.S. from the constantly changing global economic environment. Also, as we have seen with India, any expectations that are not met may be perceived as signs of the country’s diminishing ability to fulfill its promises to the public. This could in turn lead to a less ambitious young population that may decide that higher education is not worth the time and money if there are not enough job opportunities available in the future. With a Five Year Plan comes enormous pressure on the government to follow through with its promises. Any results that fall short could lead to less faith in the U.S. government. At least now when the U.S. government currently exhibits a poor performance, we don’t have a prior promise to compare it to. This may actually work to their advantage because it makes them seem less incompetent.
            I would definitely be in favor of some sort of long-term plan established by the government. This would give me a much better idea of what kind of opportunities I may have available at a certain future date. It might encourage me to attend law school if I know that the government has plans to provide additional legal job opportunities in the future. It would provide all people my age with a better understanding of what direction they should aim for. It would also help people my age make better decisions about how to invest their money in terms of what kind of education they decide to pursue. If job opportunities are projected to be scarce in the future for a particular field, it may deter people from majoring in that field. However, this could also lead to the U.S. losing its competitive edge in whatever field that may be. Similar to any government policy, a U.S. Five Year Plan would have its prose and cons that would have to be weighed carefully before a decision was made to implement one.  

Thursday, March 21, 2013

Billions of Entrepreneurs Book Review

Billions of Entrepreneurs: How China and India Are Reshaping Their Futures and Yours
Author: Tarun Khanna
ISBN: 978-1-4221-5728-2
By: Marc O’Bryan


            In Billions of Entrepreneurs, Tarun Khanna provides an insightful analytical comparison of the divergent paths toward economic development respectively taken by China and India. He sets the stage for this comparison by first describing the changing state of the current globalized economy. Developed nations are beginning to see their economic power and influence shift over to some key developing nations, China and India in particular. Similar to Zakaria’s warning in his book, The Post-American World, Khanna cautions developed nations to be aware of the progressive events taking place in China and India.  Khanna explains how these two nations are experiencing a surge of entrepreneurial activity that should be recognized as a catalyst for the transition of global power from Western nations to developing nations. 
            The primary purpose of Khanna’s book is to contrast the different forms of entrepreneurship taking place in India and China. The title of his book describes the sheer magnitude of entrepreneurial development taking place in these two nations. It is also a metaphorical reference to how these two countries are utilizing entrepreneurship not just for financial gain, but also for the betterment of their respective societies as a whole. As the two most populous countries, problems in China and India, such as poverty or unemployment, are magnified as a consequence of the massive size of their populations. This means that these two countries have a lot more work to do in comparison to developed nations. Khanna illuminates this point in order to justify his belief that “entrepreneurship in developing nations occurs in far more encompassing and far-reaching ways than in more developed settings.”

Contribution to Knowledge:

            Khanna provides a multifaceted analysis of the radically different environments of China and India in which entrepreneurs have been forced to maneuver. While entrepreneurs in China must operate under the strict regulatory controls of the government, entrepreneurs in India must navigate through a decentralized marketplace under a dysfunctional government.  Khanna provides practical knowledge to foreign investors considering China or India as their next targeted investment opportunity. Each nation has its own advantages and disadvantages when it comes to entrepreneurship and investment. 
            Another practical piece of analysis in Khanna’s book describes how China’s government welcomes foreign investors, while India’s government does not. India’s government heavily favors its own indigenous private businesses, while China gives its foreign investors the “red carpet treatment.” Khanna sheds light on the different obstacles that any up and coming entrepreneur will face in China and India. While an investor may receive ample support from the Chinese government, he or she will find out quickly that complying with Party demands is the only way to succeed. The Chinese government controls the major banking institutions and the development of new infrastructure, and therefore controls which businesses have the opportunity to succeed. Microsoft quickly learned that its enormous success in the U.S. and other markets did not automatically transfer into China. Even Bill Gates was forced to do some “courting” when he did business with the Chinese government. To gain the trust of the Party, Microsoft promised to share with them the Window’s source code, its most heavily guarded asset. Entrepreneurs seeking to do business in India will find an enormous barrier to entry simply based on the government’s preference for indigenous companies. However, entrepreneurs in India face almost no pressure from the government in terms of regulatory controls. The tradeoff is that India lacks decent infrastructure required by most businesses. Khanna’s analysis of the various issues that entrepreneurs face in each country offers practical insight for potential investors thinking of venturing into China or India.

Khanna’s Strengths:
            Khanna’s analysis of entrepreneurial development in India and China adopts concepts from the notable sociologist, Antonio Gramsci, a neo-Marxist whose writings attempt to account for the reasons why capitalism was able to take hold in only certain societies. The parallels between Khanna’s comparison of entrepreneurial development in China and India and Gramsci’s analysis of capitalism in advanced versus underdeveloped societies are a very intriguing feature of this book. Applying concepts from Gramsci, Khanna provides thorough contrasting descriptions of China and India that encompass a wide variety of each country’s cultural, political, and economic components.  
            Khanna describes China as a State-led nation in which the government controls most aspects of life. The Chinese Communist Party (CCP) runs the Chinese government and claims to use its “fiat authority” to serve the best interests of the public. The party supports and justifies its authoritative power by exclaiming its seemingly noble mission to improve public good over the interests of its private sector. China employs a top-down form of development in which the government controls the flow of capital, which essentially means they control the flow of opportunities available to entrepreneurs. In China, “the government is the entrepreneur,” meaning Chinese businesses that wish to succeed must operate within the Party’s guidelines and comply with the government’s demands. Khanna shows how China’s strong government is more efficient when it comes to infrastructure development and initiating change. Khanna’s analysis of the Chinese government is very similar to Gramsci’s conceptualization of the role of the State in the context of revolutionary change. Gramsci proposed the idea that nations with weak civil societies were easily controlled by the State. Under these conditions, the State is the hegemonic group that claims intellectual and moral leadership as an inherent right. This is what has allowed the CCP to control the Chinese government and society. Khanna describes the government’s control of information and private property rights as a significant source of power because it prevents the spread of ideas and discussion among the general public. The government’s panoptic monitoring of all information outlets is a form of behavioral conditioning that keeps Chinese citizens in line within the Party framework. Entrepreneurs do not have access to accurate information as the government skews economic and financial data to serve its own interests. These authoritarian policies provide little incentive or opportunity for potential entrepreneurs to pursue their ambitions when their own government is working against them in every way possible. While China lacks the appropriate stage for publicly led change, India’s apathetic government has set the stage for a dysfunctional and unorganized form of public discourse.
            Khanna’s portrayal of India as having a strong civil society relates directly to Gramsci’s concept of civil society as the catalyst for change. Civil society is comprised of the organizations that exist between the State and the economy. These are the non-governmental institutions that represent the varied interests of the public. Gramsci claimed that strong civil societies made it hard to initiate change because it required not just the consent of the State, but also the consent of a pluralist society in which there were many competing interests among different groups. This concept applies perfectly to Khanna’s account of India as a seemingly dysfunctional society incapable of implementing effective change. India’s pluralist composition and highly democratic characterization are the cause of the government’s ineffectiveness. Unlike China, where the government does not have to compete with a mélange of private interest groups, India’s government must work in cooperation with several competing interests that hinder progress. This is evident when one looks at the parliamentary procedures of the Indian government, which Khanna describes as a series of “catcalls, sit-ins, and walkouts” that prevent meaningful debate. China’s government, on the other hand, is incredibly organized and without dissent. China’s National People’s Congress (NPC) is able to control its society because its power is derived from its hegemonic claim of serving the public interest. Since this goal appears to encompass the interests of everyone, it is hard for private groups to go against it. India also has a hegemonic claim to serving the public interest, embodied in a law regarding development. This law states, “The object of all development is the human being.” The only problem is that each human being in India seems to have a conflicting interest, which in a highly democratic society, means nothing ever gets accomplished. India’s civil society with its many competing interests make it hard for any one group, including the government, to take control and initiate effective changes. For this reason, it is India’s civil society that is slowly making changes in India through its autonomous entrepreneurial efforts. These groups actually do all they can to avoid government involvement, which is viewed by many as an obstacle to actually getting something done.
            Khanna’s accounts of China and India’s respective abilities to foster entrepreneurial growth are made much more convincing by their backing from Gramsci’s concepts of civil society and hegemony. Rather than simply offering superficial observations about the differences between these two societies, Khanna delves much deeper into each country’s social structure to account for their different accommodations of entrepreneurship.

Khanna’s Weaknesses:

            The main weakness of Khanna’s book is the fact that it is an arduous task just to get through it.  He consistently goes into painstaking detail for each and every example he provides to support his main points. Each example contains numerous acronyms of organizations, new names of state officials, and an extensive history lesson on the topic at hand.  While providing examples is a great way to support any argument, Khanna takes this too far. His emphasis on these agonizingly detailed examples distracts the reader from the main points he is trying to make. By the middle of a chapter, it is hard to remember Khanna’s particular main point for that section of the book. His writing requires the reader to already be well informed of China and India’s respective political, economic, and cultural backgrounds. Without this prior knowledge, Khanna’s book is incredibly overwhelming and comes off as pedantic. This is particularly true of the chapter about the financial systems of India and China in which Khanna must expect the reader to be a financial analyst and political economist.  If Khanna could provide a more simplified version of this book in which his examples were limited in number and complexity, his main points would come across much clearer to readers.
            Another weakness of this book is Khanna’s lack of focus on the relations between India and China. He briefly mentions early on in the book in a section titled, “The New Dance,” how India and China would mutually benefit from a more cooperative relationship. He goes on to say how the potential combined economic power of these two developing nations could increase their joint global influence to a level that surpasses already developed nations. This seems like a very important topic to cover; yet he only addresses it briefly in the beginning and end of the book. Even though the main point of his book is to point out the differences in the entrepreneurial development of each country, it would have been interesting to learn more about the similarities between each country in regard to their economic development.
            One more disappointing aspect of this book was the lack of attention paid to the informal economy in India. There is only a brief mention of Dharavi, one of India’s largest slums with a thriving informal economy. Rather than focusing on the entrepreneurship of slum residents, this brief section of the book addresses the issue of gentrification in India.  Basically, India’s emphasis on private property rights has made it difficult for real estate developers to tear down these slums in order to transform them into more upscale areas. Khanna ignores the fact that these slums are a source of thriving entrepreneurship, where many of these slum residents have established small businesses. They have managed to do this with no help from the government, whose inability to properly plan for development led to the creation of these slums in the first place. With a title called Billions of Entrepreneurs, it seems odd that he would not focus more on the millions of entrepreneurs living in slums, who overwhelmingly contribute to the prosperity of India’s economy. Khanna’s book would have benefitted from discussing in more detail the efforts of small-time entrepreneurial operations rather than primarily focusing on huge companies like India’s Infosys and China’s TCL.

Overall Impression:

            Overall, Khanna’s Billions of Entrepreneur lacks a humanistic component. His discussion of development in China and India is characterized by a reified conceptualization of each country’s entrepreneurial landscape. This book was written too heavily from a business perspective. There isn’t enough cultural justification for why the differences he describes exist. If Khanna had been able to more directly incorporate a supplementary cultural or sociological viewpoint, the reader would have a well-rounded understanding of why entrepreneurship is so different in each country.
            On a more positive note, this book is incredibly informative to any reader willing to take the time to fully understand each supporting example. Khanna’s thought-provoking criticism of each country’s political and economic systems offers the reader the opportunity to understand the development of two rapidly emerging economies. This book is a must read for any up and coming business professional who will most likely end up interacting with one or even both of these developing nations. Khanna’s book provides the basic tools for understanding how to do business in each of these developing nations. This book essentially serves as an instruction manual on how to do business with India and China. After reading Zakaria’s Post-American World and gaining a basic understanding of how China and India are becoming stronger competitors in today’s global economy, Khanna’s book reinforces that viewpoint by informing the reader about each country’s path to development. For anyone looking to gain a better understanding of global competition and entrepreneurial opportunities, I would definitely recommend reading these books.