Factbook Outline Automotive Industry in China and India

1. Factbook Outline Automotive Industry in China and India Foreign Investment Analysts India - Samantha Pinto China - Jiaxiao Zhang

2. WHY PICK US? Samantha Pinto • Bachelors Degree in Human Resources & International Business • USP: Indian work experience • Languages: Hindi, Konkani, English Allen Zhang • Bachelors Degree in International Business • USP: Smartguy from China • Languages: Mandarin & English

3. Introduction - Purpose: to discuss the automobile industries in China and India and the related business implications based on the various dimensions discussed in class and provide recommendations for foreign investors and auto companies. - Brief overview of the automotive industries in both China and India

4. Comparative analysis - India Culture • High Power Distance, Masculinity, Long-term orientation • Low Individualism and medium to low Uncertainty avoidance Corporate governance System • The corporate governance model in India is moving towards the Anglo American model whereby shareholder interests are emphasized. • The Securities and Exchanges Board of India (SEBI), has made a significant progress in providing a rigorous regulatory regime that helps ensure transparency and fair practice. • A majority of the country’s Small and Medium-Sized Enterprises (SMEs) still rely on relationship-based, informal control and governance mechanisms that limit financing and keep the cost of capital higher than perhaps necessary. National Innovation Systems • central government is taking charge of science and technology development plans and policies, huge support for R&D and technology transfer • infrastructure is weak and a barrier to manufacturing

5. Comparative analysis - India Still NIS • High percentage of financial expenses on education as a percentage of GDP in India • India's IT Industry • Innovation performance subsystem shows that the economic development of India has better potential in the knowledge intensive service-oriented economy Comparative Political Systems • India is a democratic country in terms of politics • India's lower house, the Lok Sabha, is modelled on the British House of Commons, but its federal system of government borrows from the experience of the United States, Canada and Australia. • India’s political environment has been moderately stable which has contributed to the booming economy in India. This is an attractive characteristic for the foreign competitors

6. Comparative analysis - India Different IR systems • The Industrial Relations Division of the Union Ministry of Labour and Employment • Industrial Relations paradigm in India had dramatically changed following the adaptation of free market policy in the early nineties. • A sound and positive industrial relations climate. • statistical figures of Union Government’s Labour Bureau, exhibits drastic decline of industrial disputes from 1,825 in 1990 to 421 in 2008, and India being the third most preferred global investment destination. • Foreign direct investment inflows to India went up to $32 billion in 2011, which was a 33 percent increase over the previous year Comparative Business Ethics • India scores 36 out of 100 on a scale from 0 (highly corrupt) to 100 (very clean) on Transparency International’s CPI. • This high level of corruption in India is very important to note for foreign investors entering the Indian market to conduct business.

7. Comparative analysis - China Culture • High Power Distance, Masculinity, Long-term orientation • Low Individualism, Uncertainty avoidance Corporate governance System • stakeholder approach: the major stakeholders are the government officials who are choosing and directing the firm managers. • mainly State-Owned Enterprises (SOEs): Government officials are in charge of the firms and firm managers answer to the officials. • Advantages & Disadvantages • build good personal relationships with the government officials National Innovation Systems • moving toward to a market-based open innovation system • adopted various important policy instruments to encourage innovation activities and to promote transfer and commercialization of R&D results • encouraged and promoted foreign corporate R&D in China • mostly focused on incremental innovation with little radical innovation • automotive industry: innovate by commercialization; architectural innovation

8. Comparative analysis - China Comparative Political Systems • Closest to be a Totalitarian system but not that extreme • Politically ruled by one single party which is the Chinese Communist Party (CCP) but Capitalism and private businesses also allowed and even supported by the CCP in many parts of the economy • Automotive industry: SOEs dominant; Mostly Joint ventures for foreign companies Different IR systems • Weak and inefficient union system • Relatively new labour market • High income disparity Comparative Business Ethics • Moderate to high level of corruption • Foreign investors should be aware of the corruptive culture in China • Recent anti-corruption campaign is causing declining sales for premium auto brands due to the increased cautiousness of the government and military officials

9. Conclusion and Recommendation • Brief recap of the analysis • Provide suggestions on entering China or India based on different circumstances • Investment Goals (Returns; R&D, Manufacturing, Sales) • Scale of investment • Core competency • Modes of Entrance

10. Thank you