Greenfield Investment Method - Pest Analysis

1.0 INTRODUCTION

          Pharmaceutical industry is an industry that we choose for this assignment and the country chosen is Pune, India.  Basically, Pune is one of the city in Maharashtra that famous with many its industries like automobiles, manufacturing, pharmaceutical industries. Besides, it also known as a city which has a tremendous of research institutes of Information Technology (IT), management and training as well education industries like university. Those industries actually have attracted more people like students, migrants and the professionals around the world especially in Middle East, Asia and Africa as well. Pune also one of the fastest growing cities in the Asia. For the foreign direct investment (FDI) industry, the Greenfield investment method is a suitable method for this investment. Basically, Greenfield investment is a method in which a parent company will start a new venture in another country often in developing countries like India and China. Normally, this parent company will build a new facilities and offer new jobs once they are hiring new workers for that facilities. The company also will offer some tax breaks and other incentives for setting up this Greenfield investment method, (A Wang, ‎2009).

          Apart from that, we have chosen Nipro Corporation for our company. This is because Nipro Corporation is an established company and has expanded more for its business especially in pharmaceutical industry. Nipro Corporation eventually was founded in 1954 and currently known as National Company in Japan. It headquartered is located in Osaka. In the meantime, the aims of Nipro Corporation also stress more in expanding and to grow as a truly global comprehensive health care company that can fulfill each of every need of diverse people from different gender, ages, customs, cultures and many more. Besides it also has achieved over 25 years of experience and dedication, and has become a top supplier of co-branded blood glucose monitoring systems to retailer globally. Moreover, Nipro Corporation already has seven major medical production centers worldwide and around more than 500 subsidiaries as well as more than tens of thousands of employees. The main objective of Nipro Corporation is actually dedicated to assisting patience with diabetes manages their disease and have a pleasant life. Therefore, this is why we choose this company for FDI in India rather than the other country.

2.0 FINDING ANALYSIS

       2.1 PEST ANALYSIS

          There are several reasons of choosing India over other country to start a new venture for Self- monitoring blood glucose meter. Since our company will have a new facility in Pune, India so it is crucial to analysis the PEST factors from this country. Basically, PEST analysis is stand for Political, Economic, Social and Culture and Technological.  PEST analysis not only help to assess the external factors for the business, but it also assists to determine how those factors affect the performance of business in the long term. Normally, most of parent companies will create new long term jobs in the foreign country by hiring new employees at right the places.

          First and foremost, as one of the largest democracies in the world, India runs on the federal form of government. The political environment in India also can be greatly changed by certain factors like the government’s policy and political stability that includes the politician’s interest and the ideologies of several political parties. Thus, mostly the business environment in Pune, India is affected by multivariate political factors that may suit for foreign investment. Besides the stability of political condition and the well develop of taxation system in Pune also can encourage more investment. Basically, there are several common taxes that be charged in Pune such as Income tax, service tax and sales tax which are imposed by the Union Government. For the other taxes like utilities takes are been managed by local bodies. Apart from that, the government in India often encourage free business through a variety of programs to support the citizens there. Therefore, India is a right country to open a new venture and operating an investment.

         Furthermore, the economy of India is seen more stable after the establishment of new policy of industrial reform in 1991. As based on the policy, diminutions in industrial licensing, development of FIBP and many more has caused in a stable expansion of economic environment in India. As one of the developing cities and main centre of learning in India, Pune has emerged as a conspicuous place for manufacturing and Information Technology, IT and it is the eighth largest metropolitan economy. In facts, India has registered about $5.07 trillion of GDP in 2013 and followed by some improvement of 5% in gross domestic product, GDP growth rate in 2014 to 4.35% in 2013, while Pune is sixth highest state that contribute more in per capita income in the country. As the centre of Information Technology(IT) and Bio-Technology(BT), it drives Pune’s prospering economy to high per capita income of Rs 46,000 per annum, and it is actually 50 per cent higher compared to the country’s PCI. (The Time of India,2008).  Besides, the current population of Pune also higher which is 9,218,902 9.2million, (India Online Pages,2015). Then, the average monthly disposable salary is   Rs 42,450.21($471.98) which is not too higher compared to Japan $2,162.15, (Numbeo.Com). Therefore, Pune is a suitable location for the FDI because the salary need to be paid for the new employees obviously cheaper than in Japan as well as the stability of economy is good for future investment.

          The next factor in PEST is the Social factor. Basically, social factor indicates some changes that may affect business environment. For example, when the ageing population in India rise, so it also may result in a substantial rise of pension cost as well as the increase in the employment of senior employees. In facts, in India there is about 70% of people from 1.2 billion of total population between ages of 15 and 65.  Moreover, in India particularly in Pune, there are a big influences of Hinduism and a tradition of caste system. This system actually has created a culture and emphasize the establishment of hierarchical relationship. Besides, India consists of varieties of religion such as 81.3% of Hindu, 12% of Muslim, 2.3% Christian, 1.9% Sikh and 2.5% other groups like Buddhist, Parsi and Jain, (Kwintessential,2000). Hinduism is the dominant religion in the Pune. Furthermore, in Pune, Marathi language is the official language of Maharashtra. However, Hindi and Marathi also are the main language that be used in Pune. Normally, for the large cosmopolitan, the people also can use either English or Gujarati as well as other India languages for daily communication, (Flame University, 2014). So, since there are varieties of religion and custom as well the using of many type of language especially English, thus, it is a good opportunity to having a market in that country.