This report will consist of a contextual analysis of the Indian competitiveness and investment attractiveness of the Indian soft drink industry. The author will use Porter’s National Diamond as a framework to conduct the industry analysis of the Indian soft drink industry and will draw clear conclusions and recommendations of entering into the Indian market.
Throughout 2010, the Indian soft drinks market generated total revenues of $3.8 billion, representing a compound annual growth rate (CAGR) of 11% for the period 2006 – 2010. During the period 2006 – 2010, the Indian soft drinks market grew at a double digit rate, as a result of strong sales increases across all of the products categories. Market consumption volumes increased between 2006 and 2010 with a CAGR of 10.7%, to reach a total of 6.7 billion litres 2010. This is expected to rise to 10.1 billion litres by the end of 2015, representing a CAGR of 8.8% for the 2010-2015 period. The overall market growth is expected to accelerate during the forecast period, however, the annual rate of growth is set to fall from a high of 10.1% in 2011, to a low of 7,6% in 2015. (Datamonitor, 2011, pp.7-8).
Porter’s National Diamond
Rugman and Collinson (2009, p.457) noted that Porter’s four determinants of national competitive advantage can be ‘critical in helping a country build and maintain competitive advantage.’ These four determinants are, factor conditions, demand conditions, related and supporting industries and firm strategy, structure and rivalry. There are also two external variables which can have a big influence, these being the Government and chance, which will be included in the analysis. This is known as Porter’s single-diamond framework. A model of Porter’s single-diamond framework can be seen in Fig.1.
Fig.1. Porter’s single-diamond framework
These factors tend to include land, labour and infrastructure and are necessary in order to compete competitively in a specific market. These factors analysed below take into consideration all three of these elements and how they can benefit or disadvantage the Indian soft drink industry.
The Indian infrastructure has went under a lot of development over the last 15 years, however it’s infrastructure is still seen as poor compared to other leading countries. According to Levitt (2011), there is ‘practically no mass transit in Bangalore, Indian technology firm Infosys spends nearly $5 million a year on buses, minivans and taxis to transport its 18,000-plus employees to and from Electronics City, Bangalore's main technology hub. Modern highways and bridges, state-of-the-art seaports, dependable power and clean water continue to be in short supply throughout the nation.’ India has under invested in its infrastructure for the last 60 years and is seen as 10-12 years behind its current needs. Traffic jams on Indian roads can result in people spending an upwards of four hours commuting to work every day. The lack of reliable power in India has seen many major cities lose power one day a week to relive pressure on the grid, which has resulted in many factories having to maintain expensive backup generators. For businesses wishing to enter the soft drink industry, this information will not be that encouraging for them. With India having an inefficient transport system, soft drink manufacturers need efficient transport systems that will help with distribution and growth in exports. Also the fact that there are regular power cuts, means new business will need to buy generators to ensure that production does not come to halt, which could have a costly effect on the business if a power cut happened. India definitely has a lot of potential, however the author recommends that potential entrants wait a few years until infrastructure improves...