Asian Business

December 19, 2019

Introduction

This report aimed to present the analysis of doing business within Asian
countries. The report includes in-depth analysis regarding the cultural,
political, and economic factors that affect the business system within the
two selected countries. The countries selected for this report are India and
China that are distinctively different from one another in terms of
socio-cultural and economic factors. The report is divided into two various
parts that reveal about business system within Asian countries, cultural
economic and political effects on the business within India and China, and
the opportunities and challenges that provide benefits or hinders the
business activities within the Asian countries. The data was gathered by
exploring secondary information published in journals and media. The
report ends up with a brief summary that concludes the findings collected
throughout the report and justifies the benefits and drawbacks of doing
business in Asian countries.

Business System in Asia

In recent years, India and China have experienced the process of social,
economic, and political transformation that provided long-term benefits to
these nations. The Asian business system is based on various components
which range from the culture that prevails in the region or society, an
institutional framework based on which the firm operates in the region and
the nature of policies that guides the collaboration and coordination of firm
within the region (Kotler, Kartajaya and Hooi, 2017). Hence, the business
system in Asian countries is highly dependent on the cultural values within
the region. Cultural development creates a significant influence on the
orientation of economies within the region. For instance, Confucian is the
most civilized region, and in China, it has affected the management system
greatly. The business system within Korea, China, and Singapore has
further borrowed the features of Confucian based on which the economies
are molded further. However, Brown (2018) argued that every individual
country within Asian has a diverse set of actions that are culminated in
nurturing their economies. The countries that support open trade and open
culture are promoting the innovativeness that provides significant benefits
in terms of doing business.

Another factor is the management style, which is more likely to be

centralized in decision making. The centralization is correlated with the
social market structure, and the government policies are embraced to shape
the different functionalities within the economy of Asian countries. Rather
than embracing the open market economy, the market determinants are
considered while managing the business. Ambler, Witzel, and Xi
(2016), stated that the contemporary business environment in the Asian
counties is heavily emerged based on socio-economic development. The
shift from eastern to western approach or close to open approach further
flourished the businesses within the Asian region. Today, the increase in
consumer spending and purchasing power provides significant benefit for
starting up a business which ranges from the service sector to
manufacturing (Tan, Gopalan, and Nguyen, 2018).

According to the research conducted by Sikdar and Pereira (2019), it is

found that today, the management structure has been shifted from tight to
decentralized control which has resolved the cross-cultural management
issues. This promoted foreign investment and the grown in globalized
business environment further made Asian countries to adopt flexible
approaches in order to maintain a strong relationship. Choudhury and
Nayak (2019), further reported that in Eastern countries, the businesses
had shifted their perspective of doing business from profit goals to social
responsibility. The corporate social responsibility initiative is embraced by
Asian firms as importantly as by the west, and today, it has become one of
the core components for every business in Asian. Therefore, according to
published data on Bizlatin Hub (2017), doing business in the Asian region is
one most potential decision because of the growing nature of the economy.
Today, Asia has become one of the most powerful marketplaces where
China is leading economic power in the region. The size of the market does
facilitate businesses to expand in the market. The strategic locations,
availability of resources, and affordable labor provide extensive business
opportunities for investors to invest in China. The labor in China is cheaper
as compared to the Indian market, which facilitates manufacturing firms to
a start-up business. This allows to achieve the opportunities of economies of
scale, but on the other hands, the workforce is more competent and skilled
full.

Cultural, Economics and Politics Effect on business in China and

India
According to Stark, Täube, and Ahrens (2016), the most outstanding event
that helped during the 21st century is the emergence of India and China as
the leading player in the Asian market. China is one of the highly populated
countries within the world, with more than 1.4 billion people during 2019,
whereas India has about 1.37 billion people that cover about 30% of the
total world population. These countries are the second and the fourth world
economies according to their purchasing parity, and according to the recent
GDP, the annual growth rate of China and India is about 6.3% and 8.2%,
respectively. Therefore, the economic environment provides favorable
environment that facilitates the development and business growth.

Therefore, both countries but particularly China, have received greater

attention from scholars and international companies regarding doing
business. For instance, Gupta and Bhaskar (2016) studied legislative,
political, and institutional differences between these two countries. Since
1980 the adoption of openness by chains further created a favorable
environment for private properties. Meanwhile, in India, the national
privatization resulted in political decentralization, and it improved the entire
governance structure, which facilitates growth and political stability.
However, China remained the community part, whereas India is based on
the democratic system, but the economic development models within these
two countries resulted in reforms. With regard to infrastructure
development, economic development, quality of life, and level of technology,
China is more favorable for doing business as compared to India (Kumar and
Sethi, 2016). The Indian economy is relatively smaller than the Chinese
economy, and it creates a limited impact on the entire global economy. The
exports from china are 10 times higher than the Indian exporters, and the
foreign direct investment in China is more time higher as compared to India.

The pathway to prosperity in India and China is another driver which further
facilitates investor to do business. The socio-economic factors are
supporting the investor to invest in both countries as compared to other
Asian countries, but the most differing factor in the Indian economy is of
technological development. India plays a leading role in the service sector
and in the field of ICT. The human capital within India is highly qualified in
terms of education and experience. The availability of highly skilled
workforce supports provided long term advantage for business success and
growth (Bhattacharyya, 2019). Therefore, with regard to the human capital
and intellectual, the investor gains huge benefits from the local workers that
add strategic capabilities for firms investing throughout India. Besides this,
China is strategically competent in terms of its manufacturing capabilities.
The legacy of communism that promoted the concept of industrialization is
the major aspect of increasing FDIs. The availability of large-scale
manufacturing and the production of goods at low cost and with low labor
attracts the investors to gain the benefit of economies of scale (Gera, and
Purankar, 2019).

Hence, China and India are both the destination for foreign investors, and as
reported in various studies, the countries have higher market growth rates,
low cost of labor, and policy liberalization. China has a greater market size
and strategic location with regard to logistics and geography. Therefore, the
cost of production is relatively lower as compared to how the country and
business that wants to achieve the goal of cost competitiveness can start up
their business in China (Kaur, 2016). However, the investor is more
reluctant to invest in China because of their cultural differences, unfair
coemption, language barriers, and legal coverages. This is why India holds a
better point when it comes to investment because of similarities in culture
and fair competition.

Opportunities and Challenges - China and India

According to Sahasranamam and Sud (2016), China has risen as the

consumer economy, and it has become one of the export-oriented countries
that created ample opportunities for businesses to expand. With regard to
China, access to the market provides opportunities for investors to do
business, but the local distribution network and the changes in buying habits
of the consumer and the strong regulatory requirement made the country
difficult in terms of market access. Pappu (2019), argued that about 37% of
US products failed in the Chinese market because of the strong regulatory
requirement. Besides this, consumer preferences have shifted, and today,
the consumer environment is highly diverse. The investors that wanted to
do business in China must take the consumer preferences in the account or
else; otherwise, they fail because of different consumer nature. The
consumer are more committed to their local brands which also create
challenges for international firms to start-up. Bureaucracy is also another
challenge that results in difficulty while doing business in China. The
business must follow strict rules and guidelines from a political party and
state governments, which makes the unfavourable environment for firms.

The oversees firm that wanted to invest in China faced a stiff challenge due
to rules and regulations. According to the survey conducted by Feuerwerker
(2017), about 80% of investors doing business in China are considering
bureaucracy as the most significant challenge because of strict governance.
The investor might face difficulty in getting permits, licenses, and other
regulatory requirements along with other compliance towards governmental
laws. Besides this, in China, Chinese companies are improving their services
and product to enhance the quality of life where consumer prefer their own
domestic products rather than the international product. The consumer
behavior towards using their own products makes it difficult for an
international firm to penetrate and survive, which is one of the most
potential decisions to invest in (Tan, Gopalan, and Nguyen, 2018).

Despite these difficulties, Ambler, Witzel, and Xi (2016), reported various

opportunities for doing business in China. Wang and Zhuang (2019) stated
that opportunities are limited as compared to challenges, and it provides an
unfavorable environment for businesses to do business in China. The
opportunities can be categorized as four basic factors that provide an
advantage to do business in China. This ranges from labor cost to growing
GDP, consumer spending, and demand for western brands. The consumer of
China are demanding western brand, but still, the majority of the population
are inclined to buy their own domestic product. The cheap labor provides
opportunities to do business, but today Chinese labor is no longer cheaper
as it was before.

On the contrary, India has been recognized as the most potential

destination for businesses. The country is going from unprecedented
liberalization, which promoted the consumer base for international firms.
Today, the country has become one of the faster-growing nations across the
world, and it granted overseers investors, to gain access to the market.
According to Bhattacharyya and Èirjevskis (2018), starting up a business in
India is one of the most significant challenges because of access to market
knowledge and procedure involved. The businesses required to go through a
wide range of permits, which have numerous procedures. The businesses
that are starting up in India have to gain a permit from every specific
authority, which is itself a complex process. The property registration also
requires legal work, and the businesses are required to go through several
property regulation processes. They have to pay stamp duties, lawyer
charges, and other land and survey fees in order to gain final permits over
the land used for the business. According to OEDC, it takes more than 4.3
years to resolve insolvency in India, which is another technical process
involved in the business, which creates challenges for investors to invest in
India (Adhana and Gulati, 2019).

Katoch (2016), the political uncertainty remained challenges for the Indian
nation; thus, which affect the perception of ding businesses in India. The
foreign business may find India as a highly unattractive country in Asia
when it comes to political uncertainty. The political uncertainty creates a
disruptive environment, which affects not only the conditions, but also
affects resource allocation, taxation, and land acquisition (Abdin, 2019). It
also results in corruption and India on ease of starting a business is ranked
as 158, whereas on Perception Corruption Index, it is ranked as 85th among
the 175 countries. Therefore, this shows that corruption creates an
unfavorable environment for business, and it affects the business
community which does affect the decision about starting up business in
India.

Despite these challenges, India is one of the most attractive destinations to

start a business among the other Asian countries. The country's population
provides a wider consumer place for middle-class growth. The middle class
is now moving to high class, and the shift in consumer classes provides
opportunities for start-up more business to meet the growing need
(Feuerwerker, 2017). The location is ideally the best throughout Southeast
Asia. This is because the products which are manufactured in India can be
supplied to other neighboring countries such as Bhutan, Sri Lanka, Pakistan,
Maldives, Nepal, Bangladesh, and Myanmar. Besides this, the resources are
available comparatively at low cost as compared to other countries. The
country has the highest rate of the workforce, and the majority of workers
are younger, which provides an advantage for a demographic dividend. The
large pool of young worker provides innovative mind which is beneficial for
start-up a new business (Tan, Gopalan, and Nguyen, 2018).

The availability of strong and technical human capital with engineering

capabilities and English-speaking account, engineers, grades, doctors,
teacher, etc are highly attractive for the foreign investor. The human capital
is one of the most attractive aspects which provides significant benefit while
doing business in India. Jia, Lan, and Miquel (2018) argued that thou India
lacks infrastructure facilities, but the country is improving in terms of
transportation, logistics, and technological infrastructure. The country has a
coastline of 7516.6 km, which is the biggest peninsula in the world. It severs
more than 13 major ports and 200 minor and the other intermediate ports.
This facilitates trade across the world and further attract investors.

Conclusion

From the report, it is concluded that among Asian countries, India is the
most potential destination for doing business because of its sheer market
size, availability of resources, growing income, skilled labor, and another
completing factor. However, the regulatory requirement and long
procedures do create a disadvantage for the investor to invest. The
investors are required to go through numerous procedures before starting
up a business, which makes the country ineffective. Besides India, China is
another attractive destination for business, but comparing it with India,
China is least attractive because of serval factors. The Chinese economy is
growing, but in terms of labor, India is more attractive. China is attractive
for a domestic investor, but for an international investor, the place is not
favorable because the domestic firms are more demanded by the consumers.
Hence, conclusively it is summed that among India and China, India is
favorable in terms of business investment as compared to China.

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