BUSINESS ENVIRONMENT ANALYSIS

Purpose of Business Environment Analysis

Relevance to Our Work

What is it

How to do it

WELCOME TO NAIR

 Name

Shailendra Jaiswal Senior Professor Management

Shailendra_jaiswal@yahoo.com

Email

spmgt@mail.rscbrc.ac.in
09974003522

Mobile Lectures available on

http://www.scribd.com/shai lendra_jaiswal

Vision And Mission . Business Environment Analysis . Innovation Management. Value chain management and Business Models .

SUSTAINING /PROTECTING

Normal curve

BUSINESS ENVIRONMENT ANALYSIS

ENVIRONMENTAL CONCERNS

MEGATRENDS
FORCES SHAPING THE WORLD

ECONOMIC

T E C H N O L O G Y F L U X

STRENGTH FLEXIBILITY

GREAT OPPORTUNITIES
OPP

I N C R E A S I N G E X P E C T A T I O N

WEAKNESS
EXECUTION

SERIOUS THREATS
SOCIAL/POLITICAL/ REGULATORY GLOBALIZATION

RESOURCES INCLUDING ENERGY

BUSINESS ENVIRONMENT ANALYSIS

Factors/trends affecting Indian Railways Megatrends Pest analysis models Framework for outside-in thinking Current environment

Why should we try to deepen our understanding of external environment and its impact on Railways

Relative National Share of Global Economic Output (1500 ACE to 2050 ACE)
35%

India & China: the two largest economies of the 16th, 17th and 18th centuries

30%

China

A series of imperial experiments

Re-Orient: an Asian century?

US

% Share of Global O ut put

25%

India

20%

Colonial engagement and decline

15%

10%

UK

Russia

Japan

5%

0% 1500 1600 1700

T ime

1800

1900

2000

US

China

India

UK

Japan

Russia

Sources: Maddison, 2000, Goldman Sachs, 2003, Revi, 2005

Economic Growth Trends for Major Economic Powers (2000-2100)

IFs Base Case: N ational/Regional GDP at PPP (at 1995 constant USD)
120,000

China-EU
100,000

China-US

India-EU

India-US

India-China

80,000

GDP (Billion $)

India, China & Japan had the largest 60,000

urban populations in the world till the early 19th century
40,000

20,000

2000 India China 2010 2020 US A 2030 EU25 2040 2050 Years J apan 2060 Russia 2070 Brazil 2080 2090 2100

The US and EU continue as major powers till the 2030s, after which China will typically lead for up to 50 years, while India comes up from behind

HOW TO REACH 2090 FASTER .

Stages of the Growth Curve

Maturity
Growth
Start

S CURVE

ADAPTING / LEARNING

THERE ARE NO LIMITS TO IMPROVEMENT

Lots of Growth Curves

Television E-cash Movies Images Mp3 Games Web Gopher, Archie Streams FTP Email Mag tape transfer Remote resource sharing Terminal access Terminal linking

Growth In Many Fields

J CURVE

CONTINUOUS INNOVATION CREATING

CONTINUOUS INNOVATION CREATING

Power law

Normal curve

S curve

SUSTAINING /PROTECTING

ADAPTING / LEARNING

National Populations with Tertiary Education (2000-2100)

N ational Populations with T ertiary Education (2000-2100)
600

India-China-EU
500

India-China-US

Populat ion (millions)

400

300

200

100

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100 Years India China US A EU25 J apan Russia Brazil

India and China in competition as potential lead knowledge powers followed by US and EU?

Framework For Outside-in Thinking

MEGATRENDS

PERVASIVE COMPUTING

DEVELOPMENT IN TELECOMMUNICATION

Urbanization
Big cities getting biggerand poorer 66% of world in cities by 2030 2007: 3.2 billion people in cities - a number larger than the entire global population of 1967

URBANIZATION

GLOBAL WARMING

ENERGY/POWER

BIOMECHANICS

HUMAN/MACHINE

CLEAN
ATRACTIVENESS PERFORMANCE

SAFE
MORE TRAFFIC
(FREIGHT/PASSENGERS)

CONFORTABLE

SAME NETWORK

New technologies
MATERIALS
LIGHT WEIGHT SMART

Interoperability

Systems integration
MECHATRONICS
WHEEL/RAIL STEERING,SUSPENSIONS

STRUCTURES
OPTIMIZATION DESIGN FOR MANUF

AERODYNAMICS
CFD NOISE INDUCED

AN ELECTRIC BUS TAKES 15 SECONDS TO RECEIVE AN ENERGY BOOST AT STOPS.

Real Estate Classifications

Control Rooms Corporate Offices Rental / Staging Financial Exchanges Government Buildings Race Tracks Hotel Rooms and Lobbies University, College, School Studios Highway Signs Retail Banks

Film Sets, TV Backdrops Theme Parks

Casinos

Corporate Reception Airports Areas Shopping Malls Stadiums Pub, Club, Bars

Railway Stations Taxis, Trams, Buses High Street Retailers Grocers Petrol Stations

Restaurants Mobile Vans Outdoor High Impact Billboards

Hair Salons

Hospital, Waiting Rooms, Surgeries Mobile / Portable Screens

35 Advertising Classifications

INDIAN LOGISTICS INDUSTRY- A REGIONAL PERSPECTIVE

LOCATION ATTRACTIVENESS

Megatrends/MajorShifts
From Nation-States to Networks From Traditions to Options From Export-Led to Consumer-Driven From Government-Controlled to Market-Driven From Farms to Supercities From Labor-Intensive to High Technology From Male Dominance to the Emergence of Women From West to East

* Megatrends Asia, John Naisbitt, 1996

MEGATRENDS
Aging demographics Energy Volatility & Rise of Alternatives Connectivity / Web 2.0 Global Warming & Rise of Green Products Focus on China/RDEs Rise of Urbanization/ I Infrastructure

Rise of Services

Risk & Security Focus

Rise of Trust Economy

Innovation imperative

Globalization

RDE* challengers

Economic volatility

Global divides

Rise in natural disasters

Health spending /biotech

Entertainment/ celebrity

Health & wellness

*Rapidly Developing Economy

CURRENT ENVIRONMENT
The industry is driven by the economy and subject to political intervention The industry competes with other modes The industry is impacted by technological changes Railways is confronted with the changing pattern of industrial production and geography away from traditional industries and clusters towards a more dispersed pattern embodying high value and low volume manufactures. A transforming economy in India, which is shifting from a primary bulk commodity production system to a specialized manufacturing system with increasing contribution from the services sector. A global economy which is getting highly integrated and where the options to source raw materials, production source, intermediate finished goods and markets for finished goods can be varied and change from one cycle to another. A growing and urbanizing population in India, whose transportation needs are driven by an affluence leading to increased requirements of onboard and off board services.

Potential Challenge Infrastructure

When the winds of change are blowing, some build shelters and some build windmils . . .

PEST Analysis Models

Political
Purposes: To find how political development, locally, nationally, internationally affect the strategy of a business. Areas to be considered: Consumer laws and regulation Political pressures, Government views of certain business activities, including local, national or international government political issues affecting a business

1. 2. 3.

4.
PhotoDisc

PEST Analysis Models

Political
1. 2. 3. 4.
PhotoDisc

Economic

Purposes: To find how economic factors may affect on the business. Areas to be considered: Consumer activities, such as spending patterns Economic conditions, such as inflation, unemployment, growth, etc. Government policies, such as fiscal, monetary, exchange rates, etc. The changes in production and labor market

PEST Analysis Models

Political
Economic
1.

Purposes:
To find what competitive advantage a business may gain by social changes.

Areas to be considered:
Aging population trend, which may increase services for old people Birth rate increase, which may affect baby product markets Security condition, e.g. increase in crime may cause a business to increase insurance costs Pressure groups, such as environmental groups, local community groups, etc. which may prevent a business from polluting a river

2.

Social

3.

4.

PhotoDisc

PEST Analysis Models

Political

Purposes: To find how new technologies might affect the transport /business activities. Areas to be considered:
1. 2. 3. 4. The rate of technological change The development of IT The wide use of Internet The creation of new materials for production Impacts: All these technological changes will lead to some effects on the business, such as the product of the business may be replaced by new products or its production methods may have become out of date.

Economic

Social

Technological
PhotoDisc

MULTIPLE PERSPECTIVE THROUGH MULTIPLE ANALOGY

IMPACT OF MEGATRENDS ON RAILWAYS
MEGA TRENDS
1 2 3 4 5 6 7 8 9 10 11 12 13 14

IMPACT

15 16
17 18 19 20

SPREADING INNOVATION THROUGH CREATIVITY

TECHNIQUE OF MULTIPLE PERSPECTIVE THROUGH MULTIPLE ANALOGY

TRANSFERRING ESSENCE FROM SOURCE DOMAIN TO TARGET DOMAIN

MEGA TRENDS
1 2 3 4

IMPACT ON INDIAN RAILWAYS

Globalization Liberalization of Indian economy Economic growth and spatial dispersal Demographic Changes Population growth and urbanization Scarcity of fossil fuels and natural resources and Rise of alternative sources of energy new materials Rapid advancement and spread of information and communication technology Lifestyle changes Rising levels of education Fashion Media Climate Change and Environmental concerns Transparency and regulatory Environment Rise of services

5 6

7
8
9 10

SPREADING INNOVATION THROUGH CREATIVITY

TECHNIQUE OF MULTIPLE PERSPECTIVE THROUGH MULTIPLE ANALOGY

TRANSFERRING ESSENCE FROM SOURCE DOMAIN TO TARGET DOMAIN

MEGA TRENDS
1 2 3 4

IMPACT ON FUNCTIONAL DEPARTMENTS

Globalization Liberalization of Indian economy Economic growth and spatial dispersal Demographic Changes Population growth and urbanization Scarcity of fossil fuels and natural resources and Rise of alternative sources of energy new materials Rapid advancement and spread of information and communication technology Lifestyle changes Rising levels of education Fashion Media Climate Change and Environmental concerns Transparency and regulatory Environment Rise of services

5 6

7
8
9 10

MULTIPLE PERSPECTIVE THROUGH MULTIPLE ANALOGY

IMPACT OF MEGATRENDS ON FUNCTIONAL DEPARTMENTS
MEGA TRENDS FUNCTIONAL DEPARTMENTS

Globalization

HRD

Liberalization of Indian economy

ELECTRICAL/ENERGY MANAGEMENT
3 4

Economic growth and spatial dispersal Demographic Changes Population growth and urbanization Scarcity of fossil fuels and natural resources and Rise of alternative sources of energy new materials Rapid advancement and spread of information and communication technology Lifestyle changes Rising levels of education Fashion Media Climate Change and Environmental concerns Transparency and regulatory Environment Rise of services

OPERATIONS MARKETING

FINANCE
MAITENANCE/MANUFACTURING /MECHANICAL INFRASTRUCTURE /ENGINEERING SIGNALLING / IT /COMMUNICATION

6 7 8 9 10

SECURITY/SAFETY RAILWAY STATIONS

MAPPING IMPACT OF MEGATREND

Source Model 1 2 3 4 5 Target Model

6
7

MAPPING IMPACT OF MULTIPLE MEGATRENDS

MEGA TREND 1 1 2 3 MEGA TREND 2 MEGA TREND 3 MEGA TREND 4 MEGA TREND 5 MEGA DETERMINANTS TREND OF IMPACT 6

4
5 6

Passenger (billion passengermiles)

Earnings Growth in the last 15 years

Rs. in Crores

160000 140000 120000 100000 80000 60000 40000 20000 Total Amount 0 Sundry Amount Other Coaching Amount Goods Amount Passenger Amount

Growth of suburban and Non Suburban Traffic

6000 5000 Suburban 4000

3000 Non-Suburban 2000

1000

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 (R.E.) (B.E.)

1. Suburban traffic is more than non suburban traffic. 2. The gap between the two is now reducing. 3. Non suburban is growing faster than suburban.

Traffic Growth over Previous Year

25%

20%

15%

Suburban Growth over Prev. Yr.

10%

Non suburban Growth over Prev. Yr.

5%

0%

Total Growth over Prev. Yr.

-5%

INDIA Vision 2020

GDP growth -8-9% year on year Quadrupling of real capita income 4th largest GDP, SME driven economy Per capita GDP from 153 rank to 100 Population >1.3 billion Self sufficient agricultural output Growing labor force

INDIA Vision 2020

High growing sectors
Commercial agriculture Agro industries Garments, construction, tourism Fuel and power Retail and wholesale trade IT and IT enabled services Transport and communication Education, health Financial services

Targets vision 2020

IMPORTANT TARGETS VISION 2020 PARAMETER TOTALPOPULATION (Million ) 15-64 years LIFE EXPECTANCY(Years) PUBLIC EXPENDITURE ON HEALTH(%of GDP) FOOD PRODUCTION (Million Tonnes) LITERACY FEMALE AS % PUBLIC EXPENDITURE ON EDUCATION (as % GDP) UNEMPLOYMENT RATE-- AS % ACESS TO SANITATION as % TELEPHONES per 1000 POPULATION FREIGHT TRAFFIC-BILLION TONNE KM RAILWAY FREIGHT BILLION TONNE KM PASSENGER TRAFFIC- MILLION PASSENGERS TOTAL POWER GENERATION(twh) FUEL DEMAND COAL MILLION TONNES FUEL DEMAND OIL-MILLION TONNES FUEL DEMAND -GAS-BILLION CuM 2007 1013 604 64 0.9 193 44 4 7 <2 73 34 1100 500 1300 463 311 83 21.6 100 200 5500 3000 2000 1363 538 195 64.7 2020 1331 882 71 3.4 417 100 8

Investments in key sectors

SECTOR WISE INVESTMENTS 2002-07 In RS crores 340237 127107 101889 102189 60108 106743 22997 6893 5643 32367 2007-12 In million $ In RS crores In Million $ 75608 28246 22642 22709 13357 23721 5110 1532 1254 7193 658630 278658 345134 200802 111689 246234 40647 36138 8966 127306 146362 61924 76696 44623 24820 54719 9033 8031 1992 28290 SECTOR ELECTRICITY ROADWAYS TELECOMMUNICATIONS RAILWAYS WATER and SANITATION IRRIGATION PORTS AIRPORTS STORAGE OIL AND GAS PIPELINES % jump 94 119 239 97 86 131 77 424 59 293

Railways Vision 2020

Enhance gross revenue from 1.2% to 3% of GDP by 2020 Annual growth of 10% for next ten years Network expansion by 25,000 Kms. by 2020 Segregation of passenger and freight lines on highdensity network routes Maximum speed of passenger trains to be raised from 110 / 130 Kmph at present to 160 / 200 Kmph on segregated routes by 2020 Increase the speed of freight trains from 75 to 100 Kmph Gauge conversion programme to be completed Electrification of 33,000 Kms. of routes Making railway operations free of accidents

SURPRISE FROM BANGLADESH

The most dramatic period of improvement in human health in history is often taken to be that of late-19th-century Japan, during the remarkable modernisation of the Meiji transition. Bangladeshs record on child and maternal mortality has been comparable in scale.

 Bihar has clocked an annual growth rate of 14.15 per cent for the fiscal 2010-11, surpassing the GDP figures of some of the most developed states such as Gujarat, Maharashtra and Punjab. The state has witnessed a GDP growth rate of over 14 per cent thrice in the past five years.

India: Factor Contributions to Growth

Share of annual growth (1950-2000) at 1993-94 prices
1950-1960
100%

1960-1970

1970-1980

1980-1990
Other Factors

1990-2000

% share of Annual Growth

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

'Capital'

'Technology &

Institutions'

'Labour'
'Land'
Source: TARU analysis, 2006 based on Sivasubramonian, 2000, 2004, NAS, 2006

Savings & Investment and Technology & Institutions are the primary growth drivers of the Indian economy

Land

Labour

Capital

Technology & Institutions

Others

India: Steady but Decelerating Urban growth since the 1980s

30%

Percentage Decadal Growth Rate

25%

20%

15%

BUT period of urban growth deceleration

10%

5%

0%

1911

1921

1931

1941

1951
T ime

1961

1971

1981

1991

2001

% Urbanisation

Urban CAGR
Source: Census of India, 2001

A major puzzle: Indias decelerating urbanisation since the 1980s. Possible

explanations: stagnant urban employment, declining living conditions and relative immobility of rural India

Indian cities: a world of natural population growth

100%

Proprtion of absolute increase in Urban population

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1961-71

Net Rural-Urban migration is ~ 20% of Indian urban population growth

Net reclassification of rural to urban areas and vice-versa make up ~20%) of urban population growth

Natural population growth is the most important component (~ 60%) of Indian urban population growth

1971-81

Intercensus periods

1981-91

1991-2001

N atural Growth of U rban population

N et Reclassification

N et Rural-U rban migration

Source: Census of India, 2001

Net rural-urban migration makes up only 20% of Indian urban growth

Catalysing Indias Urban Economy

Trade, Hotels & Restaurant Other Services Banking & Insurance Public Administration & Defence Registered Manufacturing Real Estate Transport,Storage & Communication Construction Unregistered Manufacturing Agriculture Mining & Quarrying Elect. Gas & Water Supply Fishing Forestry & Logging 87,308 87,714 85,725 77,111 74,747 74,817 58,023 42,389 24,387 180,803

Moderate employment growth

Stagnant or declining employment growth

Moderate employment growth

Low employment growth

Urban

Rural

100,000

200,000

300,000

400,000

NDP 2000 (Rs. crore)Source: TARU analysis, 2006, NAS, 2006

Trade & part of Other Services (e.g. IT/ITES) are key growth drivers that also create steady jobs. Core urban economic sectors (manufacturing, finance, Govt.) have stagnant or declining employment growth

Geological Coal Resources India (as on 31.3.2012)

Roads: Future Perspective

Traffic handled by Road (MT)
200 100 0
MT

177
34 27 61 100 77
Raw Materials* Finished Steel Total

2004-05
* Excludes traffic due to export of iron ore

2019-20

Traffic for roads, due to steel industry by 2020, would increase by 300%(approx.). The road network needs would be expanded The steel plants and mines to be integrated with the national highway development.

Railways Future perspective

Traffic handled by Railways (MT)
300
MT

230 80 11 2004-05 91 33

263
Raw Materials* Finished Steel Total

200
100

0
2019-20
* Excludes traffic due to export of iron ore

Traffic for railways, for steel industry by 2020, would increase by 300%(approx.).The railway facilities would be expanded substantially Participation by the steel industry in creation of railway infrastructure

INLAND WATER TRANSPORT

INLAND WATER TRANSPORT

Coal Slurry Production: Sizing

Coal sizing, cage impaction example shown.

2 mm minus crushed coal sample.

Benefits of Water Transportation

Fuel efficiency- As per international standards, 1 gallon (3.8 liters) of fuel can transport 1 tonne of cargo through 514 miles (827 km) by barge, as compared to 202 miles (325 km) by train, and 59 miles (95 km) by truck.

Safe mode for moving toxic material and chemicals Environment friendly- low noise and air pollution. Reduces land congestion. Generates more employment per rupee of investment than any other mode.

Strategic Long-term Climate Risks: Coastal Flooding, Drought & Glacial melt

Glacial melt

Drought

Coastal Flooding

, , ,

, -- It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most

adaptable to change. If what Darwin said is true then there is immense hope for India. In any SWOT analysis our flexibility would be our major strength and in a world where change is the only constant Indians are definitely having innate competitive advantage with their learned adaptability . Root spring of our flexibility is our diversity ,and in modern India a critical mass is exposed to diversity of language , sub cultures and social systems. Please consider the following guesstimates about the multiple language skills of Indians .

Percentage of Indians in Global population knowing two languages

20-40%

Percentage of Indians in Global population knowing three languages Percentage of Indians in Global population knowing four languages Percentage of Indians in Global population knowing five languages Percentage of Indians in Global population knowing six languages

30-50% 40-60% 60-70% 70-80%

The skills with multiple languages and exposure to different sub cultures prepares the Indian Mind for adaptability and is one of the major reasons for success of Indian diasapora. , , -- Thre are enough reasons to hope for a bright future for India , lets not loose hope and work to convert our strength into excellence .

Automobile Indias automotive industry

Largest three-wheeler market in the world Between 2004-05 and 2009-10, domestic sales registered an annual average growth of 8.3% Exports grew at an annual average growth of 20% between 2004-05 and 2009-10 2nd largest two-wheeler market in the world Two-wheelers have the largest market share in India In 2009-10, two-wheelers constituted 76.23% of the market Annual average growth registered between 2004-05 and 200910- 10.3% Growth drivers - increasing demand from rural areas Two wheeler penetration to increase from 22% to 26% over next 5 years

Automobile Indias Automotive industry

4th Largest passenger car market in Asia & 10th largest in the world Passenger car sales in 2009-10 at 1.5 million units & exports at 4,41,710 units Passenger car segment constitute 80% of the Passenger Vehicle Industry Compact & Mini cars constitute 80% of the total volume India to become hub for small car exports 4th Largest Commercial Vehicle Market

Annual average growth in market size over 2004-05 -2008-09 21%

Automobile Opportunities
Manufacturing Auto components to meet domestic demand
Investment possible in key segments of auto components like engine and engine parts, transmission and steering parts, electrical parts, suspension and breaking parts

Nissan has identified India among the five low cost countries to manufacture its new generation compact cars

Research & Development

Hyundai intends to make India a hub for small car development

Development of new products that are environment friendly

Electrical Machinery
Growth of this sector is driven by Increasing demand for power and electrification - A capacity addition of 78,700 MW has been proposed for the Eleventh Five Year Plan (20072012), translating to a higher demand for electrical machinery Rapidly growing Industrial sector Focus on investment in Infrastructure The sector has been allowed 100 per cent foreign direct investment (FDI) through the automatic route India also has many Special Economic Zones (SEZs) in the engineering sector.

Electrical Machinery Segments of Electrical Machinery

Boilers

Production stood at USD 2.1 billion in 200809

India is a net importer of boilers Generation Equipment Turbines & Generator Sets In 200809, production of turbines and generators was valued at USD 874 million and USD 370 million

India is a net importer of turbines and a net exporter of generators

Transformers
Transmission Equipment

Transformer production in 200809 stood at 72 million KVA, with India being a net importer of transformers

Distribution Equipment

Switch Gears & Control Gears

Production of switchgears and control gears stood at 17.8 million units in 200809

Electrical Machinery Nuclear Sector

Huge investment potential in Higher Capacity Thermal Units & Nuclear Reactors The Government of India (GOI) proposes to add 3,380 MW of nuclear power capacity by 2012 With signing of nuclear agreements with different countries, India to become a major hub for manufacturing nuclear reactors and associated components

Consumer Durables
The size of the consumer durable and electronics sector is around USD 6.6 billion The consumer durables sector grew by 26.2% in 2009-10 and in Q1 of 2010-11 recorded 29% growth Growth in Market Size between 200304 and 2007-08 Refrigerators - 81% Washing Machines - 68% Air Conditioning -217% Equipment

Market Potential can be visualized from the following Penetration Levels Refrigerator use is around 18% of the population Washing machine 6% Air conditioner less than 2% Microwave oven around 1%

Food Processing India is the.

Largest producer of pulses, milk, cashew nuts, coconuts and tea in the world Second largest producer of rice, wheat, sugar, ground nut and inland fish Second largest producer of fresh vegetables and accounts for 15% of world production

Accounts for 10% of world fruit production, producing 41% of world mangoes and 23% bananas

However about 30-40% of the farm produce is wasted in the country

Food Processing India is the.

Food is the biggest consumption category in India with 31% of consumers wallet expenditure Processed food market in India is at nascent stage of development Food processing level for fruits and vegetables in India is just 2.2% compared to 65% in US and 23% in China
Opportunities in Warehousing and cold development storage

Packaging machinery technology

Lab infrastructure Dairy processing

Food processing units for domestic sales/ exports

Industry is poised to reach USD 318 billion by 2020

Tourism
Travel & Tourism Demand (INR billion)
30000 25000 20000 15000 10000 5000 0 2005 2006 2007 2008 2009E 2010E 2020E 3882.6 4465.7 4921 6181.7 6008 6778.2 24252.4

Over the next decade, demand for travel and tourism is expected to achieve an annualized growth of 9.2%

Travel & Tourism contributed

8.6% to GDP in 2010, likely to increase to 9% by 2020

10% to employment in 2010

Government to increase investments in the sector to 9% of GDP

Tourism Opportunities
Hotel Infrastructure

In November 2009, there were about 1,25, 000 rooms available

55,000 new rooms expected to be added by 2013-14 Huge opportunities for investments budget hotels in Tier I & II cities which are buzzing with business activity Wellness Tourism Indias Wellness services market worth USD 2.9 billion & expected to grow at 30% per annum for the next 4-5 years

Tourism Opportunities
Rejuvenation Segment Rejuvenation segment (spas, alternate therapies, ayurvedic treatments etc) to grow to INR 194.5 billion by 2014 from INR 43.7 billion in 2009 Fitness segment Fitness segment (comprising gyms and slimming centers) to grow very fast, weight management category growing at CAGR of 13% On-ground infrastructure Huge opportunities for investment in building on-ground infrastructure like roads, rail connections, hotels, restaurants and other wayside amenities

Gems & Jewellery

Gems & Jewellery Exports (USD billion)
80 60 40 20 25 58

The exports are expected to grow at CAGR of 15%, amounting to USD 58 billion by 2015 from current size of USD 25 billion

2009

2015

Source: Unlocking the potential of India's Gems & Jewellery Sector, FICCI Technopak report

Indias Current Advantage

Ability to deliver good quality at low costs Cost of cutting diamonds in India is 7% of that in Belgium and 60% of that in China

Gems & Jewellery Opportunities

Indias Current Dominant Position
Mass Jewellery Designer Jewellery

Branded Jewellery

Processed Raw MaterialLow Value

Processed Raw Material High Value

Raw Materials

Gems & Jewellery Value Addition Ladder

Chemicals
Chemical Sector including pharmaceuticals and petrochemical has an annual turnover of approximately USD 83 billion, which is equivalent to 5% of Indias GDP. It is the 12th largest in the world in terms of volume and third largest in Asia.

Major raw material component sources available in the country

Base chemicals is the largest segment accounting for ~53% of the total industry followed by pharmaceuticals with ~24% Indian pharmaceutical industry is ranked 3rd in the world in terms of production volume and 14th in terms of domestic consumption value. The Indian pharmaceutical industry was estimated at USD 19.4 Bn in FY09. Formulations account for ~65% and bulk drugs for the balance 35% in value terms.

Chemicals
India is the fourth largest producer of agrochemicals globally, after US, Japan and China. Petrochemicals sector expected to grow 12.5 MMT by 2011-12 Investment potential about $ 17 billion Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) are coming up in a number of Indian states. PCPIRs are specifically delineated investment regions with an area of around 250 sq km and planned investments greater than USD 15-20 Bn. Investments of over USD 280 Bn have been planned across the three approved PCPIRs Bharuch, Visakapatnam and Haldia and three planned PCPIRs Mangalore, Cuddalore and Paradeep.

Chemicals
Indian Biotechnology industry crossed the USD 3 billion mark in FY10 (including bio-services and bio-informatics), registering a year-on-year growth of 17% The year-on-year growth of the biotech market is expected to accelerate driven by high demand for vaccines, biopesticides, biofertilizers, biodiesel and biotherapeutics in India as well as at the global level. BioPharma segment grew at a CAGR of 11.9 % in 2009-10. It contributed $1.9 bn, accounting for 62 percent market share.

Construction
The sector is among fastest growing sectors

top 5 recipients of FDI

100% FDI permitted Largest employers (including construction and facilities management)

The market value of real estate under construction projects crossed USD 100 billion in 2010 from USD 69.4 billion in end of 2006

Construction Opportunities
Residential Housing

Housing shortage to increase from more than 24 million units in 2007 to 26 million units by 2012.
Commercial The demand for office space is expected to total 180 million sq feet by 2013 Retail Cumulative Retail demand is expected to reach 43 million square feet by 2013. Around 46% of the estimated demand will be focused on tier I cities between 2009 and 2013

Infrastructure Roads and Highways

India has one of the largest road networks in the world, with a total length of 3.3 million km During the XI th Plan around USD 65.4 billion is likely to be invested in the roads sector, of which 34% will be contributed by the private sector, which translates to 35,000 km over the next five years The Government of India (GoI) has permitted 100% FDI in the road sector Ministry of Road Transport and Highways has set a target of completion of 20 km of national highways per day

Infrastructure Telecom
One of the fastest growing sectors with over 15 million new subscribers being added to the network every month Second largest wireless network in the world India has emerge as the country which offers the lowest mobile tariffs across the globe.

While the mobile services space have seen exponential growth in urban areas, these have not yet reached the vast majority in rural areas with rural teledensity of approximately 27.8 percent, indicating huge untapped potential for the sector.
The rural market is expected to drive the next round of growth for the voice-based services, while data services will create the much needed churn within the maturing urban markets.

Infrastructure Telecom
Allotment of 3G spectrum and BWA licenses have been complete. This will open multiple dimensions for wireless broadband, 3G services Broadband is yet to reach a critical mass despite rapid growth; the numbers have risen from 6.98 million in August 2009 to 10.52 million by 31st October 2010, registering a growth of 55 percent on an annual basis. With subscriber penetration under 2 %, the sector has potential for aggressive growth in the future. India to evolve as a hub for telecom equipment manufacturing Several new home grown players are rapidly expanding their market presence

Infrastructure Power
A study by McKinsey called "Powering India: Road to 2017 estimates India's power demand to increase to 315-335 GW by 2017 At present, Indias total installed capacity is 1,62,367 MW Government of India projects an investment of USD 4.3 billion for renovation and modernization of various old power plants during 11th and 12th Five-Year Plans Additionally, an investment of USD 213.7 billion is proposed for capacity addition of 78,700 MW in the 11th Plan (2007-12) and USD 235.1 billion to add over 94,431 MW in the 12th Plan Immense opportunities exist for private sector participation in generation, transmission, distribution equipment

Infrastructure Railways
Railways are the lifeline of Indian economy and will have a larger role in future as the country grows It is third largest network in the world Government undertaking modernization and augmentation of railway infrastructure, improvement in passenger facilities and security PPP projects being initiated & identified The sector expected to generate private investments worth USD 4.3 billion during Eleventh Five Year Plan

Delhi Mumbai Industrial Corridor (DMIC)

Vision : To develop DMIC as global manufacturing and trading hub supported by world class infrastructure and enabling policy framework.
Mega infra-structure project worth USD 90 billion covering an overall length of 1483 KMs between Delhi and Mumbai First phase of the project is expected to come up by 2018 Total of 24 nodes (11 Investment Regions & 13 Industrial Areas) identified in consultation with 6 state governments.
11 Investment Regions ~ 200 Sq km area (min) 13 Industrial Areas ~100 Sq km area

Huge opportunities for various players across the value chain - power, transportation, equipment providers and internal infrastructure

LEVERAGING NEW TECHNOLOGY SECTORS

Innovating for next billion customers..

Innovating in India for India/Emerging Markets
From product modification to product innovationMNCs embracing the new Made in Indiavalue for money paradigm to have mass appeal Microsoft India has taken initiatives like language interface packs in 12 Indian languages. And Windows Live, includes email, instant messenger, online storage, photo gallery and social networking in seven Indian languages LG has launched low priced TV range Cineplus and Sampoorna for rural markets GE developed an ECG machine, MAC 400, to serve the rural market. This is portable and costs about US$1,000 Following Tata Nano, global automakers giants such as GM, Nissan etc. have announced entry into the small car segment

Homeland Security
Growing focus on Homeland security in India in the backdrop of robust economic growth and an increasing threat of disruptive activities India to become one of the major civil security markets in the world with expected cumulative spending of over USD 10 billion by 2017

By 2020 about 6 per cent of global procurement in the field of homeland security is expected to be emanated from India
Segments to witness growth: electronic security market & system integration, consultancy and training

Major opportunities exist in security related equipment such as Intrusion detection systems, vehicle scanners, entry barriers, detection devices, access control, surveillance, Supervisory control and data acquisition systems (SCADA)

Green Technology

India is committed towards ensuring an Eco friendly growth The country targets to meet 15% of its energy requirement through renewable sources by 2020 Challenge for India harnessing renewable energy sources in terms of cost effectiveness & bring greater efficiency Opportunities in

photovoltaic solar panels

highly efficient water heaters & batteries next generation cars like hybrids and electrical cars

Animation & VFX

Size of Indias Animation & VFX industry USD 40.9 m in 2009 Estimated to reach USD 96.4 m by 2014 While Indian studios are adept at 2D, 3D & flash animation, Stop motion capabilities are still in early stages of development With 8 children channels focusing on broadcasting animated series, India is one of the largest animation consuming markets for television In comparison to other countries providing high quality animation services, India offers significant cost arbitrage
Estimated costs for 30 minutes of animated content 2D Hand drawn 3D Backend production Flash Animation India USD 45,00050,000 USD 90,000 USD 200,000 USD 20,000 Korea, Philippines USD 60,750 67,500 USD 121,500 USD 270,000 USD 27,000 North America USD 180,000 200,000 USD 360,000 USD 800,000 USD 80,000

Source: FICCI-KPMG Media & Entertainment Industry Report

Gaming
Gaming estimated to be the fastest growing sector in the Media and Entertainment Industry in the next 5 years Growth Drivers Mobile Gaming - Increasing telecom subscribers; Rollout of 3G & Increasing usage of mobile VAS Console Gaming - Young population; Rising disposable income & Move towards service oriented models Online Gaming - Increasing broadband subscribers; Higher PC penetration & Strong marketing through social networks etc
Gaming Industry (USD million)
Mobile Console Online & PC Total Industry Size

2009
3.7 10.1 2.5 16.3

2014
29.6 24 12.6 66.2

CAGR (2009 2014)

51.6 % 18.9 % 38.2 % 32.4 %

Source: FICCI-KPMG Media & Entertainment Industry Report

FACTORS/TRENDS AFFECTING INDIAN RAILWAYS

Factors affecting Indian Railways