Why Not to Invest in India: an Analysis of the It Sector

1574 Words7 Pages
Core Issue: The case primarily concentrates on the investment strategy of the US-based multinational IT company that is focused on improving technological services in various fields such as health care, banking and billing, with clients in more than 170 countries, however, mostly concentrating on the BRIC countries. The firm’s main concern entails building a strategy on how to stay competitive in the foreign market facing pressure from the domestically based peers that have an advantage of better understanding various political, environmental and economic forces affecting their sustainability. The presented case supports the idea that Servcom’s best decision is to reduce its focus on India and shift its investment into more diversified international markets. Analysis: Political – As one of the key disadvantages of operating in India, lack of government transparency is a number one issue. Due to the Foreign Exchange Regulation Act, Servcom made a decision to withdraw operations from the country completely. Even though the Act required a significant reduction of their equity ownership and not complete withdrawal, we can justify Servcom’s decision. As a result of the Act, the government took control of all the operations relating to foreign exchange to regulate payments, import and export, and enforcing investing the profits into economic development of the country versus remitting them back to the parent company. All law violators were treated as criminal offenders. As a result of the continuing business, 18 MNC’s were found guilty. This experience implies that Servcom should be extremely alert that the government policies can change anytime. Since IT industry is the largest contributor to the country’s growth, government relaxed restrictions on technological imports and reduced income taxes. Servcom, would they not get preferential treatment by the
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