Technology

Boeing is the world leader in the manufacturing of aeronautical for domestic as well as defense purposes. Boeing has a wide customer base in many parts of the world and its operations spread across multiple countries. Boeing does not have its manufacturing presence in India and it is considering the expansion of its operations in to India. This gives the company easy access to a number of resources required for the manufacturing of its planes such as raw materials and highly skilled labor resource etc... However there could be several risks associated when a company ventures into a new country to establish its operations in that country. This paper aims to evaluate the risks involved in Boeings possible entry into India and the possible mitigation measures. The main objective here is to examine if it could still be favorable for Boeing to venture into India in spite of these risk factors.
   
Boeing  its prospective expansion into India
Boeing is the worlds leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined. Additionally, Boeing designs and manufactures rotorcraft, electronic and defense systems, missiles, satellites, launch vehicles and advanced information and communication systems. As a major service provider to NASA, Boeing operates the Space Shuttle and International Space Station. The company also provides numerous military and commercial airline support services. Boeing has customers in more than 90 countries around the world and is one of the largest U.S. exporters in terms of sales. (Boeing, 2009)

Headquartered in Chicago, Illinois, USA, it headed by W. James McNerney, Jr as its CEO, James A. Bell as its CFO and J. Michael Luttig as its General Counsel. Its revenue figure was US  60.91 Billion for the financial year of 2008. It then had a net income of  2.67 billion.
Boeings official website sources (Boeing) indicate that Boeing has manufacturing, technology and service partnerships with firms across the globe. It has around 22,000 contracts with partners and suppliers globally. It also has designing, research and technology development centers in many countries. Boeing currently has its operations in Australia, Canada, China, France, Germany, Italy, Japan, Korea, Middle East, Russia, Spain and UK.

Currently does not have its manufacturing presence in India. It would be a good option for Boeing to venture into the Indian market to establish its manufacturing presence in that country. This would be a right time for Boeing to enter into India to set up its manufacturing presence because of the relatively cheaper human resources. India is also strategically located connecting various parts of Asia and Australia through land and sea on one side and the gulf countries and Europe on the other side. This is would be very convenient for Boeing to acquire raw materials easily for its manufacturing operations in India. India is also a hub for the manufacture and export of many auto components so Boeing will have an easy access to all the raw materials it requires for the manufacture of its products from the Indian market. Another import factor to be considered is that Indian government is very investor friendly and it encourages foreign investors by providing them various incentives such as land at cheap prices to construct their industries, tax concessions etc Therefore it would be a good idea for Boeing to venture into India to set up its manufacturing base.
However when a corporation is venturing into a new country to establish its operations there, there could be a number for factors that need to be considered before entering the country. These factors include the risk factors such as the political risks, legal risk, financial risk etc We also need to consider the nature of business risks associated with the new venture by taking into consideration various issues associated with the competitors and customers. Last but not the least the cross cultural differences between the employees of the home country (USA) as well as India need to be considered to understand the potential risks or opportunities that could arise out of such differences. All these risk factors will now be discussed in detail in the following pages.

Business Risks
Today, HAL has 19 Production Units and 9 Research and Design Centers in 7 locations in India. The Company has an impressive product track record - 12 types of aircraft manufactured with in-house R  D and 14 types produced under license. HAL has manufactured over 3550 aircraft, 3600 engines and overhauled over 8150 aircraft and 27300 engines. (Hindustan Aeronautics Limited)

There are certain business risks that are involved in Boeing expanding its operations into India. Boeing may encounter some of the aircraft manufacturers in the Indian market such as Hindustan Aeronautics Limited (HAL). Though HAL might not be a direct threat to Boeings global businesses in the short run, there might be some other significant problems that Boeing may face due to HALs presence in India. HAL may go for lateral recruitment of Boeings employees which might leak sensitive information or its higher end technology to HAL. Since these two will be the two major aircraft manufacturing companies they both may end up employee poaching from each other. This may result in higher employee attrition rate among both the companies.

On the international front, its major competitor Airbus might go a step further by establishing its manufacturing facilities in China which is even cheaper in terms of manpower thereby reducing its overall production costs of aircrafts. This may result in a price war between the major air craft manufacturers. 

Political and Legal Risk
India is the worlds largest democracy. The Indian democracy has been quite successfully running the economy right from the time of the Indian independence of 1947. However in the Indian parliamentary democracy there is a chance that no party might get a full majority at times and a coalition government may be formed. If such shall be the case as it had been for quite a number of times in the past, the developmental activities in the country and the economic progress will be slowed down. Who comes to power is highly unpredictable in Indian politics.

India has had coalition governments at the Centre as well as in individual states since the last two decades. Since India is a diverse country with different ethnic, linguistic and religious communities, it also has diverse ideologies. (The Viewspaper, 2008)

There might be a lot of differences between the central and the state governments. In such a scenario, the businesses may have to get the support from both the centre and the state. A lack of support from any one of the government bodies could result in a problem to the business establishment. This fact has been very clearly established when one of the US companies (Exon Mobil) had the support of the central government to conduct its operations in India, however it had failed to impress upon the state government of Maharashtra in which it had started its operations. As a result, the state government created problems to the company and made sure that its was not able to carry out its business operations in India.

In India, the web of corruption probably has a bureaucratic core. A vast bureaucracy that is instituted to control every aspect of economic life creates the incentives for individual and institutionalized corruption. Then the democratic political system uses that bureaucracy to extract rents that are used for fueling the vast political machinery. (Dey, 2003)

Another major problem running a business in India is the corrupt bureaucracy. The businesses could also turn this factor to their advantage because they could easily get things done by bribing the appropriate government officials. 

US President Barack Obama on Tuesday took note of the historic animosity between Pakistan and India and signaled the United States wanted to find ways to reduce tensions between the two countries. (httpwww.thenews.com.pktop_story_detail.aspId25767)

India is known to have had tensions with its neighbors such as Pakistan on the issue of Kashmir and with China on the issue of Tibet and Arunachal Pradesh. However these tensions seemed to have been reduced considerably these days as these countries are opting to resolve the issues with peace talks. 

More than 600 people have been killed and hundreds maimed and devastated in terror strikes in India in the last six years. (The Times of India, 2008)

India in the past has been subject to quite a number of terrorist attacks. There have been incidences of serial blasts in Mumbai, Delhi, and Bangalore etc which have been the work of terrorists.

India is a diverse country with a number of religions and languages coexisting together. Though there have been a few communal clashes in the past, India has been quite peaceful for most of the time in its history with the presence of relatively less communal violence on its soil.

Over three million cases are pending in just the 18 High Courts and more than 20,000 cases are pending in the Supreme Court for admission, interim relief or final hearing. This is not the full story since million more cases are pending at lower courts. The most protracted lawsuit ever recorded was in India (which has the dubious distinction of entering the Guinness Book of records). A Mahant, or a keeper of a temple, filed a suit in Pune in 1205 A.D., and the case was decided in 1966  a full 766 years later. However, we can take consolation that this is not the average time taken by the Indian courts for deciding cases. It is estimated that on average a case can take from seven to fifteen years. (Vaidyanathan, 2005)

The country has a good judicial system in place which was originally set up by the British. Justice will be served in this country but however there is a chance that it might be served very slow.

To overcome most of these political and legal risks, Boeing could find a suitable partner to enter into a joint venture in India. It could alternatively have a subsidiary company in India giving it sufficient freedom in India to run the business operations.

Financial Risk
There could be a minor degree of financial risk when Boeing is investing in India. Boeing being a manufacturer of sensitive defense equipment may be a terror target. Hence it would be ideal for Boeing to get insurance for its manufacturing plant as well as for its inventory.

The fact of the matter is that indirect tax is one area where very fewer reforms have been made over a couple of decades. Kelkar, chairman of the 13th Finance Commission has evolved an excellent and modern indirect tax regime known as GST (goods and service tax), which, if all goes well would be made operational from April 1, 2010. (Yadav, 2009)

Another form of financial risk that Boeing could encounter in India is the change in tax rates. There is a likely hood of this happening however the possibility is very less because India is moving towards the implementation of the GST which shall be in effect from the mid of the following year. Once the new tax law is implemented the chances of any further changes in the taxes will be very less.

Boeing could raise up to 50 of its finances for its expansion into India from the Indian market itself either through debt or equity. This significantly reduces the financial risk that Boeing will be carrying.
In spite of facing the financial risk, the Indian venture will still be very attractive to Boeing because of the significant reduction in the costs that Boeing could achieve on each plane that it manufactures in India.

Cross cultural differences
An Indian who hesitates to say No may actually be trying to convey that he is willing to try, but presuming the task to be unrealistic in nature, he may worry whethe he would get the job done. It is important to create a safe and comfortable work environment where it is okay to say No and also okay to make mistakes without the fear of repercussions. (Stulus Inc)

There are a lot of cross cultural differences between the United States and India that Boeing needs understand in order for it to be successful in its Indian venture.

Indias informal economy remains a large, important source of employment. The non-salary cost of employing a worker is moderate, but dismissing a redundant employee is costly. The difficulty of laying off a worker creates a disincentive for job creation. (The Heritage Foundation, 2009)

While in the United States, Boeing could afford to follow the classic hire and fire system, the Indian conditions make it difficult for Boeing to do so. Firing an employee in India is not as easy a job as hiring them.

In a group discussion, only the senior most person might speak, but that does not mean that the others agree with him. They may maintain silence, without contradicting him (or you) out of respect for seniority. Westernized Indians on the other hand can be quite assertive and direct and it is fine to treat them in the same manner. Politeness and honesty go a long way in establishing the fact that your intentions are genuine. (Stulus Inc)

However there are a lot of advantages in hiring the Indian employees. Indian workers are known for their inclination towards work. They would be easily willing to work in different shifts like in the night shift.
Women are treated with respect in the work place. They feel quite safe and secure in most organizations in India. Foreign women working here will find it easy to adapt to an Indian work environment. However, they need to plan their wardrobe carefully, keeping in mind the conservative dress codes in India. (Stulus Inc)
India is a land of diversity. There is a lot of diversity among people from different parts of India. So, for Boeing to establish its business in one state shall not be the same as establishing its presence in another state of India. Therefore Boeing will have to analyze the differences in cultures among the different states of India and at least understand the culture of that state in which Boeing will be establishing its manufacturing unit.

Summary
It is a good opportunity for Boeing to enter into the Indian market however we found many risks in the form of business, political, legal and financial risks to Boeings possible entry into India. It could have its potential business risk from its competitors. Boeing could possibly face political and legal risk in the form unstable democracy, differences between the centre and the state governments, corruption among the government officials, regional tensions with Pakistan and China, a slow judiciary system etc Boeing may also encounter financial risk in the form of a possible terrorist attack, or in the form of higher taxes. Last but not the least Boeing may have to understand the cross cultural differences between the working style in the United States and in India.

In spite of all these risks, the Boeings venturing into India could be strategic move to Boeing for it can get an enormous advantage in terms of access to a lot of resources in one place such as raw materials for its manufacturing operations, highly skilled and talented pool of human resources etc Boeing could have access to all these resources at a lesser price than what it is currently procuring now. With these dramatically reduced costs, Boeing could increase its profits to a large extent.
Therefore it is recommended that Boeing should expand its operations to India by establishing its manufacturing presence in the country.