In May 2010, Mark Hopkins of Tel-Comm-Tek (TCT) India, a company headquartered in the United States, announced his resignation and intention to return to his home in Vermont.116 at the time, he was the managing director of the Indian subsidiary of TCT. During his tenure,
Hopkins oversaw steady growth in market share and profitability of the Indian operation. Upon his announcement, TCT began searching for his replacement.
TCT: A Brief Introduction
TCT manufactures a variety of small office equipment in nine different countries. It distributes and sells products such as copying machines, dictation units, laser printers, and paper shredders worldwide. TCT reported sales ...view middle of the document...
Improving Infrastructure Shaping TCT India’s expansion plans is the ongoing improvement in India’s transportation infrastructure. Improvements in highways, railways, and seaports increase the efficiency of product movement both in and out of the country. Management envisions making the local subsidiary a vital link in TCT’s increasingly sophisticated supply chain. Presently, TCT’s supply chain integrates input suppliers, production, and wholesalers in the United States and Europe. Long-term plans outlined integrating supply points throughout Asia.
Democratic Norms India’s independence in 1947 institutionalized strong democratic norms of accountability, transparency, and freedom. Progress on the economic front had been even more dynamic. From 1947 through 1990, India’s decision to have a centrally planned economy led to the infamous “License Raj,” a situation marked by elaborate licenses, regulations, and bureaucracy that were required to open and run a business. In 1991, India began a transition toward a free market economy with the intended demise of the License Raj. This transition, an ongoing process, has helped stabilize the economic environment and boost India’s attractiveness as a manufacturing site. Still, India’s business environment poses problems.
Problematic Legal Environment The Indian legal environment, although endorsing the principles of the rule of law, struggles with corruption. The primary driver of corruption, in many observers’ eyes, is the country’s vast bureaucracy, a legacy of the previous centrally planned economy. Partial success in dismantling the License Raj has resulted in a civil administration that influences many aspects of economic life. Notably, Western high-tech companies run into problems with intellectual property violation. Patent infringement and business-process piracy are not uncommon.
Outmoded Labor Laws The legal system creates other complications. For example, India’s labor laws, little changed since they were enacted after independence in 1947, make it difficult to lay off employees even if a company’s fortunes hit hard times or the economy slows. Companies are reluctant to hire workers, given the risk of being unable to fire them if circumstances change. Necessary terminations are difficult to execute and often involve extensive negotiations and settlements. “Companies think twice, 10 times, before they hire new people,” said Sunil Kant Munjal, the chair of the Hero Group, one of the world’s largest manufacturers of inexpensive motorcycles.
Anticompetitive Legislation In addition, Indian laws bar companies with more than 100 employees from competing in many industries. These laws protect small enterprises operating in many villages scattered throughout India, often at the expense of larger-scale operations. Another challenge is high tariffs. These had been put in place to promote domestic production and still apply to many classes of imports, including some that...