Political Science

Introduction
India is one of the most lucrative markets in the world. Now considered an economic giant in Asia, India has been building a viable manufacturing sector and it is currently producing heavy machinery including automobile.    India is one of the most populous nations on earth world. According to CIA World Fact Book (2009) estimates, India has more than 1,166,079,217 people making it second populous nations after China.  This population, stratified into various classes and market segment with different purchasing powers, makes a lucrative market base for any product. The country has a diverse economy which comprise of traditional farming, cottage industries, modern agriculture, modern industries, and a vibrant service sector. For the last three years, India has maintained a GDP real growth rate of 7.4% in 2008, 9% in 2007, and 9.4% in 2006 with a GDP per capita of $2,900 in 2008. The country has also invested heavily on development of her infrastructure in line with development policies. Today, India is recognized as one of the leading investment destination in Asia.  With a labor force of more than 5223.5 million active people, India has been able to develop a low price labor market which is attracting thousands of investors every year.  Therefore, India would be a suitable market to introduce a fuel cell car since there is a large market base and infrastructure. This report will look into the viability of introducing fuel cell vehicle in India including the possible mode of entry and risk assessment.

Country Risk Assessment
Mode of entry
The mode of entry describes the way in which a company makes entry into a market. The mode of entry puts forward the plan that a company will use to enter into a foreign market. There are many factors which are considered before deciding the mode of entry into a market. There should be a thorough analysis of the market conditions including political, economical, and social factors. Market dynamics like competitions, consumers, and others must also be considered carefully. After careful analysis of the above factors, the company can decide to use any of the following modes of entry – exporting, licensing, joint venture, or direct investment (QuickMBA, 2009).  The chosen mode of entry has a lot of impact on the eventual establishment and growth of a company or product.

The Indian government has put in place a policy framework for development of fuel cell car but the dream has not been realized (Sharma, 2003).  Currently, India has developed HCNG cars but they are not considered fully developed fuel cell cars.  Leading automobiles in the country like TATA have been proposing the development of fuel cell cars but there are steps to be taken.  Since 2004, the idea of development of fuel cell cars was mooted in India but it has never been fully developed.  This implies that there is will and policy framework in development of fuel cell cars in India but this has been constrained by various factors among them lack of proper technology.

This is an important consideration in deciding on the mode of entry to Indian market.  Considering the above factors, it is evident that there is already a developing infrastructure for fuel cell vehicle but the technology seems limited. Therefore a joint venture would be the most appropriate mode of entry into the market. This is in consideration of the different factors that are involved in establishment of a fully running fuel cell cars which are supported by hydrogen pump stations. First, the company will require having running hydrogen fuel stations which will fuel the cars. Second, it will require having a factory line producing these cars.

Considering these two factors, a direct entry will be a difficult option for the company since it may need heavy capital outlay to put in place a running factory and hydrogen pump supply. In light of the current efforts in place, it will be easier for the company to enter into a joint venture with India Oil Corporation which has already put in place running system to develop hydrogen supply in various pump stations. A joint venture will save the company a lot government bureaucracy and capital investment compared to a situation where it has to put in place its own hydrogen pump stations.

On the other hand, it is also expensive for the company to put up a manufacturing plant for fuel cell vehicles. It would require the company to have a heavy capital investment and a lot of time to go through government bureaucracy before establishing the plant. Therefore a joint venture with an existing India automaker will be an easier and cheaper option.  The joint venture will help the company to acquire knowledge on the market such that it will find it easier to venture into the market if it decides to invest directly.  In this case, a joint venture with a leading automaker like TATA which had been trying to develop fuel cell vehicles would be the most appropriate option. In the joint venture, the Indian company would provide production infrastructure while the other would provide technology.

Political economic issues
Political and economic factors are important factors to consider while investing in the country. India is recognized as the largest democracy in the world. Good governance and government initiatives have seen an increased number of foreign investors in India. Although India is experiencing political upheaval in some parts especially those experiencing religious conflicts, the country political system has been encouraging to investors. For the last three years, India has recorded impressive economic growth which has been fostered by the political environment. India has maintained a GDP real growth rate of above 7.4% in 2008, 9% in 2007, and 9.4% in 2006 with a GDP per capita of $2,900 in 2008.

Indian government has been on the forefront to promote efficient use of hydrogen and other green fuels. Hydrogen has been seen as the future fuel that will drive cars on the road (Bushby, 2006).  The government has put in place policy framework that aims at encouraging use of hydrogen fuel which is prime source of energy for fuel cell cars.  The Ministry of Renewable Energy in India has put aside US$6 billion aimed at developing hydrogen infrastructure and promote use of hydrogen by 2020.  In line with this vision, the project is aimed at having more than one million fuel cell vehicles running on hydrogen by 2020. It will also see development of a hydrogen plant power generating plant with an output of 1000 MW by 2020 (The Indic View, 2007). To make the vision a success, the government aims at bring in more players. It is expected that the Indian Oil Corporation will play a leading role in collaboration with other major stakeholders like SIAM (Society of Indian Automobile Manufacturers), education institutions like Universities, and many others.  The government has already put in place a demonstration project in collaboration with Indian Oil Corporation. These projects have enabled dispensation of hydrogen and CNG which are used as fuel for a number of vehicles.

Therefore there are little risks posed by political and economic factors.  The government of the day has been very encouraging to investors and has come up with policy framework that will lead to development of the fuel cell vehicles.

Infrastructure
Indian government has put in place measure to ensure development of physical infrastructure for development of her economy (IFC, 2009). Although the standard of physical infrastructure is still considered low compared to other developed countries, India has relatively well developed infrastructure system.  The country has diversified transport systems including roads, railways, airports, pipelines, waterways, and others.

According to CIA World Fact Book, (2009), India has 349 airports.  Of this number, 250 airports have paved runways while 99 have unpaved runways. In addition, the country has 37 heliports. This implies that India has a   well developed air transport system for both cargo and human transport.

CIA World Fact book (2009) also records that India has a well developed pipeline transport system. It has 2 Km pipeline for condensate/gas in addition to 6,601 Km gas pipeline system.  The country has also developed a 2,156 Km liquid petroleum gas pipeline and a 7,678 Km oil pipeline system. In total, India has a 6,876 Km pipeline system for refined products.

However, road and railway system comprise bulk of Indian transport infrastructure.  The country ahs a 63,327 Km railway line which is ranked the fourth longest in the world (CIA World Fact Book, 2009).  It has 10,820 broad gauge railway system and 10,621 Km narrow gauge railway system. India has a long history of development of railway system and it was among the first countries in the world that developed and elaborates railway transports system when it was colonized by Britain. Today, India railway system is still used to support transport of manufactured goods since it is well connected to the waterways.  India has the second longest roadways in the world.  The country has a total of 3,316,452 Km roadways of which 200 Km are expressways (CIA World Fact Book, 2009).  The road system penetrates to the interior of the country and connects the inland to waterways and railways.

According to CIA World Fact Book, (2009) India has well developed water ways running 14,500 Km.  This constitutes of 5,200 km major rivers and about 485 Km canals which are used for mechanized vessels. India has a total of 501 merchant marines of which 102 are bulk carrier, 241 are cargo, 1 is a carrier, 19 are chemical tankers, 13 are container, 18 are liquefied gas, 3 are for passengers, 11 are for passengers and cargo, 92 are petroleum tankers, while1 is a roll one/ roll off.  Leading ports and terminals include Chennai, Haldia, Jawaharal Nehru, Kandla, Kolkata, Morgugao, Mumbai, New Mangalore, and Vishakhapatnam (CIA World Fact Book, 2009).

Labor and staffing
India is one of the countries in the world that have a well developed and learned labor force. India is recognized all over the world for her educated labor forces that has enabled developed of an outsourcing economy.  India has a total of 523.5 million active people in the labor force with 28% working in the service sector, 12% in industries, and 60% in agriculture (CIA World Fact Book, 2009). Due to her large labor forces, India has been able to develop a low wage economy.  This implies that labor force, and in that case well trained English speaking labor force, will not be a major challenge for the company investing in India.  Since the company will have a joint venture with an existing India automaker, it will be advantaged in the sense that it will use the currently existing labor force within the Indian company.