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CHAPTER 1 INTRODUCTION Introduction to the International business in India The e

conomy of India is the twelfth largest economy in the world by nominal value and
the fourth largest by purchasing power parity (PPP). In the 1990s, following ec
onomic reform from the socialist-inspired economy of post-independence India, th
e country began to experience rapid economic growth, as markets opened for inter
national competition and investment. In the 21st century, India is an emerging e
conomic power with vast human and natural resources, and a huge knowledge base.
Economists predict that by 2020, India will be among the leading economies of th
e world. India was under social democratic-based policies from 1947 to 1991. The
economy was characterized by extensive regulation, protectionism, and public ow
nership, leading to pervasive corruption and slow growth. Since 1991, continuing
economic liberalization has moved the economy towards a market-based system. A
revival of economic reforms and better economic policy in 2000s accelerated Indi
a's economic growth rate. By 2008, India had established itself as the world's s
econd-fastest growing major economy. However, the year 2009 saw a significant sl
owdown in India's official GDP growth rate to 6.1% as well as the return of a la
rge projected fiscal deficit of 10.3% of GDP which would be among the highest in
the world. India's large service industry accounts for 62.6% of the country's G
DP while the industrial and agricultural sector contribute 20% and 17.5% respect
ively. Agriculture is the predominant occupation in India, accounting for about
52% of employment. The service sector makes up a further 34%, and industrial sec
tor around 14%. The labor force totals half a billion workers. Major agricultura
l products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes,
cattle, water buffalo, sheep, goats, poultry and fish. Major industries include
telecommunications, textiles, chemicals, food processing, steel, transportation
equipment, cement, mining, petroleum, machinery, information technology enabled
services and software. India's per capita income (nominal) is $1032, ranked 139
th in the world, while its per capita (PPP) of US$2,932 is ranked 128th. Previou
sly a closed economy, India's trade has grown fast. India currently accounts for
1.5% of World trade as of 2007 according to the WTO. According to the World Tra
de Statistics of the WTO in 2006, India's total merchandise trade (counting expo
rts and imports) was valued at $294 billion in 2006 and India's services trade i
nclusive of export and
1 import was $143 billion. Thus, India's global economic engagement in 2006 cove
ring both merchandise and services trade was of the order of $437 billion, up by
a record 72% from a level of $253 billion in 2004. India's trade has reached a
still relatively moderate share 24% of GDP in 2006, up from 6% in 1985. Despite
robust economic growth, India continues to face many major problems. The recent
economic development has widened the economic inequality across the country. Des
pite sustained high economic growth rate, approximately 80% of its population li
ves on less than $2 a day (PPP). Even though the arrival of Green Revolution bro
ught end to famines in India,40% of children under the age of three are underwei
ght and a third of all men and women suffer from chronic energy deficiency.
LOGISTICS MANAGEMENT – INTRODUCTION Logistics management is that part of the suppl
y chain which plans, implements and controls the efficient, effective, forward a
nd backward (reverse) flow and storage of goods, services and information betwee
n the point of origin and the point of consumption in order to meet customers' r
equirements rather to the customers’ delight. A professional working in the field
of logistics management is called a logistician. Logistics, as a business concep
t, evolved only in the 1950s. This was mainly due to the increasing complexity o
f supplying one s business with materials, and shipping out products in an incre
asingly globalized supply chain, calling for experts in the field who are called
Supply Chain Logisticians. This can be defined as having the right item in the
right quantity at the right time at the right place for the right price and to t
he right target customers (consumer); and it is the science of process having it
s presence in all sectors of the industry. The goal of logistics work is to mana
ge the fruition of project life cycles, supply chains and resultant efficiencies
. Logistics is concerned with getting (or transmitting) the products and service
s where they are needed or when they are desired. It is difficult to accomplish
any marketing or manufacturing without logistical support. It involves the integ
ration of information, transportation, inventory, warehousing, material handling
, and packaging. The operating responsibility of logistics is the geographical r
epositioning of raw materials, work in process, and finished inventories where r
equired at the lowest cost possible.
Origin and Definition of
Logistics: 2 The term
"logistics"

originates from the a
ncient Greek "λόγος" ("  s"—"rati , w rd, ca

cu ati n, reas n, speech,

rati 

n"). L  isti

s is c nsidered t  have ri inated in the mi itary's need t  supp y themse ves w
ith arms, ammuniti n and rati ns as they m ved fr m their base t  a
f rward p si
ti n. In ancient

Greek, R man and Byzantine empires, there were mi itary fficer
s with the tit e ‘L istikas’ who were responsible for financial management and dist
ribution of supplies. The Oxford English dictionary defines logistics as: “The bra
nch of military science having to do with procuring, maintaining and transportin
g material, personnel and facilities.” The American Council of Logistics Managemen
t defines logistics as “the process of planning, implementing and controlling the
efficient and effective flow, and storage of goods, services and related informa
tion from the point of origin to the point of consumption for the purpose of con
forming to customer requirements.”
Objective of Logistics Management: The primary objective of logistics management
is to effectively and efficiently move the supply chain so as to extend the des
ired level of customer service at the least cost. Thus, logistics management sta
rts with ascertaining customers’ needs till their fulfillment supplies. However, t
here are some definite objectives to be achieved through a proper logistics syst
em. These can be described as follows:
1. Improving customer service: An important objective of all marketing efforts,
including the physical distribution activities, is to improve the customer servi
ce. An efficient management of physical distribution can help in improving the l
evel of customer service by developing an effective system of warehousing, quick
and economic transportation, and maintaining optimum level of inventory.
2. Rapid Response: Rapid response is concerned with a firm s ability to satisfy
customer service requirements in a timely manner. Information technology has inc
reased the capability to postpone logistical operations to the latest possible t
ime and then accomplish rapid delivery of required inventory.
3. Reduce total distribution costs: 3 The cost of physical distribution consists
of various elements such as transportation, warehousing and inventory maintenan
ce, and any reduction in the cost of one element may result in an increase in th
e cost of the other elements. Thus, the objective of the firm should be to reduc
e the total cost of distribution and not just the cost incurred on any one eleme
nt.
4. Generating additional sales: A firm can attract additional customers by offer
ing better services at lowest prices. For example, by decentralizing its warehou
sing operations or by using economic and efficient modes of transportation, a fi
rm can achieve larger market share. Also by avoiding the out-of stock situation,
the loss of loyal customers can be arrested.
5. Creating time and place utilities: The products are physically moved from the
place of their origin to the place where they are required for consumption; the
y do not serve any purpose to the users. Similarly, the products have to be made
available at the time they are needed for consumption.
6. Price stabilization: It can be achieved by regulating the flow of the product
s to the market through a judicious use of available transport facilities and co
mpatible warehouse operations. By stocking the raw material during the period of
excess supply and made available during the periods of short supply, the prices
can be stabilized.
7. Quality improvement: The long-term objective of the logistical system is to s
eek continuous quality improvement. Total quality management (TQM) has become a
major commitment throughout all facets of industry. If a product becomes defecti
ve or if service promises are not kept, little, if any, value is added by the lo
gistics. Logistical costs, once expended, cannot be reversed.
8. Movement consolidation: 4 Consolidation one of the most significant logistica
l costs is transportation. Transportation cost is directly related to the type o
f product, size of shipment, and distance. Many Logistical systems that feature
premium service depend on high-speed, small shipment transportation. Premium tra
nsportation is typically high-cost. To reduce transportation cost. It is desirab
le to achieve movement consolidation.
Logistics Management Function Logistics is the process of movement of goods acro
ss the supply chain of the company. This process consists of various functions,
which have to be properly managed to bring effectiveness efficiency in the suppl
y chain of organization. The major logistical function are shown in figure
1. Order processing: The starting point of physical distribution activities is t
he processing of customers’ orders. In order to provide quicker customer service,
the orders received from customers should be processed within the least possible
time. Order processing includes receiving the order, recording the order, filli
ng the order, and assembling all such orders for transportation, etc. the compan
y and the customers benefit when these steps are carried out quickly and accurat
ely. The error committed at this stage at times can prove to be very costly. Ord
er processing activity consist of the following Order checking in any deviations
in agreed or negotiation terms
• Prices , payment and delivery terms • Checking the availability in of the material
stocks • Production and material scheduling for storage • Acknowledge the order, in
dicating deviation 2. Warehousing: Warehousing refers to the storing and assorti
ng products in order to create time utility. The basic purpose of the warehousin
g activity is to arrange placement of goods, provide storage facility to store t
hem, consolidate them with other similar products, divide them into smaller quan
tities and build up assortment of products. Generally, larger the number of ware
houses a firm has the lesser would be the time taken in serving customers at dif
ferent locations, but greater would be the cost of warehousing. Thus, the firm h
as to strike a balance between the cost of warehousing and the level of customer
service. Major decision in warehousing is as follow:
• Location of warehousing facility 5 • Number of warehousing • Size of warehouse • Desig
n of the building • Ownership of the warehouse 3. Inventory Management: Linked to
warehousing decisions are the inventory decisions which hold the key to success
of physical distribution especially where the inventory costs may be as high 15
as 30-40 per cent (e.g., steel and automobiles). No wonder, therefore, that the
new concept of Just-in-Time Inventory decision is increasingly becoming popular
with a number of companies. The decision regarding level of inventory involves e
stimate of demand for the product. A correct estimate of the demand helps to hol
d proper inventory level and control the inventory costs. This is not only helps
the firm in terms of the cost of inventory and supply to customers in time but
also to maintain production at a consistent level. The major factors determining
the inventory levels are: The firm’s policy regarding the customer service level,
Degree of accuracy of the sales forecasts, Responsiveness of the distribution s
ystem i.e., ability of the system to transmit inventory needs to the factory and
get the products in the market. The cost inventory consists of holding cost (su
ch as cost of warehousing, tied up capital and obsolescence) and replenishment c
ost (including the manufacturing cost).
4. Transportation: Transportation seeks to move goods from points of production
and sale to points of consumption in the quantities required at times needed and
at a reasonable cost. The transportation system adds time and place utility to
the goods handled and thus, increases their economic value. To achieve these goa
ls, transportation facilities must be adequate, regular, dependable and equitabl
e in terms of costs and benefits of the facilities and service provided.
5. Information: The physical distribution managers continuously need up-to-date
information about inventory, transportation and warehousing. For example, in res
pect on inventory, information about present stock position at each location, fu
ture commitment and replenishment capabilities are constantly
6 required. Similarly, before choosing a 16 carrier, information about the avail
ability of various modes of transport, their costs, services and suitability for
a particular product is needed. About warehousing, information with respect to
space utilization, work schedules, unit load performance, etc., is required. In
order to receive all the information stated above, an efficient management infor
mation system would be of immense use in controlling costs, improving services a
nd determining the overall effectiveness of distribution. Of course, it is diffi
cult to correctly assess the cost of physical distribution operations. But if co
rrect information is available it can be analyzed systematically and a great dea
l of saving can be ensured.
6. Facilities: The Facilities logistics element is composed of a variety of plan
ning activities, all of which are directed toward ensuring that all required per
manent or semi permanent operating and support facilities (for instance, trainin
g, field and depot maintenance, storage, operational, and testing) are available
concurrently with system fielding. Planning must be comprehensive and include t
he need for new construction as well as modifications to existing facilities. Fa
cility construction can take from 5 to 7 years from concept formulation to user
occupancy. It also includes studies to define and establish impacts on life cycl
e cost, funding requirements, facility locations and improvements, space require
ments, environmental impacts, duration or frequency of use, safety and health st
andards requirements, and security restrictions. Also included are any utility r
equirements, for both fixed and mobile facilities, with emphasis on limiting req
uirements of scarce or unique resources.
Relevance of Logistics in International Marketing Marketing experts have recogni
zed that for developing a position of sustainable competitive advantage, a major
source is superior logistics performance. Thus, it can be argued that instead o
f viewing distribution, marketing and manufacturing as largely separate activiti
es within the business, they need to be unified, particularly at the strategic l
evel. One might be tempted to describe such an integrated approach to strategy a
nd planning as ‘Marketing Logistics’. Business can only compete and survive either b
y winning a cost advantage or by providing superior value and benefit to the cus
tomer. In recent years, numbers of companies have become aware that the market p
lace encompasses the world, not just the India .As a practical matter, marketing
managers are finding that they need to do much work in terms of conceptualizing
, designing , and implementing logistics initiatives to market effective global
ly. Following are the reasons
7
Role of logistics in international business by Virender singh klair(student of G
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