doing business in india - wastewater treatment

Running head: DOING BUSINESS IN INDIA

Doing Business in India – a Blueprint for the Wastewater Industry

Benjamin S. Cheeks

International School of Management, Paris

Author Note

This paper was submitted to fulfill the requirements of Indian Doing Business in

India, DBII 7016. I would like to thank all of the faculty and staff at Amity University,

Noida, for their support and dedication to make the first ISM – Amity Seminar a success.

Correspondence concerning this paper should be addressed to Benjamin S. Cheeks.

Email: [email protected]

DOING BUSINESS IN INDIA 2

Abstract

In a recent speech at the Inaugural Function of India Water Week by the Prime

Minister of India, Dr. Manmohan Singh (2012) stated “With around 17% of the world’s

population but only 4% of its usable fresh water, India has a scarcity of water. Rapid

economic growth and urbanization are widening the demand supply gap”. A report by

Saraswathi Gomathinayagam (2013) finds that the wastewater market earned revenues of over

6.3 billion Rupees (ca. $114 million US) in 2011 and estimates this to reach 102.34 billion

Rupees ($1.8 billion US) in 2016.

Doing business in India is not easy and before entering the market, a thorough

analysis should be conducted. A PESTEL analysis shows that the wastewater market in India

is primed for growth. Due to on-going deadlock and disagreement within the political

environment, it is recommended that companies focus on the industrial wastewater market

rather than the government (municipal) market. It is also recommended that companies find

an Indian joint-venture partner with strong brand name and knowledge of the local market to

help manage Indian bureaucracy and regulatory environment.

Keywords: wastewater, PESTEL analysis, doing business in India


Doing Business in India – a Blueprint for the Wastewater Industry

The wastewater industry provides water treatment services to residential, commercial,

industrial, and government (municipal) sectors of the economy. Water treatment includes

collection of wastewater, separation of solids and other impurities, cleaning or treatment of

the water, and regulating the return of the water to the environment. India has 4% of the

world’s freshwater, but 17% of the world’s population.

The Government of India is aware of the problem and is beginning to take measures

to address the problem. In April, India proclaimed 2013 the year of water conservation. In a

speech at Water Week 2012, Prime Minister Singh (2012) said “Our water bodies are getting

increasingly polluted by untreated industrial effluents and sewage”. This awareness and

attention will create incredible business opportunities for multinational companies in the

water industry within India. This paper lays out a high-level blue print for a company in the

wastewater industry to follow before doing business in India.

Framework

In order to create the blueprint, this paper will analyze India from the perspective of

the overall environment for doing business, the current wastewater market in India, the entry

strategies and options available to multinational corporations currently in India. Information

from the analysis is then reviewed to formulate a high-level blue print for an organization to

enter the wastewater treatment market in India.

Analysis of the Environment

An understanding of the environment in which the firm plans to operate is an essential

stage of the strategic management process (Hitt and Ireland, 2000). An excellent method of

doing this is with a PESTEL analysis. PESTEL analysis stands for Political, Economic,

Social, and Technological, Environmental and Legal analysis. It assists when doing strategic


analysis or market research by providing an overview of the different macro-environmental

factors prevailing in a particular industry.

This paper will utilize a PESTEL analysis created by MarketLine as a framework for

developing opportunities and risks specifically related to the wastewater industry. Each

section will have an overview of the PESTEL analysis and how it relates to the wastewater

industry. The opportunities and risks are identified and discussed.

Political. Business cannot afford to ignore the actions and decisions (or indecisions)

of government. The policy of both the state and national government can have dramatic

effects on the business environment. In addition, international relationships can also affect

the business environment. Key political issues to consider in a PESTEL analysis are political

stability, legislation on taxation and employment, alignment of state and national

governments, and key policy initiatives.

Table 1

Analysis of the Indian Political Landscape

Current strengths Current challenges

Strong democratic setup

Improved relations with Europe and

North America

Allegations of corruption

Lack of comprehensive peace deal with

Pakistan

Terrorism

Future prospects Future risks

The new finance minister is expected to

bring in economic reform

Improved accountability of the

Emergence of strong regional parties

Social and communal tensions

Politics of fasts


government

Source: MarketLine (2012)

Application to the water industry. The political environment in India is primed for

the wastewater management industry. Governments around the world realize that in order to

have sustained development, access to a sufficient and uninterrupted supply of clean water is

of utmost importance. The awareness of the Government of India to is apparent from

numerous recent initiatives.

Year of Water Conservation - 2013. A press release on May 9, 2013, announced the

Union Cabinet declared the year 2013 as “Water Conservation Year – 2013” (Press

Information Bureau, Government of India, 2013). Several mass awareness activities are

planned to make the masses aware of water related issues and encourage conservation.

National Water Policy (2012). A press release on December 28, 2012, announced

that despite apprehensions from some of the state governments, the National Water Resource

Council had adopted the National Water Policy (Press Information Bureau, Government of

India, 2012). The Policy seeks to address issues such as the scarcity of water, inequities in its

distribution and the lack of a unified perspective in planning, management and use of water

resources.

India Water Week. In April of 2012, Prime Minister Singh delivered a speech at the

inaugural ceremony of India Water Week. In this speech he stated:

With around 17% of the world’s population but only 4% of its usable fresh water,

India has a scarcity of water. Rapid economic growth and urbanization are widening

the demand supply gap. Climate change could further aggravate the availability of

water in the country as it threatens the water cycle. Our water bodies are getting

increasingly polluted by untreated industrial effluents and sewage. Groundwater


levels are falling in many parts due to excess drawals leading to contamination with

fluoride, arsenic and other chemicals. (Singh, 2012)

Draft Twelfth Five Year Plan. The Draft Twelfth Five Year Plan acknowledges

India’s challenge and encourages industry to improve water-use efficiency by reducing water

consumption as well as reusing and recycling wastewater (Planning Commission,

Government of India, 2013). It proposes for industries to perform and publish regular water

audits as well as their water footprint.

In 2011, the Economist reported that Tension between India, Pakistan and China over

the region’s rivers has been increasing over the past few years (2011). Pakistan fears that

India will build dams on key rivers and limit the supply of water to Pakistan. India has a

similar concern with China; most notably, one of India’s largest rivers, the Brahmaputra,

flows from China and many in India fear damming or diversion of the river.

Opportunities. There are many opportunities that companies within the wastewater

industry could capitalize on due to the political environment in India.

Public Private Partnerships. Areas that were previously the exclusive domain of the

public sector, such as infrastructure, are opening up to Public Private Partnerships (PPP) in

India. There are several recently concluded projects that leveraged the PPP model. Some

key projects include:

Management contract of Jamshedpur water supply by JUSCO.

Provision of clean drinking water on Build, Own, Operate and Transfer (BOOT) basis

by Doshion at Shivpuri, Madhya Pradesh.

Industrial Wastewater. Industry and its water requirement will continue to grow.

Key industries such as power generation, refineries, pharmaceuticals, and the food and

beverage industries create great opportunities for wastewater equipment. As these industries


grow, so does their demand for wastewater treatment. Even the notorious political stalemate

creates an opportunity in the industrial wastewater industry. Governmental delays in

addressing the problems will force industry to look for their own solutions.

Risks. Companies in the wastewater industry will have many threats to deal with

when entering India

Conflicts Between the States and GoI. The Indian constitution grants the states

exclusive power to regulate water supplies, irrigation and canals, drainage and embankments,

water storage, hydropower and fisheries. However, the federal government is entitled to

legislate on issues related to the use of inter-state rivers, shipping and navigation on national

waterways, and the use of tidal and territorial waters. It is unclear going forward which

group will take the lead in developing various water-related regulations.

Government Corruption. Transparency International (2012), a non-governmental

organization that monitors and publicizes corporate and political corruption in international

development, gives India a score of 36 on its corruption-perception index; a ranking of 94 out

of 176 countries. This level of corruption creates uncertainty when the government is

awarding contracts for municipal wastewater and water management projects.

Tax Surprises. Foreign buyers of Indian companies are vulnerable to tax surprises

and other regulatory and judicial challenges by different government bodies than those

involved with the actual investment approval process. In addition, as Vodaphone can attest,

these tax surprises can include retroactive taxes.

Economic. Economic considerations for doing business in India include GDP growth

rate and trends, inflation, interest rates, currency exchange rate and fluctuations, monetary

and fiscal policies, and input costs such as energy, transport, and raw materials.

Table 2


Analysis of the Indian Economy


Inherent Strength of the economy

Second largest working age population

pool in the world

Highly favored FDI destination

Unemployment

Energy constraints and overdependence

on oil imports

Imbalanced regional development and

widening economic disparities

High inflation


Manufacturing hub

Expanding domestic market

Poor infrastructure

High fiscal debt and public debt

Elevated current account deficit

Spillover risks from advanced

economies


Application to the water industry. Despite the recent slowdown in GDP, the Indian

economy has grown over 8% on average for the past eight years. The CIA world fact book

(2013) estimates the Indian economy at US $1.95 trillion, making it the world's seventh

largest economy. Purchasing Power Parity of 4.8 trillion making it the world's third largest

behind only the US and China. This strong economic growth has made it a favored

destination for foreign direct investment (FDI). A survey by The United Nations Conference

on Trade and Development (2012) ranked India number three of the top prospective

economies for FDI. In addition, the Ernst & Young Attractiveness Survey for 2012 shows

73% of business leaders are keen to invest in India in the near future (Ernst and Young,


2012).

Opportunities.

Poor infrastructure. India's weak power, transport and communications infrastructure

is increasingly seen to be a constraint on economic growth. However, from a water

management perspective, this is an opportunity as industries and consumers look for more

effective methods of conserving, reusing, and treating their water. A 2013 sustainability

survey by Ernst & Young ranked water as the number one cause for concern for global

executives among “resources most at risk” Ernst and Young (2013).

Manufacturing hub. India offers potential for equipment manufactures in the

wastewater management industry as a manufacturing hub due to low labor costs. According

to the United States Bureau of Labor Statistics, labor costs were just below $1 per hour,

including taxes and social security (Sincavage, Haub, & Sharma, 2010). The government

unveiled a new manufacturing strategy in November 2011, which aims to increase the share

of manufacturing to GDP to 25% within the next decade.

High fiscal and public debt. The high fiscal and public debt will force the

government to look for Public Private Partnerships to fund municipal wastewater projects in

the future. Likewise, it will put more responsibility onto the industrial sector to manage their

own wastewater.

Risks.

Global slowdown. A key risk when doing business in India is that the slowdown in

developed economies will spillover into India.

Exchange rate. The Indian Rupee has fallen considerably since 2009 and as of June

2013 is trading near an all-time low against the dollar. This could make import materials

more expensive as well as depress profit in US dollar terms. However, the depreciated Indian


currency will also make labor costs cheaper and could spur exports.

Social. The current social situation in India is important to consider when preparing

to do business there. Key issues to consider from the social standpoint are changes in

population and demographics, employment patterns, popular social issues (i.e. green issues

such as global warming), values, education and health.

Table 3

Analysis of the Indian Social System


Growing proportion of young people

Rapid urbanizations

Healthcare remains a major concern

Weak social security system

Poor literacy rate

Low HDI rank


Employment guarantee scheme

Rising life expectancy

Government’s authority challenged

Inability to control birth and utility rate


Application to the water industry. India is the second most populous country in the

world with a population in excess of 1.2 billion people. This large and growing population

creates a variety of domestic water issues that Indian society is facing. A key concern is

healthcare. A study by UNICEF (UNICEF, 2004) estimates that in India, water-borne

diseases cost an annual $600 million in lost production and medical treatment. The cost of

ineffective wastewater processing is being pushed onto the population in the form of

shortages and poor water quality resulting in illness, health or by increasing house-hold

spending money to buy devices and technology to clean the water. In addition to the health


concerns, there are also increasing conflicts across competing users of water. Joy, Gujja,

Paranjape, Goude, & Vispute, (2009). highlight 63 case studies of water conflicts of different

types across the country.

Opportunities.

Rapid urbanization. Rapid urbanization and increased life expectancy will continue

to put pressure on the current urban infrastructure. The government must act quickly to meet

the needs of the increasing urban population. Water treatment facilities will be a key part of

this infrastructure.

Corporate Social Responsibility (CSR). The concept of Corporate Social

Responsibility (CSR) is gaining popularity in India. Corporations realize that initiatives

towards environmental conservation are an effective means of advertising their good deeds to

society. Many firms in India are weaving CSR initiatives into their business strategy

(Kanchan, 2010). This focus by industry on CSR will make water conservation and treatment

a key point of their CSR agendas.

Risks. A technology to clean dirty water should face little threat from the social

environment. However, for a foreign company entering the Indian market, there is a threat of

localization or the preference given the local companies. In a recent interview, Arvind

Subramanian, an Indian born economist, stated anecdotally that India has recently embarked

on a localization spree, in a number of sectors, saying local-input providers should be favored

(Peterson Perspectives Interviews on Current Issues, 2013).

Technological. From a technical perspective, a firm considering doing business in

India should consider local research initiatives, speed of change and adoption of new

technologies, product substitutions, and the level of expenditure in research and development.

Table 4


Analysis of the Indian Technological Landscape


Strong knowledge base

Cost advantage

Strong English-language skills

Gross expenditure on R&D remains

below 1% of GDP

The talent pool requires further

vocational training


Government policies promoting

research and development

Significant competitive advantage in

biotechnology research

Low proportion of high-technology

exports


Application to the water industry. Each year, India graduates more Engineers than

any country other than China. The fact that most Indian graduates speak English provides it a

boost over China when it comes to research and development outsourcing. This has led

several companies from Shell to Groupon to Microsoft to develop innovation centers in India.

Opportunities.

Research and development. Research talent in India is available at a much lower cost

in comparison with developed countries. According to MarketLine (2012), the average salary

of a researcher in India is $11,526, which is around 15% of a researcher’s salary in the United

States. This coupled with the strong English-language skills make India an excellent choice

for a global research and development hub.

Risks.

Talent pool unprepared for industry. Due to the fact that many technical institutes


within India have a strong emphasis on theory, it is believed that many of the technical

graduates are not prepared to enter the workforce.

Environmental. Environmental issues to consider are changing weather patterns,

disposal of waste, and industrial effluents.

Table 5

Analysis of the Indian Environmental Landscape


Biodiversity

Right to information

Comprehensive environmental-policy

framework

Air pollution

Depleted water resources

Poor performance on environmental

indicators

Dependence on fossil fuels for energy

requirements


Reduction of carbon footprint

Public-private partnership and

ecotourism

Increased activism

The adverse impact of economic

growth

Enforcement deterrents


Application to the water industry. For companies in the wastewater industry, the

environment landscape in India presents the best argument for entering the market. India

faces environmental issues from air pollution to depleted and polluted water resources.

However, these challenges present a great opportunity in the wastewater industry as its

products and services offer solutions to help address water-resource issues. In addition,


comprehensive environmental policies and increased activism will help provide the impetus

toward change.

Risks.

Enforcement deterrents. Weak enforcement of clean-water regulations could delay

the adoption of wastewater technology by industry as they find it cheaper to pay fines or to

avoid accountability completely.

Legal. From a legal perspective, firms should consider current law and government

policies.

Table 6

Analysis of the Indian Legal Landscape


Comprehensive legal framework for

business entities

Taxation policy driving foreign

investment

Implementation of VAT

Corporate governance

Weak implementation of intellectual

property laws

Judicial delays


Tax reforms

Good prospects in legal process

outsourcing

Implementation of regulations

Lack of a single financial market

regulator


Application to the water industry. The legal system of India is based upon English

Common Law. It has a comprehensive legal framework for both business entities. It also

contains a comprehensive framework related to water policy.


Indian constitution. The Indian constitution grants the states exclusive power to

regulate water supplies, irrigation and canals, drainage and embankments, water storage,

hydropower and fisheries. However, the federal government is entitled to legislate on issues

related to the use of inter-state rivers, shipping and navigation on national waterways, and the

use of tidal and territorial waters. The Constitution also provides that the Union can legislate

with regard to the adjudication of inter-state water disputes.

Water prevention and control of pollution act of 1974. The Water Prevention and

Control of Pollution Act of 1974 seeks to prevent and control water pollution and maintain

and restore the wholesomeness of water. It gives power to water boards to set standards and

regulations for prevention and control of pollution.

Water prevention and control of pollution cess act of 1977. This act allows state

boards to levy taxes on water extracted for industrial use.

Environmental protection act of 1986. The Environmental Protection Act (1986)

created a nationwide program for the prevention, control, and moderation of environmental

pollution. It grants the government power to inspect any premises to gauge compliance of

established norms.

Opportunities.

Investment in Indian companies. Favorable policies on foreign investment have made

India a preferred place for foreign investment. This presents an opportunity to invest in

Indian companies in the wastewater industries.

Risks. The legal environment in India presents some of the greatest threats to

industries looking to enter the Indian wastewater market.

Multiple layers of regulation. Strong disagreements between the states and GoI on

who has authority over certain water issues could lead to varying legislation across the


country making it more difficult to specify equipment requirements.

Weak intellectual property laws. International Property Rights Index (2012) ranked

India 62 out of 130 countries in the protection of Intellectual Property.

Delays. The Indian judicial system is notorious for its delays. Therefore, any legal

issues could take considerable time to resolve.

Contract enforcement. According to the World Bank (2013), India ranks low in the

enforcement of contracts. A key input to this is related to the delays in the legal system.

Analysis of the Wastewater Treatment Market in India

Understanding the nature of the industry and where the firm fits into the current

industry environment is an important next step in laying out a blue print. This analysis will

consider the size of the industry, the key players, and key partnerships that exist today.

Shay & Rothaermel (1999) show that businesses benefit from understanding the

competitive environment from multiple perspectives. According to a report by Avalon

Global Research, 2011, the water and wastewater treatment market in India is fragmented

with about 15 large players accounting for approximately 30% market share.


Figure 1. Indian market analysis by tier.

Source: Avalon Global Research, 2011

The top eight players in the market hold approximately 25% of the total market. Most

of these eight also have global alliances.

Table 7

Top Companies in the Indian Wastewater Market

Company

Estimated

Market

Share

Global Alliances

Ion Exchange 5.3% Joint Venture with Degremont, France

VA tech Wabag 3.7% Wabag Germany

Thermax 3.0% Wehrie Unwelt Gmbh and GE Water

Doshi Ion 3.7%

Joint Venture with Veolia Solutions, France and Tie up with

Kinetico Inc USA

HDO/IVRCL 2.8%

Degremont 2.3%

Driplex 2.3%

Partnership with Best Water Group Austria and Lanxess,

Germany

Triveni 1.4%

Source: Avalon Global Resource, 2011

Entry Options for the Indian Market

There are multiple ways to enter the Indian Market. The most common ways for non-

residents to invest in India are Foreign Direct Investment, Foreign Institutional Investment,

and Technology and Trademark License Agreements.

The Government of India updates the foreign direct investment (FDI) policy each year


under in “Consolidated FDI Policy”. Currently FDI is allowed to some degree in most

industries. If FDI is allowed, it can go through the automatic route or the prior approval

route. As the policy is updated yearly, experts on FDI should be consulted before any

investment is made.

Foreign Institutional Investments (FII) can be made under the portfolio investment

scheme. Most FII are made through the Indian Stock market through the purchase of equity

stakes in public companies. A small part of a FII is in company bonds.

Technology and trademark license agreements give an entity in India the right to use a

patent or trademark creating a revenue stream for the licensor.

Entry Options for Foreign Investors. Foreign entities have the right to setup as

incorporated or unincorporated entities. Incorporated entities must either enter through a

joint venture or wholly owned subsidiary. Common unincorporated entities consist of liaison

office, branch office, and project office.

Table 8

Incorporated Entities

Type of

incorporated

entity

Definition of entity

Joint Venture Joint Venture (JV) is defined as a contractual agreement formed between

two or more parties, with each party contributing their equity share, in

order to undertake an economic activity which is subjected to joint control.

Wholly Owned

Subsidiary

Wholly Owned Subsidiary (WOS) is defined as an entity 100% owned by

a foreign corporate body.

Source: business.gov.in - http://business.gov.in/manage_business/joint_ventures.php

http://business.gov.in/manage_business/joint_ventures.php


Table 9

Unincorporated Entities

Unincorporated

entity

Definition of entity

Liaison Office A place of business to act as a channel of communication between the

principal place of business or head office and entities in India but which

does not undertake any commercial / trading / industrial activity, directly

or indirectly. A liaison office is not permitted to undertake any business

activity in India and cannot earn any income in India and therefore is

required to maintain itself out of inward remittances received from the

head office outside India.

Branch Office A branch office is permitted to carry on activities, which are wider in

scope as compared to the activities permitted by a liaison office. The

profits of a branch office are permitted to be remitted outside India

subject to the payment of applicable Indian taxes. A branch office is not

permitted to engage in any manufacturing or processing activities in India

directly or indirectly.

Project Office A place of business established to represent the interests of a foreign

company executing a project in India. Such offices are prohibited from

undertaking or carrying on any activity other than the activity relating and

incidental to the execution of the project for which such office is

established. In order to set up a project office, a foreign company has to

secure a contract to execute a project in India from an Indian company.

Source: J. Sagar Associates, 2012


Recommendation

The wastewater market offers incredible business opportunities that companies cannot

afford to ignore. In a recent interview with the New York Times (Timmons, 2013), Ravi

Venkatesan, Former Chairman of Microsoft India said, “Right now, multinational

corporations have two choices. They can either not grow, or they can embrace the chaos of

emerging markets. If you think you can escape chaos, you’re sadly mistaken.”

The PESTEL analysis revealed opportunities in the municipal sector through Public

Private Partnerships with the government as well as opportunities within the industrial sector.

Although the government works to remove barriers to investing in infrastructure and

municipal waste water, corruption, delays, and growing disputes between the states and the

government of India create huge uncertainties when working with the government. However,

regardless of the politics, industry will continue to be pressured by the government to reduce

their production of wastewater. Government delays and inaction will force industry to take

matters into their own hands to ensure they have sufficient water resources of the proper

quality in order to run their business. Therefore, the recommendation is to enter the market

with primary focus on the industrial sector.

It is recommended that the market be entered through a joint venture with a local

Indian firm. Many of the key players have joint ventures or licensing agreements with large

multinationals, but there still remain many qualified India companies with which to work. A

joint venture offers many advantages and helps to mitigate some of the risks high-lighted

during the PESTEL analysis. The can also help with the Indian cultural framework. Some

additional advantages of a joint venture include:

Government and industry connections to help navigate bureaucracy, regulations, tax

systems, and tariffs.


Existing relationships with customers, raw material suppliers, and banks.

Exiting distribution network.

Source of labor and professional talent required for project execution and ongoing

technical support.

Knowledge about local market, competition, and general market conditions.

Risk sharing.

When selecting a joint-venture partner one should consider the following:

The value each participant is bringing to the relationship.

Shared values, business and social values.

Creditworthiness of counterparty.

A good joint-venture agreement will include:

Shareholders rights.

IP protection and licensing.

Non-compete agreements.

Contribution of capital and capital calls.

Exit provision and buy-out rights for deadlock of key management decisions.

When negotiating the contract, it is important to take cultural considerations into

account. A few key things to remember are that Indians do not always see the final goal of

negotiations as a contract. Salacuse (2004) found that while 74 percent of the Spanish

respondents claimed their goal in a negotiation was a contract, only 33 percent of the Indian

executives had a similar view. Indians tend to view contracts as agreements and guidelines

for future acts. Also Indians are less sensitive to time. Salacuse (2004) found that among the

twelve nationalities surveyed, Indians had the largest percentage of persons who considered

they have a low sensitivity to time. There are also differences in the degree of trust going


into the negotiation. Sycara, Gelfand, & Abbe (2009) showed that negotiators in the United

States trust until the other party proves to be untrustworthy. However, Indian negotiators

appear to embrace the opposite assumption, distrusting until the other party proves

trustworthy. Keeping these key differences in mind, patience is the key when negotiating

with an Indian company.

In a recent speech at TED-x, Ravi Venkatesan (2012) listed out some key success

factors when doing business in India. Ravi is someone who warrants listening to as the

former Chairman of Microsoft India and Head of Cummins in India; he knows what it takes

to be successful there. His key success factors include:

Commitment – the CEO must make a visceral commitment to India. The CEO must

make more than yearly status trips.

Move from control to accountability – in order to react to changing market conditions,

you must trust the local Indian management team to make the right decisions for the

company and not have every decision go back to corporate for approval.

Build India-specific products – Just because your product is successful in other markets,

does not mean it will be successful in India. Companies should see India as a market for

innovation.

Have a higher ambition – His motto is, “If it's good for India, it's good for us.”

Limitations of Analysis

This paper was written as part of the requirements for DBII 7016 Doing Business in

India. The primary purpose of the analysis was to gain a greater understanding of the

business environment in India. Therefore there was much more focus on this aspect rather

than the industry analysis. A more thorough analysis of the industry should be conducted

using a framework such as Porter’s Five Forces to gain a better understanding of the overall


business environment. In addition, a VRIO (value, rarity, imitability, and organization)

model of the investing firm’s internal environment to uncover additional opportunities and

gaps. Also to uncover strengths and weaknesses that will help the organization to gain a

sustained competitive advantage.

Conclusion

Doing business in India is not easy. Some of the key risks include corruption,

governmental stalemates due to strong regional parties, high public debt, and a high current

account deficit. However, as Arvind Subramanian said in a recent interview (Peterson

Perspectives Interviews on Current Issues, 2013), “If you don’t lump it and start getting in

despite all the problems, you will be excluded from the market”. The India market is primed

for new entrants in the wastewater industry. Initially focusing on industrial wastewater

management will mitigate many risks of working with the Indian Government on municipal

projects. The wastewater industry is fragmented with over 800 players. The largest is Ion

Exchange and they have less than 6% market share. Many of the larger players already have

licensing agreements or joint ventures with multinationals. However, there are many quality

Indian companies available to form joint ventures. Finding the right joint-venture partner and

negotiating a solid joint-venture agreement are keys to success.


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