UNIVERSTIY OF NEUCHATEL INTERNATIONALIZATION OF AUDIOTEKA: INDIAN PERSPECTIVE Case Study By Binayak Malla & Abhinayak Malla University of Neuchatel Faculty of Economic and Business Enterprise institute. Sminaire de SynthseMSc International Business Development Case study and teaching notes prepared under the supervision of Professor Sam BliliProfessor Michal Zdziarski, Dr. Katarzyna Jagodzinska and Philippe Lamb Submission date: 29th May 2013 SPRING SEMESTER 2013 2 !"#$% '( )'*+%*+, Synopsis of case..........................................................................................................................3 PART I: Introduction of Audioteka .............................................................................................5 Background of Audioteka:.......................................................................................................5 Investment in Audioteka ............................................................................................................6 Defining market .........................................................................................................................6 Competitors analysis................................................................................................................7 Internationalization in Europe .................................................................................................7 PART II: Introduction to India ..................................................................................................10 Publication industry Audiobook market in India................................................................11 Challenges in India..................................................................................................................12 Cultural dimension of India...................................................................................................14 Part III: Closing Paragraph.......................................................................................................16 PART IV: Assignment questions...............................................................................................18 Bibliography and References ......................................................................................................19 Appendix .......................................................................................................................................20 3 Audioteka Synopsis of caseWithaverysimpleconceptofprovidingdigitalaudiobook,ayoungPolishentrepreneurMr. MarcinBemeestablishedAudiotekain2008.HisvisionwastomakeAudiotekaaglobal companybypresentinghisideaofsellingbookinanaudioformat.Withaudiobook,people couldnowsit,relaxandevenclosetheireyesandlistentothestorypresentedinthebook narrated by the voice of celebrities and famous radio speakers. The best part of audio book was itscompatibilityonmostoftheelectronicdevices.Itcouldbeusedinmobiledevices, computers, laptops and any other audio devices capable of downloading audio files. Unlike paper books, audio book did not require readers to totally concentrate on reading. People could listen to itwhentheyweredoingtheirregularactivitiessuchasdriving,cooking,goingonawalk, juggingetc.Alsotheyshouldntworrymuchaboutweightandspacerequiredtocarryabook. Audio books user could carry as many audio books as they wish just in their portable devices and use them whenever they felt like.Becauseoftheseamazingfeatures,Marcinbelievedthathiscompanywasdestinedtohave success,andsoitdid.WithinfiveyearsofAudiotekasestablishment,itwasthebiggest producerofbookrecodinginPolandandthebiggestdistributionplatformofaudiobooksin PolandandCzechRepublic.SuccessinhomemarketandCzechRepublicprovidedMarcin confidentinlaunchingaggressiveinternationalizationstrategytootherEuropeanMarket. InvestmentmadebyGizaVentureCapitalworth0.5millionalsoprovidedsupportforhis campaign. He planned to launch Audioteka in 12-15 European countries before the end of 2013. It was quite natural for a technology-based company to be very aggressive in internationalization andtoexpandtheirreachasfaraspossiblebeforenewtechnologyarrivedornewcompetitor enteredthemarket.Alsothefactthattechnologywaschangingveryrapidlyandproducts associated with it had shorter lifespan provided great threat to the company. So there was a belief thattechnologicallyinnovativeproductsshouldbeaccessibleassoonaspossibletothegeneral people for the company to maximize its profit potential and expand its growth. Also, the fact that core idea behind production of technology-based product could easily be transferred and it didnt requiremuchofcapitaltoestablishanofficeinnewlocation,addedmoresupportforrapid expansion.4 For Marcin being aggressive in expanding its reach within Europe was quite understandable but thinking of something much bigger and planning to enter giant Indian market was a subject to be scrutinized in more appropriate way. The questions associated with it could be, was the company matured enough to initiate such a big move? Did they have enough resources (capital, human and technical)andbusinessinformation(market,social-culture,politicalandeconomical)aboutit? India is not just a country, but it is a different world on its own. Growing economy, supported by favorablegovernmentpoliciesforforeigninvestor,1.2billionpopulation(1.5timemorethan wholeEurope)providinghugemarketopportunities.However,differenceinbusiness environment,cultureandsocialsettingofthecountrycomparedtoEuropeanmarket,madeit very challenging for foreign company to establish well in India. The country had 22 regional and morethan100locallyspokenlanguages.Mostofthepeoplelivinginitassociatedthemselves stronglywithreligion.Culturalandreligiousaspect(aboutwhichverylittlewasknownto westernworld)playedveryinfluentialroleindoingbusinessinIndia.Complexity,associated with establishing business and operating it were very high.So, could Audioteka be able to adapt to these new kinds of environment and establish them in Indian market was the big question to be answered. 5 Part 1: Introduction of the company: Background of Audioteka: After completing three university (MA) degree in mathematics, economics at the University of Warsaw and in computer science at the Faculty of Technical Physics and Applied Mathematics of Warsaw University, Marcin Beme established Audioteka with a dream to make it one of the firstPolishcompanytobesuccessfulworldwide.Theconceptofaudiobookcametohismind whenhewastravelingwithhisbrotherontriptoPolishseaside.Thetripwasboringsothey startedtalkingwitheachotherandoneofthemmentionedthatitwouldbegreatifwecould listen to some books on such trip. So, then the idea clicked on Marcins mind (who was already a youngentrepreneur).Hisbrotherhadsomeexperienceasamangerinmultinationalcompany. So,theydecidedtoworktogetheronit.Attheearlystageofestablishment,Marcinhadavery simpleobjectiveofservingPolishpeoplewithaudiobook-abookthatcanbelistenedto, insteadofspendingtimeandeffortinreading.HisaimwastomakeeveryPolelistentoaudio bookatleastonceintheirlifetime.Heknewthatnoteveryonewouldbecomeaclientof Audioteka but thought all should know about audio book.Audioteka employed six full time persons as their core staff. In addition to Marcin as the CEO, thecompanyemployedcountrymanagerforPoland,marketingdirector,agraphicdesigner,IT specialists, and directors preparing services for Scandinavian countries, Spain and Portugal, UK contentandFrance.Theywerewillingtolookforagentsandpartnerswhocouldfacilitatethe expansion into other markets but were not willing to add more staff. In 2009 more than 1 million usersvisitedAudiotekaswebsites.Theyaltogetherdownloadedapproximately50000 audiobooks.Thesenumberswererespectivelycloseto2millionusersandover100000 audiobooksin2010.Theexponentialgrowthcontinuedintheyear2011withover2.5million usersand300000audiobooks.Audiotekacooperateswithmorethan300publishersandits services offered more than 3000 recordings, and more than 5000 were being prepared for sales. Reason of its success came from its strength, which was IT based platform that enabled to play recordingsonanymobileandaudiodeviceproducedintheworld.Rapidexpansionofmobile technologies and the increasing sales of smart phones triggered additional sales of audio books. The company cooperates with many well-known global corporations including Amazon, Apple, Android,Blackberry,DeutscheTelecom,HTC,Huaiwei,Nokia,Orange,Renault,Samsung, Sony,orSatchi&Satchiandwasinconversationwithseveralotherstostartaprojectinjoint 6 collaboration.Theseprojectsvariedfromthesimplemarketingprojectstomoreenduring partnershipsonjointdistributionandpromotion.ThefirstsuchprojectwasagreedwithNokia. Topromotethelaunchofanewmodelofmobilephone,Nokiawishedtohaveanewbookby PaoloCoheloinstalledinit.ThesaleoftheNokiamodelwithCoheloaudiobookwasmuch highercomparedtoothercomparablephonesfromcompetitivecompanies.Manyofthe customers,whoboughtNokiawiththeinitialaudiobook,comebackafterfewmonthsto downloaded audio book directly from Audioteka.Investment in Audioteka AudiotekainitialfundingwasprovidedfromtheownerinvestmentandaseedcapitalfromK2 Internet SA - a local Polish interactive marketing agency. They were also engaged in Audioteka development from the early stage by providing non-executive advises and IT support. Investment also came from Giza Venture Capital1, the Israeli fund which decided to invest EUR 0.5 million in Audiotekas development, taking up to 20% of its shares. This investment made the valuation of the company at the level of 2.5 million Euros.Defining market:InFebruary2011theNationalLibraryofPolandandTNSOBOPresearchgrouppresentedan annualsurveyonreadingtrendsinPoland2whichstated"Asmanyas20%ofPoleswith academicdegrees,and27%ofPolishstudents,didnotreadanytextlongerthanthreepagesin the last month, including any web content". In 2010 only 44% of responders declared any kind of reading of a book, a guide, an album or Internet content. In comparable studies carried out in the Czech Republic and France these numbers were 83 and 69% respectively.These facts indicated thatthereadershipofbooksandmagazineswasvanishinginrecenttime.Asupportiveargumentcouldbepresentedbystating-advancementintechnology,and introductionofnewmeansofentertainmentpresentedininternetsuchassocialmediasites, onlinevideosandnewssitesetc.,youngpeoplepaidlesserattentioninreadingbooks.By digitizingreadingmaterialssuchasbooks,magazines,anewspaperinaudioformatAudioteka was been able to create new market suitable for their products. 1 http://antyweb.pl/giza-polish-ventures-inwestuje-w-audioteka-pl-2-miliony-zlotych/ website visited on 05/20/2013 2http://www.bn.org.pl/aktualnosci/230-z-czytelnictwem-nadal-zle---raport-z-badan-biblioteki-narodowej.html 2http://www.bn.org.pl/aktualnosci/230-z-czytelnictwem-nadal-zle---raport-z-badan-biblioteki-narodowej.html website visited on 05/20/2013 7 Core market for audio book was based on entertainment business.The Audioteka service started with an offer of 200 audio books, which increased to more than 2000 within three years. In 2012 thecompanyproducesabout25newaudiobooksmonthly.ApostmortalbiographyofSteve Jobs,alegendaryApplesleader,hadbecomeanabsoluteblockbuster.Itssalesinanaudio version exceeded the level of 1000 copies in the first month after it had been released. Forthepurchaseofaudiobooks,customerswerebilledthroughthemobilephoneoperatorsin exchange of small share of revenues.In Poland, the prices of audio-recorded books were similar to the prices of printed, paper versions. The average price of a recording was about EUR 8. Sales valuesofasingleaudiobookvaried,butrarelyexceededEUR25.00.In2012thecompany producedabout25newaudiobooksmonthly.SinceNovember2008untiltheendof2011, 150.00newusersregisteredwithAudioteka.InPolandaudiobookswereusuallypurchasedby men in their thirties, with earnings above average, who were mobile, travelled a lot and wanted to make use of new opportunities created by technology. They amount to 70% of all buyers. Competitors analysis: Audible,agloballeaderandpioneerintheaudio-bookindustrywasthemaincompetitorof Audioteka. Audible was already present in the United States, France, Germany and Great Britain in 2011. It had been a benchmark for Audioteka that closely follows the news on new concepts. Audiblewasamongthefirstcompaniesdeliveringapplications(apps)forApple.Thecompany wasatrendsetterintheindustry.In2008,AmazonforUSD300millionboughtAudible.3The companyoffered80000audiobooksandmagazinesatthattime.Attheendof2007,the company generated profit of approx. USD 110 million, had 457000 registered users, and more than450collaboratingentitiespublishersandcontentdistributors.4Audibleintroducestothe marketabout1000newtitlesperyear.In2011lessthan3%ofitsprofitwasgeneratedfrom markets other than the American.Internationalization in Europe AftersuccessfullylaunchingAudiotekainFrance,thecompanywasplanningtoenter Scandinavian countries and aimed to open its subsidiary by the first half of 2013. The company had a view that these countries were potentially less lucrative market. Although, they didnt have largerscopeintermsofpopulation,thepositiveaspectshoweverwerethepriceofaudiobook 3http://www.usatoday.com/tech/techinvestor/industry/2008-01-31-amazon-audible_N.htmwebsitevisitedon 05/20/2013 4 http://about.audible.com/2008/07/10/audible-announces-fourth-quarter-2007-results/ website visited on 05/20/2013 8 couldbesetaboutfourtimesmoreexpensivethanPolandandmostprobablytwotimeshigher than in France. Company also planned to open new subsidiary in Spain and Portugal by the end of2013andapproximately8-10EuropeancountrywithpossibleinclusionofUK.Asapartof near future plan, company aimed on going to big nations such as Russia, India and Turkey.WiththeexceptionofChez-republicwherecompanycreatedajointventure,Audiotekahad opened its subsidiary in all the other countries where it entered and was planning to do so for the new countries in the list. The main reason behind it was the fact that opening a subsidiary would providemorecontrolandhelpedincollaboratingwithmanypublishers.Jointventurewasnot considered by the company to be a good option because, they believed that doing so would limit thenumberofpublisherwithwhomtheycouldcollaborate.Openingasubsidiarywouldmake them independent and make them appear neutral in the eye of competing publishers. Internationalization of Audioteka was filled with different challenges. These challenges came in the form of cultural difference, criticism about the technology, limitation of infrastructures, lack ofmaturityindealingwithinternationalissuesetc.Forexample,inScandinaviancountry,the audio book for children were not popular because people thought that it was more important for kidstohavevaluablepersonalcontactratherthanengagingthemwithaudiocontents.This perceptionwasduetodifferenceinculture.Thosepeoplewhobelievedthataudiobookwas helping to spread illiteracy among the people by discouraging them to read made criticism about thetechnology.Theothercriticizedbysayingthesekindsofproductsweremoreforblindand disabledpeoplewhohadprobleminreadingandshouldnotbeencouragedamonggeneral people, as it would make them avoid reading habits.Internationalization has created large stress on the company as they did not have much exposure and experience in dealing with different these types of issues. Rapid expansion possessed lots of risk on infrastructure side as the company had little finance and limited number of core employee working in the company. For an entrepreneurial company like Audioteka, to be able to transform the company into mid-sized global business required global experience, good managerial skills and operational excellence, among its management team without which company could lose its direction while aggressively moving forward in the path of internationalization.DespiteofallthesechallengesinEuropeanmarket,Audiotekawasstillveryaggressiveinits approachofinternationalizationbecauseitwasatechnology-basedcompanyandsince technology was changing rapidly, the company was always willing to take first move advantage 9 totaketheleadershippositioninthemarket.Itwantedtobeinlargemarketbeforethe competitionemergesornewtechnologywasintroduced.So,Audiotekawasaccessingallthe possible opportunities in different market to introduce its product.Indiahadalwaysbeeninitslist.Countrysobiginsizewithstablepoliticalandeconomic environment and immense market potential were its key features of attraction and Audioteka was interestedincapitalizingthem.However,thechallengesthatthecountrycouldpossesswould possibly be much bigger than what they had anticipated. So, making decision on how and when to enter Indian market was a big strategic question for Marcin to be answered. 10 Part II: Introduction of IndiaJustlikemanyforeigncompanieswhowereattractedbyhugemarketpotentialofIndia, Audiotekawasalsowillingtoenterthemarkettomaximizeitspotential.Thecountryalso proved to be strategically best for entering South Asian market because it is bordering with seven countries5andIndiaplaysakeyinfluentialroleineconomicwelfareoftheregion.Successin Indiaensuredeasyaccesstothesecountries.Withover1.2billionpeopleandthepopulation growth rate of 1.3% per year, India on its own could be bigger market than whole of Europe for Audioteka.Thecountryhad30%ofurbanpopulation(2010)andtherateofurbanizationwas 2.4%(2010-15)6,whichaddedmorevalueforAudiotekabecausemostoftheirsuccessesin Europe were based on urban population. Stablepoliticalsituationsupportedbystrongeconomicgrowthrateandworldwide reorganization in technological sector made the county very attractive market for Audioteka. In terms of political ideology, India enjoyed being the biggest and very stable democratic country in theworld.AsperWorldBanksworldwidegovernanceindices,Indiarankedinthe59.2 percentile in voice and accountability7 in 2010.Economic growth of 10.3%, 6.8% and 6.5% was oneofthebrightestaspectsofIndiaeconomyoverthelastthreeyear(2010,2011and2012)8. SignificanceofthisgrowthratebecameevenhigherwhencomparedwithAmericanand European economy at the same period of time. Even when the world economy was facing one of thebiggestfinancialandeconomiccrisesofrecenttime,Indianeconomywasgrowingona steadyphasemainlydrivenbyitsservicessector,whichaccountedformorethan50%ofits output. Around 65% of the population is aged 15 to 65, so this large working age population is expectedtoprovidesustainedmomentumtoeconomicgrowthinthecountry,whichindicated very positive signs for investment, and Audioteka was eager to take the opportunity. In terms of socialsettings,Indiahasmulticulturalethnicfoundation,andmaintaineduniformityinsecular ideas, with the freedom to follow any religion. India has a fast growing urban English-speaking 5IndiahasborderwithAfghanistan,Pakistan,China,Bhutan,Nepal,MyanmarandBangladesh.Thecountryis separatedfromSriLankabyanarrowchannelofseaformedbythePalkStraitandtheGulfofMannar.Except China,alltheothercountriesarepartofSouthAsianAssociationforRegionalCooperation(SAARC).They represent as a South Asian Countries and have lot of similarities in terms of soci-cultural, political and economical structure. 6 https://www.cia.gov/library/publications/the-world-factbook/geos/in.html website visited on 11/05/2013 7 Voice and accountability measures the extent to which a countrys citizens are able to participate in selecting their governmentaswellasfreedomofexpression,freedomofassociation,andfreedomofthemedia.incomparison, China and Russia scored percentile ranks of 5.2 and 20.9 in the same year. 8 https://www.cia.gov/library/publications/the-world-factbook/geos/in.html website visited on 11/05/2013 11 middleclass,whichmadeitapreferredinvestmentdestinationforinformationtechnologyand outsourcing services9. India made strong progress and received global recognition in areas such as the telecoms, IT, and IT-enabled services sectors. Government policy on technology was pro-development,withasignificantlyhigherallocationforthedevelopmentofthetechnological knowledgebaseandindustries.Becauseofthesereasons,Indiawasahostfor32.685million mainlinetelephonesubscriberand89.862millionofmobilecellularphonesubscriberforthe year2011.Itranked2intermsofmobilephoneusersafterChinaforthesameyear.Indiahas emerged as one of the world fastest growing telecom markets because of recent deregulation and liberalizationoftelecommunicationlawsandpolicies.Fortheyear2011,tele-densitywas roughly75%andsubscribershipwasgrowingmorethan20millionpermonth.Therewere13 major operators providing services among which Airtel had the maximum subscriber (December 2012) followed by, Reliance communication, Vodafone, Idea Cellular, BSNL. This information related to telecom market provided more encouragement for Audioteka because their success in Europe depended a lot on availability and accessibility of mobile phone users. So, having such a well-setinfrastructurecouldmakeiteasierforcompanytoestablishitselfinIndia.Creating partnershipwithoneofthesebigtelecomserviceproviders,companycouldgainaccessto millions of subscribers who could possibly be their potential customer. Publication industry10 and Audio book market in India: To produce an audio book, it was also important for the company to tie up with book publication companies because they were the one who had the ownership and copyright of books. In India, publishingindustrywasgrowingatanimpressivepaceanditwasoneofthefewplacesinthe worldwherethereisstillgrowthinbothprintanddigitalpublishingandthevalueofitis estimated to be $2 billion with a growth rate of around 15% for the year 2012.There are around 19,000 publishers in the country with only around 12400 having ISBNs and it is estimated that about90000titleswerepublishedeveryyearwhichincludesbooksacrossallgenres.Around onethirdofyoungpopulationidentifythemselvesasbookreaders.25%ofbooksthataresold werebasedinHindi11languageand20%ofsalesvolumecamefromEnglishlanguagebooks, 9 Country analysis report India, In-depth PESTLE insights, Data monitor , publication date, October 2011 10 Frankfurter B, Information on publishing industry in India, GBO New Delhi, German book office 11 There were 22 major languages recognized by the constitution of India of which Hindi was the official language spoken by 41% of the people and English enjoyed the status of subsidiary official languages. Besides these there 12 which made the country as the third largest market for English books consumption after US and UK market. Market share for different types of books are classified as 40% for academic books, 30%forchildrensbookand30%fortradepublishing.MajorbookdistributorsinIndiaarea) International book house12 b) India book House13 c) India Book Distributors. Retailers for online distributions were flipkart.come, infiBean and Amazon. The market for eBooks in India has been minisculebecauseofhighpriceassociatedwithit.Audiotekaconsideredthisinformationtobe very positive for entering Indian market. Growth in publication industry provided opportunity for thecompanytocreateanewmarketsegmentforaudiobook.However,pricingcouldbevery important factor for their success because as pointed out earlier, consumers were still not willing to pay for expensive eBooks in India, so to make the product attractive to the Indian consumer, Audiotekashouldbeabletopricetheirbookinaveryappropriatemanner.Pricesquotedfor audio book in Europe were far more than average for Indian consumer to buy it. Also India is a developingcountryandbooksareallowedtobeprintedinlowpriceeditioncouldaddmore pressure on lowering the price of audio book. TheotherencouragingfactorforAudiotekawasthestudyconductedbyProfessorPhilipM. Parker14onaudiobookmarketinIndia.Thereportpresentedlatentdemand15(inmillionof USD) or Potential Industry Earning (PIE) for estimated 5100 cities across the country. For each state or union territory, estimate of how the PIE grows over time was also presented in the study. Based on the study, latent demand for audio books in India was estimated to be $363.7 million in 2009. Maharashtra was the largest market with $49.5 million (13.6% of total market) followed by Uttar Pradesh with $ 42.2 million (11.6%) and the Gujarat with $29.9 million (8.23%). These topthreeregionscoveredalmost33.43%ofthelatentdemandforaudiobookinIndia. (Appendix 1) presents list of stats with latent demand in dollars and percentage of share in Indian were 844 different dialects that were spoken in various parts of the country- source of information: Country analysis report India, In-depth PESTLE insights, Data monitor , publication date, October 201112 They have more than 90 publishers as their clients and distribute books in all major and local book shops in major city of India. They also have alliance with 10,000 international publishers in the UK, US and other part of world. 13They are one of the largest distributors of books and magazines in India. it is representative for around 50 national/ international book publishers. it has its center in most of the major cities in India. 14 Philip M., The 2009-2014 outlook for Audio books in India, INSEAD Singapore and Fontainebleau, France 2008. 15EconomistscommonlydefinethetermLatentdemand:astheindustryearningsofamarketwhenthatmarket becomesaccessibleandattractivetoservebycompetingfirms.Itisameasure,therefore,ofpotentialindustry earnings (P.I.E.) or total revenues (not profit) if India is served in an efficient manner. It is typically expressed as the total revenues potentially extracted by firms.(Source www.icongrouponline.com) 13 market).Amongthecities,Mumbai(majorcityofMaharashtraregion)waswith13million populationswasrankednumber1withlatentdemandof$14.45million,followedbyDelhi (Delhistate)with12millionpopulationand$9.817millionlatentdemand.Similarly Ahmedabad,KolkataandChennaifollowedthelistwithlatentdemandworth$6.143,$5.856, $5.338 million (Appendix 2). Reflecting on to these figures, it was quite obvious that success in the Indian market were very likely once the company started their operation. Even if Audioteka wereabletofulfillthelatentdemandfortwomajorcities(DelhiandMumbai)thecompany would make $27.45 million. Challenges in India Despite being such an attractive market, India was still a developing nation very different from mostofthedevelopedcountriesofEurope.CorruptionandTerrorismhadbeentwomajor factors causing problems in the political system of the country. Even though the country is one of the fastest growing economies in the world, there exists a huge gap between rich and poor people and India is among one of the countries having highest numbers of individuals living below the povertyline.Economicgrowthandinvestmenthascrippledbypoorinfrastructureand widespreadcorruption.Indiaspoorperformanceonsocialindicatorswasreflectedinits2010 Human Development Index ranking. It was placed 119th out of 169 countries in terms of human development.Itslowrankwasmainlyattributedtopoorhealthcareandeducational infrastructure. Poor implementation of patent laws and the appreciating Indian currency (rupee) were the key risks associated with IT-based companies. Even though India seems to be very attractive market, not many international organizations had beenabletosuccessfullycapitalizeitsmarketpotential.Becauseofliberalizedgovernment policies, in recent time we have seen may international organization entering Indian market but stilltheyarestrugglingtoestablishthemselveswell.Thisisbecauseofthefactthatthereexist huge complexities in terms of ease of doing business in India for foreign companies. According to World Bank and IFCs report on Ease of Doing business in India the country ranked 132nd position out of 185 countries (Appendix 3).Despite Indian government effort in supporting FDI theEaseofdoingbusinessrankingforthecountrywasverypoorcomparedtoanaverage ranking of countries from South Asian Region and European Union.In Table number 1, it can beseenhowdifferentvariablescontributedintheoverallrankingofthecountryandalsowhat were the respective ranks for the same variable in other regions.14 Table 1: Countryranking16formostoftheEuropeancountriesisbelow60withScandinaviancountry being on the top of the list and country like Poland and Switzerland having raking of 55 and 28 respectively.HugedifferenceinrankingbetweenIndianandmostoftheEuropeancountries (including Poland) shows the complexity associated with establishing business in India. Cultural dimension of India Forabusinesstoestablishitselfwellinanycountryorregion,itshouldbeabletobetter understandculturalvaluesandsocialsettingsofthatplace.India,withitsbackgroundof5000 years old civilization, has different social and cultural settings than most of European countries. Culture is the collective programming of the mind distinguishing the members of one group or category of people from other17. Values in work place were greatly influenced by culture.So, it was very important to understand cultural dimension of society before entering into new market. ProfessorGeertHofstede,aDutchsocialpsychologist,conductedmostcomprehensivestudies 16 Source: http://www.doingbusiness.org/rankings website visited on 13/05/2013 17 Source: http://geert-hofstede.com/national-culture.html visited on 13/05/2013 India ranking South Asia European Union a) Starting a Business in India:1738672 b)DealingwithConstruction Permits 18211169 c) Getting Electricity 10512874 d) Registering Property9412162 e) Getting Credit:239654 f) Protecting Investors498268 g) Paying Taxes15211562 h) Trading across the boarder12713136 i) Enforcing Contracts18413647 j) Resolving Insolvency11610336 OVERALL RANKING 13212140 15 on cultural and provided five dimensions on the basis of which we could understand behavior of individual and their value system at workplace.WhatmakesIndiasodifferentwasitsculture.UnderstandingculturecouldhelpAudiotekato know the difference and adapt to Indian business environment based on which they could make decisions. Hofstede five cultural dimension traits could provide the best way to explain culture. The score provided for each of the traits can define culture of India. IntermsofPowerdistance18Indiahasascoreof77outof100,whichmeantpowerwas centralized,andmanagerscountontheobedienceoftheirteammembers.Communication flowed in top down manner. The employees expected clear direction of work from the managers. Audioteka had a strategy of opening subsidiary as a part of internationalization strategy, so this informationcouldhelpthemunderstandthebehavioroftheiremployeeiftheyopeneda subsidiary in India. IntermsofIndividualism19,Indiahasascoreof 48andwasacollectivesocietywithhigh preference for belonging to a larger social framework in which individuals were expected to act in accordance to the greater good of group or society. The employer/employee relationship was oneofexpectationsbasedonexpectationsLoyaltybytheemployeeandalmostfamilial protectionbytheemployer.Hiringandpromotiondecisionswereoftenmadebasedon relationships, which were the key to everything in a Collectivist society. Withascoreof 56 inMasculinedimension,Indiaisconsideredtobeamasculine society20.India is very masculine in terms of visual display of success and power. The designer brandlabel,andtheglamourthatwentwithadvertisingonessuccess,waswidely practiced. ThisinformationcouldhelpAudiotekaforadvertisingitsproductandpositioning itself well in the market. 18 Power distance is defined as the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. source: http://geert-hofstede.com/india.html visited on 13/05/2013.19 Highervalueinthisdimensionmeanspeopleweremoreindividualist,associatingthemselvesmoreintermsof their personal need and benefits where as lower value indicates collectivists who are more willing to do things that are based on group values. 20 A high score (masculine) on this dimension indicates that the society will be driven by competition, achievement andsuccess,withsuccessbeingdefinedbythewinner/bestinfieldavaluesystemthatstartsinschooland continuesthroughoutorganizationalbehavior.InmoreMasculinecountriesthefocusisonsuccessand achievements, validated by material gains. A feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable. The fundamental issue here is what motivates people, wanting to be thebest(masculine)orlikingwhatyoudo(feminine).Formoreinformationalsoseehttp://geert-hofstede.com/india.html (visited on 13/05/2013) 16 Indiascores 40 inUncertaintyavoidance21dimensionandhasamediumlowpreferencefor avoidinguncertainty.Acceptanceforuncertaintyamongthepeopleneithermadethembelieve that nothing had to be perfect nor had to go exactly as planned. Tolerance for the unexpected was high even welcomed as a break from repetitiveness. A word used often was adjust and means a widerangeofthings,fromturningablindeyetorulesbeingdisregardedtofindingaunique solution to a seemingly impossible problem.In terms of Long-term orientation22 India score is 61, making it a long term, pragmatic culture. In India the concept of karma23 dominates religious and philosophical thought. Time is not linear, andthusnotasimportantastowesternsocieties,whichtypicallyscorelowonthis dimension. Indiahasagreattoleranceforreligiousbeliefs. Societiesthathaveahighscoreon LongTermOrientation,typicallyforgivelackofpunctuality, achanginggameplanbasedon changing reality and a general comfort with discovering the fated path. Comparing India and Poland in terms of these dimensions could help in understanding difference betweencultureandvaluesystemofpeoplelivinginboththecountries.Aspresentedin (Appendix4),thefigureshowedthatboththecountryhadhugedifferenceintermsofcultural traits. Power distance is higher in India than Poland, India is collectivist society where as Poland is more individualist, both the countries are masculine but Poland is more masculine than India, PolandishighlyuncertaintyavoidancewhereasIndiaismoreacceptabletouncertaintyand India is long term oriented where as Poland is short term oriented. Such information could play important role in understanding differences in culture between two countries and help Audioteka tounderstandthebehaviorofIndianconsumer.Itcouldalsohelpindetermininginternational strategies for Audioteka while entering Indian market. 21 The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to deal with this anxiety in different ways. For more information also see http://geert-hofstede.com/india.html (visited on 13/05/2013) 22ThelongtermorientationdimensioniscloselyrelatedtotheteachingsofConfuciusandcanbeinterpretedas dealing with societys search for virtue, the extent to which a society shows a pragmatic future-oriented perspective ratherthanaconventionalhistoricalshort-termpointofview.Formoreinformationalsoseehttp://geert-hofstede.com/india.html (visited on 13/05/2013) 23 According to online Oxford dictionary http://oxforddictionaries.com/definition/english/karma karma is defined as Thesumofapersonsactionsinthisandpreviousstatesofexistence,viewedasdecidingtheirfateinfuture existences. 17 Part III: Closing Paragraph SuccessinEuropeanmarkethadgivenMarcinlotofconfidentandhebelieveshecouldrepeat hissuccessstoryinIndia.Favorableeconomicgrowthsupportedbyliberalizedgovernment policiesandwellsetdemocraticnorms,higherpercentageofyoungpeoplewhoarevery supportive of technological products, higher urbanization rate with increasing trend of accepting western culture, growth in publication industry, high latent demand for audio book in urban cities arefewofmanyfactorsthatmadethecountryveryattractivemarketforAudioteka.Without much effort, Audioteka could directly apply its current business model of internationalization to enterIndianmarketandhopeforitssuccess.However,doingsoitwouldignoredifferentrisk factorsthosecouldpossiblyhinderinthepathofsuccess.Theseriskfactorscouldbedifferent culturalfactorsthathaveveryhighinfluenceinthemarketplaceoritcouldbeassociatedwith various components essential to establish a business in the country.ManysmallculturalfactorscouldplaybiginfluentialroleinsuccessofAudiotekainIndia. Answers to questions like, which type of audio book should be launched in India? When would be the right timing for launching it? Who could possibly be the target customer? How much are they willing to pay for the product? could come from socio-cultural factors. For example, since morethan80%ofpeoplelivinginthecountryareHindu,andtheyhavestrongfaithinthe religion,audiobookrelatedwithreligiousbookcouldpossiblybeveryattractiveproduct. Launchingaudiobookatthatperiodoffestivalseasonscouldbebesttimingbecausebeinga collectivesocietypeopleliketogivegiftstotheirfriendsandfamily.Averagemiddleclass Indianconsumerisverypricesensitiveandthepurchasedecisionmadebythemishighly influenced by the price of product. Audioteka should be very clear in its approach on whether to targeturbanpopulationorruralpopulationinIndia.Bothsetsofpopulationhavedifferent demandforaudiobook.AsinEurope,urbanpopulationofIndiacouldbeservedwithaudio booksrelatedwithentertainment(bestsellersbooksofIndia)whereastheruralpopulation would be better served by audio books related to education and religion.For Marcin, India in one hand is the country filled with opportunities and huge market potential and on the other hand it is a mysterious land with very different business environment; one that hehadneverexperiencedinEurope.Hewonderedwithexcitementandabitofnervousness about how his business journey to India would be like. 18 PART IV: Assignment questions:Will Audioteka be able to achieve success in India? What according to you could be the key success factor or reason for failure of the company? Based on SWOT analysis of the company present your point of view? Whataccordingtoyoushouldbetheinternationalizationstrategyfortechnology-based company like Audioteka, reflect your answer based on mode of entry and ease of doing business? What could possibly be the most challenging factor for Audioteka while entering Indian marketa)Businessenvironment(businesslaws,complexityrelatedwithbusiness operation,lackofproperinfrastructureetc.)orb)Culturalenvironment(differencein language, work ethics, belief system, social values etc.)? Do you think Audioteka has the potential of accomplishing its objective and becoming a Globalcompany?Whatisyourpredictionaboutitsfutureandwhatsuggestionswould you like to give to Marcin for becoming successful worldwide? 19 Bibliography and References: Mhlbacher, H., Leihs, H. & Dahringer, L. (2006). International marketing: a global perspective (3rd edition) Thomson learning. JohnsonG.,ScholesK.,WhittingtonR(2005),ExploringCorporatestrategy(8thedition),FT Prentice Hall. Datamonitor,CountryanalysisreportIndia,In-depthPESTLEinsights,publicationdate, October 2011 FrankfurterB,InformationonpublishingindustryinIndia,GBONewDelhi,Germanbook office PhilipM.,The2009-2014outlookforAudiobooksinIndia,INSEADSingaporeand Fontainebleau, France 2008. http://www.doingbusiness.org/data/exploreeconomies/india/ http://geert-hofstede.com/national-culture.html 20 Appendix 1: 21 Appendix 2: 22 Appendix 3: 23 Appendix 4: \