Foreign Direct Investment

Foreign direct investment (FDI) is in general discussion in different sectors and political circles for various reasons in our country these days. We have been trying to look into the different aspects and impacts that may result, which the move may bring since our government has already approved 51% investment in multi branded and 100% in single brand products by foreign companies in India. FDI allows foreign companies to takeover the local companies or purchase shares to operate a company and expend its business in India. FDI is one good opportunity for foreign companies as well for Indian economy, local farmers and job seekers as per the experts of the retail field although, the entry of foreign companies in Indian markets would definitely put pressure on certain groups and may affect local distributors and businesspersons/mediators up to some extent.

The Benefits of FDI

Let us discuss the benefits the foreign investors will bring to our country - 

Farmers- As per the supporters of FDI the mediators would disappear from the picture in between stores and farmers/suppliers, which would save farmers from exploitation and shall help them get a better price for their produce and in turn the customer shall be benefited in the long run as the difference would be passed on to him. The supporters of FDI have ready references of countries like Argentina and Brazil where the rates have gone down by 20% with the similar experiments in retail sector and farmers benefited up to 40% by getting increased prices by the retailers in comparison to what they were getting from mediators.

Insurance sector- Insurance sector is facing shortage of capital for a long time and FDI in insurance and pension sector should give a big relief to consumers especially in rural areas. Insurance companies may come up with new and better options in different segments according to need of the person. In fact, the present companies are working on beaten tracks, which need to improve on a big level. The companies entering into the insurance field would definitely have to plan to reach to the common person to make it more popular.

 

As of now most of the present infrastructure is catering to the needs of people living in metros or bigger cities and once the capital increases through FDI, the smaller cities and rural areas should get enough importance with insurance plans according to the practical needs of the people of those areas. As a mater of fact, people in rural and semi rural areas are not much aware about insurance plans especially, insurance related to health. Once the FDI enter into this particular sector the companies with increased capital and better plans would certainly like to capture the rural segment making them aware about the needs of insurance with better and suitable plans. Rural areas need to have altogether different plans covering life, crops and health compared to people living in metros, who have different needs

The entrance of more companies in insurance sector is definitely going to open a new era due to competition among the companies and better return to the consumers as increased number of companies mean a healthy competition, more plans, lower premium, more bonus and early settlement of claims, which is one of the major problems for the time being. The new companies may bring in some different plans, which do not exist so far in the Indian insurance sector namely related to women or gender specific, which cover a major share of insurance sector overseas. The FDI may prove a big boost to insurance sector and ultimately to Indian economy as the capital in this sector certainly diverted to other sectors ultimately.

 

Pension sector- There is no facility of pension in private sector apart from PPF or fixed deposit plans offered by different banks as of now and with entry of FDI in pension sector, the hopes of private sector must be high. People who keep investing in long term plans until their retirement should get better plans by these companies, which should offer a better return to consumers according to profits. Although, there is no certainty of profits, as that would definitely be depending on market and based on certain other criteria. However, the consumer in private sector would have another option to choose from for their long-term savings and returns.  

Let us get back to retail sector in consumer goods

With the advent of FDI in multi-branding retail sector, consumer goods should be the one major sector that must gain big on economical front with benefit to every one involved including farmers to the super brains coming right out of IIM. Every one going for shopping shall have to pay lesser and better experience of shopping, as the broker or mediator system would no more be there that should benefit both, the farmer and the consumer as well. Besides the big companies, entering in to the retail sector would keep the rates competitive, quality better and a healthier environment for the consumers due to ever-increasing competition will force them to follow highest standards to stay in the market. 

Retail sector consisting of fast moving consumer goods like packed foods, different drinks, toiletry, clothes, grocery and luxury items etc including the goods you use first thing in the morning until bedtime. The CPG that stands for consumer packed goods is one of the major industries in India today with a wide and scattered network catering to needs of different segments according to areas and cities, with production, packing and marketing. Now the government has given it a new dimension opening it for FDI that should help consumers and professionals as well providing them another opportunity for jobs in organized sector.  

Retail and its economy

Retail the process of providing consumers with finished goods that starts from the manufacturing level and pass through different hands before reaching to the actual consumers. Manufacturing, packing, branding and ultimately multi-layer marketing that involves super stockiest, stockiest, whole-sellers, distributors, franchisee and finally the retailers, one can very well understand the MRP going up due to such practices, as the margin of income for the different level of sellers to be considered while fixing the prices of the commodities. Although the manufacturers are increasing and the competition also is tough as the demand is increasing due to better purchasing power of the Indian consumers at a very brisk rate during last couple of decades. 

However, the retail still being too scattered and unorganized and having too many layers of sellers is the only draw back. Let us hope that the entry of the FDI should solve some of the problem of this sector, which is fourth biggest business sector of the country. Since the big companies always prefer to make their own arrangements without having any mediators and dealing directly with the manufacturers should help bring down the prices up to a certain level and provide much needed relief to over burdened consumers.

The biggest fruits and vegetable grower

That is a fact that India is biggest producer of fruits and vegetables in the world, still people are not getting enough for their use due to the multi-level mediators those increase the cost of the produce at their will or keep it in cold storage unless a shortage is created and the price goes up. Once the new retail sector begins dealing with the farmers, directly the consumer shall get a big relief and the farmer would get the right price for his produce at the source. FDI would certainly provide the producer and the consumer a new support group. Once the farmer gets the right price for his products he is expected to grow more with renewed motivation.  

What are we going to gain?

Whenever there comes up a new industry or new business with new innovative ideas or concepts, it takes some time to show its real benefits because it takes system to establish and mould itself. As we can see the direct profits at ones however, indirect profits show up gradually but surely although not immediately. In the case of FDI, we are expecting the direct profits to farmers, manufacturers and professionals, reduced prices for consumers, better infrastructure, new consumer habits, free from mediator system, wastage of products, better quality and new options for every one right from manufacturers to consumers at the onset itself. Later we shall see a new consumer and work culture altogether different from the one prevailing today.  

Now the new avenues are open in Indian market

Retail sector is based on local markets, number of consumers in the area, the financial standard of the locals, and the nature of industries available in that particular pocket and the education level of the consumers. India qualifies on these standards therefore considered a very good market for the foreign companies. Most of the experts are hopeful of retail marketing taking an instant kick-start as the standards of Indian consumers becoming better, people looking for newer products and ever so eager to find new ways of spending their money. The companies coming to India hopefully get a wonderful business, as the conditions are suitable for them. 

Multi national brands looking forward to establish on a fast track basis as most of these are already present through different channels. Multi-brand retail sector is going to open up Indian markets for the big companies from allover the world in a big way and they too are looking at Indian markets as the future source of growth in the near future. With the population over 1.2 billion and a present turnover of almost $ fifteen billions expected to reach over thirty billions by the end of 2015, a solid network of distribution is attracting foreign companies as they feel that this is one of the fastest growing market anywhere in the world. 

Professionals’ benefit 

FMCG is one sector that has very wide scope for professionals from different fields of marketing, sales, HR, creative inputs, advertising, branding, finance and logistic with good communication skills and specialization in their respective fields. Experts from these fields are placed appropriately in other organized sectors but retail being not that well organized had the disadvantage apart a few big companies. Now companies like Wal-Mart the oldest chain of supermarkets of America, Carrefour the oldest French super stores tied up with a local group in India and our own group of Tata along with Tesco, one of the biggest UK based retail-shopping group are ready to rock Indian markets. Incidentally, the retail management, which was only recently added to management course, would be better utilized with the organized sector coming in a big way. We should expect about 8-10 million jobs created due to entry of new companies in the Indian market, a big boost for the professionals. 

The opportunity to show creativity for professionals

Yes, you read me right, the companies in every field are willing to look different and retail sector is no different as well. Looking different provides a company do better than others therefore companies need people with multi talented skills. They even send their employees on-site to get a first hand job experience or even experienced employees to mange their projects overseas. Therefore, the need of the day for the professionals is to keep themselves ready for challenges for a better and matching salary in this field.

The expectations from a professional in the retail field  

Actually, there is so much to do in this field for a management professional, just have a look at the opportunities-

Product Development -

The tough competition in retail sector makes it one of the most important works where product development, research, policy and strategy of the company’s products finalized. If you have flair in such activities, you are in for a big time journey. 

General management-

To manage the company in an efficient way the best of the lot are selected to do the job. The general management is overall in charge of the activities and fully responsible as well.

Purchasing-

This is another important department responsible for quality of the product of the company therefore; people with expertise and technical knowledge of the subject concerned are hired to do the job.

Finance-

Another important job in a company for experienced finance professionals. They keep a close watch on every activity related to financial aspects of the company and keep the management informed about the financial health and taxation related matters. The job needs total responsibility and determination with high skills.              

Sales and marketing-

Actually these are two different departments with most experienced people looking after these departments. Marketing is related to planning and strategy while the sales department looks after the direct sales but both of these are the backbone of any industry. Professionals with experience and proven track records are engaged to look after these two departments with good emoluments.

Supply chain-

This is life line of the retail sector because the persons concerned look after the delivery on time schedule basis to keep the customers satisfied because as the old saying goes, a satisfied customer is your best way of advertising who brings ten more along with him.

Operations-

Another important depart responsible for maintaining quality of the products, which requires high set of skills with technical expertise.