The Importance of BRIC

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The case of India of case The The importance The in BRIC of trade the international

Master of Sc. In Business Administration Students:

Catarina Vital, no. 11259

Diogo Alves, no. 11249

Diogo Oliveira, no 11316

Pedro Vaz, no.11285

Yitian Liang, no. 11290

Lisbon, July 1, 2010 Index

Introduction ...... 2 Importance of BRIC in the world trade ...... 4 Indian Market Analysis ...... 7 1. Basic data ...... 7 2. PEST Analysis ...... 7 3. International trade ...... 8 4. Opportunities of exporting to India ...... 10 5. Challenges of exporting to India ...... 11 6. Business Culture...... 11 Portuguese Exports ...... 14 1. Countries ...... 14 2. Products ...... 15 Recommendations ...... 18 1. Ores: ...... 18 2. High tech products: ...... 19 3. Sustainability and Environment – Energy sector importance ...... 19 4. Partnership - Construction and Iron & Steel Companies ...... 20 Appendix ...... 22 References ...... 24

Introduction

The Portuguese traditional business partners (Spain, France and Germany) are not anymore the countries with higher growing rates. In 2008, Portuguese exports outside the European Union have increased its value in the external commerce, while Portugal targeted new markets in order to avoid a reduction in its exports within a worldwide crisis scenario.

It is therefore essential to design our strategy in order to strengthen the position of our country in new markets as a part of the diversification process that has started before the crisis. Hence, Brazil, Russia, India and China are four very important fast growing countries and hence crucial markets to amplify Portuguese external trade. In its last official visit to India, the Portuguese president of the Republic stated that he would like to see Portuguese companies to be more audacious externally1 but still, Portuguese presence in this market and in other emerging ones is very fragile while investment and exports are reduced.

Till the nineties, Portuguese exports registered a big increase, even though slowing down after this period due to the high rivalry posed by Asian companies, making Portuguese ones to lose competitiveness in the international markets, due to the monetary and exchange policy imposed by the EU, also because of the strong appreciation of the euro, clearly prejudicial in exports.

In this sense and inserted in our topic, the BRIC, we found interesting the opportunity of establishing a linkage to the Asian continent, picking up the main takeaways that we could learn from those countries, and after describing the BRIC´s importance to the world trade, we will aim at analysing the suitability of a Portuguese international export strategy to India.

India is described as a continent by itself, while Indian economy is nowadays one of the largest of the world, being a hot prospect market to the Portuguese exports. However, Indian market continues to be underexplored, representing only 0.13% of total Portuguese exports. This fact was faced as an opportunity, as we will analyse the Indian market observing its macro-environment through a PEST analysis, its main cultural issues as well an international trade perspective summarizing the main advantages/disadvantages to export to this country.

After assessing India, we will carry out a general study about Portuguese exports to then draw some recommendations that will function as a guideline for AICEP of how and what to export to this Asian country.

1 Source: http://diarioeconomico.sapo.pt/edicion/diarioeconomico/edicion_impresa/economia/pt/desarrollo/1029034.html (Accessed on June 25, 2010).

3 IMPORTANCE OF BRIC Importance of BRIC in the world trade

During the 1970´s decade we figured out the beginning of an accelerated industrial growth of a specific group of countries aimed at achieving a regional leadership, by building the initial bricks of the notion of emerging markets. Furthermore, the last 10 years changed the world´s economy leading to the recognition of a new global society order. That group is called by BRIC, an acronym that refers to Brazil, Russia, India and China, used in 2001 by Jim O´Neill, a Goldman-Sachs economist.

According to a Goldman-Sachs report issued in May 20102, those so-called emerging economies had contributed “for over a third of world´s GDP growth and occupied almost a quarter of world economy in PPP (Purchasing Power Parity) terms” in the last decade. In fact, there are projections of the BRIC overtaking the USA as the economic colossus in 2018, whereas for example Brazil should surpass Italy in 2020 and India or Russia will soon be larger than Spain or Canada.

The recent growth of the BRIC is expected to be even more undermined in the next few years, while in 2050 they will demonstrate better results than the G6 together (USA, Japan, Great- Britain, Germany, France and Italy). This latter referred information is linked to the charts presented below and referred to BRICs contribution to world´s GDP, as well as the comparison of BRIC´s GDP´s growth to other countries.

BRIC'c contribution to world's GDP 60

45 2001-2010

30 2011-2020

0 China Russia India Brazil BRICs G3

Figure 1 - BRICs contribution to world´s GDP

BRIC's GDP comparison with other markets (US$ trn) 40 30 20 10 0 G7 BRIC N-11 Other Other Developed Emerging Markets Markets 2000 2010 2020

Figure 2 – BRICs´ GDP comparison to other markets (source: GS Global ECS Research)

2 Source: http://www2.goldmansachs.com/ideas/brics/brics-decade-doc.pdf (Accessed on June 26, 2010).

In the figure 1, we may highlight an estimated growth of almost 20% on the contribution of the BRIC to the global economy within 10 years. This trend is clearly led by China´s expansion of around 15% in 10 years, whereas the BRIC rise will signify the decrease of the G3 to the overall economy in almost 10%. Furthermore, on figure 2, we may observe one more time the exponential growth tendency of the BRIC specially compared to other markets.

This current and prospective economic trend will also have an impact on social terms, as the expansion of the BRIC will drive rising incomes and a new-born middle class aligning the notion of economic development to the one of economic growth. Also, this pattern will be most felt in India and China, as they are the most populous countries in the world, generating a tremendous impact on demand, increasing the PPP on those countries and stimulating competitiveness.

Despite different historical paths and of some obvious distinctions in social and political terms between the BRIC, the previous paragraphs show us a new course of world´s economy, giving a new sense to the word globalization due to the rise of those emerging countries to the status of futuristic economic super-powers.

Why India?

After exposing some of the key aspects related to BRIC´s growth in world economy, we decided to choose one country to work on, India. This topic will work as an introduction for the subsequent one, which will deal with the Indian market analysis in order to highlight the key points that Portuguese companies have to consider while exporting to this Asian country. Hence, why do we have chosen India? There are some main reasons that we can describe:

- High Domestic consumption – according to the Mckinsey Global Institute3, India accounts for more than half (67%) of its region GDP. - Cultural emphasis – although a wider description on point 2. We may highlight that the drive for initiative and entrepreneurial sense of Indian people is an important factor for companies that want to go abroad, seeking for innovation and creativity - Crisis recovery stimulus – during the recovery of the recent financial downturn, India (like China) have shown a lack of correlation with USA stock market due to market diversification - Access to partnerships with some of the rising companies in the world. As an example we can enhance Tata Group in the automobile, consultancy or steel sectors. - Capability to reinforce the position in Asia – India can be a step to develop a position in Asia, the “continent of the future”, as well as a better penetration in China, as India is now “China´s largest trading partner” - Portuguese international flows development – India is the BRIC with which Portugal has the lower level of exports, when compared to the trade flows to China, Russia and mainly Brazil

3 Source: http://www.investordaily.com/cps/rde/xchg/id/style/8343.htm?rdeCOQ=SID-0A3D9632-89DDFA62 (Accessed on June 26, 2010).

6 INDIAN MARKET ANALYSIS Indian Market Analysis

1. Basic data

Area: 3,287,263 km² (including Cashmere) Population: 1,180,000,000 people Governance system: Federal constitutional parliamentary democracy Currency: Indian rupee (exchange rate of 57 rupees = 1 euro at 24.06.2010)

GDP: $1.367 trillion (forecast for 2010), growth rate09-10 = 7.4% GDP by sector: Agriculture (17.5%), industry (20%), services (62.5%).

2. PEST Analysis

PoliticalPOLITIC environmentAL ENVIRON MENT  The largest democracy in the world;  Since its dependence in 1947, India has been dominated by several parties;  Since 2004 it is governed by the Indian National Congress (INC) that formed a coalition named United Progressive Alliance having a big mass of supporters among the Indian people;  Efforts to reach an even firmer relationship with China and the United States, trying to show their force as an emergent economy;  Good relationships with the developing countries in Asia and Africa, which leads to an all- round development of its economy.

EconomicECONOMalIC eAnvironmentL ENVIRONM ENT  India assisted to a much higher speed of the economic development since the application of market-based system in 1991, opening borders to the foreign trade and investment;  Great influence of the WTO (World Trade Organization) during the recent years with the expansion of trade and the economic growth of the country;  Some of the most important companies in India are related with the financial sector (SBI Capital Markets Ltd (SBICAP) or ICICI bank), oil and natural gas (ONGCINDIA - Oil and natural gas corporation limited India), or the Tata Group present in numerous sectors from technology to automotive;  Among the poorest countries worldwide but with a surprising potential for the development of its economy, India is an emergent economy, a BRIC and nowadays, the Indian economic growth has a feature of stabilization. The steady growth has the function to activate the global economy.

SocialSOCIAL environment ENVIRONMENT  Social environment is not good as there is lack of regulation and measures taken to confer to the Indian a good standard of living;  Education is far away from excellent, even though there was a great progress in the attendance of primary education and efforts made by the Indian government to eliminate illiteracy;  Less opportunities for the girls to go to school, resulting in less literacy among women;  Numerous inequalities in the Indian society due to the permanent social system of castes; 90％ of the employees in India are out of social security, according to the study made by OECD (Organization For Economic Cooperation and Development);  This whole situation may lead to a chaos facing a financial crisis as many people may get out of job without any unemployment benefits.

TechnologicalTECHNOLOGICAL environment ENVIRONMENT  Useful measures taken by the government: for example, the free and compulsory education until the age of 14 consigned by the Constitution of India;  In another way, there is a great importance given to the high education and it is the 3rd largest in the world, after China and the United States;  Great importance attached to the science and technology sectors also given by the constant importance of the universities research and constant development of innovator methods;  Great exporters of services related with technology and information systems.

3. International trade

Exports

As was stated before, India is one of the most important exporters in the world, being ranked 22nd in the world in terms of export volume. However, Indian trade, as well as other countries, was impacted by the global recession of 2007 to 2009. Indian exports fell from $200.9 billion in 2008 to $165 billion in 2009.

Being a country with a huge workforce, India has seen its trade being boosted by the production of precious stones and metals. The various other export commodities that India exports are: petroleum products, machinery, iron and steel, chemicals, vehicles and apparel.

India’s main export partners are: United Arabs Emirates, United States of America, China and Singapore.

Imports

Considering India as an emergent country seeking for becoming a developed society, its trade relations with external countries are aimed at strengthen its economy and increase the living standards. In this sense, India is in need of machinery and energy and that is the reason why in 2009 the major imports were crude oil and machines.

In 2009, India faced a decrease in imported products by import value, diminishing more than 20% in the amount verified in the previous year, from $322.3 billion to $253.90 billion, being ranked as the fifteenth country in comparison with the world. This is related to internal factors, due to an increase on internal production to boost economy.

Indian imports (2008-2009) 400 300 200 100 0 2008 2009 $ billion 322,3 253,9

Figure 3 - Indian imports between 2008 and 2009 (Source: Economy Watch)

Also in 2009, according to the Economy Watch, the most important India’s partners were China, Saudi Arabia and United States accounting for almost one fourth of the total imports, as it is showed below. We can also conclude that India has a portfolio of importers very well diversified, being less exposed to specific markets, although its main commercial exchange is done with China and the nearby Arabic countries.

India major country partners in 2009

Iran UAE

Saudi Arabia China

0% 2% 4% 6% 8% 10% 12%

Figure 4 - Main commercial partners of India (Source: Economy Watch)

Finally, regarding the main products imported India encompasses: non-electrical machinery, crude oil, precious stones, iron and steel, gold and silver, chemicals, coal, transport equipment and fertilizers.

4. Opportunities of exporting to India

India supports Global Trade – Despite some legislation and restrictions regarding foreign trades, India is an open country for international trade. However, it continues to be much less open than many of its large emerging nation colleagues.

Many Ports - India has a vast shoreline spanning 7600 kilometers forming one of the biggest peninsulas on the earth. It is serviced by 12 main ports and 185 notified minor and transitional ports. Different ports deal with diverse merchandise and commodities. In order to understand which ports support a certain commodity/merchandise the best deal is contacting a shipping agent who has a high network of contacts to clarify all the doubts.

Consumption is growing – It is expectable that by 2025, the middle class in India will increase from 5% in 2007 to 40%, according with Subbu Narayanswamy - co-leader of McKinsey’s consumer practice in India. By that time, or even before, India will be very likely the “country one of the largest consumer markets in the world”.

Emerging industries – While expenditures on food (in % of total consumption) are progressively going down, Indians are spending more on transports and communication, recreation, furniture and home appliances. This is also one of the reasons why machinery (including vehicles components) accounts for a significant percentage of total imports in India. On the next chart, we may have a fully understand of this paradigm:

Consumption Distribution in India (% between 1999-2007) 60% Food, beverages & tobacco 50% Clothing & footwear 40% Gross rent, fuel & power 30% Furniture, furnishings, 20% appliances & services Medical care & health 10% services Transport & communication 0% Recreation, education & 1999-2000 2003-2004 2004-2005 2005-2006 2006-2007 cultural services Figure 5 - Consumption distribution in India (Source: Mostly Economics, Wordpress)

Market Diversification - Selling to India allows Portuguese companies to diversify their business and spread their risk. As a result, companies are not tied to changes within the western and domestic markets. Besides, there is a chance of finding a potential niche much higher than in those countries. Furthermore and unlike Russia for example, India is recognized by a wide market diversification from IT to manufacturing. This factor should make it more stable than other emerging markets.

UE platform – The relationship between EU and India has been strengthened in the last years, not only from the economic and commercial standpoint, but also within a strategic perspective due to the crescent role of India in the international politics and economic dynamics.

5. Challenges of exporting to India

Packaging – There are some levels of standards, especially custom rules, regarding labeling or quarantine requests. For instance, when transporting goods to India, there is very often a quarantine inspection to those goods, mainly when there is a possibility of damaging vegetation or earth. The best way to overcome all this details is to incur on expenditure (but a very welcome one since it avoids mistakes and failures) by outsourcing an international shipping firm that could do this perfectly. Therefore, that chosen firm must understand which products are allowed to enter in India and under what specifications.

Market Information – Finding information on India is a time-consuming and difficult task, especially when comparing with our home country. Hence, if we want reliable and accurate market information and be aware of emerging opportunities with the best right options, it is indispensable to have a broker between Portugal and India, who lives in this latter and can get all that information for us.

International Competition – Worldwide, there are companies trying to take advantage from the current and future Indian economic conjuncture. Therefore, any Portuguese SME is for instance competing with US multinationals who despite some higher experience in this market also have higher resources to better explore some gaps, failures, needs and opportunities in the Indian market.

Infrastructural problems – India´s recent economy boost has put some pressure over the infrastructural facilities of the country as according to the urban expansion projections, “India has 10 of the 30 fastest-growing urban areas in the world”4, having to take into account significant modernization and expansion problems related to water and energy supply, communication improvement like telephone penetration, traffic problems on main cities or poor road conditions. This can pose serious problems to Portuguese companies operating in sectors related to construction and real-estate.

Indian Bureaucracy – The IAS (Indian Administrative Service) is a synonymous for the Indian bureaucracy and despite the urgent need of reform in the Indian system, areas like transportation or environment conservation have patent bureaucrat aspects. While internationalizing, Portuguese companies have to be aware of a slow-decision making process in some business sectors, due to an intensive bureaucracy.

6. Business Culture

When dealing with Indian companies you should take into account some culture-specific aspects that are crucial for establishing win-win agreements, adjusting your behavior to cope with cultural differences. Hence, here are some suggestions to address:

4 Source: http://www.usindiafriendship.net/viewpoints1/Indias_Rising_Growth_Potential.pdf (Accessed on June 26, 2010).

Language and religion

Although central government only recognizes Hindi has the official language of India, there are about 21 other local languages in different states. Furthermore, English is the language of international commerce, being one of the official languages. Religion plays an extremely important role in India and as we know some of the most well-known religions have born there like Buddhism and Hinduism.

Decision making and building relationships

Doing business in India involves building relationships. The decision making is not an issue of only one person as the decision should also correspond to the group or other systems that an individual belongs to. The decision made by an individual should also correspond to the family, group, or other systems that he/she belongs to. Indian culture is highly based on hierarchical positions where status, people roles and responsibilities tend to be very well defined. Indians only deal favorably with those they know and trust, hence it is not only crucial to show a good business knowledge but good signs of trustworthiness and foremost honor.

Negotiations

Indians are not very serious about the time, for them the time is not that precious. Meetings should be arranged well in advance, in writing and confirmed by phone. Avoid meetings near or on national holidays and the heat seasons by scheduling between October and March. Punctuality is expected, although flexibility is relatively accepted as family responsibilities take precedence over business so last minute cancellations are possible. Furthermore, the business environment attaches great importance to friendships. While communicating with your Indian partner the topic of friends or family would be a good choice. In this way, you will be able to gain the trust from the Indian associates.

Linked to the lack of importance given to time, always bear in mind that negotiations can be slow. If trust has not yet been established then concentrate efforts on building a positive connection as Indians do not base their business decisions solely on statistics, empirical data or presentations. They use intuition, feeling and faith to guide them and patience is a key strength to succeed while doing business in India.

Is is also clearly important to avoid the use of pressuring and disagreement tactics as Indian society has an aversion to conflict as it is considered rude and maybe seen as causing disrespect or as a personal offense.

Analysis of the axes Hofstede (Appendix 1.)

Hofstede´s 5 dimensions of culture are particularly relevant while aiming at analyzing the cultural differences between countries. This author has based a cultural assessment on 5 major factors: power distance, individualism, masculinity, uncertainty avoidance and long-term orientation. In this case, we will compare both India and Portugal results in order to check the cultural fit between both countries. This study can be found in appendix 1.

13 PORTUGUESE EXPORTS Portuguese Exports

Portugal was the European country suffering from higher changes on its exports’ structure between 2003 and 2006, mainly due to the chosen final destinations and the type of products exported.

1. Countries

According to Portuguese Official Statistics (Instituto Nacional de Estatística), in 2008 around 75% of Portuguese exports were made to European countries, mainly to Spain, Germany, France and United Kingdom.

Portuguese exports inside UE (€M) 35000 30000 25000 United Kingdom Italy 20000 France 15000 Spain 10000 Germany 5000 Others 0 2005 2006 2007 2008 2009

Figure 6 - Portuguese exports to inside EU (source: INE)

From 2005 to 2008, the total exports to countries outside the UE have been growing from 20% to 25% of the total exports, which emphasizes that the Portuguese bet on new markets, mainly in Africa and Asia. The purpose of this strategy is to try to minimize the Portuguese exposure to a limited number of European countries and to explore new emergent markets, with high growth rates, where new expansion opportunities are arising.

Portuguese exports outside UE (€M) 12000 Singapore 10000 PALOP 8000 Russia India 6000 China 4000 United States 2000 Brazil Others 0 2005 2006 2007 2008 2009

Figure 7 - Portuguese exports to outside EU (source: INE)

Regarding the Portuguese exports only to BRIC (Figure 8), this value has increased 33.3% since 2005 to 2009, mainly due to an increase in the international trade with Brazil. However exports to these countries solely represent 1.95% comparing with the total value.

Portuguese exports to BRIC (€M) 800 700 600 Total 500 Brazil 400 China 300 India 200 Russia 100 0 2005 2006 2007 2008 2009

Figure 8 - Portuguese exports to BRIC (source: INE)

In the long run, if Portugal keeps on following this diversification strategy to African and Asian countries it will be able to protect itself against downside turnarounds in the Western economies, once the country has been penetrating into markets growing more than the European ones.

2. Products

As we can see from the next chart (Figure 9), the main Portuguese products exported are: machinery, electrical devices and equipment, automobiles and tractors and other land vehicles (which are included in the two first categories – machinery and transportation materials).

Portuguese exports by product 20% 18% 16% 14% 12% 2007 10% 8% 2008 6% 4% 2% 0%

Figure 9 - Portuguese exports by product (source: Portuguese Ministry of Economy and Innovation)

According to Jornal de Negócios, in the last two decades the structure of the Portuguese exports has changed a lot. Low technology products, such as textiles and shoes, dropped from 40% to around 10% and technological products (aeronautical, pharmaceutical, IT and parts to automotive and electronic industries) have been increasing, representing roughly 30% of the total exports.

Concerning the Portuguese exports to India, they accounted to only 0.13% of its total exports, evidencing a very deficient presence in this market. As it is acknowledged in Figure 9, around 44% of the products exported to India in 2009 were capital goods (machinery), parts and accessories and other industrial materials.

Portuguese products exported to India (€M)

45 Transport equipment, 40 parts and accessories 35 Capital goods, parts and 30 accessories 25 Fuels and lubricants 20 15 Industrial materials 10 5 Food and beverages 0 Other consumer goods 2005 2006 2007 2008 2009

Figure 10 - Portuguese exports to India (source: INE)

According to INE statistics, the trade balance between Portugal and India is much misbalanced, once in 2009 Portugal has exported 40,364,358€ to India and imported 262,266,491€. However, the number of Portuguese companies exporting to India has been increasing over the last years. In 2009, this number was 338 and there are currently 7,408 companies with potential to successfully export to India5.

5 Source: http://www.bes.pt/sitebes/cms.aspx?plg=56d4aa7c-9ff3-491c-a635-4c2efa60747f (Accessed on June 27, 2010).

17 RECOMMENDATIONS Recommendations

India is the 52nd Portuguese client and its 33rd supplier. The trade relations between Portugal and India are misbalanced and its profile is not the most attractive at all: trade of lower added value products with a reduced industrialization level. Once India is an alternative market to China, in what concerns to the great potential of its internal consumption and to the capacity of the development of industries where technologies makes the difference, the Portuguese external efforts may be aimed at changing this.

Besides machinery, skins, textiles, rubber, plastics and agricultural products that Portugal buys and sells to India, we must try to explore new markets for new products. In order to reduce the gap between imports and exports, Portuguese companies must focus on distinct high tech products. Several countries, like the United States and other EU countries are already in the long run for those niches, thus increasing the pressure on the Portuguese side.

‘India could be 40 times bigger by 2050, and may also have the potential to be larger than the US by that time’6. To achieve this, however, many changes need to be implemented.

According to the research report ‘Ten Things for India to Achieve its 2050 Potential’, performed by the Global Research department of Goldman Sachs, increasing agricultural productivity, improving environmental quality and infrastructures are some of the critical aspects in order to make it happen.

Consequently, our most important recommendation for the potential Portuguese exporters to India is that they should try to focus on products and key aspects that cover the need existed behind these two trends. We will therefore present recommendations focused on some ores, high tech products, energy sector sustainability and construction and steel.

1. Ores:

Currently, Portugal is one of the largest producers and exports of ores such as copper, tin and zinc which are mostly explored in the Neves Corvo and Aljustrel mines, both located in the Iberian Pyrite Zone (Faixa Piritosa Ibérica).

Copper has some special properties: good heat conductor, strong and durable material, resistant to corrosion and a non-magnetic material, making it very attractive for several industries such as the construction, power generation, machineries and other industrial parts and accessories.

In fact, the notoriety of the copper has been growing over the last years and it has been used as a modern construction material. It is largely installed in buildings, water pipes and gas thermal systems, roofs, terminations, or just as a structural component. The development of new products such as rolled profiles, pipes, gutters and fall, has been expanding the scope of use of the copper.

6 Source: http://economictimes.indiatimes.com/quickiearticleshow/3137357.cms (Accessed on the 27th June 2010)

It is also important to note that copper is a ore with a high potential of demand in the future mainly for the construction industry, due to its profitability, adjustability and the current environmental and social concerns.

As was stated in the Indian challenges, the current government is betting on the improvement of the internal network of energy distribution. Therefore, power and energy is another industry which can be a possible target for the Portuguese exports of copper, since it is essential for the electrical generation and distribution as it is an excellent conductor of energy.

Furthermore, the industry of transports may also be a customer for Portuguese copper, once it assumes an important role in the automotive area, being largely used in motors, electronics and electrical systems.

2. High tech products:

Portugal is one of the global major players in some high tech niche markets. Thus, a country like India that is eager to become one of the world’s super powers can be seen as an open window of opportunity by some Portuguese companies to export the following products:

 Technology for interactive communications;  Biometric reader technology;  Software for navigation and communications systems by satellite;  Decision-support systems for resource planning and management;  Interactive surfaces and boards;  System for fast opening a new company;  Contact center solutions;  Wind, wave and solar energy exploration.

3. Sustainability and Environment – Energy sector importance

‘India’s high population density, extreme climate and economic dependence on its natural resource base make environmental sustainability critical in maintaining its development path.’7 This last sentence makes obvious the need for an alignment between the environment and economic activity, in order to prevent environmental degradation to happen.

Giving the most prominent example (energy), India´s over usage of coal to powerhouse supply is a problem that can be reduced through a change towards sustainable measures constituting a strategy towards cost reduction, as well as indirect effects on a better risk management and enhancing social responsibility. In this case, this would detriment the use of this scarce resource (coal) as well as signifying other environmental effects like gas emissions or ash contents on air.

Therefore, this niche market on environment can be taken into consideration by Portuguese companies by exporting cleaner technologies (wind, wave and solar energy as described above) and helping Indian companies to establish ambitious targets on the usage of renewable raw materials or renewable energies enforcing Indian companies to constitute a sustainability plan

7 Source: http://www2.goldmansachs.com/ideas/brics/ten-things-doc.pdf (Accessed on June 27, 2010).

19 with revised targets on environmental matters that would function as a checklist to materialize this sustainability notion.

Despite India´s government efforts in building a “strong policy and institutional framework, including a separate ministry for environment and forests or state and local pollution control boards”, a good solution for implementation could be a partnership with Portuguese state entities, like for example IEP – Instituto Electrotécnico Português, to overcome energy audits or rationalization steps towards energy consumption reduction.

4. Partnership - Construction and Iron & Steel Companies

India is trying to become a developed country, seeking for materials (iron and steel) and customised construction services that allow the country to create infrastructures such as bridges or pillars. These kinds of infrastructures are indispensable for a country which aims not only economic development but also life quality improvement. As a matter of fact, and according to Jim O’Neill and Tushar Poddar in “Ten Things for India to Achieve its 2050 Potential”, one of the major problems (and key-points) in India is the lack of “capacity for ownership and stewardship of infrastructure development in the municipal bodies”. Additionally, India has also shortage of skilled engineers and technicians.

Concerning with raw-materials, iron is the most widely used of all the metals in India. Its low cost and high strength make it indispensable in engineering applications such as the construction of machinery and machine tools, automobiles, the hulls of large ships, and structural components for buildings.

Therefore, taking into account that Portugal is more and more a country of services there is an opportunity behind the stated problem above, especially for construction companies which have been progressively extending their services abroad. Moreover, these construction companies would require materials to build infrastructures and what could be better than requiring those materials to Portuguese extracting/manufacturing companies? Basically, this is meant to be an implicit Portuguese partnership based on a “win-win” perspective and the creation of synergies while taking advantage of India´s medium-long term needs.

Finally, we must bear in mind that each one of these companies may penetrate in Indian market alone, but it becomes easier to soak one of them in the market first and then embed the other one by something we can call “company collateralization”.

21 APPENDIX Appendix

Appendix 1 - Hofstede Axes for India and Portugal

Figure 3 - Hofstede Axes for India and Portugals (source: http://www.geert-hofstede.com/)

Regarding Power Distance (PDI), India indicates a higher level of inequality of power and wealth within the society when comparing with Portugal. The social classes are ranked according to a system of castes that reinforces the social inequality lived in India.

India gets a much higher ranking than Portugal in Individualism (IDV), which means that “India is a moderately collectivistic culture in which an individual’s decisions must be in harmony with the family, group and social structure.” (Morrison, Conaway & Borden; 2004, p.168).

The India Masculinity (MAS) scores is much higher than the Portuguese one. Therefore, the gap between the values of men (money and goods) and women (relationships and quality of life) is bigger than that of Portugal.

India's lowest ranking Dimension is Uncertainty Avoidance (UAI) is a lot lower than that of Portugal. Thus, Indians are more open to unstructured ideas and situations, having fewer rules and regulations to attempt to control every unknown and unexpected situation. This is intimately linked to the technology-driven society that characterizes India.

India is also considered in the 5th dimension of Hofstede, the Long-term Orientation (LTO), with the score relatively higher than the world average, signifying an open-view for the future believing in new prospects, don´t submitting to traditions.

23 REFERENCES

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