Eco Hc 561 Week 6
SOLUTION OF WEEK 6:
It has been five years down the lane, and the business needs to be shifted overseas. The country of my choice is India. Now obviously India is the world’s largest democracy and the world largest market for consumer goods and healthcare services. Also India’s GDP per capita has improved a lot. The Indian government is promoting FDI (Foreign Direct Investment) to a large extent. Also the tax regime of India is far more relaxed than the tax regime of the US. Therefore expanding into India is a decent option and a great opportunity to expand the business and make more money overseas.
The Indian economy, estimated at roughly $1 trillion, is growing in tandem with the population. Goldman Sachs predicts that the Indian economy will expand by at least 5% annually for the next 45 years (see chart), and that it will be the only emerging economy to maintain such a robust pace of growth. (PWC)
The process we charge in the US will not be the same in the case of India. In fact the business would have to resort to fair pricing (the pricing that is at least 30% above the average total cost) in our case. The pricing must be quite reasonable. The reason on a primary basis is because majority of India is Hindu and Hindus are quite frugal and haggling type. If we price gouge or resort to premium pricing like in the US, the Hindu population will just dump our services and head for cheaper substitutes and in the longer rum the business’s brand equity and market share will head south. As matter of policy I am of a firm conviction that fair pricing must be the order of the day for the business if it wants to survive in mainstream India.