Arvicon International: Competitive Strategy and SWOT Analysis, Lecture notes of Literature

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Bachelor Thesis

Competitive strategy for an Indian

natural stone trader

Marco van Poppelen s

Preface

This bachelor thesis is the conclusion of my study of Industrial engineering and management. The degree is offered by the faculty “Management and Bestuur” at the University of Twente. The thesis involves a research at Arvicon International which is an Indian natural stone trader.

First of all, I want to thank all the employees of Arvicon International for their support. Without their cooperation and their effort to show me around in the company, I wouldn’t be able to conduct this research. Especially, I want to thank Mr. Gaurav Jain for his effort to teach me everything about the natural stone business.

Next to this, I want to thank Martin Stienstra and ir. Stephan Maathuis for their supervision and time during this thesis.

Last but not least, I want to thank my father ir. Jan van Poppelen and my mother Helma Kruifhof for their incredible support during my study.

Management Summary

Arvicon International faces some difficulties with their performance. A lot of products are not of sufficient quality and customers complain about this. Next to this, the company has problems to keep agreements with customers, for example the delivery terms. The problem that amplifies this issue is the fact that the company is dependent on a few customers, and so the director is scared that the loss of one of these big customers would drop the sales of the company dramatically. Some customers already threat to stop ordering from Arvicon because of quality problems like broken tiles and delays. With this thesis, we will investigate the competitive strategy the company uses. At this moment, it seems to be that the company uses a cost leadership strategy. With this strategy they want to keep the prices as low as possible, because that is one of the main reasons why customers select them. Furthermore, they face some competition from other Indian natural stone traders. An other issue is that the company promises things they can’t make true. The company should get rid of the goal to be the cheapest. Their financial position is outstanding and compared with the competition, the Dutch speaking sales managers are definitely a pro. One other important point why it’s not wise to face this competition to be the cheapest is, because there are other companies which use child labour and do other unethical things. Instead, Arvicon should use a differentiation strategy in which the firm focus on quality. To do so, Arvicon should change a lot. First of all, the amount of suppliers should be brought back. Only those suppliers who constantly deliver a high quality product according to agreements like delivery terms etcetera should receive orders from Arvicon. It should be possible to pay those suppliers a higher price for their products to be sure that their performance will remain constant.. Also the price Arvicon asks for its products should increase. It seems to be that customers prefer quality and not only a cheap price. If an price increase means that there won’t be anymore delays and that all the material will arrive undamaged, the customer will be better off. The department which is responsible for the quality control should reorganize. This is necessary, because it seems to be that they do not work efficiently. According to the director of Arvicon, there are 30 employees working for this department. Those persons have to check only 2000 containers a year together. This should be possible. Next to this, the company should try to slow down the turnover of employees. This can be done by increasing the wage for employees who know a lot about the company and do have an added value for the company. It is important to state that this thesis doesn’t guarantee that the use of an differentiation strategy will be the best for Arvicon. Also the proposals which are done are not detailed enough to implement directly. For example, it would be wise to bring back the amount of suppliers, but it is not clear yet if this is possible. It could be that the capacity of all the suppliers is too low so the amount of suppliers cannot be brought back. That is why the director of the company should have a very critical look to the proposals that have been suggested and base the decision whether to work with a differentiation strategy or not on this report and his own experience.

Chapter 1: Introduction

1.1 Background This bachelor thesis is accomplished at Arvicon International. Arvicon is an Indian trading company and is active in the natural stone business. The firm exists for eight years and is officially a daughter company of the Arvind Construction Company which was established in 1962. This company is active in civil construction works in its own country as well as abroad. It’s specialized in delivering materials which are used for construction works like cements, stones, etc. Next to this, they do some construction projects in India itself. The company was established by the Jain family and this family still leads the firm. Arvicon was originally formed to deliver natural stones to its mother company. This changed when the company realized that there is a huge demand for natural stones in Europe. From that moment on, Arvicon began to sell natural stones to other countries. Currently, Arvicon sells marble, granite, slate, sandstone and limestone in all kind of finishings to Indian customers and to customers from eight different countries in Europe. Arvicon doesn’t have its own mine, because the company is a trade company. Most of its products come from suppliers which are located in several Indian cities like Kota, Basoda, Bangalore and Shivpuri. Next to this, The Arvind Construction Company has its own limestone mine. The head office of the mother company is located in the business district of New Delhi, also called Connaught place The office of Arvicon International is located in this building. Next to the office in Delhi, the company has an office in Kota and in Bundi. These are used by employees who inspect the production facilities and the mines. This is necessary to keep the quality of the products at a certain level and to see if all the suppliers follow the law of India regarding child labor etc. The Arvind Construction Company has about 500 employees. Sixty of them work directly for Arvicon. Arvicon exists of four departments: the shipping department, the accounting department, the purchase department, and the marketing department. We might say that the purchase department exists of two sub-departments, the sub- department which is located in Delhi and who buys natural stones from suppliers and the group of employees who inspect the mines. All the departments are under command of Gaurav Jain, the director of Arvicon and one of the directors of the mother company. Next to the employees who work for a specific department, there are a few employees for other tasks like the maintenance of the information technology, to bring chai (a local drink) etc. The firm focuses on the market in Western Europe. That is done by several sales managers. Each of them focuses on one geographic area. The reason to do business in Europe is the fact that there is a huge demand for natural stones. Some of those stones are only found in development countries and by processing them in India, they are relatively cheap for a European customer. The price, Arvicon can get for natural stones which are sold to Europe is higher than the price they will get from an Indian customer. Arvicon sells about 2000 containers of natural stones each year and this turnover is worth about five million euro. Next to this, they grow with about seven percent each year. Although, a lot of diverse market information is available and some research about the market has been done, a thorough examination of this data versus the competitive strategy has not been made. Therefore, the company wanted someone who would look critically to the competitive strategy of the company.

1.5 Research questions To answer this problem statement, some information need to be gathered. It is, therefore, essential to formulate research questions so the whole research will be done more structured.

Research questions:

• How does the external environment of Arvicon look like and how does it affect the company?
• How does the internal environment of Arvicon look like and how does it affect the company?
• Which options does Arvicon have regarding the competitive strategy of the company?
• Which competitive strategy should Arvicon chose, given its internal and external environment?
• How can Arvicon implement this competitive strategy and how should the company adjust its management to this?

With the answer to the research questions, it is possible to give a sufficient answer to the problem statement. After this, it is possible to outline this information into a conclusion.

Chapter 2: literature

A theoretical framework will form the fundament of this bachelor thesis. It is important to state that the literature can be divided into several specific areas. Literature to describe the internal environment of a company and theory to describe the external environment of a company. Next to this, we will use literature regarding to the competitive strategy of a company and literature regarding to the fit of a competitive strategy and the environment of a company. Furthermore, some theory about cultural differences between countries will be used.

2.1 The external environment The external environment of an organization exists of the general environment and the task environment. To analyze the external environment of a company, it can be useful to conduct a PEST analysis. A PEST analysis is a way to analyze the general external environment of an organization (Morden, 2007, p.94). Every organization has an external environment. The external environment is quite important for a company because it is the environment in which a company operates. A Pest analysis exists of the legal-political, economical, socio-cultural and technical environment of a company. Daft (2003) adds a fifth dimension to the PEST analysis, called the international environment. For the company at which this thesis is done, this is quite useful because of the fact that the company operation in a foreign environment. The Political dimension itself represents all the regulations that the government of a country, state or a local community, designs to influence the behavior of a company (Daft, 2003). This can also be a pressure group which tries to stand up for environmental issues etc. It is important to state that not the whole political environment of India affects the company where this thesis is written about. Only regulations which directly influence the company and have a major impact on the business of the company will be described. We can think of laws regarding environmental issues, child labor and import restrictions from the European Union. The same applies for pressure groups. A pressure group which tries to help poor people in Delhi, where the company is located, doesn’t affect the company as much as a pressure group which tries to prohibit the digging of natural stones in India. Only pressure groups which have a major impact on the company will be described. Also the stability in the area where the company is located is a part of the political dimension. By looking to the chance that a company has to change its business due to a political change in the area where the company is located or in the area where the company sells its products, we can say something about political stability. A major change would be for example a coup in India. This is off course very hard to predict but we might look to for example an investigation done on this subject. Also corruption belongs to the political dimension. This affects the company because it allows competitors as well as the company itself to cheat. Data about corruption in India is available. The economic dimension represents the general economic health of a country in which a firm operates (Daft, 2003). We can see the economic health of a country via indicators like the gross domestic product (GDP), the growth rate of the aggregate economy and unemployment. Thus, we have to define the economic health for India as well as for the Benelux. It is important to state that the GDP of the Benelux is far more important for the overseas activities of an Indian trade company than the GDP of India. A low GDP in India could even be an advantage for an Indian trade company since it means that wages are low in India. A high GDP in the Benelux means that people in the Benelux have a big

competitors of an Indian firm as the market might not be transparent. Despite, it is possible to say something about the competition by working in the company. Next to this, by analyzing reports about the market for natural stone, we can say something about the competition. It is important to find out which competitive strategy competitors of a company use. This makes it possible for a company to distinguish itself from those competitors by using another competitive strategy. Suppliers of a trade company are the persons or organizations who provide products which this trade company sells. It would be possible to visit the quarries and the production facilities of the company. This makes it possible to describe them. Next to this, by having interviews with the director of the company, we can gather more information about the suppliers. The labor market for a company is the set of people who are able to work for this specific company. To gather more information about the labor market for an Indian trade company, an interview with the director of the company where this thesis is written about will give sufficient information.

Another way to look to the task environment of a company is by using Porter his five force model (Daft, 2003, p. 254). Because this bachelor thesis will be based largely on the literature of Porter, the article competitive advantage revised will be used as an addiction of the literature of Porter. The reason for choosing Porter is the fact that his work is internationally recognized and appreciated (Stonehouse and Snowdon, 2007). A weak point in Porter his model is the fact that it is a static model. This means that the origination of new markets by for example innovation is not taken into account. This would be a problem if this thesis is about a company which operates in a high tech market which changes a lot, like for example Nokia does. The natural stone market is not undergoing a lot of changes due to for example technical innovation, so the critique that Porter his model is static isn’t valid for this thesis.

According to Porter (2008), there are five competitive forces. These are: Potential new entrants, bargaining power of customers, bargaining power of suppliers, Threat of substitute products and the Rivalry among competitors. Potential new entrants are potential new players on the market. It is not in the benefits of a firm if it is easy for potential new entrants to enter the market. It is for example relatively easy for a bar to enter the catering industry, but on the other hand quite difficult for a train company to enter the public transport market. By looking to the setup costs for setting up a trade company, we can say something about this. The bargaining power of customers is the power which customers have to bargain. This is for example relatively big in a monopsony (a market situation with only one customer, the opposite of a monopoly). The bargaining power of supplier is the power which suppliers have to bargain with a company. This power is relatively large if a certain supplier is the only player on the market. This information can also be obtained by doing an internship at the company. The threat of a substitute product is the threat that a certain product will replace another product. For example, the disc man has been replaced by the mp3-player. This was a threat for producers of Discmans, and most of them saw an opportunity by producing mp3-players. Some information about this subject can be obtained from a market report of the natural stone market. The rivalry among competitors in a certain market is influenced by the other four forces according to this model. This is shown in figure one. As we can see in the figure, the rivalry among competitors is influenced by the other four forces. It should be possible to confirm this theory by working in the company and to describe how the competition in

the natural stone market is. This should match with the outcome of Porter’s five force model. This literature is useful because the competitive strategy a company follows has got to fit with the competitive forces of a company. It is important to describe the competitive forces which a company face. The fact that the five competitive force model links the task environment with the competitive strategy of a company makes this theory useful for this thesis

.

Figure 1: The five force model of Porter

Because of the fact that this thesis will be done at an Indian company, it will be handy to deepen into the Indian culture. If this thesis shows that the company could double its profit by changing the company completely by empowering employees, it may be possible that nothing will change because the culture in the country where the company is located has a huge power distance. It is important to adapt the recommendations which will be made in this thesis to the local culture. Next to this, a company who export goods to a foreign country also have to pay attention that their customers might have a total different culture. It is possible to describe a culture by using a framework which is designed by Hofstede. According to Hofstede (1985), culture is the mental programming of the mind. By using this definition, we don’t look to aspects which are above the ground like architecture, language and fashion. According to other definitions of culture, culture is everything which is created by human beings. The definition of Hofstede suits better for this thesis since we are only interested in the aspects of culture which influence the organization culture of a firm. According to Hofstede, there are five dimensions of national value systems which affect organizations.

useful to look to the marketing mix. We can see the marketing mix of a company as a mix of 4 P’s (Kottler, 2004).

Product: The product is the product itself which a company sells, but also the quality of the product which a company sells, the appearance and the packaging. If a company uses a built to order strategy in the customer order decoupling point, their appearance and the look of the packaging is less important than the quality of the product. Price: The price involves the price a customer has to pay but also aspects like payment terms, discounts and allowances. Place: The place has everything to do with logistics and the question where the product and the company are located and if the product is at the right time at the right place. Promotion: This includes the way how a company promotes its products or service and which kind or marketing tools they use. This is often considered as the most important aspect of the marketing mix.

This way of filling in the competitive strategy of a company is widely used because of the simplicity of it. It is possible to use this framework for every company in the world so no matter what a company its competitive strategy is at the moment, we can use this framework to get a clear overview of the marketing mix of the company. By working as an intern in a company, it is possible to obtain information about these subjects.

2.3 SWOT analysis A useful tool to analyze a company is a SWOT analysis. Via a SWOT analysis, we can see the strengths, weaknesses, opportunities and threats that affect the performance of an organization (Daft, 2003, p.248). The strengths are those points where a company has a competitive advance in comparison with their competitors. The weaknesses of a company are those points where the company has a competitive disadvantage in comparison with their competitors. In fact, by the analysis of the internal environment of a company, it should be possible to determine the strengths and weaknesses of that company. The SWOT analysis can be seen as a short summary of the internal environment. The opportunities and threats of a company consist of external influences. Opportunities are characteristics of the external environment that have the potential to help the organization to achieve its strategic goals. Threats are characteristics of the external environment that may prevent the organization from achieving its strategic goals (Daft, 2003, p. 249). External influences are a part the external environment of a company. By using the dissection of the external environment, it is possible to determine the opportunities and threats. The opportunities and threats are also a summary of the external environment. A SWOT analysis is quite useful because with it, it is possible to see what a firm is and is not able to do in a quick and clarifying way. The competitive strategy of a company should fit with the SWOT analysis of a company. If a company is for example very cost efficient because they have a huge capacity engine compound, they shouldn’t focus on their quality but on their quantity.

To determine the competitive strategy of a certain company with respect to the SWOT analysis, it is useful to make a confrontation matrix (see figure 3). A confrontation matrix is a matrix in which we link opportunities and strengths and weaknesses and threats. We

can make the next combinations: strengths- opportunities, strengths-threats, weaknesses- opportunities and weaknesses-threats (Koninklijke Horeca Nederland, n.d.).

Per confrontation, we should fill in a number ranging from zero to ten. A zero means that there is no link and a 10 means that there is definitely a link. In field 1, we can ask the question “can we use this chance with this strength?”. In field 2, we ask the question “can we avert this threat with this strength?”. In field 3, we ask our self the question “does this weakness make it impossible for us to use this chance?” and in field 4 we ask our self the question “does this weakness makes it impossible for us to avert this threat?”. If the answer is completely yes, we give the link a 10. If the answer is completely no, we give the link a 0. By summing up all the rows, we can see what the area for attention of the company should be.

Figure 3: The confrontation matrix

2.4 Options regarding competitive strategy

According to Porter (1980) a company should adopt one of the three competitive strategies:

• Differentiation: this is a competitive strategy in which a company tries to distinguish its products or services from competitors. This strategy can be profitable because customers will pay a higher price for the product. Next to this, customers will be loyal and won’t switch easily to another supplier. This strategy requires an intensive marketing campaign.
• Cost leadership: in this strategy, a company tries to be the most efficient so they can be cheaper than their competitors. If a company could be the cheapest, they would be able to give their customers a low price and would also be able to attract customers with this low price. Their margins will be low but because of their high turnover, their profit would still be big enough.
• Focus: With this strategy, a company concentrates on a specific regional market or a buyer group. The company will use either a differentiation or low-cost approach but with a focus on a certain group. This strategy requires a large group

Chapter 3: methodology

After the literature, it is necessary to design a methodology for conducting this thesis. We will start explaining which research theory have been used and which kind of methodology will be used. Then, a step to step way of doing this research is given. Further, the restrictions of this thesis are clarified.

3.1 General overview To accomplish this bachelor thesis, a decent methodology has to be used. The book “Het ontwerpen van een onderzoek” will be used as a hat stand for the methodology of this bachelor thesis. The reason for choosing this book is the fact that it gives a clear overview of the way a research should be set up. The advantage of the book “Het ontwerpen van een onderzoek” if we compare it to for example “De algemene probleemaanpak” is that it contains a lot of examples of problems which every researcher faces when he is doing a research. Next to this, it gives a step by step guide for conducting a research. Beside, it is widely accepted in the academic world as a tool for conducting a research. First of all, it is important to state the objective of this research. This is done in chapter one. In this chapter, also the problem statement is stated. To be able to answer the problem statement, some research questions are made to divide the problem statement. In this bachelor thesis, all the research questions will be answered so at the end, we can make a conclusion for the problem statement.

3.2 Kind of methodology To be able to conduct this research, a lot of information is needed. This bachelor thesis is a case study. This means an in-depth, longitudinal examination of a single subject (Verschuren en Doorewaard, 1998). This means that the conclusion of this thesis is only valid for Arvicon and not for any other company. In this case, Arvicon is a unique research object. This research wouldn’t be a case study if we would research the whole entire Indian natural stone industry. By working in a company, it is possible to notice all the problems which the company faces. Next to this, it reduces the gap between theory and practice. An in-depth examination of Arvicon can be reached through a labor intensive approach. By having a function of sales manager, it is possible to work in the “field”. This will lead to reference triangulation. This means that multiple sources of information will be available. This is important because it is a way to determine and improve the reliability of information. It could be in the interest of an employee to say he performs excellent so his opinion will be subjective. The communication between the company and the customers is quite important. Talks with the director of this company and other employees can provide other important information. One of the problems with talks with other employees was that it didn’t give any reliable information. Especially Indian employees were constantly saying everything which could not bring them into any trouble. For example, the person who was responsible for the purchase of materials didn’t admit that there were problems with delivery terms. When employees from the sales department saw that a problem was going to develop, the employee of the purchase department constantly denied that there were any problems. This often led to conflicts within the company. During an official interview with the same person of the purchase department, this person was only advertising the company. This source of information was completely not reliable. This is why is chosen to obtain this information less formal.

A reference called Poppelen (2008) refers to the observation of the researcher. Some employees like Sebastian Zuber and Prahib Biswal have given some information verbally which have added value for this thesis. That is why they are a part of the reference list. This method does have some disadvantages. First of all, the information cannot be traced as much as for example a sales report. It would have been better if all the information of the researcher would have be saved in memos. This hasn’t been done so we have to refer to a person instead of a memorandum. Next to this, the observation of the observer is also subjective. This means that it would be possible that conclusions would be different if the observer would be another person. The big advantage is that the information which is given to the observer is more trustful and complete if the researcher works in the company. In contradiction with the employees of Arvicon, the director of the company was giving reliable information during an interview. This is why this interview has been worked out and published in the appendix of this thesis. Also sales figures from the company will provide useful information. Those sales figures are provided by the accounting department of Arvicon. Also secondary sources are of great importance for this thesis. Secondary sources include for example statistics about a country, articles from news papers, etc. This research will be practical instead of theoretical. The information which is needed for this thesis will come from the company itself and not from literature. Literature will be used as a tool to analyze the company. The disadvantage of working as an intern to obtaining information is that this method will take a lot of time. The advantage is that this way of obtaining information will give full and trustful information (Verschuren and Doorewaard, 1998) as said before.

3.3 Chronological order Globally during this thesis, the following chronological order of rank will be followed. First of all, it is important to state the subject and objective of this research. This is done in chapter one. In this chapter, also the problem statement is stated. To be able to answer the problem statement, some research questions are made. This is to cut the problem statement of this thesis into small parts. To be able to answer the research questions, it is important to know what “competitive strategy” and “competitive advantage” exactly mean. Competitive advantage means: the way in which a company is better than their competitors so customers will buy from them and not from their competitors. The competitive strategy means: the strategy in which an organization shows its competitive advance to its customers. Sometimes in this thesis, “competitive strategy” is abbreviated to “strategy”. To accomplish this thesis in an academic and professional way, it is important to find suitable literature for this thesis. This literature will function as the hat stand for this thesis. If this is done, we have set up the basis of this thesis and we can begin with the real work. With using literature, we can describe the environment of the company. This will be done with a PEST analysis and by describing the task environment of a company. It is impossible to accomplish a full PEST analysis. This since it is impossible to describe everything what affects an organization. That is why only the important aspects of the PEST analysis will be investigated. For the economy, it is important to know the growth rate and the GDP of the Indian economy and the growth rate and the GDP of the economy of the Benelux. This information can be obtained by using the CIA fact book. The same goes for the inflation rate and the main characteristics of the Indian economy, like dependence on a certain factor. India doesn’t have a fixed minimum wage so to determine the wage of workers,

To determine what kind of products Arvicon sells, the CBI can provide important information about the natural stone market. This will include useful information to determine the market share of Arvicon and the growth rate of the market. Next to this, by using the data from the CBI, it is possible to make market segmentation for Arvicon. Work experience can provide information about the customer order decoupling point. By having a function as a sales manager, it is quite easy to gather all the information about the other parts of the marketing mix like prices and the way Arvicon promotes their products etc. To determine what kind of competitive strategy Arvicon uses now, Porter his literature on competitive strategy will be used. We can say that the strategy Arvicon uses is linked with their marketing mix. Thus with Porter his theory about different strategies and the description of the marketing mix, we can say which competitive strategy Arvicon uses. We can summaries all this information in a SWOT analysis. This SWOT analysis will be based on information which is given in earlier paragraphs. After it, we can make a confrontation matrix with this SWOT analysis. By using the confrontation matrix, we can see which of the three strategies of Porter would make a fit with the confrontation matrix. This has to do with the strengths, weaknesses, opportunities and threats of Arvicon and their significance. This will lead to a conclusion in which one of the three competitive strategies will be chosen. If the competitive strategy which is chosen in this thesis is the same as the strategy the company uses now, nothing has to change. If the conclusion shows that the firm could better use another strategy than they use now, it should be written which strategy it is and how the company should adjust its organization to this new strategy.

3.4 Restrictions This bachelor thesis will be a research on how the competitive strategy can be improved and how the value chain which belongs to this should be adjusted. Despite the fact that the market for natural stones is larger than the Benelux, this bachelor thesis will only focus on this specific geographical area. Sales to other parts of Europe and to other parts of the world won’t be involved in this bachelor thesis. This is because of time restrictions. This thesis will only focus on the competitive strategy of Arvicon and not on the competitive strategy of the Arvind Construction Company. Next to this, it will take too much time to investigate the whole value chain of Arvicon. That is why this will be done only on a rough scale. Also a plan to implement the solutions which should improve the company will not be involved in this bachelor thesis. Also an evaluation plan to check if changes are improving the performance of the company also won’t be involved in this bachelor thesis. This is all because time restrictions.

Chapter 4: Results

The results are an essential part of this thesis because the results determines the answer to the problem statement. In this chapter, these results will be given. Everything that will be clarified in this chapter will follow with the literature in chapter 2.

4.1 External environment

Political: India hasn’t got an efficient government like a European country. The problem is that there are a lot of laws in India, but the government is not able to comply with those laws. That is the reason why there is still a lot of child labor in India. This can be proven with the Corruption Perception score of India. The country scores a 3.2, which is relatively low compared to a 8.5 as an average for the Benelux (Ball et al., 2008, p. 182). This is a disadvantage for Arvicon because they have to compete with firms that are unethically. If a competitor of Arvicon decides to use children for their production, they can offer lower prices to their customers. This makes it hard for Arvicon to be the cheapest producer of natural stones in a sincere way. Despite the fact that India is one of the most corrupt countries in the world, the country is relatively stable, especially when we compare India to its neighbors like Myanmar, Pakistan and Nepal. This can be proved with India’s risk mark. Its value is 40 which is comparable to for example Poland but much better than for example Turkey, who scores a 60 (Ball et al., 2008, p. 274). This is why it is possible for Arvicon to invest in India because their investments are safe in the future. Arvicon has to pay an additional tax to export some kind of rare natural stones. By selling land to mine companies and by cashing that additional tax, the government gets financial resources from the natural resources that India has (working experience). Officially, Indian companies like Arvicon pay 30 percent corporate tax (Deepankar, 2008). The company could use the corruption and the weakness of the Indian system but the question is if this is ethically right. Export companies in India always get a tax reduction to stimulate the export of India. This is to stimulate the economy of India (Deepankar, 2008)).

Economical: India is one of the fastest growing economies in the world with a 9.4 percent growth rate. (Central intelligence agency (CIA, 2008). The GDP per capita is $2,900 (CIA, 2008) which is much lower than the GDP of The Netherlands. The GDP per capita of The Netherlands is $41,300 (CIA, 2008) Their inflation is 5.9 percent (CIA, 2008) and their economy relies much on services and agriculture. Because of the fact that wages are relatively low in India, it is possible for Arvicon to be cheaper than other countries. People who work at the mines are paid a minimum salary (Poppelen, 2008). This minimum wage is 85 Rupees per day which is equal to €1.50 (depending on the actual exchange rate). That is why it is a bit difficult for countries like Italy to compete on the natural stone market with India due to the fact that the wage for stone workers in Italy is about 40 times higher. Despite that the economy of India improves, it is threaded by inflation and overpopulation. Arvicon has to deal with the local Indian economy because all their suppliers are in India. Next to this, the mother company does a lot of their business in India. Because of the overpopulation, the labor in India will remain cheap. Also the exchange rate of the rupee is quite important for Arvicon. Arvicon has to pay its suppliers in Rupees and gets paid by its customers in euros. This is risky because a drop in the euro would also drop the profit of the entire firm.