Research And Development Of Nandini In Denmark Economics Essay

The aim of this assignment is to speak about the scheme adopted by Nandini which is Indian based dairy company. This deals to warrant the pick of choosing the European state as to why Denmark is chosen for puting up its R & A ; D by analysing assorted facts and aspects. First PEST analysis is done which analyses the political, economic, societal and technological facets of the state and state how suited the environment is to setup the R & A ; D installation. Second the cultural differences are taken into history and possible jobs that could originate from transverse civilization are dealt with. Solutions such as 3rd civilization is suggested which enables the Indo-Danish concern civilization to work in harmoniousness. Then is the pick of entry manners so as to take attention of the control over the transportation of R & A ; D cognition gained from Denmark back to India. Brownfield is seen as an optimum entry manner which is a combination of Greenfield venture and acquisition. Finally the four basic schemes are analyzed and one among them is chosen as the best suited for Nandini. Here in this instance internationalisation scheme seems to be the one suitable as it enables the company to derive the engineering know-how. There are grounds stated as Denmark in Europe is the best topographic point to develop the nucleus competence for Nandini so that it can increase its production based on the cognition acquired and later can export back to Europe and US.

2. Introduction

Nandini ( Pseudo name ) is an India based company that manufactures dairy merchandises. They chiefly produce milk and milk merchandises such as milk pick, milk pulverization, ghee, butter, cheese etc. As milk has been built-in portion of Indian nutrient for centuries it finds huge demand in the Indian market. But there is a demand to get by up with the fast changing engineering globally and to run into the international criterions which use more efficient ways instead than the traditional ways. The lone manner to run into these criterions is to develop Research and Development ( R & A ; D ) installation. R & A ; D can assist in bridging the spread and leads to more quality merchandises, efficient end products, increased productiveness etc.

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This forces Nandini to take Denmark for puting up its R & A ; D installation. The factors like advanced engineering, cost, location, political easiness to get down the set up etc have driven Nandini to come to Denmark. Denmark is known for its vastly skilled labor, technological know-how and is the best topographic point to get nucleus competence to heighten the cognition so that Nandini will be capable of exporting its merchandises back to Europe and US.

3. Plague Analysis

3.1 Political analysis:

Patterson et Al. ( 2004 ) has argued that foreign direct investing is a critical facet in the procedure of globalisation. During 1990ies the FDI saw a pronounced addition in its function due to the integrating of international capital markets. The Danish economic system portions a close relationship with neighbouring economic systems like German, Sweden and the UK. The FDI scenario in Denmark has been rather encouraging for the investors and concern people. Gjerding ( 2005 ) who considered Denmark ‘s FDI scenario from 1998 to 2003 has argued that by and large Denmark experiences an outward capital flow being more than the inward capital flow. About 70 % of the inward and outward FDI seems to be in the signifier of equity capital. The below tabular array and figure describes the place of FDI in Denmark from 1998 to 2003.

Table 1

Figure 1

On the other manus the entire stock of FDI experienced a singular addition in 2007. The factors which are actuating in political facets are high buying power, political stableness, quality labor force, easy entry processs and good substructures. The construct of set uping a new operation in a foreign state is called Greenfield investing which is at an acceptable rate in Denmark. The below tabular array summarizes the FDI, possible index, public presentation index and Greenfield investings in Denmark from 2005 to 2007.

Table: 2 FDI in Denmark

3.2 Tax facets:

The revenue enhancement rates in Denmark seem exhilarating. It has corporate revenue enhancement rate of 30 % and attractive revenue enhancement rates for exiles. This rate is below the norm in Europe. The other attractive characteristics are no capital responsibility and wealth revenue enhancements, no extra societal security parts for employers, dividends which are received and distributed without revenue enhancement, group revenue enhancement which is alone and reassign pricing statute law follows OECD ( Organization for economic co-operation and development ) guidelines. Denmark is one of the few states to hold entered into most revenue enhancement pacts and has achieved dual revenue enhancement alleviation. They have specific regulations in instance of dual revenue enhancement happening with non revenue enhancement states where a revenue enhancement recognition may be granted harmonizing to Danish regulations.

There is no keep backing revenue enhancement on involvement, direction fees, artistic royalties and no general paysheet revenue enhancement. Foreign stockholders do n’t come under Danish capital addition revenue enhancement on portions. Tax freedoms are applicable for capital additions on portions if held for more than three old ages. Their joint revenue enhancement regulation is in such a manner that a Danish company gets taxed jointly with its 100 % owned Danish and foreign subordinates. R & A ; D disbursals in position to spread out the market are deductible in the twelvemonth incurred and gets depreciated over a five twelvemonth period.

3.3 Economic analysis:

Though Denmark is a member of European Union it has refrained itself from certain elements like Maastricht pact, European defence cooperation, place personal businesss etc. Denmark is noted for its nutrient and energy exports with comfy balance of payments excess. The noteworthy economic characteristics of Denmark are its high- tech agribusiness, good life criterions, dependence on foreign trade and stable currency. With its low unemployment rate Denmark ‘s financial place is the strongest in the EU ( European Union ) . The impulse in economic growing gained in 2003 saw a crisp addition in 2006 but got bit slowed down in 2008 due to planetary fiscal crisis accompanied by addition in borrowing costs and lessening in export demand. Due to the factors like GDP per capita, public assistance benefits and political stableness the life criterions in Denmark are amongst the highest in the universe. The below figure depicts the GDP growing rate in Denmark.

Figure: 2 GDP growing rate in Denmark

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The below tabular array analyses the GDP state of affairs of Denmark in more item.

Table: 3

GDP ( buying power para ) :

$ 204.9 billion ( 2008 est. )

$ 206.2 billion ( 2007 )

$ 202.9 billion ( 2006 )

GDP ( official exchange rate ) :

$ 369.6 billion ( 2008 est. )

GDP – existent growing rate:

-0.6 % ( 2008 est. )

GDP – per capita ( PPP ) :

$ 37,400 ( 2008 est. )

GDP – composing by sector:




1.4 %

25.9 %

72.7 %

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3.4 Technology analysis:

Nygaard H. ( 2006 ) has argued that the structural development with regard to dairy agriculture is astonishing in Denmark. With their efficient genteelness plans the mean milk production per cow supports increasing. They have assortment of dairy strains with each lending vastly to the milk production. While the mean output per cow is presently 8800 kilogram which is expected to go 10300 kilograms by 2015. They have cardinal cowss database for entering the information. Merely the authorised organic structures are allowed to do usage of the information and roll up all the relevant informations and information. Directors can take relevant determinations based on the information collected.

Research has shown that about 3000 farms have invested in new production system, engineering and more milk quota. There has been immense investing in this field. About 10 % of the Danish dairy farms are utilizing milking automatons. With the addition in demand for dairy industry the other farms with hogs, cowss etc are going dairy companies. Hence the function of husbandmans have become demanding. Measures are taken to increase the foods of the cow by supplying the necessary cow provender. To achieve a coveted sort of milk the composing of the cattles ‘ milk is changed. Cattle cistrons function is done to get the better of defects in footings of reproduction, wellness and nutrition. Automatic milking system has gained importance and in Denmark now about 600 Danish dairy husbandmans are utilizing it. On an mean every husbandman has two AMS units.

The recent tendency is Denmark is “ cattles on grazing land ” . It is said that organic husbandmans must hold their cattles grazing land for 150 yearss a twelvemonth. Though it is non believed that being on grazing land needfully is the best for the cow Danish animate being public assistance society insists on cow grazing land during summer clip.

The inside informations of the cardinal cowss database are shown in the below figure.

Figure: 3

Cattle database

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On- farm analysis is done utilizing the advanced tools like french friess and detectors in the Danish dairy cowss. The tools that are placed near to the cow give inputs sing the cow rhenium production, other wellness features and warns the director for any hereafter job are to happen. Relevant stairss are taken to better the quality and measure. The below figure summarizes the on-farm analyses and proactive herd direction construct followed.

Figure: 4

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The milk sample is analyzed from which cow ‘s generative position is indicated by the Lipo-Lutin, udder wellness by milk enzymes and nutritionary balances are found based on urea degrees. This construct of on-farm analyses and proactive herd direction proves to be effectual in dairy cowss production. The below tabular array Tells about the milk output in Denmark.

Table: 3

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3.5 Social analysis:

Education has to provide the demand for the rise in demand for the skilled work force in Danish dairy companies. Right from three old ages bachelor ‘s grade to Masterss degree several classs are available in dairy engineering. Created in co-operation with Danish dairy industries they prepare alumnuss for a busy work life in an international ambiance. Skills are acquired in the Fieldss of dairy production, R & A ; D, quality control and direction. Procedure engineers are people who look after new merchandise development and take an analytical attack to the practical execution. There is a particular subdivision that runs for the continuance of 1.5 old ages at Dalum instruction centre which produces skilled dairy farmers and dairy operators who are expected to bring forth high quality merchandises. Danish Dairy preparation classs are available in order to supply insight and experience for the campaigners in dairy production.

4. Cultural analysis

Rugholt ( 2005 ) has made a elaborate survey about the similarities and differences between the Indian and Danish concern civilization. The troubles are found utilizing his survey and he has besides suggested something called third-culture or third-hybrid as a solution to these troubles of Indian- Danish civilization. Rugholt ( 2005 ) besides argues that the cultural dimensions sing individualism/collectivism, maleness /femininity ( Hofstede, 2003 ) and besides the cultural differences that arise when people from utmost civilizations work together ( Trompenaars and Hampden-Turner, 1998 ) may work in generic instances when civilizations are compared universally. He states that when two specific civilizations run into these overall wide differentiations do n’t supply solutions at manus. John Hooker ( 2003 ) through his survey tells that Danish people are by and large collectivist as they are usually in favor of societal public assistance go oning in Denmark. On the other manus they can be termed as individualist besides as Danish people are motivated by personal growing and promotion. When coming to Indian civilization he says that though Indian ‘s are fundamentally motivated by the personal challenges they are have the duty of back uping the household which is a corporate issue. Thus both Indian and Danish civilization can be fundamentally termed as both individualist and leftist. Hence the expostulations are raised in oppugning civilizations based on general theoretical impressions.

Rugholt ( 2005 ) besides states that the power exhibited by a individual who is at the top hierarchy in a house is different in India and Denmark. The top degree executive gets more personal regard and is the ultimate determination shaper who has the last word. The senior and the senior degree employees are neither questioned nor confronted by the junior employees in the Indian civilization. Contrastingly the system of “ level construction ” is followed in Denmark where equality is enjoyed by all the employees. The lower rank employee can oppugn the high ranked employee or can knock an older employee which is seen as a personal strength. Time perceptual experience besides plays a critical function in the Indo-Danish concern civilization. Indians making concern in Denmark are ever amazed by the promptness. There is no transit hold and the Danish work twenty-four hours ever starts and ends on agenda which does non go on in India. Even when it comes to run intoing the deadline the Indians ne’er volunteer in adumbrating that as they feel that they have to somehow finish it but in Danish civilization if they can non complete so they instantly inform that the deadline has to be postponed.

4. 1 The Third civilization impact:

Harmonizing to Eaton confer withing group which is a cross-cultural consulting house “ 3rd civilization ” is the best solution to get the better of either-or state of affairss. It is neither biased to any one civilization nor a less effectual via media. It is merely the set of norms and systems that enables to do determinations, to cover with struggles and speak about good direction. The top organisations runing globally happen this 3rd civilization to be so effectual in conveying out the best accomplishments and properties to accomplish superior consequences. These top organisations are able to leverage the cultural differences and out perform mono-cultural squads in the long tally. The ideal 3rd civilization takes all the members of the multi cultural squad into consideration. They should be cognizant of their ain cultural pattern and at the same clip should be witting of the cultural patterns of the people with whom they are working with. Cultural relativism should be used to equilibrate this difference in civilization. Third civilization workplace solutions are seen as get downing point instead than as trouble-shooting scheme. In this context for “ Nandini ” it is gratuitous to state that Indian hierarchy should be merged with the Danish level construction. Though the solution would be re-train the Indian employees in Denmark with the systems and schemes that are more similar to Danish level construction it is non possible to wholly convey in the level construction norms. Danish besides need to project aside some of their traditional impressions to do the Indo-Danish concern civilization work swimmingly.

5. Reasons to Invest

Denmark has some attractive characteristics that make it one of the best topographic points to set up concern. The undermentioned points sum up the characteristics.

It is a natural gateway to most of the Norse states with Copenhagen being the chief airdrome for the Northern Europe.

It has one of the universe ‘s top flexible labor markets.

Possessing advanced telecommunication substructure in Europe it is among top universe taking in usage of Personal computer, cyberspace etc.

With immense figure of universities it has extremely skilled work force as most of the population is educated.

Attractive company revenue enhancement rate of 25 % doing exiles benefit from particular revenue enhancement government.

The below figure depicts the labour productiveness in Denmark.

Figure: 5

Denmark welcomes the foreign investors with particular scope of possibilities to accommodate their concern demands. The undermentioned points are those

Very fast and cost-effective constitution processs.

Can integrate a new company online within few hours.

Facility to keep meetings electronically for board members an stockholders ‘

Dividends are distributed on an interim footing with no notarial workss.

There are no residential demands for pull offing managers and other top executives.

Their jurisprudence is in conformance with current EU statute law.

The have first-class installations to put up R & A ; D substructure. The below figure depicts entire R & A ; D forces countrywide per capita. “ Nadini ” should do usage of this advantage for its R & A ; D set up.

Figure: 6

5.1 Labour market:

Danish work force is one of the most productive in Europe. With the flexible operations they allow companies to work 24 hours a twenty-four hours and 365 yearss a twelvemonth. Danish labour market ensures corporate understandings between the employees and employers therefore paving manner for high grade of consensus in the labor market. Because of this they have really low frequence of work stoppages and high degree of societal security. It is non so hard to end the contracts as legal and agreed notices are respected. They have about 83 % of population who have completed secondary instruction and 40 % of the population who have completed higher instruction. This is one of the chief grounds as to why they have such a skilled work force. Furthermore their linguistic communication accomplishments are first-class as the younger coevalss are skilled in several European linguistic communications. English is the 2nd natural linguistic communication at that place. Their expressway web connects all the market in the Northern European part.

The below figure shows the skilled labor handiness in Denmark

Figure: 7

5.2 Ownership-Location-Internalization ( OLI ) paradigm:

This is one of the most of import theoretical accounts on international investing behavior refined by Tormenting ( 1988 ) . This influential alternate theoretical account negotiations about how companies involve in FDI to achieve ownership specific advantages, location advantages and internalisation advantages. It is of import for “ Nandini ” to include this paradigm so as to prolong its operations and R & A ; D unit in Denmark.

Ownership specific advantage is about the ability to get economic assets or rights which is non possible without direct investing at the foreign market.

Location advantages are endownments and attractive forces that are market specific where the company invest.

When a company establishes control over ownership specific advantages and location advantages internalisation advantages occur.

Morsink ( 1998 ) argues that ownership advantages and location advantages constitute economic integrating and internationalisation advantages lead to premier strategic urge for FDI.

The FDI in Denmark is accompanied by ownership control issue as there is an discerning idea about what if foreign companies take control over the domestic economic activities. Harmonizing to Dunning and Narula ( 2004 ) the companies who develop relational assets at the market where they invest tend to hold a competitory advantage over the industries that simply have knowledge- intensive relationships. They besides stress on the fact that relational assets that value making and prolonging relationships are more of import that ownership control of capital assets in the cognition based economic system. Thus it becomes of import to strike balance between capital plus control and relational plus control. The relational assets create an ambiance of cooperation and trust when cognition sensitive activities are considered. Harmonizing to Williamson ( 1986 ) the relational assets created with concerted set up hostile to timeserving behavior seems to be more efficient. Hence “ Nandini ” should accommodate the FDI scheme built upon relational assets to win in Denmark.

6. Entry manner

After make up one’s minding to come in a foreign market following inquiry that arises is sing the manner of entry. There are about six manners to come in a foreign market with each manner holding its ain advantages and disadvantages. Hill ( 2007 ) has analyzed all these six manners of entry with the tabular array below sum uping them.

Table: 4

Entry manner




Can recognize location and experience curve economic systems

High conveyance costs, trade barriers and jobs with local selling agents

Prison guard contracts

Earn returns from procedure engineering accomplishments in topographic points where FDI is restricted

Efficient rivals are created, there is no long term market presence


Development costs and hazards are low

No control over engineering, can non recognize location and experience curve location economic systems, does n’t prosecute in planetary strategic coordination


Development costs and hazards are low

Inability to prosecute in planetary strategic coordination, no control over quality

Joint ventures

Access to local spouse ‘s cognition

Sharing development costs and hazards politically acceptable

No control over engineering, can non recognize location and experience curve location economic systems, does n’t prosecute in planetary strategic coordination

Wholly owned subordinates

Protection of engineering

Ability to prosecute in planetary strategic coordination

Ability to recognize location and experience economic systems

High costs and hazards

Beginning: Hill ( 2007 )

The pick of entry manner is of paramount importance when it comes to international concern and selling literatures. For “ Nandini ” to come in Danish market the pros and cons of these entry manners are analyzed carefully. Joint venture has the disadvantage of missing control over engineering know-how. The construct of Greenfield venture and acquisition that come under entirely owned subordinates seem to hold positive impact. Harmonizing to Meyer and Estrin ( 1999 ) the Greenfield venture enables the investor to make an wholly new organisation with its ain specification but bit by bit. Whereas the acquisition guarantee rapid entry with acquired house non fiting the organisation of the investor. So the optimum entry manner is termed as “ brownfield ” which is a distinguishable entry manner where acquired houses are restructured to resemble a Greenfield venture. The below figure depicts the resources employed in the entry manner.

Figure: 8

Resources employed in the entry manner

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Meyer and Estrin ( 1999 ) have besides argued that this Brownfield entry manner paves manner for farther empirical research and can be developed as a managerial determination doing tool. This incorporates the facets of local environments as determiners. Brownfield non merely enriches the concern analysis but besides brings in a differentiated spectrum of entry manners for international concern. The houses whose nucleus competences are based on combination of house specific international resources with specific local assets chose Brownfield option. With the emerging universe market that requires high integrating and local resources Brownfield will derive importance worldwide. This entry manner can be utilized by “ Nandini ” to set up its R & A ; D base in Denmark. The figure below depicts the determination procedure taking to Brownfield undertakings.

Figure: 9

Decision procedure taking to Brownfield undertakings

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7. Organization scheme, construction and control

It may non be possible for the houses to achieve full benefits from economic systems of graduated table, larning effects and location economic systems due to force per unit areas from local reactivity. Besides it is hard produce a globally standardised merchandise to function the planetary market from individual low-priced decrease. The demand to custom-make the merchandise offering for local conditions may work against such a scheme. Bartlett and Goshal have come out with four schemes. Firms usually choose among those schemes when they compete internationally. The appropriateness tends to change with the extent of force per unit areas for cost decreases and local reactivity. The four schemes are:

Global standardisation scheme

Localization scheme

International scheme

Transnational scheme

Global standardisation scheme operates on a end to prosecute a low-priced scheme on a planetary graduated table. Their purpose is to increase profitableness by harvesting cost decreases. The standardised merchandise is marketed worldwide to achieve maximal benefits from economic systems of graduated table and learning effects. Firm which pattern this scheme does n’t custom-make their merchandise offering and market scheme to local conditions. This is more utile when there are strong force per unit areas for cost decreases and minimum demands for local reactivity. They are prevailing in many industrial goods industries whose merchandises serve cosmopolitan demands. They are chiefly focused on commanding costs.

Localization scheme additions profitableness by custom-making house ‘s goods so as to better their gustatory sensations and penchants across national boundary lines. They are suited when the customization is done to fit the gustatory sensations in assorted national markets. By custom-making the merchandise harmonizing to the local demand the value for the merchandise in local market additions. This works good when the cost force per unit areas are non excessively intense.

Multinational scheme is one when the houses face both strong cost force per unit areas and intense force per unit area from local reactivity. Bartlett and Goshal argue that to prolong in the planetary environment houses need to take necessary actions to react to force per unit areas for cost decreases and local reactivity. Multinational endeavors must concentrate on leveraging the subordinate accomplishments. However it is really hard to implement this scheme as it places conflicting demands on the company. In order to do the merchandise respond to local demands in different geographic markets more costs are incurred which runs against the end of cut downing costs.

International scheme is practiced in houses when they find themselves with low cost force per unit areas and low force per unit areas for local reactivity. The merchandises which are produced domestically are so sold in international market with minimum local customization. They centralize merchandise development maps like R & A ; D at place. For the houses that pursue international scheme the caput office retains tight control over selling and merchandise scheme. They tend to command the nucleus competence and hence it makes sense for houses to put up their R & A ; D installation to get the needful engineering. Thus for “ Nandini ” it is better to follow this scheme to accomplish the coveted intent.

8. Decision

After analysing the above factors it shall be appreciable for Nandini to put its R & A ; D installations at Denmark. Initially there may be some hiccoughs cross cultural struggles, clip direction etc but in due class of clip people need to accommodate themselves as that is the best solution to convey in the needed successful concern environment. There are ways and agencies of supplying preparation to the employees to do them comfy in the new environment. The engineering know-how is grasped from the Denmark and the company ‘s production method is changed consequently so as to better the production. Once the high production is achieved attempts are taken to export it in Europe and US. TO accomplish this it is necessary to put up some decentralized gross revenues units in Europe and US so that they can work independently harmonizing to the local market. Thus it will pave manner for new merchandises to the hit the market in an effectual mode to prolong in the planetary competitory market.



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