MANAGING BUSINESS PROCESSOUTSOURCING

COMPRATIVE STUDY BETWEEN

INDIA AND BANGLADESH

SUBMITTED TO

DR. R. SUJATHA

SUBMITTED BY:

PRIYATA SINHA (A04)

NAINA DHOLAY (A08)

MBA-HR (2014)

2ND FEB, 2014

INTRODUCTION

The study is between two neighboring countries India and

Bangladesh on the grounds of economy, politics & law,

education, business, culture and so on. The main focus is

to create a knowledge pool about these countries which

will help investors or entrepreneurs to decide where to

invest between these countries specially on outsourcing

business.

These are some basic facts about India and Bangladesh:

Country India Bangladesh

Official Name Republic of India Republic of

BangladeshIndependence Day 15th August 1947 16th December 1971Capital City New Delhi DhakaOfficial Language Hindi, English BengaliPolitical System Republic Representative

DemocracyPopulation (census

11)

1,210,193,422 154,695,368

National Flags

Religion Hindu, Muslim,

Christian, Sikh,

other

Muslim , Hindu,

other

Currency Indian Rupee TakaCurrent President Pranab Mukherjee Abdul Hamid

Time zone of India is IST (UTC+05:30) and time zone

of Bangladesh is BST (UTC+6).

Both are SAARC (South Asian Association for Regional

Cooperation) countries.

According to population India is on 2nd position in

the world and Bangladesh is on 7th position out of

221 countries and dependencies.

India has the world's third largest road network

Indian Railways is the fourth largest rail network

in the world.

Location and Geographical Resources:

India is situated between the Himalayas in the north

with border of China, Bhutan and Nepal, in the south and

south east it has Sri Lanka and Bay of Bengal, and in the

west it has Pakistan. The longest river is The Ganges

other notable rivers are Krishna, Kaveri, Godavari, and

Mahanadi. In India world’s third largest peak is situated

i.e. Kanchenjunga. India is full of geographical

resources it has deserts like Thar Desert(world’s seventh

largest desert), the Deccan Platue and Chtanagpur Platue

which are known as the store house of the minerals like

mica, bauxite, copper, lime stone , iron ore and coal.

India has 7000km coastline consists of 43% sandy beaches,

11% rocky shores and 46% mudflats. In 1970 India has only

5 national Parks but as of 2012, April there is 104

national parks recognized. The total area of the country

is 3,287,590km.

On the other hand Bangladesh is situated in the

eastern part of South Asia. In the west it has India

(West Bengal as east part of India), in north if is far

from Himalayan Ranges. The main stream of Ganges flows

here with the name of The Padma; other rivers are The

Brahmaputra, Kushiyara, Meghna and Karnaphuli. In

comparison to India it doesn’t comprises of deserts. It

also has deltaic coastline of 560 km. it also has

Chittagong Hills in the southeast and highlands in

northwest. There are 17 national parks in this country.

Total area of this country is 147,570km.

In the comparative analysis of both the countries it

is easily seen that according to natural varieties and

climate India is more versatile than Bangladesh. More

naturally India covers a bigger are than Bangladesh. So

any business if depends upon natural resources will chose

India over Bangladesh.

Economic overview:

Country

Topics

Bangladesh India

Starting business 83 177Getting Electricity 189 110Registering Property 177 91Getting Credit 82 24Paying Taxes 98 159Trading Across

Borders

126 129

Corruption

Perceptions Index

144/176 94/176

Purchasing Power

Parity

291( world bank

rank 45th )

4487 (world bank

rank 3rd)Broadband Usage 3.5% (out of total

population)(IWS)

11.4% (out of

total population)

(IWS)Stock of Direct

Foreign

Investment

$6.166

billion(31.12.2011

)

$203.9 billion

(31.12.2011)

Literacy 53.5% 74.04%GDP per capita 747.34 USD (2012) 1489.24 USD(2012)

The economy of India is the tenth-largest in the

world by nominal GDP and the third-

largest by purchasing power parity (PPP).

 According to the International Monetary Fund,

Bangladesh ranked as the 44th largest economy in the

world in 2012.

Major Market challenges in Bangladesh:

Deficiencies in energy, transportation &

infrastructure have prevented Bangladesh from

achieving higher growth.

Economic weaknesses include an undeveloped and

undercapitalized financial sector, inefficiency and

loss making public sector and a decision averse,

bureaucracy act as resistance.

Corruption is widely perceived to be endemic at all

level of society. Bangladesh felt to 144th out of 176

countries in Transparency International’s Corruption

Perception Index.

Land, gas, power are also major impediments to

growth.

Major Market challenges in India:

Corruption is often cited as a barrier to the

effective development of the private sector and

poses business risks.

Blackouts and power shedding interrupted irrigation

and manufacturing across the country.

It lacks of transparency and accountability in

government issues and longer time taking processes

for regulatory processes.

BPO Opportunities and Challenges in Bangladesh

Real-estate, resources and attractive taxation

policies help lower the total cost of operations

compared to other outsourcing destinations.

Bangladesh possesses one of the most attractive

demographic populations in the world. 50% of the

population is below 25years of age.

The country is powered by young motivated and

passionate workforce with comparatively lower

attrition rate.

The pool of talented workforce in this country is

available at a lower wage than India. Therefore

outsourcing in the country can have a significant

cost advantage.

In addition to low wages, Bangladesh also offers

significant in terms of cost of infrastructure, rent

for office space in Dhaka (capital) is below 20% of

that of New Delhi.

State of the art telecommunications infrastructure

is supported by extensive fiber optics connectivity

across the country. Charges for Internet bandwidth

in Bangladesh is currently the lowest in South Asia

(almost 50% of that in India).

Geographic location of Bangladesh also provides time

zone advantage for European countries, as the half

day time difference means that work related queries

sent to Bangladesh in the evening can be responded

by early morning next day (European time).

The govt. of Bangladesh is providing a significant

support for the growth of the IT outsourcing sector

and has provided significant budgetary incentives

like tax assumptions, duty cut etc. Direct tax is

exempted in the IT sector till 2015.

There are many Bangladeshis residing in west such as

US and Europe this can help the country in building

a network and can enable the local industry to

obtain contracts.

Bangladesh: As a BPO Destination of choice- Recognized by Global

Technology Research and Financial Analyst of the World

In 2005, Goldman Sachs included Bangladesh in the

Next 11, the largest populations after BRIC, which

combines economic and political conditions and it

could greatly impact the global economy.

JP Morgan has included Bangladesh in the “Frontier

Five” economies in 2007.

Global Technology research house, Gartner has

included Bangladesh in its list of top 30

outsourcing destination in its 2010 report.

Credit rating agency Standard and Poor (S&P) and

Moody’s have placed Bangladesh ahead of all

countries in South Asia, except India.

Factors that make Bangladesh a favorable BPO destination

a. Population & Demographic: 50% of Population is below25 years of age. Bangladeshis are known for hard work and commitment even attrition rate is very low as compared to employees of other countries.

b. Internet Bandwidth: The internet bandwidth cost in Bangladesh is comparatively very cheap than other countries. It is 50% cheaper as compared to India.

c. Govt. Support: Govt of Bangladesh is taking significant steps in making Bangladesh a favorable destination of business for foreign investors. Policy like exemption of direct taxes in IT sector till 2015 is helping in growth of the country.

d. Cheaper Manpower: the significant pool of young workforce is available at a much lower wage as compared

to other outsourcing countries. The wage rate in Bangladesh in IT industry is over 50% cheaper than other countries.

ARGENTINA

BRAZIL

CHILE

COSTA RICA

EGYPT

INDIA

MALAYSIA

MEXICO

PHILIPPINES

ROMANIA

S. AFRICA

SRI LANKA

UKRAINE

0

10

20

30

40

50

60

70Average Salary Cost of IT sources at Entry Level

US $

in

Thou

sand

Countries

e. Cheaper Infrastructure cost- Costs of infrastructurein Bangladesh are fairly low compared to destinations in Asia particularly in terms of officespaces. The rental of office space in Dhaka is 20% lower of that in Delhi and 40% of Manila.

Argentina

Brazil

Chile

Costa Rica

Egypt

India

Malaysia

Pakistan

Poland

Russia

Slovakia

Thailand

Vietnam

020406080100

Infrastructure Cost

Companies of few Countries with offices in Bangladesh

US Germany Sweden UK France Italy Denmark Switzerland Sri Lanka Netherlands Hong Kong Belgium Japan Australia Spain Norway Turkey Canada

Bangladesh Beckons: KPMG, Jan, 2012.

Poland

COMPANIES IN BANGLADESH

Top 10 MNC’s in Bangladesh

Chevron (Petroleum Industry) Mobil (Petroleum Industry) Grameenphone Ltd. (Concern of Telenor,

Telecommunication industry) Unilever Bangladesh (FMCG) Nestle Bangladesh (FMCG) Standard Chartered Bank (Banking Industry) Citi NA (Citi Group, Banking Industry) HSBC(Banking Industry) Siemens (Electronics) Ericsson  British American Tobacco (Cigarette) Avery Dennison (Service Industry) Youngone (Garments Industry)

Other companies who are currently doing businesses Bangladesh Successfully:

Novo Nordisk (Pharmaceuticals Danish Company) Maersk (Danish Business Conglomerate) Systematic ( Software System Provider Danish

Organization) IC Companies (Fashion Company- Danish) BTX Group (Danish Clothing Company) Arla Foods ( Swedish-Danish Corporate) ConocoPhilips ( US Corporate) Mc Larty Associates (US Corporates) Met Life (US organization) GAP (US Clothing) Walt Disney (US )

Chery (European Car Manufacturing) DHL (European) Esprit (European Clothing Company) Western Marine Shipyard Limited(European) Commerz Bank (European Company) SANARC(European) VizRT (Norway) Bording Data (Denmark) Samsung (South Korean)

Organizations Supports Bangladesh

WTO WHO United Nations Development Programme (UNDP) The World Bank Asian Development Bank(ADB) International Finance Corporation (IFC) IMF World Food Programme (WFP) Bangladesh British Council Centre on Integrated Rural Development for Asia and

Pacific (CIRDAP) International Labour Organization United Nations UN Information System UN Population Fund (UNFPA) UNICEF UNHCR DANIDA Private Sector Development Programme Commission of European Communities (EC) Canadian International Development Agency etc.

BPO Sector in India:

Outsourcing in India though started a longtime back

but the term “outsourcing” itself was not used then.

BPO sprinted up in the US and UK and European

companies in 1970-80.

In the year 1990 American Express, Swissair, British

Airways and General Electric (GE) start captive

units in India.

In the year 1999 The New Telecom Policy of 1999

ended the state monopoly on international calling

facilities. This heralded the growth of

inbound/outbound call centers and data processing

centers. One of the first outsourced services to

third party players was medical transcription.

Though outsourcing of business processes like data

processing, billing, and customer support began

towards the end of the 1990s when MNCs established

wholly owned subsidiaries.

By the end of 2005 many third party players spring

up in India.

India is expected to become world's second-largest

online community after China with 213 million

internet users by December 2013 and 243 million by

June 2014, according to a report by Internet and

Mobile Association of India (IAMAI) and IMRB

International.

In FY2012 India earned revenue of USD 100 billion.

BPO sector increases to 58% in 2011 from 51% in

2009.

BPO sector in India provides employment via 4500

companies over 32 cities.

BPO sector contributes 7.5% of National GDP in 2012.

The major reason for growing BPO in India are- cost

effective labor resource, internet usage, English

educated population, large market to grow and

capture, availability of engineers(in lesser

wages),etc.

The ITes-BPO sector has benefited from investor

friendly policies of Indian govt. the participating

firms enjoy minimal regulatory and policy

restrictions along with a broad range of fiscal and

procedural incentives.

Stakeholders of Indian BPO recognize foolproof

security as an indispensable element of global

delivery.

Case Study

Industrial Accident in Bangladesh:

On 24 April 2013, Rana Plaza, an eight-story commercial building, collapsed in Savar, a sub-district in the Greater Dhaka Area, the capital of Bangladesh. The search for the dead ended on 13 May with the death toll of 1,129. Approximately 2,515 injured people were rescuedfrom the building alive.

It is considered to be the deadliest garment-factory accident in history, as well as the deadliest accidental structural failure in modern human history.

The building contained clothing factories, a bank, apartments, and several other shops. The shops and the bank on the lower floors immediately closed after cracks were discovered in the building. Warnings to avoid using the building after cracks appeared the day before had been ignored. Garment workers were ordered to return the following day and the building collapsed during the morning rush-hour.

Dozens of consumers in the United States spoke out against unsafe working conditions found in the factory building. People also unleashed their anger at retailers that did not have any connections to that specific building, but are known to source from factories located in Bangladesh.

Walmart, along with 14 other North American companies, refused to sign. A group of 17 major North American retailers, including Walmart, Gap, Target and Macy’s, announced a plan to improve factory safety in Bangladesh,drawing immediate criticism from labor groups who complained that it was less stringent than an accord reached among European companies. Unlike the accord joined mainly by European retailers, the plan lacks legally binding commitments to pay for those improvements. It affects also US businesses to come to Bangladesh.

Highlights on few sectors of both the countries

Tourism Sector

From times India has been a destination for great

vacations for foreigners. Both internationally and

nationally India grows a lot on travel business as well

as recognized as an all in one holiday destination.

The World Travel & Tourism Council calculated that

tourism generated INR6.4 trillion or 6.6% of the nation's

GDP in 2012. It supported 39.5 million jobs, 7.7% of its

total employment. India is ranked 3rd among countries with

fastest growing tourism industries over the next decade.

India ranks the 38th country in the world in terms of

foreign tourist arrivals. 

Bangladesh also became a developing foreign currency

earner through tourism. The country was listed by Lonely

Planet in 2011 as the "best value destination". The World

Travel and Tourism Council (WTTC) reported in 2013 that

the travel and tourism industry in Bangladesh directly

generated 1,281,500 jobs in 2012 or 1.8 percent of the

country's total employment, which ranked Bangladesh 157

out of 178 countries worldwide. Bangladesh ranked 142 out

of 176 in world’s ranking in 2012 for travel and tourism

direct contribution to GDP.

Agricultural Sector

In India agriculture contributes a huge figure in GDP.

Today it ranks 2nd worldwide in farm output. It serves 16%

of the GDP and 10% of export earnings depend upon 159.7

million arable land areas.

Like India, Bangladesh also primarily an agrarian

economy. It serves 18.6% of the GDP and employee turn

around 45% of the total labor force. Remarkable

production is of jute is there due to ample of water

supply and it has fertile soils to do any type of

farming. It earns lots of foreign money from exporting

agricultural products to other countries.

Power & Electricity Sector

India is world’s 4th largest electricity sector as of Dec,

2013 after US, China and Russia. The country has both

conventional and non-conventional power production and

consumption like thermal power, hydro power, nuclear

power, solar power, wind power, biomass power, geothermal

energy, tidal wave energy. The per capita average annual

domestic electricity consumption in India in 2009 was 96

kWh in rural areas and 288 kWh in urban areas for those

with access to electricity.

In compare to India, Bangladesh has a quite small energy

infrastructure. Per capita power consumption is 136kWH

one of the lowest in the world. Commercial energy

consumption is mostly natural gas (around 66%), followed

by oil, hydropower and coal.

IT & ITES Sector

Information technology in India is an industry consisting

of two major components: IT Services and business process

outsourcing (BPO). The sector has increased its

contribution to India's GDP 7.5% in FY2012.

The information technology sector in Bangladesh had its

beginnings in nuclear research during the 1960s. Over the

next few decades, computer use increased at large

Bangladeshi organizations, mostly with IBM

mainframe computers. However, the sector only started to

get substantial attention during the 1990s. Today the

sector is still in a nascent stage, though it is showing

potential for advancement.

Textile Sector

Bangladesh's textile industry, which includes knitwear

and ready-made garments along with specialized textile

products, is the nation's number one export earner,

accounting for 80% of Bangladesh's exports of $15.56

billion in 2009.  Bangladesh is 2nd in world textile

exports after China. 3 million people employed in the

industry.

In India textile manufacturing is the 2nd largest source

of employment after agriculture and accounts for 20% of

manufacturing output, providing employment to over 20

million people. Ludhiana produces 90% of woolens in India

and is known as the Manchester of India. Tirupur has

gained universal recognition as the leading source of

hosiery, knitted garments, casual wear and sportswear.

References

http://www.tradingeconomics.com/india/exports

http://www.aneki.com/comparison.php?

country_1=Bangladesh&country_2=India

http://data.worldbank.org/country/bangladesh

http://data.un.org/CountryProfile.aspx?crName=Bangladesh

http://www.gpit.com/the-opportunities-and-potential-of-

bpo-in-bangladesh/

http://www.tmf-group.com/en/media-centre/resources/top-

challenges/apac/india

http://iveybusinessjournal.com/topics/global-business/

indian-entrepreneurship-and-the-challenges-to-indias-

growth#.Uu57FD2SyE4

http://en.wikipedia.org/wiki/

List_of_countries_by_GDP_(PPP)#Lists

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bangladesh.india

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option=com_content&view=article&id=13&Itemid=110

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option=com_content&view=article&id=13&Itemid=110

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bpo-in-bangladesh/

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Business_process_outsourcing_to_India