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
http://www.indexmundi.com/factbook/compare/
bangladesh.india
https://www.countryreports.org/login/register.htm
http://en.wikipedia.org/wiki/
List_of_sectors_in_Bangladesh_Liberation_War
http://www.creative-outsourcing.co.uk/index.php?
option=com_content&view=article&id=13&Itemid=110
http://www.creative-outsourcing.co.uk/index.php?
option=com_content&view=article&id=13&Itemid=110
http://www.gpit.com/the-opportunities-and-potential-of-
bpo-in-bangladesh/
http://www.nasscom.in/indian-itbpo-industry
http://www.ibef.org/industry/information-technology-
india.aspx
http://en.wikipedia.org/wiki/
Business_process_outsourcing_to_India
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