Environmental Analysis of India for Investment by a UK Tourism Company

This report analyzes the environmental factors of India for investment by a UK tourism company. The report covers factors like political, geographical, economic, legal, technological, and socio-cultural factors. The report concludes that the company must consider cultural differences as a priority while investing in India.

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12-16-2018

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Executive summary
This report will include the environmental analysis of a developing country like India, where a
U.K. tourism country would like to enter into India and invest in the country. For this objective,
the factors like political, geographical, economic, legal, technological, and geographic were
analyzed in detail, to decide on the investment in India.
Some of the major challenges that the company could face while investing are the factors like
terrorism level and risk in the country, political instability in the country, as the political parties
are changing rapidly, high level of corruption, and low technological development as compared
to the country like the United Kingdom. Some more such factors included the cultural difference
of both the countries and India being the multi-cultural country; consist of many religions and
values. This concluded that the company before investing must consider the cultural difference to
the priority.
Some of the major opportunity for the tourism U.K Company to invest in India included the
famous geographical location, that is the major influencer for the tourist to come and visit, which
can be benefited to the company while investing. Moreover, considering the legal factors, the
major opportunity is that the government is taking various initiative focusing this industry in the
country to boost this sector.

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Contents
Executive summary.........................................................................................................................1
1. Introduction..............................................................................................................................3
2. Geographic factors...................................................................................................................4
3. Political factors.........................................................................................................................4
4. Economic factors......................................................................................................................8
5. Socio-cultural factors.............................................................................................................10
6. Legal factors...........................................................................................................................13
7. Technological.........................................................................................................................14
8. Conclusion..............................................................................................................................16
References......................................................................................................................................18

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1. Introduction
The tourism industry is in a growth stage worldwide; tourism companies are responsible for
services like traveling services outstation and in the city travel, or hospitality service. In this
report, the focus would be on the hospitality service of U.K firm, wishes to trade or establish that
in a developing country that is India. For this reason, the challenges and opportunities for the
company to invest in India would be studied, considering various factors like geographical,
political, economic, legal, and socio-cultural factors of India. Tourism and hospitality industry of
India is growing at a great rate. The major advantage that a company can have while investing in
the country is the robust demand, attractive opportunities, government policy support, and
diverse attractions.
This industry is considered to be the growth driver for India among other various service sectors.
The most important potential aspect to consider is that the nation is rich in culture, variety in
ecology, natural beauty locations, historical heritage, and terrains all across the nation.
Moreover, it is beneficial for the country as well, because this is the reason to generate
employment. Considering the fact and figures, then the fees from this industry during January to
October in 2018 has been increased by 8.30% every year to US dollar 23.54 billion (ibef.org,
2018). If the investment is considered, as per DIPP (Department of Industrial Policy and
Promotion) the tourism and hospitality industry has attracted foreign direct investments to
approx. 11.39 billion of US dollar, for a period of 2000- 2018. Moreover, to attract major tourist,
the government has considered many schemes in the account, which will also indicate a growth
opportunity for the tourism company to invest in this industry in India.

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2. Geographic factors
While considering the geographical consideration, the foremost thing is terrorism, which is a
factor, which will influence the investment decision for the company. Terrorism and security –
this factor have a negative effect on the progress and growth of the nation. Terrorism also has an
adverse effect on such industry. This aspect is one of the political problems for the nation’s
authority. Some states as if Kashmir and Assam state, which are very much, considered as a
terrorism area. This aspect can be a challenging to the company for investing in the country.
Although the official authority of the nation takes place with regard to handling terrorism by
enhancing the security of tourist who is traveling to areas that are prone to terrorism (Trivedi,
2016).
Considering this factor, some of the most popular geographical locations are Goa, Agra for
TajMahal, Andaman and Nicobar islands, Munnar, Kerala for lakes and tea gardens, Leh Ladakh
for adventure, Darjeeling being the queen of the Himalayas, Udaipur as the city of lakes. There
are numerous locations and a geographical feature that is a creation for the opportunity for the
tourism companies to gain an advantage, as these are the most attractive places to target
customers in India (Doole & Lowe, 2008)
3. Political factors
This is considered the most important factor while analysis the environment of India. Some
major aspects considered in this factor are:
 Political instability – this index plays an important role, as with the change of political
parties, and its frequency the laws and regulation are also altered, which will eventually

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affect the business in the long run and in operations. India does not have very prong
political stability index considering the global rankings (theglobaleconomy, 2018).
Figure 1: Source: (theglobaleconomy, 2018)
 Corruption – the corruption level also has a great influence in deciding for the investment
in the nation, for this factor an index is control of corruption, that is how political parties
can control the level of corruption in the country. Through facts for 1996 to 2016, it was
observed that the controlling power is very low (theglobaleconomy, 2018).

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Figure 2: Source: (theglobaleconomy, 2018)
Political risk – political risk factor included the risk related to exports transaction, foreign
exchanges, natural disaster, revolutions, and wars. Considering the political risk index in long
run, India political risk is not very high, it is moderate, which can be plus point or opportunity
for the company (Baldwin, 2008).

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Figure 3: source: (theglobaleconomy, 2018)
Therefore, while considering this factor and its aspect discussed, it was observed that there are
various challenges that the company could have to face, nevertheless, they can turn these
challenges into opportunities and can gain profit.
 Trade regulations – considering the trade regulations of India, there are various policies
and procedures involved in the trade. There are many nations, with which the country is
in trade agreements in negotiation with various other countries. According to the
agreements done, the participating companies, that is India and other nations would
mutually provide the trade concessions. This usually included tariff elimination, duty
reduction on key goods, and moderation in norms related to trade in various industries
like service sector (smallb.sidbi.in, 2018). India has already entered in trade agreements
with nations like Singapore, Nepal, Afghanistan, Korea, ASEAN, Mercosur, Sri Lanka,

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Chile, Bhutan, and SAARC. Considering this aspect, it would be beneficial for the UK
brand to invest in this country with no restrictions, and ease of formation and entering the
country.
4. Economic factors
Economic factors are another significant factor in analyses before investing in any country.
Better economic aspects will help them attract more tourist from various countries; moreover, the
growth opportunity for the company lies with this factor. The aspects included GDP of the
nation, foreign direct investment, and economic growth. Moreover, these factors also include
inflation and foreign exchange. The various considering as per this factors are as follows:
 GDP (Gross Domestic Product) – this is one of the most important aspects which
indicates the condition of the country economically. GDP is calculated by adding up the
gross value added by the Nation’s producers in the economy, and add the taxes collect,
deducting the subsidies received, as this is not the part of products vale. Evaluating the
facts till 2018, September, the GDP of India, currency unit being billion was maximum
till now that is 45542.39 billion. While considering the data from 2004 till current that is
2018, the average value is 22863.59 billion. Moreover, from the graph, it can be said that
GDP is generally increasing every year, which indicates the strong economy with time.

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Figure 4:( source: (theglobaleconomy, 2018)
 Foreign direct investment – FDI is another factor for this consideration, it is the equity
flow of direct investment in the Indian economy. This is concluded by adding up the
investment from rankings, equity capital, and various other capital. This is a category of
investment associated with cross-border and with a resident in this economy have the
direct control and influence over the management of the company in Indian economy.
Considering the facts from 2006 to 2018, June, the data has been provided by reserve
bank of India, that the average value was 464435.12 million for India (theglobaleconomy,
2018). After considering this aspect, it can be said that for the UK tourism company can
be in benefit, as this indicates the availability of foreign investment in the country and the
development is observed more precisely.
 Unemployment rate – this is another economic aspect, which affects the working of a
company. The unemployment rate has been decreased after 2009, but still, the

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unemployment rate is very high as compared to another country, that is 3.5 percent for
the last three year that is 2015, 16, and 17. This indicates that the employment generation
is low in the country, which can be an opportunity for the UK tourism industry, to
generate employment and earn a profit.
 Inflation – inflation is a factor of a nation, that affect most of the business, the income of
people, and consumer spending, which will eventually influence investment decision in
the country. For this aspect, the study consists the forecast of inflation in coming years,
the inflation forecast is one of the indexes, where the data has been provided by the
International monetary fund. Considering the era from 1980 to 2023, the inflation
forecast says, that the average is 7.25 percent. Nevertheless, the forecast for 2018 to
2023, the inflation rate tends to decrease, would be reaching to 3.99 percent in 2023. This
could be taken as an opportunity for the tourism company to invest in the nation
(theglobaleconomy, 2018).
5. Socio-cultural factors
India is popular for it is rich in culture nations. Culture has always given due importance in the
country. In addition, since it is a multicultural country, the challenge for the company investing
in is language and cultural understanding. Some of the factors of culture according to Hofstede’s
cultural dimensions indicate the behavior of the people as per their values and ethics and culture.
For example, the masculinity dimension score for this country is 56, which indicates that it is a
masculine society. This considers the display of power and success. Moreover, it is a spiritual
country considering various religions and deities (hofstede-insights, 2018).

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Power distance dimension of India is 77, which is very high; indicating that top-down structure is
giving more importance in organizations, and society. Therefore, the target audience to select
would not be youth and could be parents, whose decisions are important (hofstede-insights,
2018).
Another factor is individualism, which indicates the society maintains the degree of
interdependence among its participants. The score of this nation is 48, which indicated both
individualistic traits and collectivistic traits (hofstede-insights, 2018).
Uncertainty avoidance index is 40, which is quite low, indicating that imperfection is accepted in
the country and it is a patient nation, and unexpected tolerance is high (hofstede-insights, 2018).
Indulgence dimension for India is 26, which is quite low indicating Restraint culture, and people
have a tendency for pessimism and cynicism. This type of societies is not interested in putting
emphasis on gratification control of desires and leisure time. This could be a great benefit and
opportunity for the company to invest in the tourism industry (hofstede-insights, 2018).
After studying the aspect it can be said that the company that is, investing in this country must
consider culture with most priority while offering any plan for tourism, stay, and traveling
places. Moreover while marketing strategies creation, culture must be taken into account to gain
opportunity and face the challenges (Gugin, 2018)
.

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Figure 5:(Source: (hofstede-insights, 2018)
 Communication styles of India – this included the humble and polite indirect verbal
communication. In addition, generally avoids confronting and conflict. This indirect
communication is conducted with people who are not so close (Semanticscholar, 2018).
In addition, direct communication is done with trustworthy people and who have some
relation with the individual. Therefore, for the company, it is essential to have indirect
communication with targeting customer but can follow direct communication for building
personal relationships with the customers (CultureWizard, 2018).
 Significant dates – the country is full of colors and celebration. That is the festivals plays
important role in the nation. Moreover, since the religions are numerous, festivals are in
large count and importance. Therefore, while planning the travel in the tourism industry,
the UK Company must follow these dates and plan accordingly. For example, Pongal
festival, some significant dates like republic day, Mahatma Gandhi birthday. Christmas
festival is popular and celebrated grandly in Goa (culturalatlas, 2018).

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6. Legal factors
Before entering into a country for business purpose, it is important to study the legal system of
the country in detail, as it is to be followed by the company entering. There are many aspects to
study under this particular factor like taxation, judicial laws, and government initiative for the
tourism industry.
 Judicial law – the system of Indian judicial is one of the oldest systems worldwide. The
constitution of India was initiated in 1950, which explains the laws of the land. A
hierarchy is followed in the judiciary of India. At the highest level, there is a supreme
court for handling disputes and taking a decision on a country level, below that, comes
the High court, which is responsible for state-level disputes. Likewise, there are also
some authorities working below the High courts. For the company, this can be
challenging to follow the hierarchal judiciary system in case of any issue arise, which
could take a longer time than usual (silf.org, 2018).
 Rule of law index - it is one through which the level of confidence of agents in the rule of
society are identified, moreover in property rights, quality of contract enforcement, the
courts, the police, and as a likelihood of violence and crime. The average value of this
index, for India for period 1996 to 2016 is 0.07 points, which indicates not so strong rule
of law in India (theglobaleconomy, 2018).
 Taxation – this is another important aspect, which is the influencer and decision maker
for the investment decision in the country. For this the corporate tax is most significant,
the higher the tax, the lower is the opportunity to gain higher profits, as the money has to
be given to the government for the revenue generated. Similarly, the lower tax of
corporate tax indicates the chances of more profit gaining opportunity. Considering the

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data, it can be said that the corporate tax for 2014 was 34%, which significantly increased
in 2015 with 1%, which it is come up to 35%, which is constant until now. Therefore, for
the UK Company to invest in the country must consider the challenge of taxpaying at this
rate (theglobaleconomy, 2018).
 Government initiative – in legal factors, government, an initiative taken by that is very
important, as it will affect the industry and financial development of the company. For
UK company to invest in this country and industry it can gain benefit from following
initiatives:
 State of unity- that is a statue of a very popular leader “Sardar Vallabhbhai Patel.”
Has been located and inaugurated in 2018, October. Its height is 182 meters, has
considered as the highest statue worldwide. This initiative is taken to boost the
hospitality and tourism sector and making India at the top position according to
the world tourism map (Onpointconsultingllc, 2018).
 According to the budget of 2018-19, the authority of India has allotted a large
amount that is rupees 1250 Cr for tourist circuits to develop under PARSAD
(Pilgrimage Rejuvenation and Swadesh Darshan and spiritual augmentation
Drive)
 The Indian government is working for the motive to achieve 1% world’s
international tourist share, that has to accomplished by 2020 and working for two
percent until 2025 (ibef.org, 2018)
7. Technological factors
Considering the technological factor, the country is developing and the technology is upgrading
rapidly. Nevertheless, when compared to the country like the United Kingdoms, this factor is

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very strong for the UK instead of India. The country is adopting technology from more
developed countries instead of innovation. Moreover, the education level is very low in India as
compared to the United Kingdom; it was observed that the adaption of technology by the
residents of the country is very late. Although the various initiative has been taken by the
government to promote digital up gradation and advancement, still the majority of the population
is not able to use or are not aware of this aspect (Balli, 2018).
Another aspect under this factor is infrastructure, when considering history, the country has
developed infrastructure to a large extent, but this is not enough when compared to a country like
the UK, as still there are various rural areas where infrastructure has not been developed, the
road connectivity is also not properly available at those areas. Nevertheless, the quality of the
road is more than the average since 2015, according to the data provided by the world economic
forum. Therefore, it can be said that this can be an opportunity for the UK based tourism
company to invest in the country. Moreover, considering the mode of travel, another index that
needs to be studied is railroad infrastructure quality, according to the data from 2009 to 2015, the
average value was 4.45 points, which is not highest as seven, but is more than the average
(theglobaleconomy, 2018).
8. Ecological factors
Nation’s ecological system is also important while entering into the country; this factor includes
aspects like water resources, environmental problems, pollution, and weather. For a tourism
company to invest in the country needs to know that the country consist of generally four season,
and accordingly the tourist places are open, popular and available.

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Considering environmental problems, the country consist of many problems, like ozone layer
depletion, land, and soil erosion, deforestation issues, and climate change. These aspects need to
be considered before investing, as these problems can hamper and be challenging for tourism
business in the country. Moreover, there are various regions where water scarcity is the major
issue, which must be considered before deciding on providing the travel services (Balli, 2018).

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9. Conclusion
From the discussion conducted, this report included the analysis of tourism industry in India, as a
U.K. based Tourism Company, would like to enter the nation. The opportunities and challenges
can be identified by the help of analyzing factors like geographical factors, which consist of
aspects like terrorism level, which observed as a challenge for the tourism company as the safety
could be hampered for foreigners. Moreover, various areas have been observed which can be
beneficial for the tourism company to target.
Another factor observed was political factor, where the most important aspects were Political
instability, Corruption, Political risk, and Trade regulations. According to this aspect, the
challenges for the company while investing included that political stability is not very strong,
and the level of corruption is high. Moreover, political risk is average, which is it is not very risk
related to exchange rates and other such activities in the nations.
Economic factors are other important factors before investment decision, it includes various
aspects like the unemployment rate, which is very high, and the company can generate
employment by investing in this country. Moreover, considering the DP of the country, the
economic condition of the country tends to be growing, which is again beneficial for the
company to invest.
For a country like India, the most important thing is culture, due to which studying socio-cultural
factors provide due relevance. The culture of U.K and India is very different, which can be
challenging for the company to plan regarding the marketing mix to offer while investing in the
nation.

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Then discussed was a legal factor, which included the judiciary system, which company needs to
follow while entering. Moreover, one of the beneficial things is that the government has taken
many initiatives to the prompted the tourism industry of India.

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