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    A country enjoys a comparative advantage in the production of a good when that good can be produced at a lower cost in terms of other goods. India was having absolute advantage over u.s. For software production but not the comparative advantage as salary paid to programmers was highest. A country's advantage in production arises solely from its relative factor abundance.

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    A country enjoys a comparative advantage in the production of a good when that good can be produced at a lower cost in terms of other goods. India was having absolute advantage over u.s. For software production but not the comparative advantage as salary paid to programmers was highest. A country's advantage in production arises solely from its relative factor abundance.

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    66 views14 pages

    Indian Software Industry

    Uploaded by

    Viral Soni
    A country enjoys a comparative advantage in the production of a good when that good can be produced at a lower cost in terms of other goods. India was having absolute advantage over u.s. For software production but not the comparative advantage as salary paid to programmers was highest. A country's advantage in production arises solely from its relative factor abundance.

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    of 14

    Presented By, M2 Team 5

    Kunal Patil Rohit Prabhune Pratik Soni Abhijeet Thakur Mrkt-47 Mrkt-48 Mrkt-57 Mrkt-58

    http://www.tcs.co.in/index.html Sources: P. Taylor, "Poised for Global Growth," Financial Times: India's Software Industry, December 3, 1997, pp. 1, 8

    Emergence: 1980 & Mid 1990s

    GDP contribution 2011 7 % & 26 % Of Total Indian

    Exports
    Size of the Industry 1992 388 Million USD, 1997 1.8

    Billion USD & 2011 76 Billion USD


    Competitive Advantage - 70,000 USD in US & 5000

    USD in India

    High quality standards (ISO Certification)


    Inexpensive wage rates

    Highly educated middle class


    English: Working language Time zone advantage (complementary to US) Satellite communication facility Emphasis on engineering

    Call Centers
    Data entry Transcription

    Backend Support Work


    Low No. of Software Products developed in

    Engineering
    Healthcare Financial

    India
    The Industry is like a Brain Drain

    Software Development
    Photo & Video Editing Web analytics

    Quality Cheap Labour is


    what they Get & they are benefitting from It

    General Level of Education lower than USA Poor infrastructure compared to U.S.

    Less computer & Internet penetration


    Installed computers < 1.8 Million in 1997 Just 1.5 telephone lines per 100 people Only 45000 Internet Connections in 1997

    Specialization and free trade will benefit all trading partners (real wages will rise), even those that may be absolutely less efficient producers.
    A country enjoys a comparative advantage in the production of a good when that good can be produced at a lower cost in terms of other goods.

    A country enjoys an absolute advantage over another country in the production of a product when it uses fewer resources to produce that product than the other country does.
    India was having absolute advantage over US for software production but NOT the comparative advantage as salary paid to programmers was highest among the other jobs in India.

    The Heckscher-Ohlin theorem states that a country which is capital-abundant will export the capital-intensive good. Likewise, the country which is labor-abundant will export the labor-intensive good.
    Each country exports that good which it produces relatively better than the other country. In this model a country's advantage in production arises solely from its relative factor abundance.

    Though India is a labour abundant country, this theory does not take into account other factors like:

    Time zone advantage (complementary to US) Language advantage English: Working language

    The effect of one point depends on the others. It is a self-reinforcing system.

    THE ANALYSIS OF PASSIVE FACTORS IN INDIA 1. Land -Available in pleanty. 2. Location -Strategic locations are available. 3. Natural resources (minerals, energy) -Apart from energy, all other resources are available 4. Labour -Skilled and unskilled labors are available in plenty. 5. Local population size -Local market size has the potential to absorb any excess production.

    THE ANALYSIS OF ACTIVE / PROACTIVE FACTORS IN INDIA 1.Factor conditions 2.Demand conditions 3.Related and supporting industries

    4.Firm strategy , structure and rivalry


    5. The role of the Indian government in this model

    What are the primary factors imperative to the success of Indian Software giants despite the obvious lack of infrastructure?
    Road ahead: How do Indian IT companies plan to maintain the competitive edge?

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