COUNTRY PROFILE: FRANCE

COUNTRY

Formal Name: French Republic (Rpublique Franaise).

Short Form: France

Capital: Paris.

Currency: euro

PROFILE

Geography of France

France possesses a large variety of landscapes, ranging from coastal plains in the north and west, where France borders the North Sea and the Atlantic Ocean, to the mountain ranges in the south (the Pyrenees) and the southeast (the Alps), of which the latter contains the highest point of Europe the Mont Blanc a 4810 m. In between are found other elevated regions such as the Massif Central or the Vosges mountains and extensive river basins such as those of the Loire River, the Rhone River, the Garonne and Seine.

Geography Area: 551,670 sq. km. (220,668 sq. mi.);

largest west European country, Cities: Capital-Paris.

Major cities--Marseille, Lyon, Toulouse, Strasbourg, Nice, Rennes, Lille, Bordeaux.

Terrain: Varied.

Climate: Temperate.

Major Cities: The countrys capital Paris, the only French city with more than 1 million inhabitants, has a population of 2,142,800in the city proper (as of 2004) and 11,330,700 in the metropolitan area (2003 estimate). Greater metropolitan Paris encompasses more than 15 percent of the countrys total population. The second largest city is Marseille, a major Mediterranean seaport, with about 795,600 inhabitants.

Other major cities include Lyon, an industrial center in east-central France, with 468,300inhabitants, and the second largest metropolitan area in France, with 1,665,700 people. Further important cities include: Toulouse, 426,700, a manufacturing and European aviation center in southwestern France; Nice, 339,000, a resort city on the French Riviera; Nantes, 276,200, a seaport and shipbuilding center on the Atlantic coast; Strasbourg, 273,100, the principal French port on the Rhine River and a seat of the European parliament Montpellier, 244,700, a commercial and manufacturing city in southern France; and Bordeaux,229,500, a major seaport in south-western France and the principal exporting center for key French vineyard regions. According to the 1999 decadal census, more than 25 additional French cities had populations surpassing 100,000.

Indo-French bi-lateral trade has seen an overwhelming growth over the last two decades. France, a developed country in the continental Europe draws its economic strengths from the farm sector. Indias export-import trade with France has been hovering around 9% during the mid 2000amongst all European Union countries. Interestingly, trade with other western European countries like Germany, England and Italy is more than with France while, ironically, France has been always a great market opportunity for Indian merchandise.

France is the worlds fourth largest exporter of goods and second largest exporter of agriculture products. Under the unified efforts of Federation of Indian Chamber of Commerce & Industry (FICCI) and UBIFRANCE, Indo-French bilateral trade is expected to reach three times by the end of 2012. Indias trade with France has to be diversified broadly and more commodity groups must be identified and brought into export basket. The present paper seeks to analyse the Indo-French trade with the help of the trade data and attempts to build prognosis about the future trade growth trajectories between the two countries.

People

Language: French. Education: Years compulsory--10. Literacy--99%. Work force (2009): 28.3 million (preliminary): Services--75%; industry and construction--21.7%; agriculture--2.9%.

Population 65,312,249 (July 2011 est.) The metropolitan France population is 62,814,233

Age structure

0-14 years: 18.5% (male 6,180,905/female 5,886,849) 15-64 years: 64.7% (male 21,082,175/female 21,045,867) 65 years and over: 16.8% (male 4,578,089/female 6,328,834) (2011 est.)

Median age total: 39.9 years male: 38.4 years female: 41.5 years (2011 est.)

Population growth rate 0.5% (2011 est.)

Birth rate 12.29 births/1,000 population (2011 est.)

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Death rate 8.76 deaths/1,000 population (July 2011 est.)

Net migration rate 1.46 migrant(s)/1,000 population (2011 est.) 4

Urbanization urban population: 85% of total population (2010) rate of urbanization: 1% annual rate of change (2010-15 est.)

Sex ratio At birth: 1.051 male(s)/female under 15 years: 1.05 male(s)/female 15-64 years: 1 male(s)/female 65 years and over: 0.72 male(s)/female total population: 0.96 male(s)/female (2011 est.)

Infant mortality rate total: 3.29 deaths/1,000 live births male: 3.61 deaths/1,000 live births female: 2.96 deaths/1,000 live births (2011 est.)

Life expectancy at birth total population: 81.19 years male: 78.02 years female: 84.54 years (2011 est.)

Total fertility rate 1.96 children born/woman (2011 est.)

Nationality

Noun: Frenchman(men), Frenchwoman(women)

adjective: French

Ethnic groups Celtic and Latin with Teutonic, Slavic, North African, Indochinese, Basque minorities overseas

departments: black, white, mulatto, East Indian, Chinese, Amerindian

Religions The French government does not keep statistics as to religion. The 2003 CIA World Factbook lists the religion of France as: Roman Catholic 83%-88%, Protestant 2%, Jewish 1%, Muslim 5%-10%, Unaffiliated 4%

Overseas departments: Roman Catholic, Protestant, Hindu, Muslim, Buddhist, pagan

Languages French (official) 100%, rapidly declining regional dialects and languages (Provencal, Breton, Alsatian, Corsican, Catalan, Basque, Flemish) Overseas departments: French, Creole patois, Mahorian (a Swahili dialect)

Literacy definition: age 15 and over can read and write total population: 99% male: 99% female: 99% (2003 est.)

School life expectancy (primary to tertiary education) Total: 16 years male: 16 years
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female: 16 years (2008)

Education expenditures 5.6% of GDP (2007)

Maternal mortality rate 8 deaths/100,000 live births (2008)

Health expenditures 3.5% of GDP (2009)

International rankings

evelopment Index, 2001: 17th (out of 175)

world-wide press freedom index Rank 11 out of 139 countries

INTRODUCTION Indias relation with France started soon after Indias independence in 1947. The diplomatic ties were established in the same year. The relationship soon became so well established that Pondicherry, an erstwhile French colony was amicably handed over to the government of India on November, 1,1954, without any military intervention from France. Over the years, the trade relations with France became further strengthened. In 2003, France has become the largest supplier of nuclear power for and remains a large military and economic trade partner of India French investments in India during the last 15 years have brought US $1.76 billion into Indian market. The trade relations generated a business of around US$ 6.2 billion in 2005-06.( Economy Survey of India,2005-06).

In contrast to the early years of 70s and 80s wherein France was ridden with trade deficit, the 1990 saw France emerging as a strong trading country with favourable trade surpluses. By 1995, France had a trade surplus of $34 billion ( www.wikipedia.com). With a thrust on producing capital goods for exports, France could not keep pace with demand of consumer goods on the domestic front. As a result of which its dependencies on imports of consumer goods started increasing. On the other hand, prior to early 1990s, Indias foreign trade was restricted and based on import substitution policy. But with the enactment of Foreign Trade Regulations Act, 1992, there was more thrust on the promotion of foreign trade. Foreign trade has been regarded as an engine of growth. Indias share in global trade, which has hitherto been hovering around two percent, has to be enhanced to ensure the advantages of externalities to the economy ( Singh, 2001) foreign India being a country with labour intensive industries could seek the opportunities emerging and India has been duly capitalizing on it. At the time of independence, Indias trade was almost exclusively with UK because UK had created colonial companies in India which largely facilitated the trade between the two countries. Indias trade remained mostly undiversified until 1973. However, when UK became the member of EU in 1973, Indias geographical direction of trade started diversifying to other western European countries like Germany and France. Trade with France has been increasing ever since but it has not been increasing at the level or to the extent to which India is capable of bringing it. There is a lot of potential to bring Indias foreign trade to higher levels with France particularly in the consumer goods and food
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processing segments. In order to analyse Indias prospects of foreign trade with France the present study is aimed to obtain the following objectives.

Economic Overview of the France

France is the fifth economic power in the world. Its per capita income from goods and services is among the highest in Europe, and its labor productivity is one of the best in the world. The internationalization of the French economy is an established fact. It can be measured by the dynamic nature of its trade with Europe and the rest of the world. It can also be seen in capital movements: France is both a major investor in other countries and favoured destination for international investment. France is the worlds number six economic power in terms of GDP. The countrys assets range from transport, telecommunications, food industries and pharmaceutical products through banking, insurance and tourism to traditional luxury goods (leather goods, ready-towear fashion, perfumes, fine wines and spirits, etc.).

Overview of Industries trade and Commerce GDP (purchasing power parity): $2.145 trillion (2010 est.) country comparison to the world: 10 $2.114 trillion (2009 est.) $2.169 trillion (2008 est.) note: data are in 2010 US dollars GDP (official exchange rate): $2.583 trillion (2010 est.) GDP - real growth rate: 1.5% (2010 est.)

Exports: $517.2 billion (2010 est.) country comparison to the world: 6 $475.9 billion (2009 est.) Exports - commodities: machinery and transportation equipment, aircraft, plastics, chemicals, pharmaceutical products, iron and steel, beverages Exports - partners: Germany 16.4%, Italy 8.2%, Belgium 7.7%, Spain 7.6%, UK 6.8%, US 5.1%, Netherlands 4.2% (2010) Imports: $588.4 billion (2010 est.) country comparison to the world: 6 $535.8 billion (2009 est.) Imports - commodities: machinery and equipment, vehicles, crude oil, aircraft, plastics, chemicals Imports - partners: Germany 19.3%, Belgium 11.4%, Italy 8%, Netherlands 7.5%, Spain 6.8%, China 5.1%, UK 5% (2010)

Reserves of foreign exchange and gold: $166.2 billion (31 December 2010 est.) country comparison to the world: 14 $133.1 billion (31 December 2009 est.) Debt - external: $5.633 trillion (30 June 2011) country comparison to the world: 4 $4.698 trillion (30 June 2010) Stock of direct foreign investment - at home: $1.161 trillion (31 December 2010 est.) country comparison to the world: 2 $1.128 trillion (31 December 2009 est.

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Objectives of the study To study Indias Trade with France, to examine the growth prospects of Indias foreign trade with France and to suggest on the basis of findings of the study, various measures which would fillip and elevate trade relations with France.

The data pertaining to commodity Exports and Imports from France retrieved from the Export and Import Data Bank of DGFT do actually belong to 99 major commodity groups codified as per ITC (HS) code, but due to the constraint of time and space, only major commodity groups were taken for research analysis. The selection of the major commodity groups was done objectively on the basis of their import and export value. Highly valued commodity groups were taken for research analysis. The selection, in this regard, was done separately for imported commodities and exported commodities. 24 commodity groups from the export basket and 17 commodity groups from import segment were finally chosen for analysis. The minimum export and import value for a commodity group to qualify for separate analysis was fixed at Rs. 100 crores. The remaining 75 commodity groups in exports and 82 commodity groups in imports were treated in aggregate, and separate analysis was conducted under the heading Miscellaneous Group.

The data for the purpose was taken from 1997-98 to 2004-05. The year 1997-98 (initial year for analysis) was purposely chosen as it was deemed that by then the liberalization policies in all areas particularly those concerning with foreign trade policies had started blooming. Thus the data selected was processed and with the use of regression analysis, Compound Annual Growth Rates (CAGR), of selected commodities (based on high value) in the import as well as in the export segment were computed. Besides, a comparative analysis was performed with regard to Indias export growth with France in contrast to Indias export growth with world.

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Trade with France

France occupies an important position in the EU and has been an important source of imports for India. Major imports from France include Aircraft, spacecraft and parts thereof, Engineering goods including electrical machinery, Nuclear Reactors, Iron and Steel; optical/surgical instruments, capital goods and organic chemicals. On the other hand, the major exports to France are Readymade Garments, Articles of Leather and Raw Hides, Footwear and other such articles.

France is the world's fourth largest exporter of goods and the second largest provider of services and agriculture. France is the largest producer and exporter of farm products in Europe Forging inwards into the European Union is now the objective of all countries as trade with affluent Europe is always a major attraction for all developing countries including India. As a matter of fact, trade with France has to be taken with all seriousness to ensure that France should work as a gateway for Indian merchandise to continental Europe. The following suggestions are put forth: 1. India export growth with France has been growing at around 11 percent whileas the imports from France have been growing at approximately 13 percent. This growth has to further enhanced. 2. The export basket to France has to further diversified to other commodity groups as exports to France should not be confined to readymade garments, leather and footwear only but it should include more and more Engineering, IT and IT enabled products as well. 3. Owing to more focus on the production of capital goods, the food processing industry in France continues to be in the infancy stage and there is open opportunity for India to venture into processed food exports. France along with Germany has been the main architect of European Union and shall continue to be so (Fontaine, 2005) and nevertheless, European Union is a major market opportunity for all countries in the world and India should capitalise on its relations with France which would serve as a threshold for furthering its reach of exports to other countries of Europe.

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Moreover, Government of India has to use a multi-pronged approach to enhance trade with a major trading partner of Europe. The following suggestions are put forth in this regard. 1. Organic Presence. Establishing an organic presence in France through the creation of chain outlets in the form of marketing office, branch office for ensuring speedy transmission of information on latest market trends and potential customers. This would result in greater Indian competitive strength. 2. Hormonisation of Standards. The fundamental contention between the EU and the developing countries is the Standards. Under the EU-India Standards and Quality Programme, modernization of Indian testing laboratories took place. India should ensure to export only that merchandise which would bear those standards and certification as is acceptable to the requirements under France 3. India as Brand. Indian Industry associations particularly CII and ASSOCHAM should make coherent efforts to create a brand name for India in France which would be ensured only through quality products and services. 4. Conducting Industry Exhibitions. Industry exhibitions should conducted in major cities of France, to promote the latest Indian product lines and Indian industry should also participate in the trade fairs organized by France in major cities. 5. Need for enhanced role for Indian High Commission. The economic and trade section in the Indian high commission need to upgraded by (2002-03), 18.13% (2003-04), 30.64% (2004-05). However, Frances share in Indias total trade has by and large been growing. It was 1.75% in 2000-01, 1.88% in 2001-02, grew to 1.90% in 2002-03, came down to 1.67% in 2003-04, went again high in 2004-05, when it was 1.83% (Table 3 ). Nevertheless, Indias total trade with France has never been favorable because the overwhelming imports of Aircraft, spacecraft & parts thereof, Engineering goods, Nuclear Reactors, Iron & steel, capital goods. All these imports far outdo the exports to France. The whole country of France in general particularly the Paris in particular, being the hub of fashionware, India can further capitalize on readymade Garments and unwoven fabrics by further promoting Indian fabrics and readymade garments across France so that this major export item from India finds further augmentation of the staff for collecting relevant information about domicile changing trade laws having implication for exports from India into France.

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6. Revamping Trading Houses. The export trading houses should be revamped to ensure more focus on the opportunities offered by French market

Business Opportunities In Future At the invitation of the Prime Minister of India, the President of the French Republic paid a working visit to India from 4 to 7 December, 2010. Mr. Nicolas Sarkozy and Dr. Manmohan Singh had detailed and useful discussions on bilateral, regional and international issues of mutual interest. Reaffirming their shared vision and values inspired by multilateralism, justice, freedom, equality and fraternity, France and India reiterated their determination and confirmed their commitment to work together towards peace and global security. As the Strategic Partnership between France and India enters its 12th year, the French President and the Prime Minister of India, recognizing Indias growing role on the international stage, have shown their determination to give a new impetus to the Indo-French Strategic Partnership.

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Relation between India and France

1. Global and regional challenges France and India would like to work together to make the G20 as effective as possible and help it find its place within an international system that will better reflect todays world and challenges. Monetary instability, major macroeconomic imbalances, volatility of the price of commodities including agricultural food products, development gap especially infrastructure and lack of food security are tangible threats which our two countries refuse to ignore. The G20 has become and must remain the premier forum for international economic cooperation with a view to laying new foundations for strong, sustainable and balanced growth and the international economic system. In respect of multilateral trade, the two countries are looking forward to the ambitious, comprehensive and balanced conclusion of the Doha Development Round of Negotiations in 2011. India and France reiterated the need for in-depth reform of the United Nations, including of its Security Council, to make it more representative of todays world. France reaffirmed its support for India to become a permanent member of an expanded Security Council without further delay. With the French Presidency of the G20 which has just started, Indias dual participation in the G20 and the Security Council for the 2010/2011 timeframe present an historic opportunity to step up joint work in these two bodies. Both countries will look to all members and groupings, including G20, to make clear support for reform of the Security Council.

France and India reaffirm their wish to continue and expand their dialogue and concrete cooperation in multilateral bodies, especially in UNSC during the 2011-2012 biennum, so as to address threats such as regional crises, terrorism, climate change and proliferation of weapons of mass destruction and their delivery systems, as well as to promote arms control and global disarmament. International Terrorism is a common threat that needs to be countered jointly. Today, it has become one of the core issues in our bilateral strategic cooperation. International cross15

border terrorism needs to be addressed at the global multilateral level by supporting initiatives in the framework of the United Nations such as the draft Comprehensive Convention on International Terrorism. We need to work together in international bodies like the FATF to counter financing of terrorism and money laundering. France and India reaffirm their determination to work for peace, democracy and development in Afghanistan. The French President and the Indian Prime Minister welcome their countries contribution and efforts towards the reconstruction and security of Afghanistan. The two countries underline the need for adequate development of the Afghan National Security Forces to enable Afghanistan to defend its sovereignty and independence. They expressed concern at the continuing existence of safe havens and sanctuaries for terrorist groups beyond Afghanistans borders and resurgence of terrorist groups. They agree that terrorism must be combated firmly by the international community. The two countries call on the neighbors of Afghanistan to play a constructive role conducive to the countrys stabilization and development in its regional environment. India and France have pledged to enhance cooperation at bilateral and global level to effectively address climate change. The two countries have decided to pursue this objective by working to achieve ambitious outcomes in Cancun in the form of balanced operational decisions on mandated issues in accordance with the Bali Road Map. France and India have also reaffirmed their determination to continue to work in the framework of the bilateral working group on environment established in 2008 which is to convene in Paris in the first quarter of 2011. Recognizing Indias non-proliferation record as well as its willingness to further contribute to global non-proliferation efforts and with a view to enhancing the international non-proliferation regime, France favors and will jointly work with India towards Indias increased participation with international nonproliferation initiatives and full membership of multilateral export control regimes NSG, MTCR, AG, WA in a manner consistent with procedures and objectives of these groups. In the context of their shared commitment to universal and general disarmament and to the reinforcement of the non-proliferation regime, India and France affirm the need for a meaningful dialogue among all states possessing nuclear weapons, in particular those holding the largest arsenals, to build trust and confidence and promote international stability, peace
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and security. They support international cooperative efforts to reduce the risk of terrorists acquiring nuclear weapons or material. The two countries reiterate their support to starting immediate negotiations in the Conference of Disarmament for a multilateral treaty banning the production of fissile material for use in nuclear weapons or other nuclear explosive devices. France and India reaffirmed their commitment to diplomacy to resolve the Iranian nuclear issue, and discussed the need for Iran to take constructive and immediate steps to meet its obligations to the IAEA and the UN Security Council. India and France also expressed concern about the situation in the Korean peninsula and urged DPRK to comply with UNSC and IAEA BoG resolutions. France and India will continue to support the development of relations between the EU and India more so when India and EU are enhancing cooperation as reflected in the deepening of the strategic relationship as well as the entry of the Lisbon Treaty into Force. The two countries welcome the holding of the EU-India Summit on 10 December 2010 in Brussels and call for renewed efforts to achieve the mutually beneficial conclusion of the EUIndia Broad-based Trade and Investment Agreement.

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2. Indo-French Strategic Partnership Civil nuclear energy The two States welcome the entry into force on 14 January 2010 of the India-France Cooperation Agreement on the Development of Peaceful Uses of Nuclear Energy and the signing of Agreements on the protection of Confidentiality of Technical data and information relating to cooperation in the peaceful uses of nuclear energy, and concerning intellectual property rights on the development of the peaceful uses of nuclear energy which supplement it. Noting the innovative, broad-based and dynamic nature of their partnership in the field of civil nuclear energy cooperation, France and India welcome the progress towards further strengthening cooperation between the two countries including in research and development and in setting up joint nuclear power projects. In this context the signing of the General Framework Agreement between NPCIL and AREVA represents a significant milestone. Following Indias enactment of civil nuclear liability legislation, both countries stand ready to further exchange views on this issue so as to ensure the appropriate framework for the sound development of their cooperation. The "Commissariat lEnergie Atomique et aux Energies Alternatives CEA" for France and the "Department of Atomic Energy DAE" for India have concluded on December 6 a Cooperation Agreement in the field of Nuclear Science and Technology for peaceful Uses of Nuclear Energy with the aim to establish a general framework to enhance their collaboration and signed a specific implementing agreement in the field of education and research. The CEA expressed its interest in cooperating with Indias Global Centre for Nuclear Energy Partnership (GCNEP), as a means to contributing to multilateral cooperative efforts to promote peaceful uses of nuclear energy.

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The fight against terrorism Terrorism strikes not only the people and the interests of our two countries but also imperils peace and stability of our respective regions and the world. We reaffirm our irrevocable condemnation of this scourge in all its forms and our will to intensify our cooperation to counter it. Since our Joint Statement of 25 January 2008, we have aimed at intensifying bilateral consultations and exchanges with the objective of better assessing these threats and sharing relevant information. Today, we have decided to make this cooperation a priority of the IndoFrench security relationship. With the tragic losses suffered in the November 2008 terrorist attacks in Mumbai particularly in mind, we call for the active prosecution of the authors of such crimes and their accomplices, and urge that they be brought to justice expeditiously. In our common fight against terrorism, we will continue to enhance our operational cooperation as far as possible and will seek to ensure that the widest possible measure of mutual legal assistance is rendered, and that extradition requests are processed expeditiously. Our two governments will coordinate their endeavors in international bodies such as the Financial Action Task Force in order to define common positions and promote concrete initiatives. In the pursuance of our efforts to strengthen the international legal framework against terrorism, we resolve to intensify our efforts to urgently conclude the Comprehensive Convention on International Terrorism at the United Nations. France and India call on all countries to become part, as a matter of urgency, of all international counter-terrorism conventions. Both sides reiterated the importance of adhering to sanctions regime against Al Qaeda and Taliban as established by UNSCR and subsequent Resolutions and the need to preserve its credibility.Security and defense France and India reaffirm their common interest in continuing to strengthen their defense relationship, which is an important pillar of their Strategic Partnership and reflects their common determination to work for global peace and security.

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The two States agree to continue and intensify their cooperation on counter piracy and maritime security. France and India recognize the need for an intensified cooperation in combating piracy in the Gulf of Aden and other areas. The two states welcome the ongoing exercises between their Navies (Varuna) and Air Forces (Garuda) and have confirmed their interest towards extension of their cooperation through exercises between the two Armies. The two States also welcome the on-going efforts and future prospects for joint programmes in defense industry, which would include joint research and development and transfer of technology. In this regard and as a first step, the two States expect to launch soon the SRSAM and Kaveri program. Discussions concerning the upgrading of Mirage 2000 aircraft are expected to be finalized soon.

Space Cooperation Acknowledging the essential nature of cooperation in the field of space, which is a key sector for scientific cooperation between the two countries, India and France intend to broaden the scope of their exchanges and further develop their joint efforts in this field. In the spirit of the Framework Agreement signed between Indian Space Research Organization (ISRO) and French National Space Agency (CNES) on a wide range of issues related to use of space for peaceful purposes, they applaud the Space establishments of both nations for the progress made in developing the Megha-Tropiques and SARAL satellites, due to be launched in 2011 timeframe. The two governments reaffirm their determination to pursue space cooperation in the fields of Earth Observation for climate change studies and space exploration. India and France also acknowledged the ascending trend of the industrial cooperation over the years nurtured by space industries of both countries. In this regard, they gladly welcome the recent breakthroughs made by Astrium and Antrix Corporation in the joint development and marketing of communications satellites, following their 2005 Agreement. They also welcome continuing this promising collaboration in the coming years.

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3. Bilateral cooperation Development of economic and trade exchanges France and India welcome the outstanding development of their bilateral economic exchanges in recent years. The two countries welcome the contracts signed in the latter part of 2010 for aircraft leasing, satellite launching, biometric technology, energy and urban transportation. Aware of the potential for the development of their bilateral exchanges and investments, and confident about the opportunities afforded by the dynamism of their economies ranking among the leading global economies the two governments reiterate their objective of doubling their trade exchanges in a balanced way despite the crisis, over the period 2008-2012. Beyond that, the liberalization of exchanges provided for by the EU-India Broadbased Trade and Investment Agreement, combined with ongoing cooperation in the field of civil nuclear energy and the resumption of aviation industry contracts, will further boost trade between the two countries. France and India welcome the significant development of cross-investments between the two countries and large-scale investment by India-based French companies in the car industry, building materials, electrical equipment, public water utilities and rail transport. They also welcome prospects for Indian investments in France. They welcome the private sector's involvement in boosting bilateral trade and call on the Indo-French CEOs Forum to continue to play a decisive role in identifying new avenues for cooperation and facilitating the business climate between the two countries.

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Cooperation in the field of Agriculture and Food Processing France and India recognize the strategic importance of the agricultural and food processing sector in addressing the needs for affordable, healthy, high quality and sustainable food products in both countries. They express in particular their will to double and balance exchanges of agricultural products as part of comprehensive cooperation including food products logistics, the distribution sector and agrifood research. The two sides expressed satisfaction at the on-going cooperation between the two countries through the Indo-French Joint Working Group on Agriculture. The areas identified for further cooperation include strengthening the post-harvest management capacities (e.g. cold chains, storage...), wine/Vineyards, research and training and exchange programmes, animal identification and tracing and genetic improvement of dairy cattle breeds.

Cooperation in the field of sustainable development (town planning, transport, housing) Both parties expressed their commitment to the continuation of bilateral exchanges in the field of standards, best practices and capacity building in order to further enhance cooperation between Indian and French institutional structures as well as business partnerships.

Cooperation in the field of human exchanges France and India, reiterating the importance they attach to encouraging people to people contacts and human exchanges in accordance with the joint declarations of 25 January 2008 and 30 September 2008, reaffirm their determination to cooperate closely in the field of migration, with a view to encourage legal and orderly migration of students, professionals and skilled workers to each others country, depending on opportunities available, to assure the return to their country of illegal migrants who have been properly identified as their nationals and to combat irregular migration.

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Welcoming the preliminary talks held in New Delhi in November, 2009 and which led to beginning of negotiations on a bilateral partnership agreement on migrations under this comprehensive approach to migration, the two States agreed to swiftly launch these negotiations between the two countries based on a draft text submitted by France with a view to conclude them as soon as possible. University and scientific cooperation The two States reaffirm their determination to pursue efforts in order to ensure that human exchanges permeate and stimulate all areas of bilateral cooperation, including in the fields of research, education and cultural exchanges. They encouraged the trend of increasing number of Indian students studying in France and French students studying in India. More than 200 framework agreements for promoting student mobility have been signed by French and Indian higher education institutions. The five scholarship programmes established under the "Quai dOrsay / Entreprises" scheme have helped welcome 101 Indian students to the best schools and universities in France since 2006. A total of almost 400 scholarships were awarded in 2009. France and India call for an increase in bilateral student exchanges and pledge to facilitate the academic stays of French students in India and Indian students in France. France and India support the launch of an ambitious cooperation at the Indian Institute of Technology (IIT) Rajasthan, which is to allow a consortium of French higher education institutions, to initiate a partnership and joint workson sustainable development and on green accounting project. This project will ultimately make it possible to incorporate the environment into the daily business of enterprises and to develop the territory and urban heritage targeted by decentralized cooperation actions. Recognizing the essential contribution of education and scientific research to global prosperity and stability, they welcome the success of the Franco-Indian Centre for Advanced Research (CEFIPRA) which has been steering closely science and technology-related projects since 1986. They welcome the ambitious initiatives envisaged to increase its outreach and develop its partnerships. They further reiterate their common determination to strengthen Indo-French cooperation in the field of innovation. They welcomed research collaborations in the areas of solar thermal technology, ICT in health lab, systems and designs for automobiles and aerospace, robotics and control systems, art, culture and heritage restoration.
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India and France recognize that with the 21st century being hailed as the century of knowledge, alliances in the knowledge economy will be critical for both countries, especially by leveraging Information and Communication Technology. Based on their shared endeavour to strengthen democracy, transparency and accountability, France and India wish to start an initiative on Democratizing Information and Open Government as a way to use Information and Communication Technology to modernize the relationship between the State and the citizen. The two governments welcome the action of the French Development Agency (AFD) which contributes through concessional financing for supporting projects in the field of renewable energies and energy efficiency, sustainable forest management and biodiversity conservation. As a key instrument of our cooperation in the field of sustainable development, the AFDs level of intervention is to increase significantly over the next few years. 80

Cultural exchanges France and India welcome the holding of the cross cultural seasons Bonjour India and Namaste France which meet the desire for understanding and exchange on the part of the Indian and French peoples. They welcome the launching of the news channel France 24 in India. They reaffirm their determination that an Indian Cultural Centre should be established at 3 Avenue de Lowendal in Paris and intend to finalize the necessary arrangements to that end. The two governments welcome the signing of the film Co-Production Agreement which is to inspire our future joint co-operation projects in the film industry and will be viewed as an example in terms of co-production

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In-depth PESTLE insights

Overview The economy is buoyed by the services sector, but rising current account deficit and inflation remain aconcernThe French economy is one of the largest economies in the EU, with a GDP of $1.5 trillion (constant prices, 2000).Although the economy shrank by 2.6% in 2009, it rebounded with a growth of 1.5% in 2010. The countrys well-

developedinfrastructure and strong services sector are supporting the economy. The services segment contributed around 82.1% of the GDP in 2010. It rose from 1.43 trillion in 2006 to more than 1.58 trillion in 2010, and is expected to reach around 1.78 trillion by the end of 2013.

However, the economy faces huge challenges in the form of weak government finances, rising inflation, and widening current account deficit. The total budget deficit for 2010 was 136.5bn ($194bn), around 9% of the GDP. Inflation has been on the rise after it fell to 0.1% in 2009, increasing to 1.6% in 2010. It is expected to grow to 1.8% in 2011. The current account deficit as apercentage of GDP was 2.7% in 2008, 2.9% in 2009, and 3.3% in 2010. In the present economicsituation, the state's deteriorating financial condition is putting additional pressure on the economy. France scores high on human development, but rising unemployment is a concern

France ranks high in terms of social development. On the UN Development Programme's (UNDP) Human Development Index for 2010, the country ranked 14th among 169 countries. Like most European nations, France is also facing the challenges of ensuring social security for an aging population. The unemployment rate in the country is inching towards 10% after averaging 9.6% for 2009 and 2010. Income inequality in the country has increased and the education system has failed to meet the changing requirements.

The country's minimum wage has consistently risen, but labor productivity has not increased by the same proportion. This has made wage hikes unrealistic. Moreover, the government has initiated new measures to address unemployment-related issues arising out of the present economic crisis. The governments attempts to initiate labor reforms have been met with public protests, which could result in political instability. The pension system was
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revamped in 2003, but the employability of the older population is still limited. The government plans to increase retirement age from the current 60 to 62 by 2018 under the new Pension Act. The need to increase the contribution period is being felt, but the governments efforts in this direction have met with resistance.

Measures to encourage innovation underway, but R&D expenditure remains low France has been traditionally known as a technologically advanced nation. The countrys total expenditure on research and development (R&D) has been steadily declining as a percentage of GDP from 2001, and is far below the projected EU target of 3%. However, France has been proactive in innovation by introducing research tax credit, innovation clusters , and reforms to its university system. The countrys 35bn Special Investment Plan has also played an important role in attracting capital, jobs, and talent into the country. There has been a steady increase in the number of public-private laboratories in the country, reaching 214 in 2009. Under its higher education reforms, 90% of the universities in the country will be autonomous by the end of 2011. The Special Investment Plan covers three priority areas: healthcare, nutrition, and biotechnology; environmental urgency and ecotechnology; and information, communication, and nanotechnology.

Overview

France is open to FDI, but labor market rigidities could hinder investment France has been slowly liberalizing its economy by doing away with restrictions on investment in formerly government dominated sectors. As a member of the EU, it provides a reasonably hospitable climate for foreign investment. The country attracted inward foreign direct investment (FDI) of $65bn in 2009, with nearly 22,645 foreign companies operating in the country and employing nearly three million people. The number of projects originating in emerging countries increased by52% compared to 2009. In 2010, foreign companies based in France created two million jobs. However, the government is yet to dispense with its interventionist practices, and there are deterrents in the form of a lack of fiscal freedom or investment freedom. There are plans to exert tighter control over companies in which the state still hasa stake. In April 2011, a mandatory bonus scheme suggested by President Sarkozy was slammed by both unions and companies, many of which see it as unnecessary state intervention in employer-employee relations.

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Growth in green fuels is a positive development, but lack of growth in green taxes will affect sustainability The French government has attached great significance to environmental concerns; in fact, the Environment Charter forms a part of the French constitution. Frances environmental laws have influenced EU environmental laws to a great extent. France has stabilized its greenhouse gas emissions in accordance with the UN Framework Convention on Climate Change(UNFCCC). In 2010, more than 100 billion litres of bio fuel were produced globally, out of which nearly 85% of production was from developed and emerging countries. It was largely dominated by the US (46%), Brazil (29%), and France (nearly4%). Frances greenhouse gas emissions are 5.6% below the ceiling set by the Kyoto Protocol for 200812. Despite these successes, a lot of work still needs to be done to reduce the energy intensity of the economy and integrate environmental concerns into the energy, transport, and agriculture sectors. The proposed changes under environmental tax reforms are yet to be fully implemented. In March 2010, the government dropped its proposed carbon taxation. The Organisation for Economic Co-operation and Development (OECD) has also called on France to consider increasing taxes on coal, natural gas, home heating oil, and diesel in order to improve its environmental profile.

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Rank & Value according to different sector Indicator

1st pillar: Institutions 1.01 Property rights ....................................................... 1.02 Intellectual property protection ............................... 1.03 Diversion of public funds ........................................ 1.04 Public trust in politicians ......................................... 1.05 Irregular payments and bribes ................................ 1.06 Judicial independence ............................................ 1.07 Favoritism in decisions of government officials ....... 1.08 Wastefulness of government spending ................... 1.09 Burden of government regulation ........................... 5.7 ............18 5.6 ..............9 4.8 ............29 3.4 ............44 5.4 ............32 4.9 ............37 3.7 ............39 3.1 ............77 2.7 ..........126

value rank

1.10 Efficiency of legal framework in settling disputes .... 4.4 ............37 1.11 Efficiency of legal framework in challenging regs. ... 4.5 ............27 1.12 Transparency of government policymaking ............. 1.13 Govt services for improved business performance 1.14 Business costs of terrorism .................................... 1.15 Business costs of crime and violence..................... 1.16 Organized crime ..................................................... 1.17 Reliability of police services .................................... 1.18 Ethical behavior of firms ......................................... 1.19 Strength of auditing and reporting standards ......... 1.20 Efficacy of corporate boards .................................. 1.21 Protection of minority shareholders interests ......... 1.22 Strength of investor protection, 010 (best)* .......... 4.6 ............47 3.6 ............70 5.2 ............93 5.3 ............47 5.8 ............39 5.3 ............33 5.4 ............23 5.3 ............34 5.2 ............21 4.6 ............42 5.3 ............65

2nd pillar: Infrastructure 2.01 Quality of overall infrastructure ............................... 2.02 Quality of roads ...................................................... 2.03 Quality of railroad infrastructure .............................. 2.04 Quality of port infrastructure ................................... 2.05 Quality of air transport infrastructure....................... 6.4 ..............5 6.5 ..............1 6.3 ..............4 5.4 ............26 6.2 ............10
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2.06 Available airline seat kms/week, millions* ........ 2.07 Quality of electricity supply ..................................... 2.08 Mobile telephone subscriptions/100 pop.* ......... 2.09 Fixed telephone lines/100 pop.* ...........................

3,717.5 .......8 6.7 ..............9 105.0 ........74 55.9 ...........7

3rd pillar: Macroeconomic environment 3.01 Government budget balance, % GDP* .................. 3.02 Gross national savings, % GDP* .......................... 3.03 Inflation, annual % change* .................................... 3.04 General government debt, % GDP* ..................... 3.05 Country credit rating, 0100 (best)* ...................... 5.3 ..........114 18.8 ..........75 2.3 ..............1 86.3 ........130 85.2 ..........16

4th pillar: Health and primary education 4.01 Business impact of malaria .............................. 4.02 Malaria cases/100,000 pop.* ................................ 4.03 Business impact of tuberculosis ............................. 4.04 Tuberculosis cases/100,000 pop.* ......................... 4.05 Business impact of HIV/AIDS ................................. 4.06 HIV prevalence, % adult pop.* ............................... 4.07 Infant mortality, deaths/1,000 live births* ................ 4.08 Life expectancy, years* ......................................... 4.09 Quality of primary education ................................... 4.10 Primary education enrollment, net %* .................. n/appl. ........1 (NE) ...........1 6.3 ...........26 9.3 ...........28 5.7 ...........47 0.4 ..........78 3.4 ..........17 81.4 ........11 4.6 ..........37 98.5 ........22

5th pillar: Higher education and training 5.01 Secondary education enrollment, gross %* ........ 5.02 Tertiary education enrollment, gross %*................ 5.03 Quality of the educational system ........................... 5.04 Quality of math and science education .................. 5.05 Quality of management schools ............................. 5.06 Internet access in schools ...................................... 5.07 Availability of research and training services ........... 5.08 Extent of staff training ............................................ 113.2 ........8 54.5 ........45 4.2 ..........41 4.9 ..........25 5.6 ............8 4.4 ..........59 5.4 ..........15 4.3 ..........41

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6th pillar: Goods market efficiency 6.01 Intensity of local competition .................................. 6.02 Extent of market dominance .................................. 6.03 Effectiveness of anti-monopoly policy ..................... 6.04 Extent and effect of taxation ................................... 6.05 Total tax rate, % profits* ....................................... 6.06 No. procedures to start a business* .......................... 6.07 No. days to start a business* .................................... 6.08 Agricultural policy costs.......................................... 6.09 Prevalence of trade barriers ................................... 6.10 Trade tariffs, % duty* .............................................. 6.11 Prevalence of foreign ownership ............................. 6.12 Business impact of rules on FDI ............................. 6.13 Burden of customs procedures .............................. 6.14 Imports as a percentage of GDP* ........................ 6.15 Degree of customer orientation .............................. 6.16 Buyer sophistication ............................................... 5.5 ............28 4.3 ............33 4.9 ............20 2.8 ..........128 65.7 ........128 5 ..............29 7 ..............25 4.0 ...........60 4.7 ...........35 0.9 .............6 5.6 ...........18 4.6 ...........71 4.6 ...........39 30.8 .......114 4.7 ...........58 3.8 ...........43

7th pillar: Labor market efficiency 7.01 Cooperation in labor-employer relations ................. 7.02 Flexibility of wage determination ............................. 7.03 Hiring and firing practices ....................................... 7.04 Redundancy costs, weeks of salary* ....................... 7.05 Pay and productivity ............................................... 7.06 Reliance on professional management ................... 7.07 Brain drain ............................................................. 7.08 Women in labor force, ratio to men* ..................... 3.3 ..........137 5.1 ............62 2.5 ..........141 12 ............51 3.9 ...........66 5.0 ...........34 3.7 ...........50 0.88 .........33

8th pillar: Financial market development 8.01 Availability of financial services ...........................5.6 ...........25 8.02 Affordability of financial services ................. .......5.0 ...........28 8.03 Financing through local equity market .................... 8.04 Ease of access to loans ......................................... 8.05 Venture capital availability ....................................... 4.7 ...........12 3.0 ...........61 2.8 ...........57
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8.06 Soundness of banks .............................................. 8.07 Regulation of securities exchanges ........................

5.4 ..........54 5.1 ..........30

8.08 Legal rights index, 010 (best)* ................................. 7 .............43 9th pillar: Technological readiness 9.01 Availability of latest technologies ............................ 9.02 Firm-level technology absorption ............................ 9.03 FDI and technology transfer ................................... 9.04 Individuals using Internet, %* ............................... 9.05 Broadband Internet subscriptions/100 pop.* ........ 9.06 Intl Internet bandwidth, kb/s per user* ................ 9.07 Mobile broadband subscriptions/100 pop.*.......... 10th pillar: Market size 10.01 Domestic market size index, 17 (best)* ................. 5.7 ............8 10.02 Foreign market size index, 17 (best)* .................... 6.0 ..........13 6.3 ..........16 5.5 ..........35 4.8 ..........59 79.6 ........16 36.1 ..........7 78.6 ........19 44.0 ........18

11th pillar: Business sophistication 11.01 Local supplier quantity ........................................... 5.2 ..........26

11.02 Local supplier quality .............................................. 5.5 ..........15 11.03 State of cluster development .................................. 11.04 Nature of competitive advantage ............................ 11.05 Value chain breadth ................................................ 4.5 ..........30 5.5 ..........15 5.4 ............9

11.06 Control of international distribution ......................... 4.4 ..........33 11.07 Production process sophistication .......................... 11.08 Extent of marketing ................................................ 11.09 Willingness to delegate authority ............................ 5.4 ..........19 5.6 ..........11 3.5 ..........88

12th pillar: Innovation 12.01 Capacity for innovation ........................................... 5.0 ..........10

12.02 Quality of scientific research institutions ................. 5.5 ..........15 12.03 Company spending on R&D ................................... 12.05 Govt procurement of advanced tech products ...... 4.6 ..........19

12.04 University-industry collaboration in R&D ............4.4 ..........33 3.8 ..........49

12.06 Availability of scientists and engineers .................... 4.9 ..........22 12.07 PCT patents, applications/million pop.* .............. 110.2 ......14
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PESTLE highlights
Political landscape Generalities France is a democratic republic, The Prime Minister of France is head of the government, The Executive power is done by the government, The legislative power is vested by the government, the Senate and the National Assembly, The judiciary power is independent of the executive and legislative ones, Since about 50 years, the country has been governed either by a left -wing coalition recently or a right-wing.

France has improved its rankings in the Worldwide Governance Indicators for 2009 on the parameters of voice and accountability and rule of law. France has a percentile rank of 90.5 on voice and accountability as of 2009, which is an improvement over its 2002 score of 83.2. Despite attempts to decentralize power, France remains a highly centralized country with an elite group being dominant in the state and corporate sectors. Corruption is perceived to be widespread in French politics. Climate change agenda Fuel prices Expansion of EU Business politics in France About external affairs, on May 29/2005, French voters in the referendum on the Treaty establishing a Constitution for Europe turned down the proposed charter. One of the great questions of current French politics is economic liberalism, as opposed to government intervention in the economy Social pressure groups Workers' unions: Employers' unions Students' unions Peasants' unions
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Economic landscape The government plans to reduce its budget deficit by limiting total spending to286.4bn in 2011, with the anticipated economic growth of 2% in 2011 also helping to close its budget gap. Changes in disposable income Exchange rates Taxation Economic growth around the world

Overview Frances share in exports in the eurozone fell by 16% during 19992007, and exports from the country declined by 4.6% in 2010 to $595bn. Declining exports are expected to affect the prospects of the French economy in the near term.

France is the sixth largest economy in the world in USD exchange-rate terms, In 2012, the country has a GDP (gross domestic product) of 1.7 trillion euros.

Social landscape

France has Europe's second-highest birth rate, and has shown an upward trend since the 1990s. France's birth rate of around two children per woman in 2010 makes it one of only two European countries that could maintain their current population based on present trends. The problem of an aging population is becoming more apparent. Additional government expenditure between now and 2050 due to increased pensions, healthcare, and dependency care related to the aging population is predicted to be more than 4% of GDP. Demographic changes Attitudes to environmental issues The ethical consumer Aging population

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Technological landscape

France has a favorable innovation climate, which is reflected in the large number of patents received. In 2010, the total number of patents received from the US Patent and Trademark Office (USPTO) reached 124,723, which indicates the countrys strong support for innovation and R&D. The governments interventionist attitude, as seen in the case of Internet advertising, and the ongoing withdrawal of business-friendly schemes like the Young Innovative Company (YIC) concept will affect industrial growth, and could reduce investments in the country. Demand for alternative fuels Advances in manufacturing The driverless car

The French budget plan for in industrial research and innovation is about 648 115 796. There was a priority given to scientific research, technological development, industrial restructuring, and the development of national energy sources. The establishment of a ministry of research and industry by the socialist shows their commitment to the belief that basic research is closely linked to industrial prowess. The social and cultural roots of research in France have long kept the French scientific community away from the question of the use and economic exploitation of knowledge. The globalization of exchanges and cooperation, which has been accelerated by the speed of electronic data transfer as well as by the support of the European Union to R & D projects, has changed this tradition.

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Legal landscape

Foreign investments increased by 22% in 2010, with 782 projects leading to nearly 32,000 jobs, an increase of 6% compared to 2009. Many of these projects were related to the renewable energy sector. In 2010, foreign companies based in France created two million jobs. Many of the governments tax and labor reforms have been met with cynicism and public protests. The government is planning to increase weekly working hours to 39 from the current 35 and abolish the wealth tax l'impt de solidarit sur la fortune. However, these moves are bound to face public outrage and demonstration. (schwab, 2013-13) (V.sutharaman, 2012) (2013) (Henry, 2012) (medabesh, et al.) () Employment law Environmental regulations

Environmental landscape

France has played an active role in the preparation of global agreements on environmental protection and sustainable development and in the strengthening of international environmental governance. As part of its global environmental partnership, the country initiated the Global Forest Partnership in May 2010 with Norway. In March 2011, the European Commission decided to take France to the EU Court of Justice for its poor adherence to EU industrial emissions regulations. The EU alleged that France has at least 62 factories that have not received environmental authorization from the EU. Increased awareness of environmental issues concerning waste and carbon footprint

Environment Scanning and Competitiveness of the Auto and Auto Components sector

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GAP Analysis of automobile industry

France was a pioneer in the automotive industry and is the 10th-largest automobile manufacturer in the world by 2011 unit production and the third-largest in Europe (after Germany and Spain).

France is home to two major automaking companies - PSA Peugeot Citron (owner of the Peugeot and Citroen marques) and Renault S.A. (owner of the Renault marque and of Dacia of Romania, and Renault Samsung Motors of South Korea). The France-based Renault Trucks is a major producer of commercial vehicles and is owned by Volvo AB. Both PSA Peugeot Citron and Renault produce a large number of vehicles outside of France.

French-designed cars have won the European Car of the Year and World Car of the Year awards numerous times. The Citron DS took third place in Car of the Century award and has been named the most beautiful car of all time by Classic & Sports Car magazine.

Overview of French automobile industry

2010: WITH A RETURN TO GLOBAL GROWTH, FRENCH MANUFACTURERS PRODUCTION REACHED NEW HEIGHTS

With a return to world growth, French manufacturers rubbed out the sharp falls posted in 2008 and 2009associated with the economic and financial crisis. Compared to 1997, production grew by 57% to nearly 6.4 million vehicles, reaching new heights. More than ever before, this growth has its roots outside Western Europe. After a drop of 350,000 vehicles in 2009, production grew by 800,000 to over 2.7 million; in 1997, figures stood at only 659,000 vehicles.

These areas where the level of vehicle ownership is generally much lower than in Western Europe represent markets of large potential within which investments must continue and increase. The market in Western Europe, a mature automobile zone, remains the base market for French manufacturers. Figures grew by 380,000 over the period, to 3.7 million vehicles. In France, numbers rose to 430,000 vehicles and a rise in market share helped limit
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the downturn elsewhere in Europe. To weather the development of overseas competition, French manufacturers continued to invest in France, in research and development and also plants.

After the historic fall in 2009 caused by the economic and financial crisis, world GD P growth return to the high levels it enjoyed until 2007. Similarly to previous years, the development differed between OE CD countries where GDP rose by 3% and developing countries (+7 to 8%), steered by China and India in Asia and also Brazil and Argentina in South America. The recoveries in Eastern Europe, particularly in Russia did not erase the drop in 2009. The price of raw materials grew throughout 2010 and with increases noted since early 2011, the high prices of 2008 were nearly reached, as with oil for example.

These developments have limited consumer purchasing power; consumers have been affected in developed countries by the effects of this crisis, with the high unemployment levels affecting their confidence. For businesses, a return to investment began. In this context of a collapse of Western Europes base marketing terms of the levels observed prior to the crisis, French automobile manufacturers must deal with consumer decisions about what to buy, the rising cost of raw materials for manufacturing processes, dearer money worsened by the crisis and maintaining the euro at a high level in terms of other main countries. Despite everything, they must continue to meet societys demands, which require considerable research and development expenditure. Furthermore, this crisis highlighted the entire automobile branch upstream through suppliers and downstream with transportation and the sale/maintenance of vehicles. In this economic and financial environment, in 2010 the worlds automobile market reached a new high of 75 million vehicles; supported for the most part by the strong growth of developing countries. In Western Europe, new car markets fell due to the end of the different government plans for scrap incentives, whilst commercial vehicle markets returned to growth. French manufacturers managed to raise their penetration in a context of increased competition while continuing to manage their stocks.

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In Eastern Europe, the industry returned to growth, driven by Russia and Turkey. However, to satisfy vehicle ownership requirements, French manufacturers continued to develop commercially and industrially in this area whose opportunities should eventually grow. The PSA Peugeot Citron and Mitsubishi plant in Russia produced its first vehicles and Renault is developing a strategic partnership with the Russian manufacturer AvtoVAZ, now part of Nissan. In Asia, the car market continued to develop strongly. Beyond China, the worlds leading automobile market since 2009,growth was observed in many other countries such as India, Thailand and Indonesia. Market opportunities for French manufacturers grew healthily in this area, and today exceed 1.2 million vehicles. The search for investment (PSA Peugeot Citron with its partners in China and Renault in India) and renewed, adapted vehicle ranges should support this future growth. In Latin America where markets have reached all new highs, French manufacturers sales have enjoyed strong growth at nearly650,000 vehicles, for the first time exceeding those destined for Eastern Europe, including Turkey. New investments have been voted by the French companies to attempt to return to automobile development in this region. Finally, French manufacturers have managed to sell 200,000vehicles in Africa.

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Fig. 1

Fig. 2

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Overview of the Automobile and Auto Components Sector

The liberalisation of the Indian industry saw significant growth in the Indian Automotive Industry. Today, the Indian Automotive Industry is a significant contributor to the Indian economy, contributing nearly 5% to the countrys GDP and about 17-18% to the kitty of indirect taxes to the Government, while investment outlay stood over Rs. 83,500 crore in 2008-09. With its wide penetration and strong influence on the countrys economic and industrial development, the auto sector is indeed one of the major drivers of our economy. Moreover, economic liberalization coupled with its technological, cost and manpower advantage have made India one of the prime business destination for many global automotive players. With its strong influence on the countrys economic and industrial development it is indeed one of the major drivers of our economy. Moreover, economic liberalization coupled with its technological, cost and manpower advantage have made India one of the prime business destination for many global automotive players. The sector has moderate direct employment and significant indirect employment; it is estimated that the sector provides direct and indirect employment to over 13 million people.

Product categories of the Automobiles Segment

The Automobile segment comprises of the following four broad categories of vehicles Passenger Vehicles Commercial Vehicles Three-wheelers Two-wheelers Two-wheelers, being the most popular means of personal transport, alone account for about 75% of the total automobile production in India, while passenger vehicles account for nearly 16% of the production. However, owing to their lower sales realisations, two wheelers account for only around32% of the sales in terms of value while passenger vehicles account for around 62% of the same.

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Value Chain of the Automobiles Segment

The Automobile segment, comprising of the OEMs, is at the topmost Tier of the Automotive Industry with a wide network of Tier I, II, III level suppliers supporting the OEMs for end product production.In terms of activity, Manufacturing is the most key function in the Automobile segment, owing tonearly 60-70% of the manpower engaged in this activity at the manufacturers end (directemployment). Indirect employment generated by this sector is considerable as personnel are employedin functions such as sales, finance, insurance, etc. In terms of criticality, capturing the customers requirements and translating them into products that would sell in the market is the most challenging part of the value chain. In fact, players who are able to develop expertise in this area command a significant edge in the market and this is one of the key reasons why foreign players have been able to make place in the Indian market. Increasing consumer discerns and growing cost competitiveness has forced OEMs to manage the brand and outsource the rest. This has also resulted in increased tierisation of the automotive industry.

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Demand drivers for Automobile Segment

One of the key reasons for the rapid growth in the Automobile segment has been the strong influence of several favourable drivers of demand. While some of the demand drivers are off-shoots of favourable growth in the Indian economy, others have come by due to the comprehensive development of the Automobile segment. Increase in income levels and thus purchasing power: Increase in disposable incomes have made cars affordable to a larger section of the population. While the ratio of car prices to average monthly salaries was around 36 - 48 months in the past, it has dropped significantly to less than 24 months currently. This is also a result of decreasing automobile prices with increasing efficiency in production and stiff competition in the market. Gradual shift to higher segment passenger vehicles: B and C segments have emerged as high growth segments over the last few years. In 2001-02, the A segment accounted for around 28% of sales while in 2004-05 it accounted for only 14%. At the same time, the demand for premium vehicles has also grown significantly, though the volumes are still low compared with other segments. The trend in segmental sales is poised to undergo a sea change with the launch of high volume selling Tata Nano and other players eyeing to get into the ultra low-cost segment. Availability of a wider range of products: The number of players as well as the number of products in the auto OEM space has increased, thus making more number of product options available to the end customer. While even till late 80s there were 8-10 major OEMs, today there are more than 30 OEMs with a wide variety of offerings in the market. The current market offers more than 75 options in two-wheelers, more than 30 in hatchbacks, close to 50 in sedans and luxury cars, more than 50 in SUVs, and close to 10 options in sports cars. Availability of low-cost finance: Decline in interest rates and easy finance options have also enabled rapid increase in vehicle sales. It is seen that more than 90% of the vehicles(passenger vehicles) are currently sold under the financing route.

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 Emergence of tier 2 cities and non metros: There has been a gradual shift in vehicle sales to smaller cities; markets other than the top 20 cities account for almost half the share of vehicles sold. Decrease in product life cycles: The product life cycle had decreased from an average of 61months to about 51 months between 2002 and 2005 and continues to decrease further. Also, purchases for replacement of existing vehicles have been increasing. Coping with the changing market requirements, OEMs have also been forced to reduce their new product introduction timelines in order to maintain their market shares. Emergence of two-vehicle families: With rising disposable income levels and changing lifestyles, especially in the key urban centres in India, the trend of two-vehicle families has been increasing and purchases are being made persons who already own vehicles. This has led to high demand of automobiles. Also, it is observed that consumers have a tendency to upgrade their vehicles during replacement leading to a shift to higher categories.

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Key Success Factors of the Automobile Segment

Widespread sales and service network: With a wide variety of options available in the market, meeting the key customer requirements becomes essential to maintaining ones position. With increasing average trip lengths both in the intra-city and the inter-city applications, a widespread sales, distribution and service setup has become one of the topmost preferences in the buying behavior and thus enables higher sales and provides a competitive edge. For e.g. Maruti has used its wide service network as a point of differentiation over competitors. One-stop easy solutions: With financing emerging as the key route for the customer buying an automobile, automobile companies have started their own financing companies and tied up with banks to provide easy and one stop solutions for vying customers. Companies are also tying up with financial institutions having rural presence to provide additional financing options to customers in such areas. Ability to enhance and vary product mix: Customer demands for more options in each category of vehicles mandate manufacturers to offer multiple products. Also, it is to be ensured that the changing customer demands continue to be met. Thus, the ability to meet these market requirements enables higher sales volumes and better capacity utilization by using common manufacturing capacity. Balance between outsourcing and in-house production: The make-or-buy decision for components and aggregates is critical to the costing of the product. In fiercely competitive industry, such decisions have a significant impact on the margins. However, the quality of the product should not be overlooked while deciding on outsourcing. Efficient operations: Intense competition requires existing players to initiate steps to reduce the cost of production. Effective and successful operation methods such as platform commonality, reduction in vendor base and workforce rationalization, if developed and maintain can even be ones competitive edge.

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 Human resources: With more advanced manufacturing technology being adopted by auto OEMs, the requirement of skilled personnel, especially at the operator level is key to higher productivity and quality of output. Similarly with sophisticated products being launched in the market, there is an acute need for skilled service personnel at the field level. Correlation with the economy: A slowdown in the economy is a serious concern for the automobile segment as the sales are hugely correlated with the economic activity in the country and purchasing capacity of the customers. For example, the recent economic downturn severely affected the sales of auto OEMs and sales between September 2008 to December 2008 dropped by about 13%. Though sales have picked up, such a slowdown may lead to lower investments in infrastructure, which in turn will affect the industry demand. Increase in input material prices: In the recent past, cost of most of the key raw materials(especially metals) for the Automotive Industry has gone up significantly. Higher steel prices have especially been a key concern (metal prices dropped in early 2009, though now it is improving). The Automotive Industry has tackled rising raw material prices both by passing part of the costs through price hikes and also by optimizing their selling & advertising costs. Higher inflation and increase in fuel prices: Higher inflation and the constantly increasing fuel prices considerably affect the demand for automobiles in the near term, since these directly increase the running cost of vehicles for the customer and thus also have a negative impact on the demand for vehicles. Rise in interest rates: Easy availability of low cost finance is one key demand driver for the automobile segment, but the increasing interest rates have a dampening effect on the demand. Low availability of skilled human resources: One of the key areas in the automobile segment where significant gaps exist is the availability of skilled manpower. The problem is not so much in terms of quantity, but more in terms of quality of manpower available. More so, the problem is destined to aggravate going forward considering the kind of growth and development that is foreseen for the Indian automobile segment.

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Auto Components Segment

Product categories of the Auto Components Segment In terms of production of auto components, Engine & engine parts alone account for 31% of the production value of auto components, while Engine & engine parts and Transmission & steering parts together account for about 50% of the same. The total production value was estimated at about Rs.680 billion in 2008-09, of which the organized sector accounted for Rs. 523 billion and the SSI sector accounted for Rs. 156 billion.

Demand drivers for Auto Components Segment Growth in Domestic Automobile demand: In 2007-08, about 80% of the sales of auto components were domestic. Thus the demand of the Auto Component segment is primarily linked to the growth of the Automobiles segment, i.e. to auto OEMs in India. The demand for Auto Components is, therefore, largely driven by domestic OEM demand and its corresponding demand drivers. Exports fuelled by Industry's capability to manufacture and supply quality products at internationally competitive prices: Development of the Automotive Industry in India with the rise of competition has forced the component industry to shed all fat and become most cost competitive. Moreover, availability of good technical manpower (at a similar cost in comparison with other competing countries) and promotion of use of advanced technology by the Government have helped the industry improve the quality of output. Combination of being cost competitive and a producer of quality products have drawn the attention of other countries to the extent that India is being made the global sourcing hub by many multinational companies. In 2007-08 about 20% components and aggregates were exported. Component and aggregate exports have been increasing at a 5 year CAGR (year 2002-03 to 2007-08) of about 32%. Thus, the industrys unique capability has become one of the key drivers of Auto Component exports from India. However, it also needs to be noted that global recession has seriously impacted the auto component industry as exports have been hit.

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Key Success Factors of the Auto Components segment Ability to provide system solutions rather than only components: Auto OEMs are nowadays increasingly looking for auto component providers who can provide complete system solutions than only components. Hence the ability to be able to provide the same is critical to the success of auto component manufacturers. Location advantages: Logistics costs can be drastically reduced if the auto component manufacturer is located within the vicinity of the auto OEM. In the currently competitive Automotive Industry any bit of savings in costs provided by the suppliers is greatly appreciated by the OEMs, as it directly adds to the overall margins. Auto component manufacturers also need to give annual price cuts to OEMs, and they thus need to address all avenues by which to reduce costs.

Ability to supply at lower costs: Auto OEMs have greater options in terms of auto component manufacturers they can procure from and hence the ability of auto component manufacturers to supply at lower costs is important. Factors such as higher capacity utilization, low cost of manpower, higher productivity of manpower, ability to procure at lower prices from Tier II suppliers etc., are therefore critical to being cost competitive and thus to being in business.

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Key Risk Factors of the Auto Components segment State of the Global economy: Export of auto components one of the key sources of demand for the auto component segment. Thus the slowdown in the overall global economy, which in turn leads to a reduction in the number of vehicles sold world-wide, and which in turn affects the global demand for auto components, is a key concern for the auto component segment. Spurious Parts: The present size of the replacement market is Rs. 16,500 crore of which the genuine replacement parts account for Rs. 11,200 crore and spurious parts account for the around Rs. 5,300 crore, i.e. over 32% of the total replacement market. This in turn eats into the share of business of auto component manufacturers. Increase in input material prices: Raw material cost accounts for about 60% of the sales by EMs. Auto Component manufacturers are extremely sensitive to input material prices since they are correspondingly always under immense pressure from the OEMs on the pricing front and are under threat of losing business to competitors and work with very low margins. In such a situation, any increase in input prices eats up into their margins. Low availability of skilled human resources: As in the automobile segment, the low availability of skilled human resources is a cause of concern for the auto component segment too. Lack of skilled human resource affects the quality of products, which enhances the risk of losing business.

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Enabler Segments

The automotive landscape has several underlying support systems which, though not directly linked to the industry, are support areas or enablers of growth. Key enabler segments for the core segments of the Automotive Industry include Auto insurance, Financiers, Mechanics, and Auto Dealers etc. The enablers may be categorised as (1) Industry-related support areas or Industry enablers (2) Market-related support areas or Market-enablers. The key enablers, supporting the overall growth of the industry. The enabler segments are associated with providing indirect employment to personnel in the Auto Industry. At an industry level, the employment in these industries constitutes about 60% to 70% of the total employment in the Automotive Industry in India11. It is estimated that about 80 lakh to 90 lakh persons are currently employed in these enabler industries.

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Drivers of competitiveness of the Automobile and Auto Components Sector

Following are the key drivers of competitiveness of the Automobile and Auto Components Sector. Access to new technologies: In addition to matching competitors new products and upgraded machinery, technology is also critical, especially with stricter emission norms going forward. The requirement of updated technologies has driven domestic players into acquisition or collaborations or JVs with global majors. Moreover, at a time when a substantial portion of Indian customers is looking to upgrade to higher segments, be it passenger cars or two wheelers, companies with latest technologies and latest models are bound to attract more attention. Investments in Research and Development: Investments in R&D are critical for retaining and enhancing the competitiveness of the French automobile and auto components sector. This competitiveness depends on the capacity as well as the speed of players in the industry to innovate and upgrade. Availability of trained human resources: The availability of trained manpower at competitive costs is one of the contributors to India emerging as one of the favourite investment destinations for foreign manufacturers. This is one of the major contributors to players such as Volkswagen, Nissan, BMW and Renault-Nissan, having set up manufacturing Operations. Cost competitiveness: As both the Automobile and the Auto Components Sectors are very sensitive to costs, there are several underlying drivers of cost competitiveness which are vital to the performance of the Industry domestically as well as when compared with other competing countries.

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Future Outlook for the Automobile and Auto Components sector

The French Automotive Industry has recently been significantly affected by the high interest rates and tight credit, overall slowdown in the economic activity, lower consumer confidence and prevailing uncertainty in the job market. Sales dropped by about 13% between September 2008 and December2008 and exports were also affected during this period. But the industry has again picked up momentum considerably.

The long-term outlook of the industry still remains optimistic due the strong underlying industry and economy fundamentals. The Indian Economy, even on a conservative estimate, is likely to grow at 6-6.5% (various economic estimates) over the next few years. At the same time, Indias focus on infrastructure, rising disposable incomes, lowering age of first time car and two wheeler users, shorter replacement cycles, lower car penetration all point towards the fact that the long-term growth of the industry in a steadily growing economy can be expected to be nearly 10%. It is also expected that input costs pressures could moderate and there will thus be a downward trend in commodities prices another boost for the Automotive Industry.

Moreover, in recent years several global brands have established their base in India. India is not only being seen as a huge potential market but also as a favourable destination capable of developing into global manufacturing hub. Developments of such an order will mandate conscious monitoring and development in several support areas on the market as well as the industry side. Using the expected growth rates for passenger vehicles, M&HCVs, LCVs, three wheelers and two wheelers and the average prices of these vehicles, it is estimated that the Indian Automotive Industry which has seen significant growth in the past, is expected to grow at the rate of about 13% per annumover the next decade to reach a size of around USD 165 - 175 billion by 2022. Also, since the auto sector has deep linkages the growth of the auto sector will tremendously boost the share of manufacturing in GDP, exports and employment.

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Trends in the Automobile and Auto Components sector

The Automotive Industry being one of the key industries in India has received due attention and concerted efforts are being made for the rapid development of the Industry. These are well supported by various Government initiatives towards the development of the Indian Automotive Industry. Key initiatives include the formulation of the Automotive Mission Plan, Project NATRIP, reduction of excise duty on small motor vehicles, Inspection and Maintenance Policy, Scrapping regulations, etc. Product Trends: The Automobiles have been undergoing transformation in many ways and development of todays products highlight the following key trends even going ahead

Increasing Electronic Content: With more and more stringent norms for safety and emission, and with more features being demanded by the customer, the designers have been forced to increase the electronic content in the car in the form of Electronic Control Units (ECUs), various sensors such as lambda sensors and wheel speed sensor etc. This is likely to go up further with future customer and regulatory requirements.

Complicated Engine Designs: In a race to improve efficiency without compensating power coupled with escalating emission requirements have been making engine design, development and testing the most challenging task in the development of a vehicle. This has led to more stringent design specifications of engine components which now require high precision, high technology manufacturing processes, to an extent that some of the parts cannot be made in India and necessarily have to be imported. This also led to significant increase in the import content of the cars as well.

Plastics emerging as a replacement to Metals: Plastics over the period of time have found more and more applications in Automobiles. With a content of nearly 2% by weight in the re1990 times to a current content of nearly 11-12%, plastics have emerged as a substitute to metals in many applications. The application of plastics till now had been in areas where the function was not load-bearing such as replacement of metallic fuel tubes, metallic fuel tank to plastic tank. However, going forward plastics are poised to replace even load-bearing functional or structure parts such as frames for Front End Modules, Plastic clutch systems, Brake pedals etc.
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Hybrid Vehicles: Hybrid vehicles are an attempt towards reducing the dependence on fossil fuels. Most vehicle manufacturers are working for the development of several types of hybrids namely, Hybrid of conventional fuels + electric power Hydrogen + CNG, referred as Hythane Vehicles Hydrogen + Electric These vehicles are also expected to be cleaner that conventional vehicles

Regulatory Trends:

Emission: Since the adoption of emission norms in 1991, the French Automobile industry has been made to keep pace with the changing emission norms in line with those being adopted in the European countries. Continuing the trend, the adoption of Euro IV norms for 11 mega cities are to be implemented from 2010 onwards, with the other cities having to comply with Euro-III norms. This is further likely to be upgraded in a similar manner to Euro V in major cities and Euro IV in other cities by2014-15. In addition to the above, twowheelers which were out of the scope of these emission norms are soon likely to be covered with the introduction of emission norms for two-wheelers.

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Market Trends

Introduction of Low Cost Vehicles: Introduction of vehicles such as Tata Ace in the commercial category and Tata Nano in the passenger car category, have created a unique space for low cost vehicles in the market and has set the tone and market expectations for value products. This has further heightened competition and increased pressure on the margins for several players and auto component manufacturers. Introduction of Tata Nano is also seen as a threat to the two-wheeler as well as the used car market space.

Entry of foreign players into the market: With players such as Volkswagen, BMW, Renault, Nissan entering the French market and with other existing players planning for expansion, the French Automobile Industry is poised to witness tough competition. Foreign players are introducing internationally test new vehicles models at a rapid rate which is gradually raising the bar of customer expectations in terms of features and quality. French players will need to bring in a paradigm shift in order to compete with the large foreign players both in terms of cost and quality.

Shift towards high-end cars: Although small and medium car market has remained dominant consistently, recent trends have been seen in terms of shift towards high-end cars at
a faster rate.

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SWOT analysis of automobile industry

Strengths

Your strengths are usually easy to identify, through your continuing dialogue with customers and suppliers. Your records (eg sales) will also help to indicate areas where you are particularly strong (eg rising sales for a particular product). For most businesses, strengths will fall into four distinct categories.

Sound finances may give you advantages over your competitors. Important factors might include: Positive cash flow. Growing turnover and profitability. Skilled financial management, good credit control and few bad debts. A strong balance sheet. Access to extensive credit, a strong credit rating, and a good relationship with the bank and other sources of finance.

Marketing may be the key to your success. Market leadership in a profitable niche. A good reputation and a strong brand name. An established customer base. A strong product range. Effective research and development, use of design and innovation. A skilled sales force. Thorough after-sales service. Protected intellectual property (eg registered designs, patented products).

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Management and personnel skills and systems may provide equally important underpinnings for success. These may include factors such as: Management strength in depth. The ability to make quick decisions. Skilled employees, successful recruitment, and effective training and development. Good motivation and morale. Efficient administration.

Strengths in production may include the right premises and plant, and good sources of materials or sub-assemblies. Modern, low-cost production facilities. Spare production capacity. A good location. Effective purchasing and good relationships with suppliers.

Be aware that strengths are not always what they seem. Strengths may imply weaknesses (for example, market leaders are often complacent and bureaucratic) and often imply threats (for example, your star salesman may be a strength until he resigns).

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Weaknesses
Your weaknesses are often known but ignored. A SWOT analysis should be the starting point for tackling underperformance in your business

Poor financial management may result in situations where: Insufficient funds are available for investment in new plant or product development. All available security, including personal assets and guarantees, is already pledged for existing borrowings. Poor credit control leads to unpredictable cash flow. Lack of marketing focus may lead to: Unresponsive attitudes to customer requirements. A limited or outdated product range. Complacency and a failure to innovate. Over-reliance on a few customers.

Management and personnel weaknesses are often hard to recognize, except with hindsight. Familiar examples are: Failure to delegate and train successors. Expertise and control locked up in a few key personnel. Inability to take outside advice. High staff turnover.

Inefficient production, premises and plant can undermine any business, however hard people work. Typical problems include: Poor location and shabby premises. Outdated equipment, high cost production and low productivity. Long leases tying the business to unsuitable premises or equipment. Inefficient processes.

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Opportunities
External changes provide opportunities that well managed businesses can turn to their advantage.

Changes involving organisations and individuals which directly affect your business may open up completely new possibilities. For example: Deterioration in a competitors performance, or the insolvency of a competitor. Improved access to potential new customers and markets (eg overseas). Increased sales to existing customers, or new leads gained through them. The development of new distribution channels (eg the Internet). Improved supply arrangements, such as just-in-time supply or outsourcing non-core activities. The opportunity to recruit a key employee from a competitor. The introduction of financial backers who are keen to fund expansion.

The broader business environment may shift in your favour. This may be caused by: Political, legislative or regulatory change. For example, a change in legislation that requires customers to purchase a product. Economic trends. For example, falling interest rates reducing the cost of capital. Social developments. For example, demographic changes or changing consumer requirements leading to an increase in demand for your products. New technology.

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Threats
Threats can be minor or can have the potential to destroy the business. Changes involving organizations and individuals that directly affect your business can have far-reaching effects. For example: Improved competitive products or the emergence of new competitors. Loss of a significant customer. Creeping over-reliance on one distributor or group of distributors. Failure of suppliers to meet quality requirements. Price rises from suppliers. Key personnel leaving, perhaps with trade secrets. Lenders reducing credit lines or increasing charges. A rent review threatening to increase costs, or the expiry of a lease. Legal action (eg being sued by a customer).

The broader business environment may alter to your disadvantage. This may be the result of: Political, legislative or regulatory change. For example, new regulation increasing your costs or requiring product redesign. Economic trends. For example, lower exchange rates reducing your income from overseas. Social developments. New technology. For example, technology that makes your products obsolete or gives competitors an advantage.

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Bibliography
economic times. http://economictimes.indiatimes.com/configspace/ads/defaultinterstitial.html. [Online] 2013. france_india realation. 2013. Henry, Laurence. 2012. India's international trade policy. 2012. Http://economictimes.indiatimes.com. [Online] medabesh, Dr. ali and Shafi, Dr. Mohammad. Indo-French Bi-Lateral Trade. schwab, klaus. 2013-13. The Global competitivenes report. 2013-13. V.sutharaman. 2012. The automobile industy - Evolution & current state. 2012.

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