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IMPACT OF THIRD PARTY RECRUITERS IN

THE INTERNATIONAL CONTEXT

- AN ASSIGNMENT ON INTERNATIONAL BUSINESS

Submitted by,Name: Nithya SS

Reg No: 0921348

II - MBA

Sec: M

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TABLE OF CONTENTS

SNO TOPIC PAGE NO

1 Introduction 32 Country profile 3

2.1 United States 32.2 India 6

3. Company profile 84. Strategies to be followed on venturing into the United States 135. Conclusion 14

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1. INTRODUCTION:

The aim of this study is to compare the external factors feasible for an industry to venture intoanother country, sustaining and improving the growth of that industry. In this scenario, I havetaken the example of an Indian Recruitment agency ABC Consultants, embarking in the USIndustry having the Porters diamond in consideration.

The number of students pursuing opportunities abroad is expanding and no longer limited toindividuals form elite background. This larger pool has less international exposure and fewerpersonal sources of information than earlier generations of mobile students. These students arelooking for help and willing to pay for it. Universities now see these students as importantsources of revenue as well as contributions to diversity. Competition for international studentshas increased greatly. As a result, new enterprises have appeared to address the demands of thisgrowing market which has an uprising advantage for an Indian recruitment agency.

Recruitment agents are not new operators in higher education. But their participation in theuniversity admission process has always been controversial. No data are available about how

many agents operate worldwide, but their presence is growing and an increasing number ofuniversities are using these services. Now, am going to elucidate the methods to set up an Indianrecruitment agency in the US with university collaboration.

2. COUNTRY PROFILE:

2.1 THE UNITED STATES

The United States has a capitalist mixed economy, which is fueled by abundant naturalresources, a well-developed infrastructure, and high productivity. According to the InternationalMonetary Fund, the U.S. GDP of $14.4 trillion constitutes 24% of the gross world product atmarket exchange rates and almost 21% of the gross world product at purchasing powerparity (PPP). It has the largest national GDP in the world, though it is about 5% less than theGDP of the European Union at PPP in 2008. The country ranks ninth in the world in nominalGDP per capita and sixth in GDP per capita at PPP.

US Trading Policy:

In this broad context, overwhelming majorities also endorse the US taking the lead in bringingdown trade barriers. In a July 1997 poll by Penn, Schoen & Berland, 79% of respondents agreedwith this argument:

We live in the age of the global economy in which trade and technology are bringing the worldcloser together. We must lead in the revolution to reduce international trade barriers so thatAmerica will have access to all of the developing markets because in the long run these nationswill increase their buying power, and expanding exports to them will be the key to our growth.

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A majority of Americans believe US policy should ultimately support the goal of increasingtrade. In an April 2001 Rutgers University poll, 64% expressed support for President Bush"reducing trade barriers to facilitate the import and export of goods". A January 2001 poll for theCongressional Institute found that a 53% majority favored "eliminating some of the barriers thatexist to international trade, for example by reducing tariffs, in order to promote increased

international trade;" only one in three (33%) were opposed.

Foreign direct investment in the United States:

y Foreign direct investment in the United States (FDIUS) in 2009 totaled $152.1 billion,down by more than 50 percent compared to the $319.7 billion in 2008.

y Despite the downturn from 2008, the $152.1 billion in foreign direct investment recordedin 2009 was greater than four years recorded in the past decade - 2002, 2003, 2004, and2005.

y The 2009 FDIUS was the lowest since 2005, when FDIUS was $112.6 billion. However,the 2009 FDIUS was considerably higher than the early 2000s, when it dropped below$100 billion in 2002 and 2003.

y By comparison, the U.S. economy shrank last year, with real gross domestic product(GDP) dropping by 2.4 percent in 2009.

y While foreign direct investment from Canada into the United States increased 23 percent,German direct investment into the United States more than quadrupled between 2008 and2009, rising from $5.8 billion to $24.6 billion.

y A foreign direct investment capital inflow from France into the United States is increasedby 66 percent between 2008 and 2009, jumping from $14 billion to $23.4 billion.

USA, 19%

Germany,

16%

France,

15%

Switzerland , 11%

United Kingdom,

10%

Netherlands,7%

Other

countries,

22%

Leading countries by FDI investment

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Poters Diamond for the US:

Importance of Porters diamond:

Porter's diamond model suggests that there are inherent reasons why some nations, and industrieswithin nations, are more competitive than others on a global scale. The argument is that thenational home base of an organization provides organizations with specific factors, which willpotentially create competitive advantages on a global scale.

Porter's model includes 4 determinants of national advantage, which are shortly described below:

1. Factor Conditions:

Factor conditions include those factors that can be exploited by companies in a given nation.Factor conditions can be seen as advantageous factors found within a country that aresubsequently build upon by companies to more advanced factors of competition. Factors notnormally seen as advantageous, such as workforce shortage, can also be seen as a factorpotentially strengthening competitiveness, because this factor may heighten companies' focus onautomation and zero defects.

Some examples of factor conditions:

y Highly skilled workforce US has a high level of high skilled workersy Linguistic abilities of workforcey Rich amount of raw materials There is no dearth of raw materials in the technology per

say

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2. Demand Conditions:

If the local market for a product is larger and more demanding at home than in foreign markets,local firms potentially put more emphasis on improvements than foreign companies. This willpotentially increase the global competitiveness of local exporting companies. A more demanding

home market can thus be seen as a driver of growth, innovation and quality improvements.

3. Related and Supporting Industries:

When local supporting industries and suppliers are competitive, home country companies will potentially get more cost efficient and receive more innovative parts and products. This willpotentially lead to greater competitiveness for national firms.

4. Firm Strategy, Structure, and Rivalry:

The structure and management systems of firms in different countries can potentially affect

competitiveness.L

ikewise, if rivalry in the domestic market is very fierce, companies may buildup capabilities that can act as competitive advantages on a global scale. Home markets with lessrivalry may therefore be counterproductive, and act as a barrier in the generating of globalcompetitive advantages such as innovation and development.

In the case of US, the advantage of setting up a recruitment agency is because of the teeminginternational students in the universities where they do not have campus recruitments unlikeIndia. By using Porter's diamond, business leaders may analyze which competitive factors mayreside in their company's home country, and which of these factors may be exploited to gainglobal competitive advantages. Thus Porter's diamond model can be used during a phase ofinternationalization, in which leaders may use the model to analyze whether or not the home

market factors support the process of internationalization, and whether or not the conditionsfound in the home country are able to create competitive advantages on a global scale.

The role of the government in this model is to encourage, stimulate and to help to create growthin industries.

2.2 INDIA

Indian GDP growth rate:

Gross Domestic Product (GDP) in India expanded 8.90 percent in the third quarter of 2010 overthe previous quarter. From 2004 until 2010, India's average quarterly GDP Growth was 8.40percent reaching an historical high of 10.10 percent in September of 2006 and a record low of5.50 percent in December of 2004. India's diverse economy encompasses traditional villagefarming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude ofservices. Services are the major source of economic growth, accounting for more than half ofIndia's output with less than one third of its labor force. The economy has posted an average

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growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentagepoints.

Annual gross domestic product grew 8.9 percent in the September quarter. Consumer priceinflation eased to an annual 9.7 percent in October from 9.82 percent. Wholesale price inflation,

which is more closely watched as it covers a higher number of products, eased to 8.58 percent inOctober from 8.62 percent a month earlier.

Investment growth slowed on an annualized basis to 11.1 percent from 19 percent in the previousquarter, while annualized private consumption accelerated to 9.3 percent from 7.8 percent in theprevious quarter, pointing to inflationary risks. The services sector, which accounts for over 50 percent of GDP, grew 9.8 percent in the September quarter, higher than 9.3 percent in theprevious quarter.

Porter's Diamond of National Advantage:

TheD

iamond Model of Michael Porter for the competitive advantage of Nations offers a modelthat can help understand the comparative position of a nation in global competition.

Traditionally, economic theory mentions the following factors for comparative advantage forregions or countries

1. Land2. Location3. Natural resources (minerals, energy)4. Labor, and5. Local population size.

Because these 5 factors can hardly be influenced, this fits in a rather passive (inherited) viewregarding Indian economic opportunity.

The points of the diamond are described as follows

1. Factor Conditions

y India creates its own important factors such as skilled resources and technological base.y These factors are upgraded / deployed over time to meet the demand.y Local disadvantages force innovations, new methods and hence comparative advantage.y Local market size has the potential to absorb any excess production.

2. Demand Conditions

y A more demanding local market leads to national advantage.y A strong trend setting local market helps local firms anticipate global trendsy A more demanding local/ global market has given INDIA the international / national

advantage

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3. Related and supporting industries

y Local competition creates innovations and cost effectiveness.y This also puts pressure on local suppliers to lift their game.

4. Firm strategy, structure and rivalry

y Local conditions affect firm strategy.y Local rivalry forces firm to move beyond basic advantages

3. COMPANY PROFILE

Function of ABC Consultants:

This agency serves as a match maker offering services to employers trying to fill vacancies andto individuals seeking employment.

The recruitment agency takes details of job vacancies offered by their clients and aims to matchthe requirements of the job to the most suitable applicant, either by selecting from its candidate

database or by advertising. It filters potential candidates and provides clients with a shortlistfrom which they can choose who they want to interview. A recruitment agency can specialize in placing permanent workers in positions across a generic field or in specific sectors, or intemporary vacancies where the worker remains an employee of the agency (known as tempingagencies).

Profile of ABC Consultants:

Founded in 1969 by Dr B P Agrawal, ABC Consultants is the pioneer of organized recruitment

services in India. Over the years, they have established as the best recognized recruitment brandnationally. They are the preferred recruitment partners for clients and a trusted consultant forIndian professionals.

ABCs roots in management consultancy enable to bring a unique approach to recruitment. Theirfocus has always been on middle and senior management talent needs. They recruit acrossvarious industry segments for multinational corporations as well as leading Indian businesshouses. In the past 40 years, they have helped shape the careers of over 85,000 professionals and

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have partnered with more than 350 multinational companies to set up and staff their operations inIndia.

Core Values:

At ABC, they believe that their success is best reflected through the success achieved by ourclients and candidates. The hallmark of their approach comprises:

y Partnership. They act as an extension of their clients office. They are knowledgeablepartners providing decisive and dedicated support to their clients.

y Integrity. Clients are demanding and their standards are high. They honestly representtheir clients to candidates and their candidates to clients. They do not promise what they

cannot deliver.

y Confidentiality. They accord the highest respect to information that they have beenentrusted with.

y Commitment. They remain committed to deliver high quality services to both candidatesand clients by adequately understanding their needs.

Industry practices:

1. Automobile & Auto Components

ABCs Automobile and Auto Components practice has a strong presence across the entirefunctional chain. They serve as the solution partner to top vehicle manufacturers, leading Tier 1-3 suppliers worldwide, OEMs and after-market service providers. The results speak forthemselves ABC has helped recruit over 200 professionals over the past one year.

Their consultants who are mostly engineers from the Auto industry have the specialized skillsthat are required for successfully closing positions in this space. Given their varied experience,they have the ability to understand the mandates better in the broader context.

2. Consulting & Financial Services

The recent trends toward convergence and consolidation have redefined the entire consultingspace. Today, India is among the leading M&A markets in Asia. With the economy growing at8.6%, the need for banking services is growing at 34%. The markets growth is driven by new products and services that include opportunities in credit cards, consumer finance and wealthmanagement on the retail side and in fee-based income and investment banking on the wholesalebanking side.

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ABC understands that these require skilled resources in sales, marketing, credit and operations.With knowledge across diverse sectors such as banking, capital markets, asset management,insurance, investment banking, private equity, broking, strategic consulting and professionalservices this team services some of the best names in this space.

3.E

ngineering Research &D

evelopment

ABC has developed expertise to fulfill engineering design requirements across differentindustrial areas such as automotive, aerospace, chemical, power, industrial automation, medicaland healthcare and machine tools. ABCs engineering R&D practice has played a key role inestablishing the Indian design set-up of several global multinationals.

Their consultants are experienced engineers who have worked in leading R&D establishments inIndia and bring strong domain knowledge to the table.

4. Outsourcing & Offshoring

The evolution of the ITES industry in India presents a significant change in the nature ofopportunities and challenges. The business has rapidly moved from a low-cost transaction processing operations model to a high-end knowledge-based delivery model. The industry isexpected to be about US$ 20 billion by 2008. More than 50 per cent of the sector is projected tobe knowledge-based and is expected to become a US$ 17 billion industry by 2010.While BPO isall about size, volume and efficiency, KPO, in contrast, is driven by a depth of knowledge,experience and judgment. In this rapidly changing scenario, the need for professionals who canoperate in a global workplace situation is high.

ABCs clients include some of the best organizations in outsourcing and offshoring, be it

captives or third party vendors; voice or non-voice; general or niche players.T

he team at ABCConsultants acts as a partner to the client in not only recruiting for their critical leadershippositions in the BPO industry, but also in understanding the talent dynamics of this segment.

5. Information Technology

India has emerged as the fastest growing IT hub in the world, its growth dominated by ITsoftware and services such as Custom Application Development and Maintenance (CADM),System Integration, IT Consulting, Application Management, IS Outsourcing, InfrastructureManagement Services, Software testing, Service-oriented architecture and Web services. Theprojection for 2010 is US$ 60 billion. India today commands a 65 per cent share of the global

offshore market in this space.T

here is a talent crunch, in the sense that the growth in thetechnology sector has been explosive and companies cannot keep up with their hiring needs andrequirements.

ABCs technology practice has an impressive track record of keeping pace with Indias emergingtechnology leadership. They also help attract retail professionals from overseas to India. ABCsspecialized team is capable of handling complex requirements across multiple technologydomains, be it a product, consulting or services.

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Functional Practice:

1. Finance & Accounts

ABC Consultants understands the specific needs in finance and accounts, be it the requirement

for an executive who will develop a long-term corporate transformation strategy, raise IPOs,provide support for a merger or spin-off or for rigorous reporting or general accounting, treasuryor taxation. With over 300 finance and accounts positions closed in the last one year, one canrely on ABC to find the best this industry practice has to offer.

2. Human Resources

Human resources development in India has gained a strategic position in the corporate scheme ofthings. It is not considered just a department function any more. The role now demands a rangeof competencies including business acumen and market intelligence besides culture and valuecreation. As people become the most critical element in any business, the human resources

function is the key driver of an organizations performance.

Whether the requirement is for an executive who will be a part of operational or strategic HR, orfor one who will be in charge of organizational behavior, learning and development, employeerelations, talent acquisition and retentionABC can deliver it all. With 250 HR mandatessuccessfully concluded over the last year, ABC Consultants can confidently say that ones searchfor functional specialists ends here.

3. Legal

ABC Consultants specializes in sourcing talent for legal requirements at senior levels, globally.

Our expertise include recruiting forL

aw Firms within India & overseas, inL

egal ProcessOutsourcing (LPO) firms, and for providing In house legal Counsel(s).

ABC Consultants seeks to partner with clients to identify, recruit and bring on board topexecutives such as DirectorLegal, General Legal Counsel(s), company secretaries, Law (firm)Partners, Solicitors and Associates. Their methodical, comprehensive and result orientedapproach assists in building organizations by carefully nurturing their talent pool.

Search Methodology:

Their selection process is based on a structured and systematic approach, which is proactive,detailed and target oriented. This process begins with understanding the clients needs and goesall the way to post recruitment follow-up with both client and candidate. The key principles ofsearch methodology focus on

Understanding the client organization with regard to existing business activities, organizationstructure, culture and future growth plans

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Mapping position specific competencies including job title, deliverables, principalaccountabilities and other relevant details

Developing a Sourcing Strategy that draws up a target list of appropriate industries and/orcompanies from which to recruit and utilizing our network, along with our database to develop a

list of most promising candidates within these companies.T

his is presented to the client as acomprehensive list of people we intend to approach.

Establishing Contact once they have determined a mutual interest in pursuing specificcandidates. Candidates are contacted and apprised of the opportunity for eliciting their interest inthe position.

Evaluating candidates with the aim of determining a profile match with the job, their careeraspirations and suitability in the context and culture of client organization. In addition to personal interviews, they selectively use psychometric assessment tools such as ThomasProfiling & SHLTesting.

Detailed Reference Checks on candidate(s) who have been selected for hire, before the offer isformally extended. If required, they could also help conduct a background check on thesecandidates, through appropriate agencies.

Negotiations for the final candidates compensation requirements and if required, assist incompleting the hiring arrangements.

Post joining follow- ups with the client and candidate ensuring smooth transition

Representative searches:

ABC Consultants is backed by many decades of experience gained from working with leadingcompanies worldwide. This gives them an edge over their competitors. Here is a representativelist of some of their recent assignments:

y High Circley Automobile & Auto Componentsy Consumer & Servicesy Consulting & Financial Servicesy Engineering, Process & Infrastructurey Electronic Manufacturing Servicesy Engineering Research & Developmenty Entertainment, Media & Communicationy Human Resources

y Fast Moving Consumer Goodsy Not for Profity Outsourcing & Off shoringy Pharmaceutical, Healthcare & Life-

Sciences

y Retailing & Hospitality Servicesy Information Technologyy Telecommunicationsy Finance & Accountsy Legal

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4. STRATEGIES TO BE FOLLOWED ON VENTURING INTO THE UNITED STATES

International student mobility is big business. Approximately, 2.8 million students study abroad,distributing an estimated $50 billion around the globe annually. Most international students comefrom developing or middle income countries, the majority from east and south Asia; most are

self-financed.T

hey contribute major revenues to the institutions and countries where they studyand represent a key part of the internationalization of higher education. Thus is becomesimperative that the international as well as the local students will have to settle down in a jobafter graduating. By and large the US universities do not provide campus recruitments thathappen to be a major phenomenon in India. Thus the recruitment agencies can take a call inenrolling with the universities and helping the students to major their potentials with a rightcareer.

ABC consultants have established their presence in India since 40 years and they have helpedshape the careers of over 85,000 professionals and have partnered with more than 350multinational companies to set up and staff their operations in India. Their financial stability is

sound with proper adherence to legal compliance.H

ence, this is a perfect time for ABCconsultants to embark their presence internationally in the US and widen their operationsenabling internal growth and word wide presence.

Function of Recruitment Agents in the US:

Recruitment agents act as local salespeople for one or more universities overseas. They are notuniversity employees but their presence on the ground ensures that the institutions that hire themare more accessible to students interested in going abroad. Agents act as local promoters and aconduit of international applications for their university clients. They are typically paid a

commission that ranges from 10 to 15 percent (but many go as high as 25 percent) of the firstyears tuition.

Agents may also act as counselors, helping students sort through the overwhelming amount ofinformation available on the Internet. However, their motivation does not consist of providingimpartial information but rather to steer students to specific institutions something that may notbe entirely clear to a student who consults them.

The primary client for agents is the institution that hires them. In order to be successful, theymust deliver acceptable number of students to their sponsoring institutions. It is not known howfrequently agents accept payment from students as well as from universities and colleges,although anecdotal evidence indicates that this does happen. The key here is that the extent of

their activities, source of their fees, and propriety of their services lack transparency, particularlyto students.

Other information sources:

To be successful, these recruitment agents must cultivate a local reputation for providingexcellent service to students, not institutions; they must be well informed about a wide range of

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colleges and universities, academic programmes, and admission requirements throughout theworld. They welcome contact with institutions; meet with travelling representatives, contactalumni, and often visit campuses abroad. In fact many universities seek out these advisors andprovide them with information to build a triangle of communication that works to everyonesadvantage.

Perverse incentives To maintain financial stability on establishing a recruitment agency abroad:

The dynamism between intermediary, institutions, and a student is inevitably influenced by theincentives and rewards that shape it. A recruitment agents income will depend on directingstudents to specific institutions. While this action may result in a good match for the student, theincentive is not set up to ensure the best match for the student or, for that matter, to work in thestudents best interests.

Agents are entrepreneurs who earn their income from providing a service to two entities whosebest interests may, or may not, be the same. The rewards arise from the relationship between theagent and the institution that hires him or her, not from the service provided to the student, presenting a potential conflict of interest that no professional standard or guidelines caneliminate. In fact, as long as the incentives favor the interests of the student, professionalstandards will have limited effect.

5. CONCLUSION:

New enterprises have responded to the opportunities form the growing number of mobile

students. The use of recruitment agents is clouded by many factors. Their activities areadequately monitored to guarantee that students interests are protected. The internationalstandards can guarantee local activity or that the relationship between an agent and a universitywill be entirely transparent to the student.

Agents are a strong presence in many countries. However, the issue of employing agents meritsmore public discussion, and it would be most unfortunate to forego the debate and proceed onthe basis of if u cant beat them, join them

Thus on venturing internationally, ABC Consultants will plough profits with the activeparticipation of both international and local students of the US and the numerous middle level

and the top level knowledge workers. With constant tie-ups with the universities and companiesacross the globe it is possible for the recruitment agency to have an international presence thuscatering to needs of students and the working professionals.