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

1

TABLE OF CONTENTS

SNO 1 2 2.1 2.2 3. 4. 5.

TOPIC Introduction Country profile United States India Company profile Strategies to be followed on venturing into the United States Conclusion

PAGE NO 3 3 3 6 8 13 14

1. INTRODUCTION: The aim of this study is to compare the external factors feasible for an industry to venture into another country, sustaining and improving the growth of that industry. In this scenario, I have taken the example of an Indian Recruitment agency ABC Consultants, embarking in the US Industry having the Porters diamond in consideration. The number of students pursuing opportunities abroad is expanding and no longer limited to individuals form elite background. This larger pool has less international exposure and fewer personal sources of information than earlier generations of mobile students. These students are looking for help and willing to pay for it. Universities now see these students as important sources of revenue as well as contributions to diversity. Competition for international students has increased greatly. As a result, new enterprises have appeared to address the demands of this growing market which has an uprising advantage for an Indian recruitment agency. Recruitment agents are not new operators in higher education. But their participation in the university 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 of universities are using these services. Now, am going to elucidate the methods to set up an Indian recruitment 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 natural resources, a well-developed infrastructure, and high productivity. According to the International Monetary Fund, the U.S. GDP of $14.4 trillion constitutes 24% of the gross world product at market exchange rates and almost 21% of the gross world product at purchasing power parity (PPP). It has the largest national GDP in the world, though it is about 5% less than the GDP of the European Union at PPP in 2008. The country ranks ninth in the world in nominal GDP 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 bringing down trade barriers. In a July 1997 poll by Penn, Schoen & Berland, 79% of respondents agreed with this argument: We live in the age of the global economy in which trade and technology are bringing the world closer together. We must lead in the revolution to reduce international trade barriers so that America will have access to all of the developing markets because in the long run these nations will increase their buying power, and expanding exports to them will be the key to our growth.
3

A majority of Americans believe US policy should ultimately support the goal of increasing trade. 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 the Congressional Institute found that a 53% majority favored "eliminating some of the barriers that exist 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. Despite the downturn from 2008, the $152.1 billion in foreign direct investment recorded in 2009 was greater than four years recorded in the past decade - 2002, 2003, 2004, and 2005. 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. By comparison, the U.S. economy shrank last year, with real gross domestic product (GDP) dropping by 2.4 percent in 2009. 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 and 2009, rising from $5.8 billion to $24.6 billion. A foreign direct investment capital inflow from France into the United States is increased by 66 percent between 2008 and 2009, jumping from $14 billion to $23.4 billion.

Leading countries by FDI investment

Other countries, 22% Netherlands, 7%

USA, 19%

Germany, 16% France, 15% Switzerland , 11%

United Kingdom, 10%

Poters Diamond for the US:

Importance of Porters diamond: Porter's diamond model suggests that there are inherent reasons why some nations, and industries within nations, are more competitive than others on a global scale. The argument is that the national home base of an organization provides organizations with specific factors, which will potentially 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 are subsequently build upon by companies to more advanced factors of competition. Factors not normally seen as advantageous, such as workforce shortage, can also be seen as a factor potentially strengthening competitiveness, because this factor may heighten companies' focus on automation and zero defects. Some examples of factor conditions:
y y y

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

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 will potentially 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 will potentially 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. Likewise, if rivalry in the domestic market is very fierce, companies may build up capabilities that can act as competitive advantages on a global scale. Home markets with less rivalry may therefore be counterproductive, and act as a barrier in the generating of global competitive advantages such as innovation and development. In the case of US, the advantage of setting up a recruitment agency is because of the teeming international students in the universities where they do not have campus recruitments unlike India. By using Porter's diamond, business leaders may analyze which competitive factors may reside in their company's home country, and which of these factors may be exploited to gain global competitive advantages. Thus Porter's diamond model can be used during a phase of internationalization, 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 conditions found 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 growth in industries.

2.2 INDIA Indian GDP growth rate: Gross Domestic Product (GDP) in India expanded 8.90 percent in the third quarter of 2010 over the previous quarter. From 2004 until 2010, India's average quarterly GDP Growth was 8.40 percent reaching an historical high of 10.10 percent in September of 2006 and a record low of 5.50 percent in December of 2004. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, accounting for more than half of India's output with less than one third of its labor force. The economy has posted an average
6

growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. Annual gross domestic product grew 8.9 percent in the September quarter. Consumer price inflation 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 in October from 8.62 percent a month earlier. Investment growth slowed on an annualized basis to 11.1 percent from 19 percent in the previous quarter, while annualized private consumption accelerated to 9.3 percent from 7.8 percent in the previous 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 the previous quarter. Porter's Diamond of National Advantage: The Diamond Model of Michael Porter for the competitive advantage of Nations offers a model that can help understand the comparative position of a nation in global competition. Traditionally, economic theory mentions the following factors for comparative advantage for regions or countries 1. Land 2. Location 3. Natural resources (minerals, energy) 4. Labor, and 5. Local population size. Because these 5 factors can hardly be influenced, this fits in a rather passive (inherited) view regarding Indian economic opportunity. The points of the diamond are described as follows 1. Factor Conditions y y y y India creates its own important factors such as skilled resources and technological base. These factors are upgraded / deployed over time to meet the demand. Local disadvantages force innovations, new methods and hence comparative advantage. 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 trends y A more demanding local/ global market has given INDIA the international / national advantage
7

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

4. Firm strategy, structure and rivalry y y Local conditions affect firm strategy. 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 and to individuals seeking employment. The recruitment agency takes details of job vacancies offered by their clients and aims to match the 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 shortlist from 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 in temporary vacancies where the worker remains an employee of the agency (known as temping agencies).

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 brand nationally. They are the preferred recruitment partners for clients and a trusted consultant for Indian professionals. ABCs roots in management consultancy enable to bring a unique approach to recruitment. Their focus has always been on middle and senior management talent needs. They recruit across various industry segments for multinational corporations as well as leading Indian business houses. In the past 40 years, they have helped shape the careers of over 85,000 professionals and
8

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

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

Partnership. They act as an extension of their clients office. They are knowledgeable partners providing decisive and dedicated support to their clients. Integrity. Clients are demanding and their standards are high. They honestly represent their clients to candidates and their candidates to clients. They do not promise what they cannot deliver. Confidentiality. They accord the highest respect to information that they have been entrusted with. Commitment. They remain committed to deliver high quality services to both candidates and clients by adequately understanding their needs.

Industry practices: 1. Automobile & Auto Components ABCs Automobile and Auto Components practice has a strong presence across the entire functional chain. They serve as the solution partner to top vehicle manufacturers, leading Tier 13 suppliers worldwide, OEMs and after-market service providers. The results speak for themselves 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 skills that 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 consulting space. Today, India is among the leading M&A markets in Asia. With the economy growing at 8.6%, 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 wealth management on the retail side and in fee-based income and investment banking on the wholesale banking side.
9

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 professional services this team services some of the best names in this space. 3. Engineering Research & Development ABC has developed expertise to fulfill engineering design requirements across different industrial areas such as automotive, aerospace, chemical, power, industrial automation, medical and healthcare and machine tools. ABCs engineering R&D practice has played a key role in establishing the Indian design set-up of several global multinationals. Their consultants are experienced engineers who have worked in leading R&D establishments in India 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 of opportunities 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 is expected to be about US$ 20 billion by 2008. More than 50 per cent of the sector is projected to be knowledge-based and is expected to become a US$ 17 billion industry by 2010.While BPO is all 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 can operate 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. The team at ABC Consultants acts as a partner to the client in not only recruiting for their critical leadership positions 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 IT software and services such as Custom Application Development and Maintenance (CADM), System Integration, IT Consulting, Application Management, IS Outsourcing, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services. The projection for 2010 is US$ 60 billion. India today commands a 65 per cent share of the global offshore market in this space. There is a talent crunch, in the sense that the growth in the technology sector has been explosive and companies cannot keep up with their hiring needs and requirements. ABCs technology practice has an impressive track record of keeping pace with Indias emerging technology leadership. They also help attract retail professionals from overseas to India. ABCs specialized team is capable of handling complex requirements across multiple technology domains, be it a product, consulting or services.
10

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, treasury or taxation. With over 300 finance and accounts positions closed in the last one year, one can rely 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 of things. It is not considered just a department function any more. The role now demands a range of competencies including business acumen and market intelligence besides culture and value creation. 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, or for one who will be in charge of organizational behavior, learning and development, employee relations, talent acquisition and retentionABC can deliver it all. With 250 HR mandates successfully concluded over the last year, ABC Consultants can confidently say that ones search for functional specialists ends here. 3. Legal ABC Consultants specializes in sourcing talent for legal requirements at senior levels, globally. Our expertise include recruiting for Law Firms within India & overseas, in Legal Process Outsourcing (LPO) firms, and for providing In house legal Counsel(s). ABC Consultants seeks to partner with clients to identify, recruit and bring on board top executives such as Director Legal, General Legal Counsel(s), company secretaries, Law (firm) Partners, Solicitors and Associates. Their methodical, comprehensive and result oriented approach 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 goes all the way to post recruitment follow-up with both client and candidate. The key principles of search methodology focus on Understanding the client organization with regard to existing business activities, organization structure, culture and future growth plans
11

Mapping position specific competencies accountabilities and other relevant details

including

job

title,

deliverables,

principal

Developing a Sourcing Strategy that draws up a target list of appropriate industries and/or companies from which to recruit and utilizing our network, along with our database to develop a list of most promising candidates within these companies. This is presented to the client as a comprehensive list of people we intend to approach. Establishing Contact once they have determined a mutual interest in pursuing specific candidates. Candidates are contacted and apprised of the opportunity for eliciting their interest in the position. Evaluating candidates with the aim of determining a profile match with the job, their career aspirations and suitability in the context and culture of client organization. In addition to personal interviews, they selectively use psychometric assessment tools such as Thomas Profiling & SHL Testing. Detailed Reference Checks on candidate(s) who have been selected for hire, before the offer is formally extended. If required, they could also help conduct a background check on these candidates, through appropriate agencies. Negotiations for the final candidates compensation requirements and if required, assist in completing 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 leading companies worldwide. This gives them an edge over their competitors. Here is a representative list of some of their recent assignments: High Circle Automobile & Auto Components Consumer & Services Consulting & Financial Services Engineering, Process & Infrastructure Electronic Manufacturing Services Engineering Research & Development Entertainment, Media & Communication Human Resources
y y y y

y y y y y y y y y

y y y y y

Fast Moving Consumer Goods Not for Profit Outsourcing & Off shoring Pharmaceutical, Healthcare & LifeSciences Retailing & Hospitality Services Information Technology Telecommunications Finance & Accounts Legal

12

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 come from developing or middle income countries, the majority from east and south Asia; most are self-financed. They contribute major revenues to the institutions and countries where they study and represent a key part of the internationalization of higher education. Thus is becomes imperative that the international as well as the local students will have to settle down in a job after graduating. By and large the US universities do not provide campus recruitments that happen to be a major phenomenon in India. Thus the recruitment agencies can take a call in enrolling with the universities and helping the students to major their potentials with a right career. ABC consultants have established their presence in India since 40 years and they have helped shape the careers of over 85,000 professionals and have partnered with more than 350 multinational companies to set up and staff their operations in India. Their financial stability is sound with proper adherence to legal compliance. Hence, this is a perfect time for ABC consultants to embark their presence internationally in the US and widen their operations enabling 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 not university employees but their presence on the ground ensures that the institutions that hire them are more accessible to students interested in going abroad. Agents act as local promoters and a conduit 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 first years tuition. Agents may also act as counselors, helping students sort through the overwhelming amount of information available on the Internet. However, their motivation does not consist of providing impartial information but rather to steer students to specific institutions something that may not be entirely clear to a student who consults them. The primary client for agents is the institution that hires them. In order to be successful, they must deliver acceptable number of students to their sponsoring institutions. It is not known how frequently 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, particularly to students.

Other information sources: To be successful, these recruitment agents must cultivate a local reputation for providing excellent service to students, not institutions; they must be well informed about a wide range of
13

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

Perverse incentives To maintain financial stability on establishing a recruitment agency abroad: The dynamism between intermediary, institutions, and a student is inevitably influenced by the incentives and rewards that shape it. A recruitment agents income will depend on directing students to specific institutions. While this action may result in a good match for the student, the incentive is not set up to ensure the best match for the student or, for that matter, to work in the students best interests. Agents are entrepreneurs who earn their income from providing a service to two entities whose best interests may, or may not, be the same. The rewards arise from the relationship between the agent 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 can eliminate. In fact, as long as the incentives favor the interests of the student, professional standards 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 are adequately monitored to guarantee that students interests are protected. The international standards can guarantee local activity or that the relationship between an agent and a university will be entirely transparent to the student. Agents are a strong presence in many countries. However, the issue of employing agents merits more public discussion, and it would be most unfortunate to forego the debate and proceed on the basis of if u cant beat them, join them Thus on venturing internationally, ABC Consultants will plough profits with the active participation 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 companies across the globe it is possible for the recruitment agency to have an international presence thus catering to needs of students and the working professionals.

14