Category: Bangalore University B.com Notes

It is not easy to start a business, not in India at least. Generally it takes about 89 days to start business as compared to 5 days in the US.  The lengthy list of legislations, licenses and permits, bureaucracy and red tape can have you in a tizzy. Well, thanks to the spirit of the Indian entrepreneur, he is able wade through difficult waters to finally get all approvals to start business. Here is a quick snapshot of all the necessary legal procedures that lead to formation of a company.

Companies in India can be set up as public or private. For a sole proprietor such as a designer or a lawyer, no registration or legal formality is required. The entrepreneur is merely required to obtain a license from the local administration related to his professional domain. On the other hand for a public or private company, there are a set of legal procedures leading to incorporation of the company. The various forms and applications for incorporation of the company can be filed online on the official website of the Ministry of Corporate Affairs. 

Step 1: Obtain Director’s Identification No.

Time Taken: 1 day

Cost to Complete: Rs.100

Directors of an Indian company have to register and get the identification number which is called Director Identification Number or DIN. It can be obtained by filing Application form DIN-1 online on www.mca.gov.in. The provisional DIN is immediately issued. All the documents are verified by the concerned authority and thereafter a permanent DIN is issued.  The entire process takes about 4 weeks.

Step 2: Obtain Digital Signature Certificate:

Time taken:  1-6 days

Cost to complete:  Rs.400 to Rs. 2650

Directors are also required to get Digital Signature Certificate or DSC. Digital Signature Certificate (DSC) is required for all Directors or authorized representatives of the company and professionals who will be required to sign ROC forms or documents. This certificate can be obtained from one of six private agencies authorized by MCA such as Tata Consultancy Services. Company directors submit the prescribed application form along with proof of identity and address. Each agency has its own fee structure, ranging from INR 400 to INR 2650.

Step 3: Registration of Company Name

Time to complete: 2-3 days

Cost to complete: INR 500

The name of the company should be registered by the Registrar of Companies of the state where the registered office of the company will be located. The application should mention at least four names in order of preference. There should not be an existing company by the same name. Further, the last words in the name are required to be “Private Ltd.” in the case of a private company and “Limited” in the case of a Public Company. The ROC generally informs the applicant within seven days from the date of submission of the application, about the availability of the desired name. After obtaining the name approval, it normally takes approximately two to three weeks to incorporate a company.

Step 4: Stamping of Company Documents

Time to complete: 1 day

Cost to complete: Rs. 1,300 which includes INR 200 for MOA + INR 1000 for AOA for every INR 500, 000 of share capital held by the company and also INR 100 for the stamp paper for declaration.

The Memorandum of Association and Articles of Association are the most important documents to be submitted to the ROC for the purpose of incorporation of a company. The Memorandum of Association is a document that states the constitution of the company, objectives, scope of activities of the company and also defines the relationship of the company with the outside world. The Articles of Association contain the rules and regulations of the company for the management of its internal affairs. These documents should be stamped and submitted to the ROC along with relevant forms and registration fee.

Step 5: Get the Certificate of Incorporation

Time: 3 to 7 days

Cost: Rs.14, 133

The ROC scrutinizes the documents and, if necessary, instructs the authorised person to make necessary corrections. Thereafter, a Certificate of Incorporation is issued by the ROC, from which date the company comes into existence. It takes one to two weeks from the date of filing of the Memorandum of Association and Articles of Association to receive a Certificate of Incorporation. Although a private company can commence business immediately after receiving the certificate of incorporation, a public company cannot do so until it obtains a Certificate of Commencement of Business from the ROC.

Step 6: Make a Seal

Time: 1 day

Cost: INR 530(depends on the number of seals required and the time period of delivery)

Making a seal is not a legal requirement for the company. However a seal is required to issue share certificates and other documents. Cost depends on the number of words engraved and the time period of delivery.

Apart from the above procedures, one is also required to obtain the following documents from the concerned authorities. You can apply for these registrations simultaneously and they can be obtained at minimum or no charges.

• Permanent Account Number
• Tax Account Number
• Registration with Office of Inspector of Shops and Establishment Act.
• Register for Value Added Tax (VAT)
• Register for Profession Tax at the Profession Tax Office.
• Registration with Employees Provident Fund Organisation
• Registration for Medical Insurance at the Regional Office of the Employees State Insurance Corporation

International Business Administration focuses on key business disciplines within an international context. Introducing the foundations of finance, marketing, supply chains, human resources and operations, International Business Administration covers the needs of all businesses.

“If you study a business programme, it’s always from the company’s perspective. You’re interested in surviving, gaining market access, beating your competitors and making a profit in the long-run”,

This degree develops a broad range of transferable skills, from research and planning to presenting and reporting, and prepares you for international management or consulting roles.

Why study International Business Administration?

There are many benefits of studying International Business Administration:

1. Gain an international perspective

You will study global challenges companies face, looking at international boundaries, trade, global economics and how to negotiate with diverse cultures. This approach to problem solving will broaden your world view and help you understand different perspectives. IBA is a popular degree among international students so even during your studies you will gain valuable experience of working with people from all over the world. 

2. Develop key management skills

Studying an international business administration degree involves working on individual and group projects, writing reports and presenting your ideas. You will develop essential management skills, such as:

• Leadership
• Strategic thinking
• Communication
• Delegation
• Problem solving
• Decision making
• Organization
• Presenting

3. Boost your employability

International Business Administration is a broad degree and introduces you to a range of skills that employers are looking for. As you progress through your degree programme you will begin to shape your course and specialise in the business functions you are most interested in. IBA graduates can look forward to a wide range of job opportunities in management, marketing, accounting, corporate finance, consultancy or even human resources.

4. Solve commercial challenges

Study business administration and you will analyse global and local business challenges and find strategic solutions. Through researching international markets and negotiating with other cultures and countries, you will develop the skills needed to follow a career in consultancy or management for a multinational company.

5. Build your business knowledge

How to manage diverse teams, improve financial performance, research international competitors and redesign business processes are just some examples of what you’ll learn during an IBA. This core knowledge is essential to the running of any business, and you will further develop your skills through elective modules in key areas.

Under the Companies Act 2013, the date of incorporation of a company cannot be the date of commencement of business (COB). From the point of commencement of Business, companies may be divided into 2 categories:

1. Public and Private Companies not having Share Capital

A public company or a private limited company not having share capital is not required to comply with any other formalities and may commence its business activities immediately after obtaining the certificate of incorporation from the concerned Registrar of Companies.

2. Public and Private Companies having Share Capital

As per section 11 of Companies Act, 2013, now all newly incorporated Public and Private Companies having Share Capital would be required to obtain a certificate of commencement of business from concerned Registrar of Companies before commencing the business or exercise of borrowing powers.

For statutory provisions related to commencement of Business one can refer to the following sources:

• Section 11 of Companies Act, 2013
• Rule 24 of Companies (Incorporation) Rules, 2014

The Registrar of Companies (ROC) is an office under the Indian Ministry of Corporate Affairs that deals with administration of the Companies Act 1956 and Companies Act, 2013. These officers are from Indian Corporate Law Service cadre. ‘ICLS’ is an organised Group A service recruitment of which is done by UPSC through Civil Service Examination since 2009 along with other services like IRS, IAS & IPS etc.

There are currently 22 Registrars of Companies (ROC) operating from offices in all major states of India. Some states, such as Maharashtra and Tamil Nadu, have two ROCs each. Section 609 of the Companies Act, 1956 tasks the ROCs with the primary duty of registering companies and LLPs floated in the respective states and the union territories under their administration.

The ROCs also ensure that LLPs comply with the statutory requirements under the Companies Act. The office of the ROC maintains a registry of records related to companies registered with them, and permits the general public to access this data on payment of a fee. The Union Government maintains administrative control over ROCs through Regional Directors. There are 7 Regional Directors, and they supervise the functioning of ROCs within their respective regions.

The Registrar of Company takes care of company registration (also known as incorporation) in India, completes reporting and regulation of companies and their directors and shareholders, and also oversees government reporting of various matters including the annual filling of various documents.

Why choose Company Registration in India? Benefits

Registering a company offers many benefits. A registered company makes it genuine and increases the authenticity of your business.

Shields from personal liability and protects from other risks and losses.

Attracts more customers

Procures bank credits and good investment from reliable investors with ease.

Offers liability protection to protect your company’s assets

Greater capital contribution and greater stability

Increases the potential to grow big and expand

You will also get Zero Balance Current Account – Powered by DBS Bank *

Checklist for Registering a Company in India

According to the law in the Company Act, 2003 in order for any company to be registered in India, the below conditions have to be met.

(i) Two Directors

A private limited company must have at least two directors and at most, there can be 15. Of the directors in the business, at least one must be a resident of India.

(ii) Unique Name

The name of your business must be unique. The suggested name should not match with any existing companies or trademarks in India.

(iii) Minimum Capital Contribution

There is no minimum capital amount for a company. A company should have an authorized capital of at least Rs. 1 lakh.

(iv) Registered Office

The registered office of a company does not have to be a commercial space. Even a rented home can be the registered office, so long as an NoC is obtained from the landlord.

How to Register Company Online?

Company Registration in India will boost the progress of startups and provide an additional edge over those who have not registered. The Ministry of Corporate Affairs governs the company registration process with rules and regulations framed in accordance with the law.

Step 1: Application for DSC (Digital Signature Certificate).

Step 2: Apply for the DIN (Director Identification Number)

Step 3: Application for the name availability.

Step 4: Filing of the EMoa and EAOA to register private limited company

Step 5: Apply for the PAN and TAN of the company

Step 6: Issued certificate of incorporation by RoC with PAN and TAN

Step 7: Opening a current bank account on company name

Search a company before Company Registration

One of the primary steps in Company Registration is to ensure that the company name has not already been taken by another legal entity. We can run a company name search to check the availability of the particular name in India against the MCA and trademark database.

We recommend the businesses to come up with three to four alternative names during the approval stage of Private Limited Company Registration. The Ministry of Corporate Affairs will be the final authority to approve the name based on the availability rules and regulations.

If you are disappointed that a preferred name is taken, do remember that the name of your company doesn’t have to be your brand name. However, if you’re going to trademark your brand name, also check if it has already been trademarked at http://www.ipindia.gov.in/. If it has been trademarked, you would need a no-objection certificate from its owner to have it approved as your company’s name.

Documents required for Online Company Registration

In India, Private Limited company registration cannot be done without proper identity proof and address proof. Identity and address proof will be needed for all the directors and the shareholders of the company to be incorporated. Listed below are the documents that are accepted by MCA for the online company registration process acceptable.

1. Identity and Address Proof

• Scanned copy of PAN Card or Passport (Foreign Nationals & NRIs)
• Scanned copy of Voter’s ID/Passport/Driver’s License
• Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill
• Scanned passport-sized photograph specimen signature (blank document with signature [directors only])

For the foreign nationals, apostilled or notarized copy of the passport has to be submitted mandatorily. All documents submitted should be valid. The residence proof documents like the bank statement or the electricity bill must be less than 2 months old.

2. Registered Office Proof

For online company registration in India, the company must have a registered office in India. To prove admittance to the registered office, a recent copy of electricity bill or the property tax receipt or water bill must be submitted. Along with the rental agreement, utility bill or the sale deed and a letter from the landlord with her/his consent to use the office as a registered office of the company should be submitted.

• Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill
• Scanned copy of Notarized rental agreement in English
• Scanned copy of No-objection certificate from the property owner
• Scanned copy of sale deed/property deed in English (in case of owned property)

Stage 1. Promotion Stage

Promotion is the first stage in the formation of a company. The term ‘Promotion’ refers to the aggregate of activities designed to bring into being an enterprise to operate a business. It presupposes the technical processing of a commercial proposition with reference to its potential profitability. The meaning of promotion and the steps to be taken in promoting a business are discussed in brief here.

Promotion of a company refers to the sum total of the activities of all those who participate in the building of the enterprise upto the organization of the company and completion of the plan to exploit the idea. It begins with the serious consideration given to the ideas on which the business is to be based.

According to C.W. Grestembeg, “Promotion may be defined as the discovery of business opportunities and the subsequent organization of funds, property and managerial ability into a business concern for the purpose of making profits therefrom.”

According to H.E. Heagland, “Promotion is the process of creating a specific business enterprise. Its scope is very broad, and numerous individuals are frequently asked to make their contributions to the programme. Promotion begins when someone gives serious consideration to the formulation of the ideas upon which the business in question is to be based. When the corporation is organized and ready for operation, the major function of promotion comes to an end.”

According to Guthmann and Dougall, “Promotion starts with the conception of the idea from which the business is to evolve and continues down to the point at which the business is full, ready to begin operations in a going concern.”

Stage 2. Incorporation or Registration Stage

Incorporation or registration is the second stage in the formation of a company. It is the registration that brings a company into existence. A company is properly constituted only when it is duly registered under the Act and a Certificate of Incorporation has been obtained from the Registrar of Companies.

Procedure to Get a Company Registered

In order to get a company registered or incorporated, the following procedure is to be adopted:

(i) Preliminary Activities

Before a company is incorporated, the promoter has to take decision regarding the following:

• To decide the name of the company
• Licence under Industries Development and Regulation Act, 1951

(ii) Filing of Document with the Registrar

• Memorandum of Association
• Articles of Association
• List of directors
• Written consent of directors
• Statutory declaration

Stage 3. Capital Subscription Stage

A private company or a public company not having share capital can commence business immediately on its incorporation. As such ‘capital subscription stage’ and ‘commencement of business stage’ are relevant only in the case of a public company having a share capital. Such a company has to pass through these additional two stages before it can commence business.

Under the capital subscription stage comes the task of obtaining the necessary capital for the company.

For this purpose, soon after the incorporation, a meeting of the Board of Directors is convened to deal with the following business:

• Appointment of the Secretary. In most cases the appointment of pre-tem secretary (who is appointed at the promotion stage) is confirmed.
• Appointment of bankers, auditors, solicitors and brokers etc.
• Adoption of draft ‘prospectus’ or ‘statement in lieu of prospectus’.
• Adoption of underwriting contract, if any.

Besides the above mentioned business, the Board also decides as to whether:

• A public offer for capital subscription is to be made, and
• Listing of shares at a stock exchange is to be secured.

The company will now proceed to obtain the permission of the Controller of Capital Issue, New Delhi, under the Capital Issue Control Act, 1947 if a public offer for sale of shares and debentures exceeding Rs. one crore is to be made during a period of 12 months, unless the issue fulfils the conditions of exemption as laid down in the Capital Issue (Exemption) Order, 1969.

The Capital Issue Control Act, 1947 however, does not apply to a private company, a banking company, an insurance company, and a government company provided it does not make an issue of securities to the general public.

After the above formalities have been completed, the directors of the company file a copy of the ‘prospectus’ with the Registrar and invite public to subscribe to the shares of the company by putting the ‘prospectus’ in circulation.

Application for shares are received from the public through the company’s bankers and if the subscribed capital is at least equal to the minimum subscription amount as disclosed in the prospectus, and other conditions of a valid allotment are fulfilled, the directors of the company pass a formal resolution of allotment.

Allotment letters are then posted, return of allotment is filed with the Registrar and share certificates are issued to the allottees in exchange of the allotment letters. If the subscribed capital is less than the minimum subscription or the company could not obtain the minimum subscription within 120 days of the issue of prospectus, all money will be refunded and no allotment can be made.

It may be noted that a public company having a share capital, but not issuing a ‘prospectus’ has to file with the Registrar ‘a Statement in lieu of Prospectus’ at least three days before the directors proceed to pass the first allotment resolution.

Stage 4. Commencement of Business Stage

After getting the certificate of incorporation, a private company can start its business. A public company can start its business only after getting a’ certificate of commencement of business’.

After getting the certificate of incorporation:

• A public company issues a prospectus of inviting the public to subscribe to its share capital,
• A minimum subscription is fixed, and
• The company is required to sell a minimum number of shares mentioned in the prospectus.

After making the sale of the required number of shares a certificate is sent to the Registrar stating this fact, along-with a letter from the banks, that it has received application money for such shares.

The Registrar scrutinizes the documents. If he is satisfied, then issues a certificate known as Certificate of Commencement of Business. This is the conclusive evidence of the commencement of the business.

Marketing of education is a subject with very wide coverage if one considers that formal education begins at the school age and depending upon the choice, vocation and circumstance of the persuants, matures into intermediate and higher levels of learning including professional and specialised fields. Apparently, benefits sought from higher and professional or vocational courses are more tangible or measurable in terms of entry qualifications to a chosen profession, certification to enable practicing a profession or relative ease of access to a suitable form of livelihood. Not attempting to cover the marketing of education per se, the scope of this unit is limited to the post school or higher education.

Without making specific commends about any particular discipline, the unit deliberately seeks to keep the treatment of the subject general, as the objective is to develop a basic understanding of the concepts involved in the marketing of education as a special case of marketing of services.

Interestingly, the need to ‘market’ their services has not really been felt by the education sector, as educational institutions, be they colleges or Universities or institutions catering to specific fields like ours, have faced more demand than they could cope with. For specialised fields like management and computer education, where attractive market potential has increasingly caused more and more institutions to be set up, competitive situation is changing. Even the institutions facing heavy demand have been confronted with the question of being able to choose the desired target customers, and therefore face issues like product differentiation, product extention, diversification and service integration. There is a basic concern with building and retaining organizational reputation for creating a ‘pull’ in the market. All this has activated some interest in the hitherto neglected area of marketing of education services. Let us try to understand some of the basic services marketing concepts, relevant to marketing of education. Before going into the subject of education services marketing it is important to understand the concept of education as a service. Going by the AMA definition “services are those separately identifiable, essentially intangible activities, which provide want satisfaction and are not necessarily tied to the sale of a product or another service”1. Providing a service may or may not require the use of tangible goods. However, when such use is required, there is no ownership transfer of these tangible goods in service buying transaction. Education as a service, then, can be said to be fulfilling the need for learning, acquiring knowledge-providing an intangible benefit (increment in knowledge, professional expertise, skills) produced with the help of a set of tangible (infrastructure) and intangible components (faculty expertise and learning), where the buyer of the service does not get any ownership. He may have tangible physical evidence to show for the service exchange transaction but the actual benefit accrued is purely intangible in nature.

Service characteristics and implications for marketing of education

1. Intangibility

Education like most ‘pure’ services is an intangible dominant service, impossible to touch, see or feel. Evaluation of this service however can be obtained by judging service content (curricula, course material, student workload, constituent faculty) and the service delivery system. The consumer, based on these evaluations, has a number of alternative choices before him and may make selection on the basis of his own evaluation referrals, opinions sought from others and of course a brand or corporate image of the organisation providing education. At the end of the service experience, the consumer gets something tangible to show for his efforts i.e. a certificate or a grade card denoting his level of proficiency at the given course/programme. According to Bateson, finer distinction of intangibility into palpable and mental intangibility, has implications for the marketing of the educational services.6 For reasons of both mental and palpable intangibility:

• Education cannot be seen or touched and is often difficult to evaluate: It is therefore, imperative to build in “service differentaition” in the basic product to enable competitive positioning.
• Precise standardisation is difficult: For educational packages of same levels and bearing similar certification (e.g. B.A., B.Sc., and B.Com. degree programmes, postgraduate commerce and science programmes, management diploma and degree programmes) across universities and colleges, it is often difficult to bring about standardisation of course design as resources/needs/objectives of different institutions may differ. Institutions like Universities, though, try to manage equivalence in standards through Boards of Studies which are generally inter-university bodies. Technical education is sought to be standardised through bodies like the All India Council for Technical Education. Interestingly, the lack of standardization also opens up the marketing opportunity of creating highly differentiated, need based course packages, suited to chosen target groups of customers or serving specialised/localised needs.
• Education as a service cannot be patented: This feature implies that courses designed or developed at one institution can be replicated and offered at other institutions. It also implies that as far as the service product features are concerned, all advantages of a given competitor have an essentially perishable character. Only those discernible strengths which have their basis in the people resource, cannot be easily replicated. Hence, the added importance of faculty selection and motivation for educational institutions.

As these implications of intangibility become apparent to the service product designers and providers in the field of education, the following pointers to marketing planning emerge:

i) Focus on account of intangibility should increasingly be on benefits delivered by the service system and the uniqueness of the package that is being offered. The benefit accruing to the student may emanate from the service product-its depth, width, level or variety or from the uniqueness of the delivery system, the evaluation system or the extremely high goodwill enjoyed by the institution.

ii) Education, like most other pure services, should be tangibalised so that the beneficiary has some physical evidence to show for his achievements. Certifications for various levels of attainment, citations and separate certificates for any special achievements or activities should be duly prepared and delivered in time to be meaningful.

iii) Branding through effective use of Institute/University acronym, to aid instant identification and recognition should be practiced. Concerted efforts at building up organisation’s reputation through performance as well as through skillful use of communication tools would need to be carried out to associate this ‘brand name’ with a desired ‘brand image’.

2. Perishability

Services are perishable and cannot be stored. To an extent, education displays this characteristic which results in certain features.

• Production and consumption are simultaneous activities: This is true of most conventional teaching institutions where face to face teaching necessitates simultaneous production and consumption. Open and distance learning systems which make substantial use of technology, however, have made it possible for production and consumption of the service to be carried out at different times-the use of audio-video units and preparation of course materials sent to the students across the consumer population, are designed to meet the challenge posed by the perishability character of services.
• No inventories can be build up: This is true of most services, as well as education, as an unutilised service like a course on offer, or a lecture scheduled to be delivered, cannot be stored, if there are no students enrolling for the course or to attend the lecture. This factor opens up the challenge of managing the service in the face of fluctuating demand. Nearly all universities at one time or the other have faced the problem of overstaffing, when certain disciplines went out of vogue, like pure sciences and post graduate courses in languages. The marketing implications of perishability necessitate that a better match between supply and demand for educational packages would need to be made. Course design and course offers need to be preceded by a need analysis of the target population before the decision to launch them is made. This points towards the use of marketing research techniques for service development (designing the course concept) and planning, but more than that it necessitates a shift from ‘institution orientation’ to a student or ‘customer orientation’. Courses need not be offered because the institutions have available expertise in an area or it is something that the institution has been traditionally doing. In consonance with the marketing concept, the capability of finding a better fit between the needs of the society and the design of the offering, would define the difference between an effective and a non-effective institution.

3. Inseparability

Services are also characterised by the factor of inseparability in the sense that it is usually impossible to separate a service from the person of the provider. In the context of education, this translates into the need for the presence of the performer (the instructor) when the service is to be performed and consumed. This necessarily limits the scale of operations to the number of instructors available, it also means that the distribution mode is more often than not direct in the sense that no intermediaries are involved; the transfer of knowledge is directly from the provider to the learner. As noted before, open learning systems have overcome the characteristic of inseparability by incorporating the teacher into the material and bringing about a separation between the producer and the service. A direct marketing implication of this inseparability is the need for obtaining/training more service providers as well as the need for more effective scheduling of operations.

4. Heterogeneity

Heterogenity in the context of services means that unlike product manufacturing situations where design specifications can be minutely standardised and followed, the standards of services, educational services included, would depend upon who provides the service and how. This heterogenity of performance renders service offers for the same basic “service product” from different institutes vastly different from each other. Even though standardisation of courses according to some prescribed norms may be attained, it is difficult to ‘standardise’ individual performance i.e. that of the faculty resource person. That, perhaps, is not even a desirable goal in education, but maintenance of a certain quality standard across ‘performers’ certainly is. In the absence of accepted quality standardisation mechanisms in this context, it is the market forces alone, which would force quality standards on education. Dwindling registrations in institutions, snatching away of “market shares” by more effective competitors is what is making institutions take a renewed look at quality of service delivery and mechanisms for maintenance of standards. In terms of marketing implications, the hetrogenity characteristic of educational services, necessitates careful personnel selection and planning, constant and careful monitoring of standards which can provide cues to the prospective customers to aid choice of institutions. Examples of these cues could be success rates of the placement programme, the absorption of the institutions product in the job market, or the performance of the pass-outs at other competitive examinations.

5. Ownership

Ownership or the lack of it also characterises service. In the context of education, the customer only buys access to education, or derives the learning benefit from the services provided. There is no transfer of the ownership of tangibles and intangibles which have gone into creation of the service product. Payment of fees (price for the service) is just the consideration for access to knowledge and for the use of facilities for a given tenure.

The growth of the Services Sector in India is a unique example of leap-frogging traditional models of economic growth. Within a short span of 50 years since independence, the contribution of the service sector in India to the country’s GDP is a lion’s share of over 60%. However, it still employs only 25% of the labour force. Consequently, agriculture (which is stagnant) and manufacturing (which has not yet risen to its full potential) continue to sustain the majority of our employed population. This presents a unique challenge to future economic growth in India and requires out of the box solutions that will help rapidly harness the potential of the service industry in India. Invest India takes a look at the contribution of the services sector in the Indian economy, its successes and also explores potential enablers for future equitable economic growth.

Service Sector in India: Sectors and Growth potential

Let us now look at the list of service sectors in India that perform, as well as demonstrate strong potential for future growth.

1. IT-BPM/ Fintech

The IT/ITeS & Fintech segments provide over $ 155 bn in gross value add and have the potential to grow between 10 -15% p.a. Exports form its largest component. So far, our key advantage has been low – cost labour arbitrage in a predominantly English – speaking country. Going forward, the IT and ITeS segments require significant upskilling to move beyond a ‘low – cost low value add service provider’ to a ‘high value add partner’.

Indian IT companies can also leverage their skill sets to provide fintech solutions to global financial customers. Financial risk management services, insurance, natural disaster modelling and underwriting are examples of high value add services performed within India for a global audience.

2. Healthcare & Tourism

The current contribution of the healthcare industry is over $ 110 bn and is expected to touch $ 280 bn by 2020. Availability of world – class medical facilities, skilled doctors, technicians and pharmaceuticals are some of our advantages. With digital communication and interfaces, diagnostic medicine can also be tapped into as a service for global customers.

Similarly, for tourism, India is renowned for its places of natural beauty and historical significance. Tourism presently contributes $ 47 bn to the country’s GD, compared with $ 115 bn for China. Thus, tourism has exponential possibilities to boost the Indian services sector in the next decade.

To attract significant revenues, improved customer experience (medical or tourism) is the key factor that will determine its future growth. In this context, government initiatives such as e – Visas, better infrastructure facilities, safety, connectivity etc. are enablers in the right direction.

3. Space

India captured the world’s attention last February when it broke the record for launching the most number of satellites into space. Moreover, this was done at a fraction of the cost incurred by other space powers.

Indian services in the space domain, with proven expertise in multiple launch technologies, provide it with a significant advantage over its peers in the global space transportation industry. Our launch capabilities have a near 100% track record. Many countries are actively looking to piggyback on India’s launch facilities. This demonstrates great potential. The government is actively proving its ability, but more can be done to build capacity in military and non – military space applications. In this context, public – private participation is key to ensure the flow of capital, as well as to strengthen competencies in this area.

4. Logistics & Transportation

India’s natural coastline and vast river network give it a competitive edge in providing transportation and logistics services, both domestically and internationally. These can be classified into ports and ports services, warehousing, trans – shipment services, e – logistics, inland waterways for freight and passengers, expressways and dedicated freight corridors. India’s logistics service sector itself is expected to grow from $ 115 bn to $ 360 bn by 2032.

India should closely look into the development of the service industry, given the potential and need for sustained large scale investment. Investments typically have a long gestation period. However, once the infrastructure is created, linkages to the rest of the economy provide significant multiplier effects. For example, the Mumbai – Pune expressway and the development of service industries in Pune.

5. Other services

Media & Entertainment (animation, gaming, dubbing), Education (online platforms such as MOOC), and Sports (IPL, IFL, Sports Management), Legal/ Paralegal services, Risk management and advisory functions, etc. are areas that can lead to an immense contribution of service industry in the Indian economy.

Top 10 service sector companies in India:

1. Reliance Industries
2. HDFC Bank
3. ICICI Bank
4. HDFC
5. Tata Consultancy Services
6. Larsen & Toubro
7. State Bank of India
8. NTPC
9. Kotak Mahindra Bank
10. Axis Bank

Recent Investments in the service sector

Of late, the government’s efforts in improving ease of doing business and relaxing regulatory norms have resulted in increasing FDI into the country. The following examples demonstrate the strong linkages that FDI has in unleashing the potential, as well as propelling the growth of the services sector in India:

• Connecting Gujarat and Maharashtra, India’s first bullet train has potential similar to that of the Mumbai – Pune expressway, but on a larger scale.
• Manufacturing of Rafale jets in India.
• Building large highway systems in India (expressways and freight corridors), inland waterways (Jalmarg Vikas project), port modernisation and new port development (Sagarmala project)
• Amazon India expanding its logistics footprint
• Creation of a Taiwanese tech park in Karnataka
• A dedicated fund of $ 693 mn, which will be utilised to support sectoral undertakings under the Champion Services Sectors Initiative. These include IT and ITeS, Tourism and Hospitality Services, Medical Value Travel, Transport and Logistics Services, Accounting and Finance Services, Audio Visual Services, Legal Services, Communication Services, Construction and Related Engineering Services, Environmental Services, Financial Services and Education Services.

Future Prospects of the Service Sector in India

The service sector in India has the highest employment elasticity among all sectors. Thus, it has the potential for huge growth as well as the capability to deliver highly productive jobs leading to revenue generation. To address the challenge of job creation, the Skill India program aims to achieve its target of skilling/ upskilling 400 million people by 2022. It aims to do this mainly by fostering private sector initiatives in skill development programs, and by providing them with the necessary funding.

Similarly, the Make in India program while attempting to bolster the manufacturing sector will cause a multiplier effect in adding to the portfolio of the Service Sector. In this context, the Startup India initiative is a key enabler for both the manufacturing as well as service industry in India – by offering to support innovative startups.

When manufacturing goods, the process involved takes place in the factory’s premises, keeping the customers at bay. The customer rarely comes in contact with the manufacturing process, as those processes that lie with the factory premises, lie in the sole domain of operations.

Interaction of the customers with the system should be a part of the service creation and hence this makes the customer be a part of the service process. The service failures often are the result of inadequately and inappropriately designed service processes.

Services which depend on customer contact or customers are the recipient of service actions, the customer side of the process can be mapped by identifying service delivery process. A chart that draws and lists the various contact points when the system and the customer come in contact to create a value is known as a flow chart.

Service production and consumption are inseparable, and therefore the customer acts as a co-producer of many services. The service delivery is the outcome of the service process. The process constitutes the service itself. The service characteristics of inseparability and par­ticipation often make the customer, interact and become a part of the process.

Despite such importance of the service process, sometimes service organizations pay very little systematic attention to this aspect of business. As a result, service processes evolve on their own with internal bias or no focus at all. Therefore, it is not surprising that many service organizations are not adequately equipped to serve the customer well and such processes limit the efficiency of the operations.

It is a process to deliver requested service to the end user. Let us take an example of a company which is known for its service processes DTDC begin its operations in the year 1990 and since then, year by year they have achieved various milestones based on their service quality.

This company thrives on its quick service and the reason it is able to do so is its confidence in its processes. To top it, the demand of these services is such that they have to deliver optimally without a loss in quality or in quantity. Thus, the process of a service company in delivering its product is of utmost importance.

Quality of a service is defined by the way it is been processed thus detailing the service process becomes very important for all service provider. Service processes intensely interact with the customer. Production processes differ from service processes. The customer only perceives the output of a production process he selects it and pays for it.

Process is an element of the extended marketing-mix of services marketing. A process outlines the procedures and methods to be followed to produce and deliver a service. It also determines the extent of customer involvement and participation required in service creation and delivery. Therefore, process explains a series of activities, their sequence and the role to be played by the service provider, the intermediaries and the customer. It plays an important role in determining the quality of service design, production and delivery.

It is not possible to differentiate production from delivery in services as they are inseparable in nature. Therefore, process includes all the activities related to production as well as delivery of the service. Further, processes need complete dedication and commitment of the service personnel in order to be completed successfully.

Companies, not only in the manufacturing sector, but in the service sector as well, gain competitive advantage over other players with improved processes. A well-designed and well-executed process increases operational efficiency, offers convenience to customers, reduces the cost of offering services, and improves the efficiency of service delivery. Effectively, it helps in achieving the goal of customer

Characteristics of Service Process

1. Divergence

Often, service providers adapt their services to match customer needs, as a single service might not cater to all. The degree, to which a service provider can vary services, deviating from the standard service, is known as divergence. Divergence provides an opportunity for the service provider to customise services for his customers, and serve them better. For example, many tourism companies customise their holiday packages according to customer needs.

2. Complexity

The process of creating and delivering a service involves many activities. While some activities might be quite simple, others can be quite complex. The complexity of a process should take into consideration the contribution of the different activities to service quality.

The activities that contribute to service quality in an interaction between a banker and a customer may include the friendliness shown by the banker, his knowledge about the products, the speed at which the service is offered to the customer, etc. At the same time, the number of activities in the production and delivery of a service increase with the increase in divergence, i.e., complexity increases with divergence.

3. Service Location

The nature of the service being offered largely determines the service location. Services can be delivered at the service provider’s location, at the customer’s location, at a neutral location or virtually, depending on their nature. For example, customers can either visit a hotel to have dinner or they can order home delivery.

In the former case, the service location is the hotel, and in the latter, the customer’s home is the service location. A tourist operator offers his services at the tourist spot, which is a neutral location. A banker offers his services virtually when he provides internet-banking facilities to customers. Therefore, service location depends on the alternatives available to the service provider and the customer.

4. Customer Participation and Interaction

Service processes should be designed depending on the extent of interaction with the customer and his participation in service production and delivery. The level of customer interaction and participation differs from service-to-service. For example, the level of interaction between a banker and a customer is negligible in mobile banking transactions while the level of customer participation is high in deciding and ordering a menu for a wedding.

It can also differ from channel-to-channel for the same service. The perceived quality of a service is enhanced if a customer has prior knowledge of the service process. For example, a customer who has an idea about the check-in process at an airport will be more comfortable and can appreciate the improvements made by the airline in the process, when compared to a customer who has no knowledge of the check-in process.

5. The Service Itself

Services can be either process-based or technology-based. Process-based services involve many activities that a customer has to go through before obtaining the service. For example, a student aspiring to join an IIM (Indian Institute of Management) course or any other business institution has to fill-up an application form, take the entrance test and appear for an interview, group discussion, etc., before gaining admission. Process-based services involve many people, with high levels of interaction between them.

The service provider has an opportunity to improve the quality of service at every step and in each interaction. On the other hand, equipment or technology-based services require very little inter-personal communication between a service provider and his customer.

For example, internet banking, offered by many banks like ICICI, HDFC, GTB, etc., has almost eliminated the need for personal interaction between a service provider and his customer. Through technology-based services are efficient and convenient for customers, service providers lose an opportunity to enhance the quality of service through personal interaction. Further, any problem in the teleological systems of the service provider affects the quality of service production and delivery too.

Designing a service process system involves a careful consideration of factors related to services. Various issues such as location, facility design, and layout for effective work flow procedures and job definitions for service providers, customer involvement, equipment selection, etc., should be decided while designing service process. Apart from these, the following factors should be considered in the process design and implementation.

1. The Service itself

The importance of the actual process in service delivery is being recognized of late. By employing some principles, the service and delivery process can be designed, implemented and monitored. The service itself is dependent upon its process. Even intangible services such as legal representation, equipment-based services (services through vending machines, ATM) etc., are dependent upon their process. While designing a service, it is necessary for the service provider to carefully understand the process on which the service is dependent.

2. Customer Participation in the Process

The presence of the customer is a must when some services are being performed. The consumer is a part of the production process and there is a close interaction between the service provider and the consumer.

For example, services in a self service restaurant, hair dressing saloon, beauty parlours, etc., necessitate the participation of customers in the production process.

Sometimes, the customer instead of being a passive bystander acts as productive labour if needed. Customer participation enhances the degree of customization.

For example, the education service rendered by a college would depend upon the quality of student participation in the programmes offered by the college. Through customer participation, the service provider identifies the impact the receiver of the benefit has on the service.

3. Location of Service Delivery

The issues related to accessibility and availability of services are crucial. Priority must be given in decisions about location of premises and services distribution. Provision of service may take place at the service provider’s premises or at the customer’s home.

For example, air conditioning and plumbing services should be provided at the customer’s home, while dry cleaning of clothes is carried out at service provider’s outlet.

Public services such as telephone, banking, insurance etc., should be easily accessible to the customers. Generally, the service provider should choose to provide a location convenient to the customers.

4. Level of Customer Contact

The physical presence of the customer in the system is called customer contact. The level of customer contact can be calculated from the amount of time a customer spends in the system compared to the total system.

The level of contact with customers largely depends upon the type of service received. From this point of view, a service may be high-contact service or low-contact service. Where performance of a service is fully based on equipment (automatic weighing machines, ATM, public telephone), the level of contact between the customer and service provider is nil.

In case of professional and medical services, the level of contact is very high. The service system should be planned according to high contact and low contact operations in order to achieve overall service quality.

5. Degree of Standardization

The services may be standardized services or customized services. In case of standardized services, services are delivered in a very standard format. A standardized service is generally, designed for high volumes with a focused service.

For example, pre recorded messages provided by telephone companies.

The tasks involved in standardized services require a workforce with relatively low levels of technical skill. Service providers deviate from the standard to meet the needs of different customers. This is called divergence. Customized services involve high divergence where flexibility and judgement are called for on the part of the service provider. He interacts with the customers in order to identify the needs of latter.

The interaction between the service provider and customer may be in terms of resources facility such as expertise, skill, attention, attitudes, personnel, space, cleanliness etc. In other words, interaction is more between the customer and the employees of the service provider. Provision of customized services requires high levels of technical skill. Generally, customized services are unprogrammed and not well defined before they are provided.

For example, counseling of students, house decoration, tailoring etc.

6. Complexity of the service

Complexity refers to the amount of steps involved in delivering services to customers. So, the degree of complexity can be measured on the basis of the number of activities which contribute towards the service delivery. Some services are high in complexity as well as high in divergence.

For example, a doctor’s service is highly complex and highly divergent. Every case history of the patient is so different, yet they always diagnose correctly. But catering services are high in complexity and low in divergence.