Stock Market Tips 10

Is the company internationally competitive?

Our economy is now getting integrated with the world economy. This process of integration is expected to be completed by 31 December 2004. The WTO (World Trade Organization) agreement also provides for the integration of the economies of for companies that cannot compete with member countries through lowering of tariff barriers, reductions in subsidies, greater protection for patents and copyrights, and the gradual removal of restrictions on free movement of goods, services and personnel across nations. In such an environment only those companies that are in a position to compete in the global markets, or against cheap imports coming into their domestic markets, can possibly hope to survive and grow.

How do you identify an internationally competitive company? One way to do so would be to take a look at the volume and nature of a company's exports. The very fact that a company can get export orders and sell its products in international markets, particularly in advanced markets like those of USA, Europe or Japan, means that the company is internationally competitive. Companies belonging to the following industries are, by and large, internationally competitive because it enjoys a comparative advantage in these industries:

IT services,
Healthcare,
Cotton textiles,
Floriculture,
Fruits,
Milk products,
Two wheelers,
Pharmaceuticals,
Tea,
Leather products,
Mushrooms,
Poultry products,
Vegetables,
Auto ancillaries,
Gems, and jewellery.

Companies that for one reason or another are naturally immune from international competition can also look forward to a bright future since they have virtually unlimited growth opportunities in the vast domestic market. Cement companies belong to this category. The high cost of transportation of cement insulates domestic cement companies from cheap imports and unless a foreign cement company sets up manufacturing facilities in India, it cannot offer any competition to an Indian cement company. Hotels, by virtue of their locational advantages, are also protected from competition from similar hotels located in other cities. Power generating and distributing companies also face no international competition.

On the other hand, by virtue of their high costs of production companies manufacturing fertilizers, consumer durables, electronic products, petrochemicals and petrochemical intermediates, will find their profit margins threatened in a regime of low tariff barriers.

Taking a global view, our country’s main economic strengths lie in its vast and productive land surface, a long coastline, a large variety of agro climatic conditions, a huge population, low labor costs, and a vast pool of cheap but highly trained and resourceful technical and managerial manpower.Our country is also endowed with vast mineral resources and is self sufficient in about 40 minerals which provide the primary raw materials for core sectors, like power, coal, steel, Ferro alloys, aluminum, cement, zinc, refractoriness and chemicals. What India lacks is oil, sulphur, asbestos, rock phosphate, potash, copper, lead, tungsten and nickel. Companies that can utilize these unique strengths of India to advantage should be able to reward their stockholders with generous profits in the years to come.