Business development platform for tier 2 cities like Gulbarga Part 1

A white paper

Part 1 (generic)

With infrastructure crumbling in the larger cities and property prices soaring to newer heights, it makes good business sense to move to tier 2 cities (at least theoretically). Add to that global volatility and inflationary pressures and one gets an irresistible lure to create newer businesses in tier 2 cities of India. But does a typical city like Gulbarga; in size, opportunities, geographical location, business atmosphere, connectivity and human resource potential; provide the necessary ecosystem to set up newer ventures?


Why Gulbarga? :

• Cheap property prices leading to creation of cost-effective business models (Setting up operations and scaling them up is much more economical than say in a city like Bangalore or Delhi)

• Lesser burden on infrastructure (traffic, accommodation, food etc) leading to better performance and better utilization of available time

• Availability of human resource at a more discounted PE ratios (at least true on paper)
  
• Lesser attrition rates because of accessible local talent (as proven globally)

• Government regulations promoting development in under developed areas, in terms of tax holidays and other incentives (again true on paper at least)

• Accessibility in terms of rail and road connectivity & the promised air connectivity in the very near future

• Better understanding of the city if the entrepreneurs belong to that particular city
  
• Tapping the human resource of the entire region and creating a cost-effective talent pool
  
  
  
  
  Ventures to look at:
  

• IT, IT enabled services and BPO would be on top of that list because of the obvious reasons of human resource availability, Government regulations and the factor of being closer to Bangalore and Hyderabad

• Health care and ancillary industries (with or without the IT component); again because of the obvious reason of availability of local talent
  

• Pharmaceutical and clinical research ventures
  

• Manufacturing
  

• Energy
  

• Educational and job consultancies (has a great potential if done in a professional manner)
  
  
  P.S:
  Am going to analyze each of these industries with a thorough business model in part 2
  
  
  The Challenges:
  
  

• Breaking the initial barrier of selling the idea of setting up venture in a hitherto uncharted territory
  

• Getting capital (via VCs PE funds and other investors)
  

• Creating & tapping the right ecosystem for the venture
  

• Making a thorough market analysis in terms of getting actual numbers for human resource availability
  

• Analyzing the real advantage of discounted local talent (get the actuals, because many times what is obvious is not really representative in numbers)
  

• Finding mid-level managers (this should be by far the biggest challenge once the venture is set up) to operationalize the day to day functioning
  

• Liaising with the government and local administration for not only setting up operations but also getting the due benefits
  

• Scaling up
  
  
  
  
  Addressing some of the challenges (generic):
  
  
• The initial selling of idea (of setting up venture in a tier 2 city like Gulbarga) can be dealt with by having a corporate HQ, typically in a city like Bangalore: All the operational components of the venture that are human resource and real estate intensive can be set up in Gulbarga (lets say offshore) while the corporate HQ that deals with clients can be set up in Bangalore (lets say onsite)
  

• Breaking the barrier with VC’s for early stage/seed funding can be achieved by creating a robust business model that points out the cost advantages (illustrated in individual business plans in part 2)
  

• Initial problems of creating the right ecosystem for the venture in a place like Gulbarga has to be analyzed in the business plan (in terms of connectivity, technological dependability, human talent and training etc)
  

• In theory it is quite obvious that there is a large pool of fresh talent available in Gulbarga and the surrounding regions (lets say Bijapur, Raichur etc) but can this fresh talent be trained and the cost advantage be maintained? Is there really a cost advantage? These are the issues that need to be examined thoroughly through market research and get actual numbers in the business model
  

• Finding and retaining mid-level managers is the key area of concern that has to be properly addressed in the business model in order to impress VC’s (How to go about it?)
  

• A thorough understanding and analysis of government regulations and policies is a must to drive home the advantage of setting up a venture in tier 2 cities. Also creating proper channels of liaising with government and local authorities is a must for smooth operationalization and functioning
  
  
  P.S:
  For industry specific Challenges and their redressals refer to individual business plans in part 2