India’s Manufacturing Sector Facing Challenges

Back in 1951 India’s then prime minister Jawaharlal Nehru announced that India had to become industrialized, and that as fast as possible. While the politicians have done everything they could since then, including Soviet-like planning, to industrialize the country, India has yet to become a manufacturing powerhouse like China. Indians seems more willing to grow crops and sell services than manufacture advanced products and machines.

While India’s economy had recorded impressive growth rates over the past decades, most of growth came from the service sector, and their overall performance is still being dragged down by an underperforming manufacturing sector, resulting in their current growth rate being reduced to 6.5 percent compared to the previous 8.5 percent. It’s still an impressive performance compared to other countries, but it could have been so much better. (more…)

Life’s Getting Better in China, Brazil, and India

These are the three countries in this world that are making an impressive leap outside of the economic crisis and onto the ship of economic growth as well as increased retails, stable inflation and a better life standard.

China moved up to the second place in the GDP ranking of countries in the recent past years. In 2010 a report, created by the United Nations, states that China has a GDP of 5.74 trillion, whereas that number grows to 7.3 trillion for 2011, according to the World Bank report. They have extremely high growth rates and the people are ready to put their hands in their pockets. A research shows that just about ¾ of the Chinese people fancy green products and half of them are even ready to pay more, but have something that is eco-friendly. (more…)

Small Town Consumers are Shifting India’s Economy

The growth of India’s company is decelerating. As compared to the previous, it has only expanded by 5.3% this year, in the quarter of January to March, the slowest so far for the last seven years. Consumers are skimping. According to various business executives, the product sales of durable dropped by 10 to 15 per cent in March this year. Official data showed the Indian companies today used about 15% less color television and 30% less air conditioners today. (more…)

IKEA Bolstering India’s Economic Confidence

The Swedish group IKEA, the world’s leading manufacturer and retailer of furniture asked for India’s government approval of their proposal to invest an estimated amount of €1.5 billion or $1.9 billion worth of business by establishing about 25 stores around the country in the next years.

IKEA’s business venture sparked a brand new hope for the policy makers of New Delhi who have been trying to win back the confidence of foreign investors in the country’s economy after some major flip flops.
The change in policy a year ago which permits foreign retailers to fully own their Indian businesses made IKEA’s investment plan possible. Through investing, IKEA will play a major role in the transformation of the country’s enormous shambolic sector on retail. (more…)

Procter & Gamble Innovates on Thin Margins in India

In a market of 400 million people, India is one of the targets of major manufacturing corporations in product innovation. Unlike in other nations, the upscale market of India is seen to be a peculiar one as consumers have different preference and needs. Venturing into this demanding market is P&G with its effort to become the premium producer of efficient shaving razors. (more…)

Multinationals in India: New Paradigms Business Applies

Up until recently, an international brand would enter an emerging market like India, by taking an existing product and create a stripped down low-cost version for the new market. But not any longer. Traditional business models no longer apply in India. Increasingly, you will see new products developed from the ground up with new business models. The March 2012 McKinsey Quarterly article, “How Multinationals Can Win in India,” predicts that in the next 10 years, 20% of global revenue growth will come from India. For multinationals in India to succeed, they must adopt new business paradigms immediately.

So far, multinationals have made gains in particular niches. However, none had achieved market leadership on a large scale in India. The report cited examples of companies that failed by clinging to old global business paradigms. When they shifted tracks, they experienced a turnaround.

In the article in The Economist, ‘Less is more‘, (Nov 17th, 2011) supports the contention that old global business models are no longer effective in today’s market. In the past, developing countries were perceived to be sources of lower labor costs. Today these countries are creative and are building low-cost technology and machinery that are being sold in developed markets.

One of the cited examples is the Fetal Heart Monitor, developed by Siemens. The idea for it came from India. In the past, ultrasounds were used to monitor the heart of the fetus. But these machines are expensive, complicated and one must be trained on how to use it. In India they simply used off-the-shelf microphones. German engineers improved the product without changing its simplicity. Anyone can operate a Fetal Heart Monitor without any training. It is also much cheaper than an ultrasound.

New business paradigms needed in India

A new global business paradigm must utilize the capacity of large corporations to grasp the expertise of developed countries and combine it with innovative creations from developing countries like India. To do this successfully will mean letting go of old global business market mindsets and paradigms that didn’t succeed in India. These include:

– The concept that one model fits all: This is not true in India. The country’s market is largely fragmented. In essence, there are many “Indias” within India. There is a plethora of cultures, geography, different languages, literacy levels and financial levels per culture group. There is a need to understand each of these cultures’ ways, needs and circumstances, so that products can be adjusted to meet each cultural market’s requirements to enhance sales

– Hierarchy, bureaucratic roadblocks: A foreign multinational head who holds all decision making power poses a disadvantage, especially if he is based outside the country. He is unfamiliar with India’s unique business culture. Plus, India regularly experiences changing market conditions. The multinational head fails to respond to these changes adequately

Some multinationals recognized the flaws of centralized autonomy. They responded by delegating a high degree of autonomy to Indian operations. In one case, a company that did this experienced a 30% revenue growth yearly from 2001 – 2005, the McKinsey report said.

Delegate autonomy to India

Transferring autonomy to Indian operations is the crux of needed change by multinationals. It implies that only India’s top talent is tapped to handle the delegated autonomy competently. The Indian leader has knowledge of, and experience with the Indian market. He decides on capital expenditure, head-counts, product development, product customization and pricing. He also oversees empowerment of lower management levels to enhance innovation and free enterprise.

Strong middle management is critical to successfully implementing business growth strategy. Ironically, India lacks good local middle management talent. The McKinsey report cited three ways that some multinationals have responded to the situation. First, through the institution of a fair and transparent reward system based on performance. This included incentives including career advancement to encourage self starters with high performance levels. Secondly, through the creation of prestigious job positions. These jobs included membership on executive committees and global visibility. Other incentives were higher salaries and more authority. The position was usually granted to those with strengths on entrepreneurship.

The final way is through the provision of certified leadership development courses. This became an incentive to recruit new talent and was a way to retain good performers. Leadership programs were also introduced that provided mobility and structured global rotation for top performers.

Commitment raises bottom line

It is necessary that multinational companies shift their vision when they do business in India. It is not efficient nor profitable to always focus on the bottom line. A shift in vision will call for more commitment on the part of the multinational in many ways. One means of doing this would be to expand commitment cycles. Ideally, top leadership should aim for five-year target cycles in India, and aim high. Commitment would also require global CEOs and senior executives to visit the country an average of four times yearly. This will give them the opportunity to dialogue with local clients, and get a keener understanding of shifting business cycles so that they would have an eye on which local investments deserve continued support amid business cycles.

It goes without saying that when a multinational delegates authority to its Indian CEO, there is sufficient funding to back him up. This implies, too, that the multinational has aimed high and hired only the best man for the job. At the same time, understanding the capability of your Indian CEO, it is mutually beneficial that he also has a place in global executive committees.

Quality products, lower cost

Success in India requires understanding the spending power and the demands of the Indian market. Indians like good quality products, but these should be available at prices they can afford. To make these products affordable without sacrificing quality, one can remove frills that can cut production cost from 50-70%. Sometimes, there is a side benefit to the above. An example that McKinsey cited involved a low cost, no-frills tractor that a multinational firm created for Indian farmers. The product also, surprisingly, became marketable in the US, where a number of farmers wanted a sophisticated yet affordable tractor. What yinned, in essence, also yanged.

However, producing a good product is not enough, especially in India. It is necessary to have a distribution network and chain supply that works efficiently among the various “Indias within India.” This means that the multinationals must retain strong relationships with their leading stakeholders, such as external agencies, the government and regulators.

When making a five-cycle business plan, part of the plan should be to aim high. This would mean regularly seeking new business development options. A specific team must be formed for the purpose of developing local partnerships that enhance revenue. McKinsey cited the example of a large beverage firm that was hindered, among other things, by labor laws that made distribution expensive. The firm solved its problem and circumvented these laws by contracting local distribution entrepreneurs. In the end, market penetration was enhanced, at significantly lower costs.

Finally, it is time for multinationals to outsource Indian products and talent globally. India’s products are cheaper, and the country has a vast talent pool to produce these products on a much larger scale. This can be done with an R & D team from India that is tasked to discover new innovations in the country that are relevant to markets overseas.

Sources:
https://www.mckinseyquarterly.com/Strategy/Globalization/How_multinationals_can_win_in_India_2938#
http://www.economist.com/node/21537984

Indian Men Becomes Sophisticated Consumers

India’s modern retail format is changing. What was traditionally primarily women’s domain, is now joined by a growing force of brand and product conscious men. For India’s modern man, shopping is no longer reduced to the absolute necessities. They are increasingly shopping for discretionary products such as apparel, accessories, gadgets, and grooming products, just like their female counterparts.

An article posted recently in India Times revealed a big change on men’s approach to shopping. According to the management of one of the biggest shopping centers in India, the Damodar Mall, the number of men found shopping is increasing dramatically. In one study, it was found that 40% of the customers lining up in the cashier’s area were men. The increase in the number of Indian entrepreneurs who engaged into selling men’s stuff is also a good proof that market is booming.

Indian Men’s Attitude Towards Shopping is Changing

Today it is not only women who love to treat themselves with expensive clothes, flashy gadgets, and other less-than-essential, material things. Through the past years, men were able to unveil the feeling of contentment, excitement and thrill when one goes on shopping. They have realized how essential it is to at least please yourself after a hard day work.

This leap of change happened in the life of Satish Kumar, a 43-year old techie from Delhi. Kumar was once one of the millions of men who find shopping to be not a wise act from someone who’s working so hard for his every earned penny. He never had a quality shopping time with his mother and wife for he really find it boring and tiring.

When the Kumar family decided to divide the shopping chores at their home, Kumar was assigned to take full responsibility on lugging the groceries from a shop. Things went a bit uneasy for Kumar at first. But, a never-expected-to-happen event took place when the Kumar family went on an unplanned shopping.

At the end of that day, Kumar found out that he spent 50,000.00 rubies (USD 992.00) on shoes, a jacket for the upcoming winter, and three formal shirts. Those items were not needed by Kumar that much, he just felt that strange feeling of being attracted to expensive things.

Kumar is now one of the thousands of men whose view about shopping is changed. One obvious proof of the increasing rate of the number of men who just recently indulged into the addictive world of shopping is the increasing number of businesses and clothing line who specializes on men’s garments, accessories and stuff.

What Changed In Their Way of Thinking?

Just like any other things in this world, the change on men’s point of view about shopping has surely reasons behind. Experts consider the following facts as few of the factors that are believed to be the cause why men started to love shopping: a good shopping environment which includes the structural design of the establishment, wide variety of products displayed, the convenience of being able to find all the needed things in just one roof, unending sales and discounts from their favourite brands and an increasing number of metrosexual men.

Another thing that obviously convinced men to spend part of their earnings on shopping is on how they prioritize their look now more than ever. Men became more conscious on their physical appearance making them patronize beauty products created for them. Some considered this as something very gay, but others take it as a man’s way of showing they care about how they look too.

Shimmering Blings

Another unexpected thing that men started to love is the gleam of luxurious jewelries. Although up to this time women are still as addicted to diamonds and gold as before, some men have started to collect jewelries just like some elite women of the society. It was actually recorded that India has the third largest men’s luxury jewelry market according to the Euromonitor 2011’s report. Their findings undeniably show how India’s retail market is changing. Because all things about shopping became so easy since the time that all-in-one malls were created, shopping has become more fun than ever. Good thing that men were able to appreciate it now.

Source:
India Times, ‘Men, Why even they shop till they drop?‘, March 11, 2012

Understanding The New Middle Class Consumer

What does a modern, informed teenager from São Paulo have in common with his New York counterpart? Probably more than with another teenager from his own country but from a smaller city like Manaus, the capital city of the state of Amazonas and Brazil’s seventh largest city. Ethnographic studies show that culture and consumer behavior across the world capitals are more comparable than within a country’s capital and its second- and third-tier cities. This does not suggest that the average, middle class teenager from Manaus has everything in common with another from a place like Hyderabad (India), Chongqing (China), or Krasnoyarsk (Russia). However, it does imply that they are all witnessing an incredible economic development of their countries, and together, with the rest of their generation, they are in fact the driving force behind it. (more…)

Poverty Eradication In Emerging Markets

The economic boom and the subsequent double-digit GDP growth achieved by some of the world’s emerging economies, such as Brazil, India and China, have led many to believe that poverty, inequality and other associated issues could be eliminated even without government intervention or active participation. But a new report by ActionAid, a UK based charity organization, is somewhat startling and to some extent unexpected. In the report, released to coincide with UN World Food Day, ActionAid has listed a number of developed, less developed and developing countries based the efficiency of their programs initiated to give legal, constitutional and social protection to those who need them the most. (more…)