Business in 21 st  century India Yet Another Point Of View
India…a unique ,very complex story  In India today, an Italian lady born a Catholic (Sonia Gandhi) steps aside so a Sikh (...
<ul><li>Understanding India </li></ul><ul><ul><ul><li>Setting the Context   </li></ul></ul></ul><ul><li>The Global Markets...
Did You know that India.......   <ul><li>Is the largest democracy in the world  </li></ul><ul><li>Has one of the most anci...
India…the bad news <ul><li>Inadequate infrastructure  </li></ul><ul><ul><ul><li>roads </li></ul></ul></ul><ul><ul><ul><li>...
…..and some good news <ul><li>Secular tolerance-2nd largest Muslim population </li></ul><ul><li>Stable and sharp economic ...
Why was it this way …. <ul><li>The Hindu DNA-acceptance and karma </li></ul><ul><li>A few hundred years of subjugation </l...
And what has changed…….. <ul><li>Intellect-the main Indian export </li></ul><ul><li>Abundance of knowledge resources- and ...
<ul><li>Political Scenario  </li></ul><ul><ul><ul><li>Strong socialist leanings …… </li></ul></ul></ul><ul><ul><ul><li>Yet...
Till 1991 <ul><li>Psychographic profile </li></ul><ul><ul><ul><li>Literacy 30% </li></ul></ul></ul><ul><ul><ul><li>Techno-...
<ul><li>Political Scenario   </li></ul><ul><ul><ul><li>Liberal Capitalist Regime- but at gunpoint </li></ul></ul></ul><ul>...
<ul><li>Transformation of global economy </li></ul><ul><ul><li>Blurring of business definitions </li></ul></ul><ul><ul><li...
<ul><li>India gets richer </li></ul><ul><li>Goes beyond the big cities </li></ul><ul><li>The creamy layer gets richer and ...
Consumer India: The Good News 12 16 10 5 4 2 14 15 13 15 High UM M LM L Mn HH Mn HH 1996-97 2005-6 NCAER From a pyramid to...
<ul><li>The rise of rural demand </li></ul><ul><ul><li>Rural India accounts for 74 per cent of India's population and 58 p...
Growth in rural income NCAER Mn HH Mn HH 63 38 11 4 3 34 64 25 8 8 High UM M LM L 1996-97 2005-6 The rural poor will becom...
<ul><li>The Rural - Urban Divide </li></ul><ul><ul><li>Is it a strength or a  weakness </li></ul></ul><ul><ul><li>Opportun...
The changing low income consumer <ul><li>From </li></ul><ul><li>Settle for less </li></ul><ul><li>Intimidated by technolog...
<ul><li>India –THE NEW OPPORTUNITY? </li></ul><ul><li>200 Million burgeoning middle class </li></ul><ul><li>Market deprive...
<ul><li>The Pecularities </li></ul><ul><ul><li>Not  one  Market-very heterogenous </li></ul></ul><ul><ul><li>Tyranny of av...
So what’s happening in India now? Some case stories
<ul><li>Long Haulers </li></ul><ul><ul><ul><li>Unilever (HLL) </li></ul></ul></ul><ul><ul><ul><li>BAT (ITC) </li></ul></ul...
Success in India …what made it happen? Multi-pronged strategy to tackle diversity of customer base Leverage world R&D capa...
<ul><li>General Motors </li></ul><ul><li>Ford </li></ul><ul><li>Kellogg </li></ul><ul><li>Pepsi </li></ul><ul><li>Coke </l...
Failures in India… why ? Unified global Strategy replicated in India Tastes for India – Not kept in mind Indian Values and...
<ul><li>Long haul market, ‘hang in there’ </li></ul><ul><li>Not for the faint-hearted </li></ul><ul><li>Under-investing as...
<ul><li>Build costs in tandem with revenues </li></ul><ul><li>Needs international fundamental questions-not solutions </li...
INCOME ASPIRATION IDEOLOGY Fertile Ground for Market Development THE INDIA SOLUTION
<ul><li>Software professionals-but that’s current history </li></ul><ul><li>BPO extended  </li></ul><ul><li>Food , yes foo...
India at 59 <ul><li>As a nation, India has never followed the plot. Just when the world is ready to buy into myth of moder...
 
 
<ul><li>India …….a lesson in humility </li></ul><ul><li>Dhanyavaad </li></ul>
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Managing in 21st century india

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  • - why yet another STORY -this story begins in 1947 – the brits leave -my 28 year story and the changes in india -india through my eyes -we’ve proven that god exists
  • This is not about secularism INDIA IS COMPLEX CONFOUNDING INTRIGUING ENGAGING FASCINATING
  • UNDERSTANDING INDIA-NO MEAN TASK CASE STUDIES WILL SHOW SOME LIGHT
  • More facts from sheet #### India – a political unit of loosely co-ordinated federation of states. But definitely not One Market.
  • Politicos like everywhere else Overturned the laws of scale
  • WHY 1991 AND THE SINS OF 45 YEARS WERE COMING HOME TO ROOST WAS THE POLITICAL STRUCYURE ALL WRONG Steeped in Deprivation POLITICOS KEPT IT SO Ideology – Anti Consumption Aspirations - Low Income - Low Acceptance syndrome Indian Economy in 1990-91 Huge Fiscal Deficits Large External Debt Low Forex Reserves Led to massive reform process And then onto a national upheaval in most sectors
  • It took an earthquake to loosen up the bricks. THAT WAS WHEN THE GUN WAS AT THE HEAD SHOCK TREATMENT
  • Politics gave way to pragmatism As nat inc grew , muscle got exposed The india china story gained ground Aspirations grew Can we do it..finally
  • The three key features in the previous slide are in the context of Changes in World order And specifically in the Indian Economy Managing or Coping
  • The traditional pyramid changeth and the opportunity presents itself
  • Wealth in India Increases so does the PROPENSITY to spend The High income group shall be 15 Mn in 2005-06 that is 75 Mn people (that is more than the population of 60 Mn of UK) The marketeers dream is to capture this rupee The ‘ Economist’ has suggested that India and China shall be the ‘powerhouse of world economy in the 21 st century’ – not surprising that’s where the consumption is.
  • EVERYONE ATTACKING THE TOP OF THE PYRAMID—AND WHY NOT FIRST ---------------------------------------------------------- LOT OF PENT UP DEMAND ------------------------------------------------- STRATEGIES NEEDED FOR THE BOTTOM OF THE PYRAMID –MULTIPLY VAST VOLUMES WITH SMALLER MARGINS=A NEAT PROFIT --------------------------------------------------------------------- FIX THE CONSUMER PRICE AND WORK BACK TO A CHALLENGE COST UNILEVER-NIRMA-CITIBANK-ICICI/AKAIBARON/SECOND HAND PC MARKET ----------------------------------------------------------------------- SERVING LO INCOME CONSUMER NEEDS FAR HIGHER LEVELS OF KNOWLEDGE THINK OF IT AS A DISTINCT MARKET NOT ANOTHER SEGMENT-EG SPELL LENGTH OF LO INCOME MAY BE POOR BUT HIGH ON ASPIRATION
  • The propensity to spend is still lower however increasing and increasing rapidly. Is there an opportunity here ??? This situation represents a huge opportunity for companies to change their mind-sets and their business models (e.g., “the poor can’t afford or have no use for consumer products,” or “we can’t make money in this market”). In 1995, Unilever PLC’s subsidiary in India, Hindustan Lever Ltd. (HLL): Drastically altered the management of its value chain so it could sell a detergent, called Wheel, to the poor. HLL decentralized its production, marketing, and distribution and quickly established sales channels through thousands of small storefronts. HLL adjusted the cost structure of its detergent business so it could sell Wheel at a very low price point and still make money. Today, Wheel has gross margins and a return on capital as good as, or better than, HLL’s higher-end cleaning products, Unilever has used this business model to create a new detergent market in Brazil.
  • There is an opportunity there Second hand Markets for White Goods Sachet Story/the pco story/the cigarette stock story RADO in Urban, Timex in Rurals This situation represents a huge opportunity for companies to change their mind-sets and their business models (e.g., “the poor can’t afford or have no use for consumer products,” or “we can’t make money in this market”). In 1995, Unilever PLC’s subsidiary in India, Hindustan Lever Ltd. (HLL): Drastically altered the management of its value chain so it could sell a detergent, called Wheel, to the poor. HLL decentralized its production, marketing, and distribution and quickly established sales channels through thousands of small storefronts. HLL adjusted the cost structure of its detergent business so it could sell Wheel at a very low price point and still make money. Today, Wheel has gross margins and a return on capital as good as, or better than, HLL’s higher-end cleaning products, Unilever has used this business model to create a new detergent market in Brazil. Itc’s e-chaupal
  • Compare this with the size of UK – 60 Million USA – 270 Million Germany – 85 Million France – 60 Million BUT SHOULD THIS HAVE BEEN THE ONLY FACTOR IN DECISION MAKING THE KELLOGG FORMULATION THE GENERAL MOTORS FORMULATION
  • CHALLENGE – FINDING THE CELL WHERE CELL REVENUE AND COSTS MAKE ECONOMIC SENSE Titan &amp; Timex Surf &amp; Nirma Dove &amp; 501 M800 and the Merc And everything in between 1:10 prices
  • HOPE TO SHOW YOU SOME LESSONS EXPERENTIALLY
  • THEY DID NOT BRING SOLUTIONS BUT BASIC QUESTIONS AND LEARNT KNEELING DOWN
  • KEY TO SUCCESS – INDIAN MANAGEMENT Multi Pronged Strategy Dove to Selling washing soaps to bathing soaps Leverage R&amp;D capability State of the art cars to capture the A Segment High Aspirations Low Income Market Shampoo Sachet/CIGGIE STICK/PCO Logistics HLL Rural thrust-DRILLING THRU ROCK SUZUKI OWN TRUCK FLEET /SERVICE STATIONS ITC chaupal-rural microcredit LOCAL SOLUTIONS AIRTEL-DEFYING THE CAPITAL MYTH
  • GM and Ford – Never recognized the fact that the 2-box cars are the ‘big market’ Pepsi, Coca-Cola, thirst quencher at 10 bucks kellogs – Taste of India ENRON –DIDN’T READ REGULATORY MINEFIELD “ Staying power is meaningless if staying on has no meaning”
  • ASSUMPTION-INDIA IS LIKE WE ARE-THE ARROGANCE OF CORPORATIONS Unified global Strategy replicated in India Kellogs Coke Advertising – Initial days- international Ads---NOW THANDA Hertz Car Rental DishWashers --------------------------------------------------------- Tastes for India – Not kept in mind KFC –FELL FLAT Kellogs – Parantha advt. --------------------------------------------------------- Indian Values and Attitudes Whirlpool– Grahini takes pride in her work So convenience can’t be pitched. Finally Mummy ka Magic DishWashers=WATER/SOAP/GRIME/SERVANTS ------------------------------------------------------------- ‘ Non- value right’ products Lacoste PierRe Cardin GM and Ford did not launch a 2 Box product ----------------------------------------------------
  • STAYING POWER IS MEANINGLESS IF STAYING HAS NO MEANING
  • Its all about consumer Insights Come with an open mind Learn Learn Learn / Unlearn Unlearn Unlearn/ Sachet Story of HLL Cigarette Retailing
  • Managing in 21st century india

    1. 1. Business in 21 st century India Yet Another Point Of View
    2. 2. India…a unique ,very complex story In India today, an Italian lady born a Catholic (Sonia Gandhi) steps aside so a Sikh (Manmohan Singh) could be sworn in as Prime Minister by a Muslim President (Abdul Kalam) to lead a nation that’s 82% Hindu Can you cite another country with such diversity and tolerance??
    3. 3. <ul><li>Understanding India </li></ul><ul><ul><ul><li>Setting the Context </li></ul></ul></ul><ul><li>The Global Markets </li></ul><ul><ul><ul><li>Changing Paradigms </li></ul></ul></ul><ul><li>India Today </li></ul><ul><ul><ul><li>Some Facts……More facts </li></ul></ul></ul><ul><li>Successes and failures… and cases </li></ul><ul><li>Learnings for the Global Manager </li></ul><ul><ul><ul><li>Coping in India </li></ul></ul></ul><ul><li>Some take-aways </li></ul>Structure
    4. 4. Did You know that India....... <ul><li>Is the largest democracy in the world </li></ul><ul><li>Has one of the most ancient civilizations, with a history of scientific enquiry. </li></ul><ul><li>Has never invaded another country ,yet the 3 rd largest armed country, and even a nuclear weapon power. </li></ul><ul><li>Is world’s 4 th largest economy </li></ul><ul><li>Has 29 states; 325 languages; 1652 dialects and many civilisations. </li></ul><ul><li>Has 2 nd largest pool of technical manpower in the world. </li></ul><ul><li>Produces 500,000 doctors, 350,000 engineers and 800,000 engineers every year. </li></ul>
    5. 5. India…the bad news <ul><li>Inadequate infrastructure </li></ul><ul><ul><ul><li>roads </li></ul></ul></ul><ul><ul><ul><li>ports and airports </li></ul></ul></ul><ul><ul><ul><li>power </li></ul></ul></ul><ul><li>Labour productivity issues </li></ul><ul><li>Some archaic laws -eg. Land ,labour </li></ul><ul><li>Socialist hangovers –or posturings </li></ul><ul><li>Intermittent fundamentalism issues </li></ul>
    6. 6. …..and some good news <ul><li>Secular tolerance-2nd largest Muslim population </li></ul><ul><li>Stable and sharp economic growth </li></ul><ul><li>Well established banking and a judicial system </li></ul><ul><li>Very young population-that means hands ,and demand </li></ul><ul><li>Developing into a consumption economy </li></ul><ul><li>Changing bureaucracy </li></ul><ul><li>Declining trade unionism </li></ul><ul><li>Federal and unitary amalgam </li></ul>
    7. 7. Why was it this way …. <ul><li>The Hindu DNA-acceptance and karma </li></ul><ul><li>A few hundred years of subjugation </li></ul><ul><li>And then by politicos </li></ul><ul><li>Erosion of self esteem </li></ul><ul><li>Complex governance issues </li></ul>
    8. 8. And what has changed…….. <ul><li>Intellect-the main Indian export </li></ul><ul><li>Abundance of knowledge resources- and creation of the arbitrage opportunity </li></ul><ul><li>Global acceptance of the Indian mind </li></ul><ul><li>Some visible successes overseas-software , steel , automobiles </li></ul><ul><li>Indian acquisition of overseas companies </li></ul><ul><li>A WORLD OF OPPORTUNITY OPENS UP </li></ul>
    9. 9. <ul><li>Political Scenario </li></ul><ul><ul><ul><li>Strong socialist leanings …… </li></ul></ul></ul><ul><ul><ul><li>Yet feudal in many ways </li></ul></ul></ul><ul><li>Economic Scenario </li></ul><ul><ul><ul><li>Swadeshi - Self reliance rhetoric </li></ul></ul></ul><ul><ul><ul><li>License Raj – Control on capacity production and prices </li></ul></ul></ul><ul><ul><ul><li>Ban on imports of virtually all consumer goods </li></ul></ul></ul>Till 1991
    10. 10. Till 1991 <ul><li>Psychographic profile </li></ul><ul><ul><ul><li>Literacy 30% </li></ul></ul></ul><ul><ul><ul><li>Techno-phobic society </li></ul></ul></ul><ul><ul><ul><li>Aspiration limit -Medicine, engineering, government jobs </li></ul></ul></ul><ul><ul><ul><li>Wealth creation was given the go by PROFIT WAS EQUAL TO PROFITEERING </li></ul></ul></ul><ul><li>Cultural </li></ul><ul><ul><ul><li>Socialistic guilt about consumption </li></ul></ul></ul><ul><ul><ul><li>Idealistic </li></ul></ul></ul>
    11. 11. <ul><li>Political Scenario </li></ul><ul><ul><ul><li>Liberal Capitalist Regime- but at gunpoint </li></ul></ul></ul><ul><li>Economic Scenario </li></ul><ul><ul><ul><li>Liberalized Trade Regime – opening up of India </li></ul></ul></ul><ul><ul><ul><li>Huge Investment inflows </li></ul></ul></ul><ul><ul><ul><li>Merging with the world economy </li></ul></ul></ul><ul><li>Psychographic profile </li></ul><ul><ul><ul><li>Literacy 50-85% </li></ul></ul></ul><ul><ul><ul><li>Technology exposed-and absorbing fast </li></ul></ul></ul><ul><ul><ul><li>Demographics-A very young nation- and getting younger </li></ul></ul></ul><ul><li>Cultural </li></ul><ul><ul><ul><li>Guiltless Consumers </li></ul></ul></ul><ul><ul><ul><li>Pragmatic </li></ul></ul></ul>1991 and onwards
    12. 12. <ul><li>Transformation of global economy </li></ul><ul><ul><li>Blurring of business definitions </li></ul></ul><ul><ul><li>Blurring of geographical boundaries </li></ul></ul><ul><ul><li>Rapid pace of technology change and absorption </li></ul></ul><ul><ul><li>The knowledge economy happens </li></ul></ul><ul><li>Evolution of the Indian Economy </li></ul><ul><li>Implications on Global Managers </li></ul><ul><li>Implications on Companies to do business in India – or from India </li></ul>Context Post 1991 India +
    13. 13. <ul><li>India gets richer </li></ul><ul><li>Goes beyond the big cities </li></ul><ul><li>The creamy layer gets richer and thicker </li></ul><ul><li>Serious structural shifts happening in the Indian consumer market </li></ul><ul><li>Shift away from a supply-constrained economy to a demand-driven one </li></ul><ul><li>The Indian consumer's mindset is dramatically changing </li></ul><ul><li>Austerity is no longer considered a virtue --and debt no longer taboo </li></ul><ul><li>“ Yeh dil mange more” ---the Pepsi generation is here </li></ul>Consumer India #1
    14. 14. Consumer India: The Good News 12 16 10 5 4 2 14 15 13 15 High UM M LM L Mn HH Mn HH 1996-97 2005-6 NCAER From a pyramid to a cylinder - The Richer are getting richer and the poor are getting richer. Finally - the ability will match aspiration.
    15. 15. <ul><li>The rise of rural demand </li></ul><ul><ul><li>Rural India accounts for 74 per cent of India's population and 58 per cent of its disposable income </li></ul></ul><ul><ul><li>Breaking into this market requires innovative thinking and a new strategy </li></ul></ul>Consumer India #2 THE BIG QUESTION …. “HOW TO DRILL THIS ROCK”
    16. 16. Growth in rural income NCAER Mn HH Mn HH 63 38 11 4 3 34 64 25 8 8 High UM M LM L 1996-97 2005-6 The rural poor will become less poorer, but the rural rich not much richer. Aspiration will grow, but perhaps not ability.
    17. 17. <ul><li>The Rural - Urban Divide </li></ul><ul><ul><li>Is it a strength or a weakness </li></ul></ul><ul><ul><li>Opportunity certainly exists </li></ul></ul><ul><ul><li>Creation of many market/product Life-cycles </li></ul></ul><ul><ul><li>Similar aspirations (C & W penetration/telecom explosion)……BUT </li></ul></ul><ul><ul><li>Very dissimilar purchasing power </li></ul></ul>Consumer India #3 An opportunity………………… in disguise
    18. 18. The changing low income consumer <ul><li>From </li></ul><ul><li>Settle for less </li></ul><ul><li>Intimidated by technology </li></ul><ul><li>Feudal </li></ul><ul><li>Reacting and avoiding </li></ul><ul><li>Self denial </li></ul><ul><li>DESTINY DRIVEN </li></ul><ul><li>To </li></ul><ul><li>Stretch for more </li></ul><ul><li>Curious about technology </li></ul><ul><li>Not overawed by power </li></ul><ul><li>Experience seeking </li></ul><ul><li>Affordable indulgence </li></ul><ul><li>DESTINATION SEEKING </li></ul>
    19. 19. <ul><li>India –THE NEW OPPORTUNITY? </li></ul><ul><li>200 Million burgeoning middle class </li></ul><ul><li>Market deprived of international goods </li></ul><ul><li>Pundits said that it was a market ready for all the global brands </li></ul>Consumer India # 4 But was it? … Will it be??
    20. 20. <ul><li>The Pecularities </li></ul><ul><ul><li>Not one Market-very heterogenous </li></ul></ul><ul><ul><li>Tyranny of averages </li></ul></ul><ul><ul><li>Market within markets </li></ul></ul><ul><ul><li>Speciality local markets </li></ul></ul><ul><ul><li>Very demanding consumer emerging </li></ul></ul><ul><ul><li>An amalgam culture happening emerging -new languages and metaphors </li></ul></ul><ul><ul><li>THE DELIGHT OF MARKETING PROFESSORS…..AND MARKET SEGMENTERS </li></ul></ul><ul><ul><li>And the bane of marketers </li></ul></ul>Consumer India #5 “ Whatever you say about India, the opposite is also true”
    21. 21. So what’s happening in India now? Some case stories
    22. 22. <ul><li>Long Haulers </li></ul><ul><ul><ul><li>Unilever (HLL) </li></ul></ul></ul><ul><ul><ul><li>BAT (ITC) </li></ul></ul></ul><ul><ul><ul><li>Suzuki Motor / Maruti </li></ul></ul></ul><ul><li>Later Starters </li></ul><ul><ul><ul><li>Hyundai Motor </li></ul></ul></ul><ul><ul><ul><li>LG </li></ul></ul></ul><ul><ul><ul><li>Samsung </li></ul></ul></ul><ul><ul><ul><li>GE </li></ul></ul></ul>Some Success Stories Glocalisation Is All Very Well But these are the true road warriors
    23. 23. Success in India …what made it happen? Multi-pronged strategy to tackle diversity of customer base Leverage world R&D capability for “Value right” products Provided solutions for a highly aspiring low income market Manage the logistics to address market spread Made for India Strategy And “Made in India’
    24. 24. <ul><li>General Motors </li></ul><ul><li>Ford </li></ul><ul><li>Kellogg </li></ul><ul><li>Pepsi </li></ul><ul><li>Coke </li></ul><ul><li>Enron </li></ul><ul><li>Electrolux </li></ul><ul><li>Whirlpool </li></ul><ul><li>Reebok/Nike/Adidas </li></ul><ul><li>…… .. and the list goes on . </li></ul>“Failures”
    25. 25. Failures in India… why ? Unified global Strategy replicated in India Tastes for India – Not kept in mind Indian Values and Attitudes ‘ Non- value right’ products Replicating Global Strategy
    26. 26. <ul><li>Long haul market, ‘hang in there’ </li></ul><ul><li>Not for the faint-hearted </li></ul><ul><li>Under-investing as bad as over-investing </li></ul><ul><li>Demands strategy complexity –folks and strokes </li></ul>What India means today-Rx An amazing opportunity to Fail….. Or Succeed
    27. 27. <ul><li>Build costs in tandem with revenues </li></ul><ul><li>Needs international fundamental questions-not solutions </li></ul><ul><li>Exist on Earth and Mars concurrently in terms of market and technology practices </li></ul>What India means today-Rx An amazing opportunity to succeed …… ..…or to fail
    28. 28. INCOME ASPIRATION IDEOLOGY Fertile Ground for Market Development THE INDIA SOLUTION
    29. 29. <ul><li>Software professionals-but that’s current history </li></ul><ul><li>BPO extended </li></ul><ul><li>Food , yes food </li></ul><ul><li>Medicare </li></ul><ul><li>Biotech </li></ul><ul><li>Research </li></ul><ul><li>Automotive </li></ul><ul><li>Components </li></ul><ul><li>Two wheelers </li></ul><ul><li>Cars, yes cars </li></ul><ul><li>Components </li></ul><ul><li>and the list goes on….. </li></ul>Not just a market – also a supplier
    30. 30. India at 59 <ul><li>As a nation, India has never followed the plot. Just when the world is ready to buy into myth of modernity, it finds itself harking back to medievalism. It is a narrative that defies even the most ardent storyteller, an idea that can never be encapsulated by mere numbers. Specially in India, torture numbers and they’ll confess anything. </li></ul><ul><li>It is a country in the throes of change, its greatness sometimes diminished by figures, at other times enhanced by them. But as the nation turns 60 next year, a midnight’s child ready for a new beginning, the facts and figures also show us where we stand in the community of nations – a country not afraid to confront, and surmount, its worst truths. …ANON.. </li></ul>
    31. 33. <ul><li>India …….a lesson in humility </li></ul><ul><li>Dhanyavaad </li></ul>

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