Doing Business in India ver 2.0


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This is a part of the presentation I made to the executives who are doing MS-MMK in France and visiting ESSEC Singapore campus. The presentation paints only a partial picture of India and therefore should not be used as a guide to do business there. Nor should it be used as a manual to understanding India consumer, culture, legal system, or anything related to India. The standalone presentation is necessarily out of context. A discussion along with this presentation provides a more helpful exercise.

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Doing Business in India ver 2.0

  1. 1. Doing Business in IndiaChallenges to Marketers<br />Prof Ashwin Malshe<br />Presentation made to<br />MS MMK Executives<br />
  2. 2. About Ashwin Malshe<br />PhD (Marketing), MMS (Marketing), BE (Electronics)<br />Seven years of industry experience<br />Institutional sales<br />Analytics<br />With ESSEC since July 2011<br />Multiple research interests<br />Marketing strategy<br />Marketing-finance interface<br />Consumer behavior<br />Social media marketing<br />Blogging activities<br />Micro-Positioning<br />Flirting with Finance<br />2<br />04/10/2011<br />Doing Business in India<br />
  3. 3. Source of Data<br />I use several sources of data to get the numbers reported in the presentation. Specific instances are noted on the slides. Wherever the source is not identified, the data come from the CIA World Factbook<br />3<br />04/10/2011<br />Doing Business in India<br />
  4. 4. The Story of IndiaA BBC – PBS Documentary<br />4<br />04/10/2011<br />Doing Business in India<br />
  5. 5. India – A Few Statistics<br />7th Largest country by area - 3,287,263 sqkm (land and water)<br /> 28 states and 7 union territoires<br />2nd most populous country in the world – 1.2 billion est.<br />Secular country<br /> Hindu 80.5%, Muslim 13.4%, Christian 2.3%, Sikh 1.9%, other 1.8%, unspecified 0.1% (2001 census)<br />16 official languages!<br /> Hindi 41%, Bengali 8.1%, Telugu 7.2%, Marathi 7%, Tamil 5.9%, Urdu 5%, Gujarati 4.5%, Kannada 3.7%, Malayalam 3.2%, Oriya 3.2%, Punjabi 2.8%, Assamese 1.3%, Maithili 1.2%, other 5.9%<br />English is the preferred language for most of the commercial and political purposes<br />Parliamentary democracy<br />Model borrowed from British. Prime Minister is the head of the government<br />5<br />04/10/2011<br />Doing Business in India<br />
  6. 6. Population Composition<br />6<br />04/10/2011<br />Doing Business in India<br />
  7. 7. Economy<br />GDP<br />PPP terms USD 4 trillion – 5th largest in the world<br />Official exchange rate USD 1.6 trillion<br />GDP real growth rate 2010 – 8.8% est. (World Bank)<br />GDP per capita – USD 3,500<br />7<br />04/10/2011<br />Doing Business in India<br />
  8. 8. 8<br />04/10/2011<br />Doing Business in India<br />
  9. 9. Culture<br />Conservative in several aspects<br />Women, by law, are at par with men. In reality they are treated less than equal<br />Meritocracy is partially practised<br />Caste system is weak in the cities but still manifests strongly in the smaller towns<br />Families matter more than individuals<br />Culture is more collectivistic than individualistic<br />Common to see people taking into account the impact of their decisions on others in the family or even a larger community<br />Many decisions become “family decision.” For example, buying a TV, washing machine, or a car may not be decided by one person alone<br />Group vacations are common too!<br />9<br />04/10/2011<br />Doing Business in India<br />
  10. 10. Culture<br />More tolerance towards nonconforming ideals<br />As long as you don’t interfere with their way of life, tolerance to your practices is guaranteed<br />India is perhaps the only country where Jews were not persecuted<br />Zorastrians (Parsis), the original inhabitants of Iran, live in India without facing any pressure to relinquish their culture or religion<br />E.g., on Japanese culture<br />There prevails a general sense of inferiority complex due to British occupation<br />Many cultural aspects change from state to state<br />10<br />04/10/2011<br />Doing Business in India<br />
  11. 11. Political Economy<br />Socialism sympathetic policies<br /><ul><li>Early influence of Soviet Union
  12. 12. A large vote bank resides in rural areas
  13. 13. Agriculture sector is still the largest employers of the uneducated people</li></ul>Caste and religion politics is important<br /><ul><li>Election results are still determined by non-economic reasons</li></ul>Caste (reservations in education and government jobs)<br />Minority religions may vote en-block<br />Changes in caste and religious policies don’t need huge expenditure and the results are visible quickly in the form of higher percentage of votes<br />Poor people vote in exchange of minor benefits<br /><ul><li>High levels of illiteracy and poverty combine to create a voter that can be manipulated easily by the politicians </li></ul>11<br />04/10/2011<br />Doing Business in India<br />
  14. 14. Political Economy<br />Corruption is growing in size<br />A huge wealth transfer has been undergoing from the people of India to the government officials and leaders<br /> Corruption at multiple levels<br />Ordinary people have to pay for the services that the government should provide them free of cost<br />Government officials may collect the appropriate fees but then won’t deposit it with the government<br />Ministers grant licenses to businessmen in exchange of partnerships, cash, or both<br />Bribes are paid to cover up irregularities or even crimes<br />Most of the ministers in power are hundreds and thousands of times richer than an average person in India<br />12<br />04/10/2011<br />Doing Business in India<br />
  15. 15. Political Economy<br />Government favors rapid expansion of businesses in theory<br />In reality bureaucracy has all but stopped the development in India<br />Very low investment in infrastructure<br />McKinsey Global Institute report identifies the challenges faced by India<br />Weak regulatory enforcement<br />Lack of desire to make sure that the regulations are enforced<br />Corruption thwarts most attempts to enforce regulation<br />Government provides inadequate resources to regulators<br />Uncertain legal structure<br />In modern economies legal protection to various contracts enables trade<br />In India legal system is slow as well as corrupt<br />Courts are overwhelmed by the pending cases<br />Contracts are not easily enforceable<br />13<br />04/10/2011<br />Doing Business in India<br />
  16. 16. Characteristics of Indian Consumer<br />Price conscious<br />Rational<br />Usually conducts research before buying<br />Takes into account opinions of others<br />My personal experience is that Indian friends on Facebook as more questions about which computer, phone, tablet, etc. to buy<br />Try to be discreet with large purchases<br />Potentially safety concerns but more importantly trying to avoid getting noticed even by the friends and relatives<br />Tends to save more<br />There is no social security system in India<br />14<br />04/10/2011<br />Doing Business in India<br />
  17. 17. Entering India Market<br />15<br />04/10/2011<br />Doing Business in India<br />
  18. 18. Entering India Market<br />16<br />04/10/2011<br />Doing Business in India<br />
  19. 19. Opportunities: Examples<br />Telecommunications<br />Infrastructure<br />Consumer goods<br />17<br />04/10/2011<br />Doing Business in India<br />
  20. 20. Telecommunications<br />18<br />04/10/2011<br />Doing Business in India<br />
  21. 21. Opportunities in Telecommunications Sector<br />Mobile banking and payment<br /><ul><li>Most rural Indians don’t have access to easy payment modes such as credit cards
  22. 22. However, mobile phones penetration is deep in rural India
  23. 23. Safe mobile payment systems are gaining popularity</li></ul>Reserve Bank of India has introduced guidelines for mobile banking<br />Mobile banking transactions can be up to Rs 50,000 (USD 1,000) per day<br />Small transactions don’t need encryption<br />Mobile gaming and apps<br /><ul><li>Mobile gaming in India is expected to grow at 75% per year over the next 3 years
  24. 24. Different estimates put the mobile gaming industry close to USD 1 billion by 2014
  25. 25. IT giants such as Wipro and Infosys are entering mobile app business
  26. 26. Outsourcing is now shifting to app development</li></ul>19<br />04/10/2011<br />Doing Business in India<br />
  27. 27. Infrastructure<br />MGI report covers many aspects<br />Opportunities are high in the following areas<br /><ul><li>Transportation</li></ul>Subways<br />Roads and bridges construction<br />Shipping ports<br />Airports<br /><ul><li>Power generation and distribution</li></ul>Energy prices are regulated by the government and weak contracts mean that these investments can be in trouble if prices change dramatically<br /><ul><li>Special economic zones
  28. 28. Water purification, recycling, and distribution</li></ul>Industrial effluents<br />Domestic sewage<br />Standalone systems<br />20<br />04/10/2011<br />Doing Business in India<br />
  29. 29. Case Study: HUL Pureit<br />21<br />04/10/2011<br />Doing Business in India<br />