Navigating India's complex market using actionable intelligence

Copyright © 2013 ValueNotes Database Pvt Ltd. All rights reserved.
Navigating India's
complex market using
actionable intelligence
May 2013

INDEX
About ValueNotes
Structure of Indian markets
CI strategies for India
Case studies

About ValueNotes
• Background
• Experience
• Recognition

4Copyright © 2013 ValueNotes Database Pvt Ltd. All rights reserved.
From data to decisions…
Background
Level of education Qualification
India’s premier research & consulting firm
Corporate office in Pune, India
Adherence to strong ethical framework
Established in 2000
Global partnerships

~ Over 100 CI projects in the India geography in the last 5 years
Experience in serving highly specific needs
 Market potential in India for state-of-the-art power conditioning solutions and electric power distribution equipment of a US-based
manufacturer
Opportunity assessment
 Profiles of major chemical manufacturers in India, including information about their products, product strategies, pricing, revenues,
organization charts, future plans, etc.
Competitor profiles
 Pharma: competitive landscape for a psycho-active substance - assessed its therapeutic potential in India and China; and established
the stage of development by competitors
Product launch intelligence
 Comparison of competitors of an MRO services company, on service focus, senior management experience, global delivery capabilities,
ability to scale, BCP infrastructure, and implementation capabilities, etc.
 Due diligence on hedge fund companies based in India
 Niche non-dairy segment: investigated how competitors were able to price their products more competitively
Competitor practices / benchmarking / evaluation
 Global market monitoring for over 20 companies
News monitoring

…ValueNotes’ research is highly regarded
Recognition
Our research has been quoted in the international media…
Awards
• Black Book of Outsourcing: Nominated to the top-10 ranking three years in a row (2007 to 2009)
• Nasscom Emerge 50: Nominated to the 50 emerging companies list in 2009
Nominated to present at several SCIP conferences
2011 Orlando, USA • Competitor profiling
2010 Sao Paulo, Brazil • Social media for CI
2009 Chicago, USA
• The deep web unfolded: effective use of the
invisible web tools for CI
2009 Chicago, USA
• Competitive intelligence offshoring: how
much is too much?
2008 Rome, Italy
• CI in India - perspectives of a local
practitioner

Structure of Indian markets
• Structural characteristics of Indian markets
• Organized vs. un-organized sectors
• Small scale industries (SSI) sector
• Grey market
• Diversity
• Under documentation
• Decentralized statistical machinery
• Problems with Government statistics

…pose challenges for performing CI
Structural characteristics of Indian markets
Large
unorganized
sector
High level of
fragmentation
Large grey
market
 Unorganized - unregistered and/or unregulated
 Very large number of small enterprises
 Goods/services bought or sold, without paying taxes
Low level of
documentation
 Data/statistics on large chunks of economic activity
is not collected and/or collated

… the unorganised sector is critical to the Indian economy
Organised vs unorganised sector
% GDP
% of Workforce
% GDP
% of Enterprises

…mainly comprises of proprietary firms
Micro Small and Medium Enterprise sectors
 45% of industrial employment
 50% of manufacturing output
 40% of exports
 8% of GDP
% of MSME Sector % of Registered MSME Sector

…make it more difficult to do CI
Grey market
 Large grey markets, particularly in electronics,
pharmaceuticals, branded clothing, etc
 Grey market distribution is thought of as a viable
solution for overstocking and over production
 Difficult to size grey markets
India has a huge grey market for electronics
where goods are sold at 20-25% discount rates
60-90% of iPods in India are sold in the grey
market

Andhra
Pradesh
Arunachal
Pradesh
Assam
Bihar
Chhattisgarh
Goa
Gujarat
Haryana
Himachal
Pradesh
Jammu
and
Kashmir
Jharkhand
Karnataka
Kerala
Madhya
Pradesh
Maharashtra
Manipur
Meghalaya
Mizoram
Nagaland
Orissa
Punjab
Rajasthan
Sikkim
Tamil
Nadu
Tripura
Uttar Pradesh
Uttaranchal
West
Bengal
West
North
South
East
Diversity
 28 States and 7 Union Territories
 22 officially recognized languages
 Different taxation / regulatory
norms across states
 Regional cultural nuances
 High differentials in income,
education
 Rural urban diversity
 Different states have different
levels of development and growth
It’s like doing business in > 30 countries!
The Indian curry

…key hurdle for effective CI
Under documentation
Fragmentation
Inadequate statistical
machinery
Weak or no industry
associations
Under documentation Immature market
Diversity
Large unorganised sector

Divergence in depth and breadth across states
Decentralised statistical machinery
CSO
Coordination, standard
setting & training
NSSO
Large scale statistical
surveys
Census of IndiaMinistries/
Departments
Government of India
DES - Directorate of
Economics and
Statistics
National Statistical Office
 66 state subjects – including health, police, agriculture, libraries, museums, education, mining, gas, many
types of taxes, etc
 97 central subjects
 47 joint domain subjects
Co-ordination &
Advice
Ministry of Statistics
and
Program Implementation
Home Ministry

Government statistics may also need to be validated…
Problems with Government statistics
 Existence of gaps in information
 Delays in publication of results
 Available data not easy to find
 Large and frequent revisions of published results
 Discrepancies in official statistics from different sources
 Lack of transparency in statistical operations
Water pipelines is a key infrastructure area.
There is no data on length of water pipelines in
India, their age, materials used, etc.
- How can the government plan its investment?
As much as 40% discrepancy in the import
figures of an engineering company as recorded
by DGCIS
- How reliable are the import figures?

CI strategies for India
• CI strategies in India
• Getting to Government data
• Heavy reliance on primary research
• Identifying external touch points
• Primary research
• Approaches and methodologies
• Question of ethics

CI strategies
…jugaad and innovation
CI strategies in India
High reliance on primary
research
Innovative methodologies –
proxies, extrapolation,
triangulation, validation
Low reliance on
desk research
CI Strategies

Published macro-economic data is quite good
Secondary information sources
As much as 40% discrepancy in the import figures of an engineering
company as recorded by DGCIS
- How reliable are the import figures?
Category Source Data Available
Data available (Rating 1-4)
Comprehensiveness Quality Recency
Economy
RBI, Economic Survey,
CMIE Economic
Intelligence Service,
Investment
Commission, IBEF
Macro data
Micro data
Research & Analysis
Paid databases
Trade
Ministry of Industry &
Commerce, RBI,
Economic Survey, FICCI,
IBEF
Macro data
Micro data
Research & Analysis
Company
data
CMIE Prowess, Ministry
of Corporate Affairs,
CRISIL
Macro data
Micro data
Research & Analysis
Paid databases

Some industries are reasonably well covered
Information sources
Telecom
COAI, TRAI, Ministry of
Information Broadcast,
Industry magazines,
published research
Macro data
Micro data
Research & Analysis
Paid databases
Auto
ACMA, SIAM, ARAI,
WIAA, industry
magazines, published
research
Macro data
Micro data
Research & Analysis
Paid databases
FMCG
CIFTI, Ministry of Food
Processing Industries,
IMRB, AC Nielsen,
published research
Macro data
Micro data
Research & Analysis
Paid databases

Banking &
Financial
Services
RBI, IBA, AMFI
Macro data
Micro data
Research & Analysis
Paid databases
Real Estate
BAI, CREDAI, ACRI,
published research
Macro data
Micro data
Research & Analysis
Paid databases
Chemicals
Ministry of Chemicals
& Fertilizers, industry
magazines, ICMA,
ISCMA Indian
chemical portal,
published research
Macro data
Micro data
Research & Analysis
Paid databases
Engineering
Dept. of Chemicals &
Fertilizers, TIE,
industry magazines,
published research
Macro data
Micro data
Research & Analysis
Paid databases
… but most industries suffer from a lack of quality micro data
Information sources

Look in the right place…
Getting to government data
 Identify which government departments are the touch-points for the activity to be researched
 Contact the government department/ explore their websites
 Right to information can yield unpublished data that is available with the authorities
Key
Government
touch-points
Industrial
licensing
authorities
Regulators
Tax authorities
Environmental
agencies

…so you can get (virtually) any info you want
Heavy reliance on primary research…
Competitors
Bankers Customers
Sources
Suppliers
Industry
associations
Dealers/Retailers
Distributors
Industry experts
Ex employees
Recruitment consultants
Government agencies
Social networking
associations
and others

…..gave us a validated information on the plans
Identifying external touch points
Construction
contractors
Distributors and
suppliers of raw
material
Neighboring units
and local grapevine
Local HR consultants
for blue collar
hiring
Logistics service
provider
Expansion plans
of a pharma
company in rural
UP
Every transaction leaves a trail….

…need appropriate approaches
Primary research
 References and connections important
 Cultural diversity & sensitivity
• Language
• Background of respondent
• Interpreting responses
• Gift giving versus money giving

…multiple approaches to obtain reliable intelligence
Approaches and methodologies
 Validation & triangulation
 Use of proxies & multipliers
 Extrapolation
Validation
Validate each assumption, data point and also triangulate the total market size
 Multiple sources for one data point
 Industry experts
 Market intermediaries (distributors, traders, dealers, retailers, etc)
 Upstream and down stream estimates for intermediate goods
 Proxy indicators

Ethical CI is the only sustainable approach…
The question of ethics
 Unethical ways of gathering information are
prevalent in India
 ‘Under the table dealing’ required with public
authorities like the police, judiciary and
bureaucrats
 Misrepresentation is common
Ethical CI
Honest
recommendations
No
misrepresentation
No conflict of
interest
Laws of the land

Case studies
• Indian consumer finance market
• Food ingredient manufacturer losing market share

Understand borrowing patterns in lower & middle income groups
 Purpose
 Lenders
 Market Dynamics
 Growth
 Profitability
Undocumented, unorganised, fragmented….
Indian consumer finance market
Market Segmentation
 By type of loan
 By type of lender
 By income of borrower
Future Estimates
Growth Drivers
Product innovation
Increased penetration
Interest Rates
Demographics
Competitive Analysis
 Product comparison
 Profitability
 Strategies to target LM
Customer Decision Making
 Product comparison
 Availability/ Service
levels
 Customer perceptions
Market sizing
Urban Lower
Middle Class

Fragmentation, unorganised sectors and no documentation…
Challenges
Challenges Solutions
Definition of target groups Secondary research
On the demand side: No literature on lending/ borrowing
patterns for low income groups
Intensive primary research - 300 odd interviews across 4
cities
High degree of difficulty in conducting interviews:
suspicion among respondents
Use of appropriate approaches for different respondent
types – language/ wording of questions, mode of interview,
etc.
Working out costs and loan yields of unorganized lenders Multiple measurements allowed validation and triangulation
Supply side: multiple informal lenders & lack of lender data Validation and triangulation of every data point

High reliance on primary research
Methodology
Banks
Money
Lenders
Pawn
Brokers
Credit
Co-ops
LENDERS Occupation
Location
Market size
 By Lender
 By Purpose
Market Segmentation
Growth
Total Market
Growth Projections
Products & Economics
BORROWERS
NBFCsOthers
Chit
Funds
Income
Secondary Research
 Demographic data, data on some organized players, potential contacts, definition of target segments, etc
Primary research Primary research

Marry field data with demographic and secondary data
Analysis and validation
Field Data – 300 interviews in metro, tier 1, tier 2 and tier 3 cities
 Average borrowing per year per household for salaried individuals in each city
 Average borrowing per year per household for self employed individuals in each
city
 Average borrowing by purpose
 Average borrowing by type of lender
Demographic data
 Number of households in the appropriate income group in each city
Demand side
estimates
Supply side
estimates
Field data + secondary data – over 60 interviews with lenders to low income
borrowers
 Average lending and terms of lending
 Estimated number of lenders per city
Validate

Market size estimated in the range of $4.8 – 6.1 bn in 2003
Findings
Value of borrowing by lender Value of borrowing by purpose

CI in undocumented, unorganized, fragmented markets
Food ingredient manufacturer losing market share
MNC food ingredient manufacturer losing market share to very small regional competitors
 How is their product of high quality?
 How are they selling at a low price?
 How have they built up their distribution chain?
Company background
Sourcing and
cost structure
Distribution
 Company history
 Promoters and their stakes
 Company financials
 Manufacturing facilities and offices
 Technology
 Equipment
 Raw materials
 Manufacturing
 Sales and distribution network
 Margins across the distribution
chain
 Promotions and incentives
 Discounts

For challenging data requirements, primaries and more primaries…
Challenges
Challenges Solutions
Competitors small private companies with complex
company structures
Relied on ROC documents and a LOT of primary research (over
70 respondents in all)
No literature on the product or industry
Interviews with industry experts, food technology institutes and
large number of distributors and customers
Import data not reliable
Augmented import statistics with calls to suppliers in China,
Malaysia, etc.
Customers and distributors spread all India
Large number of interviews with distributors and customers of
all sizes across cities of all sizes
Many diverse sources of information
Built up the picture like a jigsaw with bits from multiple places.
Lot of validation involved.

High reliance on primary research
Methodology
Field visits to offices and
manufacturing locations of
competitors
Secondary Data
 Lists of distributors across cities
 customers across cities
 Food technology institutes and
experts
 suppliers of raw materials
 equipment manufacturers
 Import data for key ingredients
Primary data
 Customers
 Competitors (multiple levels)
 Distributors
 Importers
 Food technology experts
 Raw material suppliers
 Equipment manufacturers
 Ex- employees of competitors
Jigsaw
Pieced together to obtain actionable intelligence

Creativity in sourcing information ensured success…
Findings
Profiled activities of 3 key
competitors and analyzed their
strengths and weaknesses
Identified competitors’ sources
of raw materials and hence the
source of their cost advantage
Intelligence on competitors’
distribution strategy
Identified opportunities and threats for the clients
Identified multiple areas for cost reduction, identified
alternate sources for equipment, raw materials & packaging
Recommended restructuring of terms with distributors -
Need for greater flexibility in terms and level of paperwork
Analyzed future plans of the
competitors and their
implications for the client
Unearthed a plan by a competitor to set up a large
manufacturing unit using technology support from a
Chinese equipment supplier

Competitor
profiles
Competitive
benchmarking
CI process
consulting
CI learning
and
development
Market
intelligence
Rumour
confirmation
M&A
intelligence
Partner
identification
Due diligence
Opportunity
assessment
Thank you
Look forward to your feedback…
www.valuenotes.com
Indian Markets
www.sourcingnotes.com
Outsourcing Intelligence
www.valuenotes.biz
Research & Consulting
ValueNotes | Pune, India | T: +91 20 6623 1700 | E: research@valuenotes.co.in

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