The Great Indian Rope Trick!

628994 — Mon, 16 Nov 2009 11:40:00 GMT

The headlines about the growth of the Indian economy are eye catching, even extraordinary by modern standards. It’s all too easy to be seduced by the romance and promise of India on your first visit.

For 2009/10 gross domestic product (GDP) growth is expected to top 6.9 percent, India is the third largest economy in the world according to the Purchasing Power Parity (PPP) Index of industrial and emerging nations and cumulative direct foreign investment (FDI) is at record levels, soon to break the $100 billion barrier.

It’s predicted that by 2025 the ‘rural deprived’ will drop from 65% of the total rural population in India to 29%. Overall, it’s estimated that nearly 300m people will move out of poverty over this period when the population will increase by 322m. In effect this means that India will have 465m fewer poor by 2025 than if the poverty rate remained at 2005 levels and over a billion less poor people than if the rate had remained stuck at 1985 levels.

The story of India as one of the world’s largest private consumption markets is seductive for many western companies looking to boost sales against a background of weak domestic demand.

CEOs of successful companies are often seduced by the headline numbers but often fail to appreciate that India is land of contradictions.

For example, it’s often assumed that the growing ‘upper middle class’ provides the most profitable customer segment for Western companies looking to do business in India in many categories.

Wrong.

India’s demand structure manifests itself in many counter-intuitive ways – which some commentators call the great India rope trick of numbers! The fact is that lower income groups spend more money cumulatively than other groups for many products, so simply targeting the wealthy will seriously limit your potential.

About 650m people live on less than US $2 a day but account for 33 percent of all consumption and 20 percent of all savings. Income is US $840 billion (PPP) or equivalent to that of South Africa and 90% of Hong Kong’s. They may be poor, but not backward. They are innovative, savvy and embrace technology just like other better-off consumers.

The question is can you add value to their lives and make money out of it as well?

It’s often said that success leaves a trail. But so too does failure.

A good example of not getting it right first time - and perhaps this is even more surprising given its marketing savvy – is Nike’s experience in India.

In 2004, the sports footwear and apparel giant attempted to translate its dominance of the US sportswear market where it enjoyed 40% market share to the Indian market.

It failed.

Nike wasn’t sufficiently aggressive in penetrating the Indian market.

Its marketing budget wasn’t that high, it used standardised promotions using Michael Jordan who wasn’t that well known in India and Nike was relatively slow in introducing the Indian market to the latest designs.

Its competitor Reebok, on the other hand, had a dual market entry strategy: low cost shoes and a brand for women. As a result, sales have doubled since 2004 from US $59m to over US $100m today. Last year the largest Reebok store in the world opened in Hyderabad in Southern India.

Closer to home, UK-based Home Retail Group (HRG), owners of catalogue and mail order business Argos have recently decided not to develop the pilot scheme they had been running.

HRG had entered into a joint venture with Indian retail partners HyperCity and Shoppers’ Stop back in 2005 for six stores outside of Mumbai plus a telephone and internet ordering service.

However, the venture had problems from the start: out of town locations, delays in shipments and stock-outs were just a few of the difficulties.

Most analysts agree that its market entry strategy was flawed: limited stock, very thin catalogue, no differentiation in-store from local competitors, semi-skilled customer service people in stores on low wages with a sales incentive failed to achieve sales targets.

Argos had made the classic mistake. It had over relied on the strength of its brand, just as Nike had done five years earlier - as a reason for pulling in Indian consumers to buy electric kettles at premium prices – it didn’t happen!

Perhaps we need to ask if the pilot scheme actually reflected the true nature of the Argos business model and that perhaps with a re-think they might turn this around. They wouldn’t be the first.

Argos was defeated by stronger local Indian rivals such as Big Bazaar and hadn’t set out to re-establish itself in the Indian market – its market entry strategy was from the totally wrong perspective - ‘inside-out’ rather than from the perspective of its customers - ‘outside-in’. And this resulted in a financial loss of up to £10m.

These examples illustrate an important truth about India.

And that is you have to set out to discover “Your India”. Brands need to reinvent themselves for the Indian mass market if they are to have any chance of generating profitable incremental growth.

And they need to take the long-term view rather than expect to unlock a treasure trove of riches overnight.

We believe that the journey starts with doing your homework and effective executive education that will prepare you for the unexpected.

Guru in a Bottle and IndiaSavvy has developed a pragmatic one day workshop focussed on understanding the Indian consumer and market dynamics by combining IndiaSavvy’s India expertise and Guru in a Bottle’s sales and marketing training expertise in the UK.

Richard Perry, CEO of IndiaSavvy explains: “Our executive education programme often involves building a team ethic for the clients ‘India team’ that will allow them to win support across the company for the India venture”.

In many cases, the Indian venture needs to be integrated into existing company activities.

And unlike many other training initiatives, we make a big effort to get senior management to understand the realities of doing business in India in an open environment that allows all ideas and concerns to be raised and dealt with.

“We have success in getting senior managers working with the same information, sharing learning and knowledge, developing a clear strategy to be promoted to all employees and ensuring that resources are made available within strict project management guidelines,” adds Perry.

IndiaSavvy has people on the ground in India in order to carry out independent due diligence that often forms the basis for a ‘go, no‐go’ decision on the implementation of a proposed project in India. “We work with one of the leading business intelligence and risk management experts in India, as the basis of being savvy about the market” says Perry.

Ultimately, we help companies build a strategy, manage risk exposure and help build the capability of their team based on senior management backing and realism about operations in India.

And it’s no Indian rope trick.

Twitter at the centre of UGC in Mumbai attacks

255762 — Thu, 27 Nov 2008 15:10:00 GMT

Twitter has been highly prevalent in the citizen journalism reports about what has been going on in the terror chaos in Mumbai with reports saying at one time the Indian government wanted people to stop Twittering.

Indian blogger Gauravonomics is saying that Twitter has been one of the best sources for real-time citizen journalism news on the Mumbai terrorist attacks.

Various sources were also reporting that at the height of the terror attacks the Indian government asked for all live Twitter updates from the scene to cease immediately. It was concerned that terrorists were using the updates to keep abreast of the news. Scary thought that terrorists are also early adopters.

A tweet was sent and reposted across Twitter saying: "ALL LIVE UPDATES - PLEASE STOP TWEETING about #Mumbai police and military operations".

Seems fair enough although you might have wanted to stop broadcast media pointing their cameras and updating their websites. If terrorists were monitoring Twitter, they were no doubt looking at news sites to get intelligence on Indian military movements.

The Indian blogosphre has also been highly active and Flickr has too has seen a lot of activity as citizen journalists snapped shots and posted them online.

The Guardian was also reporting on the use of Google Maps page and Wikipedia page and how quickly they were set up.

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The Great Indian Rope Trick!

Twitter at the centre of UGC in Mumbai attacks