New market penetration: a passage to India

Growth-focused North American companies can no longer ignore India.   Traditionally known as a center for business process outsourcing, India is rapidly joining the ranks of the first world as a major market for consumer goods and services.

According to the IMF, India is projected to generate GDP growth of 9.7% in 2010 and 8.4% in 2011.  Much of this growth can be traced to burgeoning consumer demand.  According to Stewart Hall, economist for HSBC Securities Canada:  “India is essentially a high-growth economy.  It’s a story fueled to a large extent by domestic consumption.”    Domestic growth, according to the IMF, is being driven by a “low reliance on exports, accommodative polices and strong capital inflows.” 

There remains considerable room for economic expansion arising from strong economic fundamentals.  These include: growing urbanization, a large, young workforce, and an expanding service sector.  All of these factors are contributing to the emergence of a sizable, materialistic and ambitious middle class. According to McKinsey, the India’s middle class is forecasted to grow from about 5% of the population to more than 40% by 2025, creating the World’s fifth-largest consumer market.

 Given the opportunity, what factors should companies consider when crafting their Indian-entry strategy?

Understand that India is a country of contrasts – A week and fractured government and hundreds of millions of poor and illiterate people coexist with a dynamic management class and World Class technology.

Consider India’s diversity – India is unique in many ways:  home to 1.2B people, governed by 28 different states plus the federal government; possessing 24 official languages with hundreds of dialects; absorbs a myriad of religions, ethnic groups and cultures and; encompasses a variety of climatic zones ranging from the frigid Himalayas, to monsoon-drenched jungles.

Be wary of business challenges – Despite advances, India continues to score poorly on every “Ease of Doing Business” measure.  In most of the country, the infrastructure is inadequate and will be challenged to support future growth without substantial investment. Regulations and bureaucratic practices can vary dramatically between jurisdictions.  Corruption is rife and many local firms continue to enjoy tacit privileges not available to foreigners.

Get engaged locally – While your market entry strategy should be driven by the type of products and services delivered, firms need to cultivate an extensive coterie of local (private and government) contacts and business partners who can smooth market penetration and stick handle through government regulations.  Foreign companies must also be mindful of local sensitivities and customs and not appear patronizing or uncaring.

Consider new business models to serve consumers – Although national wealth has been growing steadily, meaningful disposable income is now only reaching the vast majority of people.  To reach these consumers, North American companies need to be creative about how to deliver useful products at significantly more affordable prices than their home markets.  Examples of the radical product innovation required include the $2500 Nano car and the recently announced $35 government-developed tablet PC.  Finally, expect incumbent firms to aggressively defend their market share.

Leverage India’s strengths as part of a larger regional strategy – With its British legal system, widespread use of English and strategic location, India can effectively serve as the hub of a larger South Asian network.

Be patient – Despite its riches, India remains a frustrating market for the uninitiated.  Market penetration and investment returns will require longer time horizons.  Moreover, developing the necessary trust with local parties will take a considerable amount of time and effort. 

For more information on our work and services, please visit the Quanta Consulting Inc. web site.


2 comments so far

  1. Natarin on

    Thanks for the great info. I find these posts have a lot of info. I can’t wait to get a second to implement all these great thoughts. Thank you very much.

  2. […] As examples, both Korean states technically remain in a state of war; nuclear-armed states India and Pakistan have fought 4 wars over the past 60 years and still have a simmering dispute over […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: