[Case Study]- Business Growth Strategies for India

01/09/2017
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India has emerged as the fastest growing economy in the world.  A study reveals that the Indian economy will grow by 7.2% in FY 2016-17, which is the strongest among G-20 countries.

The current global economic downturn has forced many companies to think beyond their typical market boundaries. Though the market is growing, exciting and opportunities are unlimited, entering the Indian market poses many strategic challenges for them.

A deep understanding of the country’s multifaceted market dynamics and deep insights into the Indian consumer outlooks and expectations are essential to your success in Indian market.

Indian Economy Statistics: Know India Better

  • National Income Rank – 6th (nominal GDP); 3rd (GDP at PPP)
  • GDP of India – $2.454 trillion (nominal GDP); $9.489 trillion (GDP at PPP)
  • GDP growth rate – 7.2%
  • Per-capita Income Rank – 141th (nominal GDP); 123rd (GDP at PPP)
  • Per-capita GDP value – $1850 (N) ; $6,616 (PPP)
  • Inflation (CPI) : 1.54%
  • Sectoral contribution to GDP – Agriculture – 17.32% Industry – 29.02%, Services – 53.66%
  • Labour contribution to GDP – Agriculture – 47% Industry – 22%, Services – 31%
  • Main Industries- Software, Petroleum Products, Chemicals, Pharmaceuticals, Agriculture, Textiles, Steel, Transportation Equipment, Machinery, Leather, Cement, Mining, Construction
  • Total Export Value- $276.28 billion
  • Total Import Value- $384 billion
  • Export Goods- Precious metals (14%), Textiles (14%), Chemical products (14%), Minerals (12%), Machines (9%), Metals (8.1%), Transportation (7.6%), Vegetables (5.9%), other (15.4%)
  • Import Goods- Crude oil (18%), Machines (18%), Minerals (10%), Chemical products (9.8%), Gold (9.6%), Metals (6.9%), Diamonds (4.7%), Plastics (3.7%), Transportation (3.7%), other (15.6%)

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India: An Attractive Destination for Businesses

According to Ernst & Young (EY) firm, India is the most attractive destination for businesses in the world.

Organization for Economic Co-operation and Development (OECD) forecasts on the growth rate of India are 3.4% for 2013-14, 5.1% in FY 2014–15, 5.7% in FY 2015–16 and 7.2% in 2016-2017.

India’s nominal GDP stands at $1.53 trillion, making it 10th largest economy in the world and with purchasing power parity (PPP) at $4.06 trillion, India’s economy is 4th largest in the world, According to the International Monetary Fund.

India is among the top three strategic growth markets that companies turn to when looking to expanding their global footprint and increase business success.

The increasing demand due to its population makes the country a good market. Sectors expected to do well in the coming years include automotive, technology, life sciences, and consumer products.

India is today ranked as one of the most attractive investment destinations across the globe because of favorable demographics, huge workforce & outsourcing support, Geographical advantages and continuously improving Infrastructure support.

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Market changes, huge invasions in foreign direct investment, increasing foreign exchange capitals, booms in IT and Real Estate and booming capital markets spur the country’s continued growth.

Advantages in India

  • With a population of just over 1.21 billion, India is the world’s second most populous country, after China.
  • India’s increasing middle class has been one of the major attraction points, owing to its high purchasing power.
  • India has an estimated 600 million young people below 25 years – the future workers of the world.
  • The country also has a large pool of technical manpower which presents opportunities for industries looking to use the technical talent on a large scale.

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With this demographic advantage, India has the potential to become the economic engine of the world in the future by contributing the largest work force to the global economy.

Challenges Companies Face in India

India presents lucrative business opportunities, but both foreign and domestic enterprises face difficult challenges in guiding their businesses here.

  • India is a complex market due to regional diversity, large rural-urban divide, dominant unorganized markets and multiple legal and administrative systems.
  • A complex bureaucracy and lack of proper infrastructure facilities amplify these challenges.
  • The biggest challenge that most multinational companies face is the Indian governance framework, which is tangled between the Central and State structures.
  • Also, duties and levies undergo frequent revisions during the Annual Central and State budget exercise.

Market Entry Strategies

Keys to market entry success in Indian market are diverse-

  1. Ability to understand the diverse market and strategies towards specific regions and income groups
  2. Molding the offerings according to the target group can help gaining early acceptance
  3. Integration of informal sector into the core business model followed by gaining access to relevant networks
  4. Consistency and reliability in approaching the market, and patience to realize results
  5. Patience to understand and obtain mandatory licenses and approvals, crucial for business operations
  6. Outsourcing services and manufacturing emerges as some 6 of the leading route to market for FDI investments

Can your Company compete in India?

  • Market & competition assessment
  • Legal & regulatory assessment
  • Customer assessment
  • Entry barrier assessment

It is important to understand the client’s industry and think wisely about how you can compete with established local companies.

Brands that are Market ‘Breakers’

The Indian economy is continually evolving and growth opportunities are present across multiple sectors.

The companies need to understand the bureaucracy and regulatory issues in India. Then, the Indian consumer is not just a homogeneous mass. Each State is different in language, food, and behavior. Their cultural icons and subjects are different.

Here are some brand examples that have proven to be market breakers-

#1 McDonald

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McDonald’s entered India in 1996; it had faced several challenges.

It took so much of time to study the market that is so diverse in terms of the geographical mixture, the consumer diversity as well as in the variety of food items the Indians had.

Challenges
  • Price was too high for the Indian consumers to be affordable
  • Majority of the Indian population was vegetarian and even in non-vegetarian category the people did not eat beef (main ingredient of its food menu)
  • The people in India worship cows as motherly figure and it had to face a lot of resistance in the Indian market with political parties like Shiv Sena
  • Faced competition from lots of local food retailers who had an edge over McDonald’s in terms of prices, and knowledge of the local tastes
Solution

The company then went through a complete localization strategy.

  • McDonald’s changed its product menu to accommodate the vegetable burger given the large vegetarian population.
  • It introduced the Value Meal in its menu, making it affordable for Indian masses.
  • It also altered its store design and even reduced the product price by close to 15%.

They continued with a philosophy of Quality, Service, Cleanliness, and Value (QSCV) in the Indian market.

#2 LG

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LG’s first make an effort to enter India during the early 1990s struggled as a result of difficulties encountered mainly working with the local importers.

Challenges
  • The failure of joint ventures
  • De-licensing of the consumer electronics industry leading to the withdrawal of its operations in Indian market
  • Low brand awareness among consumers
  • High levels of competition from the local players
  • Sensitivity of Indian consumers towards pricing issues
Solutions

The company overcame all challenges by using innovative marketing strategies, specifically planned for Indian markets.

  • Introduced an innovative technology in consumer electronics and home appliance segment
  • Initiated a close tie-up with a leading cricketer for an advertisement
  • Took care of the health of the Indian consumers, launched “Golden Eye” Colour Television, “Health Air System” AC, and “Health Wave system” Microwave Oven etc.
  • The company also reduced its costs

This shows that how these brands were able to turn around their fortune and be a successful brand in the Indian market the second time around by learning from the mistakes they had made for the first time.

Conclusion

Indian market has complex structure because of diversity among people of the country that have ever changing tastes and demands.

The brands failed at first mostly because they failed to understand the dynamics of the Indian consumers as well as the markets they were going to serve.

Therefore, they had to restructure their strategies and then enter the market with an entirely changed mindset as per the market dynamics.

In today’s scenario, for any brand to succeed in Indian market, the companies need to shift their focus from forming inclusive strategies for the overall market to the strategies that adapt to the local market conditions in the India.

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