Trade knowledge / India: The Big Emerging Market—Part 4
Date: 2013-08-05
India: The Big Emerging Market—Part 4
India's economy remains beset by stubborn inefficiencies that have hindered progress and prosperity for decades. It has a decrepit transportation system, inadequate communication and electrical infrastructure, and an obstructionist bureaucracy. To succeed in this complex country market, international marketers must have a clear understanding of Socio-Cultural, Technological, Economic, Ecological and Political/Regulatory (STEEP) environment in which people and businesses live and operate.
Critical success factors for these corporations include: product innovation and customization, multiple segmentation, local sourcing, innovative retailing, outsourcing, and use of third party distributors. Successful foreign companies in India share some characteristics. Strategies and operating practices adopted by successful global players can be described as critical success factors for international marketers. Looking beyond "Global Indians"
Multinationals in the grocery, durable-goods, and packaged-goods sectors entered India when restrictions on foreign investment were relaxed less than two decades ago. Some companies have adopted a specialty-player strategy, catering to a small segment of "global Indians" and marketing products much as they would be marketed to any such customer around the world. These companies concentrate on a few big cities. Their business model is low risk and easily rolled out, can often be sustained initially through imports, and requires a limited distribution network. Although businesses of this kind can be profitable, their sales volumes are typically modest and will grow only as fast as the segment does. In many ways, this strategy misses the point of entering a market as large as India. Product Innovation and Customization
The most successful multinationals in India are those who resist the temptation merely to replicate their global product offerings. Products and price points that are competitive in India are often considerably different from those that work well in other countries. Frequently companies must develop completely new products to compete at target price points set by local competitors. For example:
Toyota Motor captured nearly a third of the multi-utility-vehicle (MUV) market by offering a significantly superior product at a limited price premium. Indian consumers attach significant importance to lifetime ownership costs; they are willing to pay a price premium for durable goods.
Hyundai reduced the engine output of the "Santro" brand in India to keep its fuel efficiency high, priced its spare parts reasonably, and made more than a dozen changes to the product specifications to suit Indian market conditions and requirements.
HP Labs in India identified power outages as a key factor limiting the access and utility of computers in rural areas, so it designed a community PC that can run on car batteries.
Multiple Segmentation
LG Electronics (LGE), reengineered its TV production specifications in order to develop three offerings specifically for India, including a no-frills one to expand the market at the low end and a premium 21 inch flat TV for the middle segment. By keeping the price of the latter offering to within 10% of the price of TVs with conventional screens, LGE succeeded in securing its favorable share of the market. The strategy led the company to a top three position in the country's consumer durables and electronic market in a little over three years, with revenues of nearly a billion dollars in India. Innovative Retailing
In India organized retail distribution systems reach less than two percent of the market. There is considerable pressure to find innovative ways of reaching retail consumers. A third party distribution system is crucial to capturing demand created by the superior price to value offerings available in smaller cities and rural areas. Successful multinationals such as Castrol, LG Electronics and Unilever have built deep third party distribution networks that serve second tier cities and villages. In the last decade, companies selling fast-moving consumer goods have drawn rural consumers into their markets using innovative strategies such as bicycle-based distribution services, smaller packaging, and extended credit. Outsourcing Logistics Management
Having outsourced traditional logistics activities such as outbound/inbound transportation, customs clearing, import/export management and outbound/inbound warehousing, the new generations of corporations in India are looking to outsource non-traditional logistics requirements such as reverse logistics, inventory management, order processing, distribution, labeling and packaging. Multinationals must learn from best practices adopted by the domestic corporations. Modes of Entry
While joint ventures are still crucial to gaining access to privileged assets in industries including metal and mining and oil and gas, the trend is to go to the market on their own via foreign direct investment. Multinationals such as Hyundai and LGE have achieved real success in India and have bypassed joint venture entirely. Both these companies have built global-scale manufacturing here making it a global manufacturing hub capable of serving other country markets. Mobilizing Regulatory Environment
Even in deregulating industries in emerging markets like India, the most successful multinationals have invested time and energy to identify and understand the key policy makers, to formulate robust positions for investment, and even to recommend regulatory changes. These companies have garnered support from constituencies such as state governments and industry trade groups and associations.
As home to Asia's oldest stock market and the world's largest democracy, India holds an enormous promise for companies around the world. Market success, however, comes to those who enter the country with the right attitude, long-term commitment and an open mind. To succeed in this market companies must invest time and resources to understand local consumers and business conditions and develop relationships with various stakeholders within the country. Building a supply chain from scratch, developing interest in product categories, redesigning the products, developing multiple price points for various market segments, and outsourcing the logistical and other activities are critical to success in India's market.
( linda )16 Jan,2012
Previous: India: The Big Emerging Market—Part 3 Next: Dealing with Conflict in International Trade
1.The news above mentioned with detailed source are from internet.We are trying our best to assure they are accurate ,timely and safe so as to let bearing users and sellers read more related info.However, it doesn't mean we agree with any point of view referred in above contents and we are not responsible for the authenticity. If you want to publish the news,please note the source and you will be legally responsible for the news published.
2.All news edited and translated by us are specially noted the source"TradeBearings".
3.For investors,please be cautious for all news.We don't bear any damage brought by late and inaccurate news.
4.If the news we published involves copyright of yours,just let us know.
