Succeeding in the Indian Market

Discussion
Aug 05, 2011

Through a special arrangement, presented here for discussion is a summary of a current article from the Third Eyesight blog.

In most conversations we have had with international brands in the last two to three years, India consistently appears on the list of the top-five markets in which to expand. Over the last two decades, some European and North American brands have seen profits while others are wondering what fit of madness brought them to tackle this market.

Typically, when looking at a new market, the very first question anyone would ask is: What is the market potential for the brand? However, you should also be prepared to ask yourself: What need is the brand addressing and what is the value being offered by the brand? Just because a brand is huge somewhere else in the world does not automatically make it desirable to the Indian consumer.

While most brands want to target the Indian middle-class millions, their sourcing structure and strategy places them out of the reach of most of the population. Brands that have succeeded in creating a significant presence, maintaining their brand image and having a sustainable operating model, have almost uniformly had a significant amount of local manufacturing. Notable examples from fashion include Bata, Benetton, Levi Strauss, Reebok, among others. Domino’s and McDonald’s have also collaborated with and developed their vendors locally to bring down costs and improve serviceability.

Apart from the costs and margins, another important issue is that of the adaptability of the product mix. Brands that are sourcing locally and have a significant product development capability in India are also able to respond to specific needs of the Indian market better, rather than being driven by what is appropriate for European or North American markets. The famous “Aloo-tikki” burger by McDonald’s is a great example of a product specifically developed for the Indian consumers. Not just that, India is probably McDonald’s only market in which its signature dish, the Big Mac, is not sold.

Of course, flexibility in tweaking the product to suit Indian market can become a concern when it amounts to losing control over the brand direction and mutating away from the core proposition that defines the parent in the international market.

Another key question is: What is the degree of control that a company wants to exercise on the brand, the product, the supply chain and the retail experience of the consumer? The corporate structure itself may be determined by the internal capabilities and strategies of the international brand in their home market or other overseas markets. A brand that has presence through a wholesale business in the home market may not have internal capability or experience in retail and would look for an Indian partner who can fill in the gap.

During our work, we have come across both extremes — companies that want to manage the minute details of the India business out of their own head offices, as well as companies that are so hands-off that they only want to hear from their franchisee or licensee when things are especially good or particularly bad. While a balanced, middle-of-the-road approach would be the logical one in each case, in reality individual styles of the top management have a huge influence on the approach actually taken.

Discussion Questions: Do you agree with the author’s list of key questions brands should ask themselves when entering a foreign market such as India? Which aspects mentioned in the article — sourcing structure, product adaptability, control issues, etc. — tend to be most overlooked?

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9 Comments on "Succeeding in the Indian Market"


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Ian Percy
Guest
7 years 5 months ago
R-E-S-P-E-C-T! Sock it to me. Sock it to me. Sock it to me. The old egotistical “ugly American” mindset can raise its head in retail too. After all “WE” are #1 in everything, aren’t we? Surely the rest of the world wants to be just like us and our divine calling is to make it so. Well when the continent of Africa has significantly higher growth than the US and we rank so low in worldwide education scores, maybe it’s time we toned it down a little. If we approach other cultures with the goal of learning from them, it will not take long for them to want to learn from us. Then we reach the holy grail of profitable collaboration. Commandment #9 of my 11 Commandments is: “Whatever you want you must first give away.” In this case that applies most of all to RESPECT. When I work in other cultures my one dominant thought is not that somehow they are lucky I came to help, but that I am far and away the… Read more »
Al McClain
Guest
Al McClain
7 years 5 months ago

Another issue that Ian touched on is a lack of curiosity on the part of mid-managers. I can’t tell you how many brand managers I’ve talked to over the years who were only interested in the markets for which they were responsible, which usually meant North America.

How about retail and CP companies sending their “up and comers” on a three week ’round the world tour, visiting stores in key markets around the world? Hard to measure the ROI, no doubt, but I’m guessing it would easily pay for itself if one thought about the long-term and retained these employees.

Dr. Stephen Needel
Guest
7 years 5 months ago

I’ll take a different perspective–quite often the biggest problem is hype. Ever since I started doing research in India 15 years ago, the hype has been that as part of BRIC, the middle class was growing, eager to consume, and waiting for more traditional Western-type stores to appear (which were just over the horizon). Western style grocery is still only 10% of the market and while the hype continues, it is showing little to no growth.

You want to play in India? As Ian says, play by their rules. Learn their market, find the empty niches, and fill those niches. Accept that control in any BRIC market is not what you’re going to have in Western markets. Life is different in these places; embrace or die.

James Tenser
Guest
7 years 5 months ago

India’s market sits high on the target lists of western consumer products and retail companies not because of its particular traits, but because of its size.

“If only they’d consume like naive Americans…”

We’ve seen this movie before in emerging markets. The lessons are enduring: Don’t assume your home market positioning, product or strategy are suitable as-is. Don’t assume existing competition is wholly inferior. Don’t try to impose your business culture on the locals. Be ready to develop a market-specific master system for sourcing, distribution, operations. Be relevant.

Tarang’s advice is sound in this regard. I would add that India is a vast and culturally varied market that may require multiple, concurrent strategies for different geographies or cultural groups. Treat it as a monolith at your peril.

Rick Moss
Guest
7 years 5 months ago

Stephen – lack of growth, if that’s the case, is certainly a concern for retailers making the investment, but it should be noted that 10% of the Indian population (those you say shop in western-style grocery stores) would represent about 121 million people. If they formed their own nation, it would be the 11th most populated in the world, coming in just behind Japan.

Craig Sundstrom
Guest
7 years 5 months ago

What need is the brand addressing and what is the value being offered by the brand?

Do I agree with this? Of course! How could I–or anyone else–NOT agree with this? It’s the question anyone should ask, first and always, here or abroad. Curiously absent from this piece is any discussion of the myriad regulations in India (or anywhere else); whether this is because it is written only from the marketing point of view, or because the author doesn’t want to scare everyone away, I don’t know.

Mike Osorio
Guest
Mike Osorio
7 years 5 months ago
After many years of watching the experience of retailers and brands who have attempted to crack the Indian market, it is amazing to see new entrants repeat the same mistakes: American (and other western countries) arrogance, assumptions around the vast quantities of ‘ready consumers’, and lack of partnering with local expertise. Like most emerging markets, India is a country of vast potential but one which requires humility, patience and flexibility. India is also a huge country with many distinct cultural and economic zones each of which require careful study. My advice for low and mid-market products and services: get in soon. The Indians themselves are more than capable of developing and delivering what the Indian mass consumer desires. Long term, and probably sooner than we imagine, only luxury brands and other difficult to acquire or duplicate products and services will need to be sourced internationally. Next on the horizon will be the rise of the Indian international brand. It is time for western and especially American companies to learn humility and understand the need for… Read more »
Tarang Saxena
Guest
Tarang Saxena
7 years 5 months ago

The success of a business in any consumer market is more an outcome of the business choices made than of the regulations in that market. In the witness box are the international brands that have not only succeeded but also established leadership positions in their respective segments.

To Stephen’s point, it is perhaps not a coincidence that these very successes are also the ones that have not gone into the market riding on hype, but on business models that address the realities of the Indian market.

Richa Gupta
Guest
Richa Gupta
7 years 5 months ago

Very interesting write-up stressing the need for localization, personalization and targeted marketing practices to (successfully) establish a presence in emerging countries. Rick Moss makes one of the most important points – even a minuscule percentage of the Indian population is by itself a fairly huge number! The revenue-generating potential that it’d give a retailer is tremendous as is the size of the available market.

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