Deciphering the Indian Business Space

Ray Titus
 


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Managing a Business activity in India is not the easiest of tasks. In fact it is one endeavor where even some of the world’s biggest organizations have failed. The single reason for this is the flawed perceptions most business concerns have about the Indian Business space. The media in a certain way has contributed to these perceptions. There are certain cities in India that seem to have hogged the limelight with the Western press and they include Bangalore and Hyderabad. But remember the realities are not necessarily what you read about, in these media stories.

Some of the ‘must know’ realities about India, which can help any Business concern wanting to make an entry, are –

Land of Diversity

Do not ever assume India to be one big homogenous mass. That is, the consumers cannot be slotted as one single huge entity. Unlike most western countries where elements such as language and religion could contribute to a certain homogeneity that could exist in society, in India there are myriad factors that contribute to unbelievable diversity. Take language for example, the constitution of India has stipulated the language for official communication as English and Hindi. In addition, it classifies a set of 22 scheduled languages which are languages that can be officially adopted by different states ( there are 22 States and 7 Union territories ) for administrative purposes, and also as a medium of communication between the national and the state governments. Though Hindusim is the religion that is practiced by majority ( 81% ), Islam, Christianity, Sikhism, Jainism, Buddhism and Zoroastrianism, are practiced too. Food Habits too change from region to region. Religion, Caste restrictions, geography, weather, and influences from other countries ( invasions and occupations ) have all contributed to the diversity in Food Habits.

All of this points to a diverse population that cannot be painted with the same brush in terms of characterisations. Doing business in India almost stipulates an understanding of this diversity. Some Business Concerns have understood this very well and have therefore ended up being successful in their ventures in India.

The best example of this is McDonalds. The primary reason for their success apart from their ‘competitive’ pricing which made the burger extremely affordable, is their menu. The menu at McDonalds hase been customised for the Indian palate. ‘Beef’ does not feature on the Menu, due to religious considerations. The customised Menu, features items such as ‘McAloo Tikki Burger, Maharaja Mac and McCurry among other Indianised dishes. Contrast McDonalds with Kelloggs which failed to understand the Indian palate and so found the going tough in India with its offerings.

What also needs to be borne in mind is that at times, customisations should not just be restricted to the country, but must also be extended to specific regions. In the business of Food and Beverage the Menu items must differ from region to region. For example, to the south of India, where vegetarianism prevails, this aspect must be reflected in the Menu Items. Similarly Coffee as a beverage finds greater favour in the south of the country.

The Great Indian Middle Class

The Indian ‘Middle class’ seems to be the favorite target for almost all Multinational businesses and their offerings. The consuming patterns of this class of people is definitely undergoing a transformation, with a significant quantum of earnings being spent on ‘discretionary’ items such as entertainment, consumer durables, books and so on. Yet this class is not necessarily ‘brand’ driven and therefore evaluates every product and service purchased, in terms of ‘value for money’. It does not have any qualms in shifting to a non branded offering if the offer were perceived as better value. The ‘value’ perception in many cases is ‘price’ sensitive. India's individual purchasing power may climb from $2149 in 1999 to $16500 in 2040. The brand driven culture in India can be limited to a few metropolitan cities, such as New Delhi, Mumbai, Bangalore, Chennai and a few other smaller cities that have attracted a migrant crowd because of the growth in services sector in them. They include Pune, Hyderabad and Gurgaon.

The states that promise a burgeoning middle lie to the south and west of the country. These states show a promise of a huge middle class community with the necessary purchasing power at least by the year 2020. Contrasted against these states would be the states to the east of the country that include Bihar, Uttar Pradesh and Orissa which will take even more time to develop this ‘middle class’. Add to this the North eastern states, and the picture is not too rosy.

Bureaucracy

The bureaucratic system that is found in India is stifling slow, problematic and corrupt. In the words of Mr. T N Seshan, former election commissioner and Cabinet Secretary, ( quote ), “We have the largest number of laws covering and uncovering almost every aspect of human life. But the inside out of Indian democracy today is that law is obeyed more in circumvention and defiance than in effect…All that we built to enshrine freedom has been eroded by a plethora of decrees, laws, rules, ordinances which serve a few; it serves the State, but not the citizens. Today it has become desperately difficult for the citizens to defend themselves against the onslaught of laws, rules and ordinances, and against the overpowering destruction of individual freedom and dignity…there is palsy at the centre and paralysis at the periphery…We have practiced socialistic principles for 46 years or more. At the end of it, today, 20% of India’s population takes 25% of its gross national income and 40% of the population takes 2% of the national income. ”

Just recently, the visiting Singapore Prime Minister, Lee Hsien Loong commented on the Indian Bureaucracy and called it a stumbling block to investment by Singapore companies in India. He remarked that Singapore companies wanted to invest in hotels in India but the Indian bureaucracy was “too complicated" and outsiders took a long time to understand it.

An example of the difficulties posed by the Indian Bureaucracy is the case of American Agro Business Company, Cargill Corporation. In spite of a go-ahead from the central government for a $15 million Salt processing Venture, problems from the State of Gujarat, where the plant was to be located, forced Cargill to shelve the project.

Prof. Ray Titus is a faculty Member at the Alliance Business Academy, Bangalore, India. He specialises in the area of Strategic Management. He also actively trains and consults for the Industry.

e-mail : raytitus@greatorion.com

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