rediff.com
Interesting article. Gotta run but will make comments soon.
The importance of competition
One of the stupidest comments I have read in recent times was the one made by the newly appointed country head of a fresh line of consumer electronics. In his excitement to sell his brand of products, he declared that
China was 20 to 25 years technologically ahead of India. Mainland China,
that is. Needless to say, the gentleman in question was selling a low cost
Chinese brand not exactly known for its technological flair. Nor for quality.
As a result, it has opened to what trade pundits in Bollywood would have
called empty halls.
Indian consumers know exactly what is good, what is not. They are clever,
informed, price canny and yet very technology savvy. They like to buy
quality brands but not at prices that would make them look silly. I
remember how Samir Jain as Vice Chairman of The Times of India group
would spend valuable time poring over his international travel itinerary to
ensure that he got the most efficient mileage and the best prices out of his
agent. No, it was not because he was parsimonious. He wanted to simply
make sure that he got the best deal at the best possible price. This is a
typically Indian trait and explains why so many rich people or their wives
actually do their own daily shopping.
Over the years, this could well diminish. People are becoming more status
conscious. While the Internet is spawning home delivery stores all over the
world there is no reason for shoppers in Bombay or Calcutta or New
Delhi to remain different from the rest in an era in which everyone is
wanting to desperately conform. But the Indian habit of driving a hard
bargain and buying a good product at a good price is unlikely to yield way
and, with greater globalisation, could actually increase simply because the
choices are becoming that much more. Which is why, if you look carefully,
you will find that only the good brands that are ready to sell at a realistic
price are doing well out here.
After all, the average Indian spends 50 per cent of his pre-tax earnings
only on food, as compared to 10 per cent in the United States if the
International Food Policy Research Institute is to be believed. Fifty per
cent! Which, post tax could go upto even 70 per cent! No wonder he puts
so much effort into getting the price and quality right. Also, compared to
people elsewhere, he has so little left to spend on other things (given his 50
per cent spend on food and his amazing propensity to save at least another
25 per cent, despite increasing consumerism) that he is extremely careful
while making his choices. Instant purchases are always minimal. A lot of
thought goes into buying anything.
Caution is a crucial virtue and even as choices increase, his expectations
are also rising. He wants more and more for less and less. More quality.
Better technology. Superior finish. Unbeatable style. Cheaper price. He is
also getting it. In his colour televisions, Walkmans, watches, audio
systems, furniture, laptops, mobile phones, cameras, crockery, cars. They
are all becoming better, smarter, more affordable.
Initially the MNCs thought that they could dump anything on us and it
would sell simply because Indian consumers were used to shoddy, local
brands that shortsold quality, service and value for money. They soon
figured out how wrong they were. KFC outlets went empty. Ford and
Opal never took off. Mexx packed up and left. Akai was forced to change
its local partner. Sony dropped its prices. Pierre Cardin shirts vanished
from the shelves. Whirlpool desperately struggled to stay afloat. Panasonic
was just heard of, never seen. Neither in homes; nor in shops. IBM got
negligible market share. Baskin Robbins, after the initial hype, simply
petered out. Even Mercedes Benz realised that the Korean van they were
trying to sell in the Indian market under their brand name had no takers.
Not unless they sold it at Korean prices.
Those who had presumed that the Indian market was a cakewalk suddenly
found they were all wrong. The huge 350 million middle class they were
told that was just waiting to lap up firang goods simply did not exist. What
actually existed was a middle class that was less than half in number and
far more informed about quality and pricing than they could have imagined.
These buyers knew exactly what was available in the world and at what
cost. They were also ready to do without things they could not afford.
And, in any case, there was this hugely flourishing grey market that could
feed their every need at affordable prices. They knew exactly where the
cheapest Versaces came from. They knew which wholesaler sold
Swatches at the best prices, where the best Rosenthals could be imported
from without paying for them as per the company pricelist.
Of course, not all the brands that came in did badly. Many cut through the
hoopla and spent quality time on designing the right entry strategy. A few
of them were smart enough to figure out pretty early in the day that the
only way to the heart of the average Indian buyer is through his pocket.
Give him a world class product at a reasonable if not exactly affordable
price and he will somehow beg, borrow and save to buy it. This explains
the success story of Maruti cars, Aiwa music systems, Nokia mobile
phones.
Many among those who started off wrong, changed their pricing policy
midway and began to do better. Some of the older brands, like Philips for
instance, rewrote their pricelist, brought out new products, new styles and
refashioned their image. The car companies are also now introducing
better and far more cost efficient models. While a slew of Indian brands,
are fighting back with a vengeance and introducing improved products at
equally competitive prices. Example: the home grown Tata Indica.
In other words, it is competition that is forcing Indian products to become
better, cheaper. Just as we, in turn, are forcing international brands to bring
to India their best range at the most affordable price. The sheer size and
potential of the Indian market is making the MNCs more circumspect,
more value conscious. While we have also realised that unless we focus on
quality and cost, our brands are doomed. This realisation will slowly blur
the dividing line between what we produce and what the MNCs bring in.
The quality will come closer and closer. So will the pricing. Which is
exactly as it should be if we want to be globally competitive.
That is how Japan became a world class manufacturer. That is how
Taiwan, Korea and China improved their technology, relearnt skills,
brought down costs and became exporting nations. This is the way India
will also go once the protectionist era becomes history. Our talent base is
phenomenal. Our skills are world class. Our technologists are among the
best anywhere. The only thing we lack is the will to work to exacting
standards.
Luckily, we have no option now. We have to compete. We have to learn
what quality means in a free market. The walls we have built around us are
already collapsing. We have no choice but to compete as equals with
everyone else and win or lose on the basis of our price, quality and
technology. Manipulating political decisions in North Block will no longer
help.
It is time to become strong, self reliant, competitive and show the world that what we have done in information technology is just a blip on the
screen. There is much more to come. We must show the world that India
is ready for the next century. To take charge of its own destiny and, in the
process, redefine its industrial might. |
