Doing Business in IndiaChallenges to Marketers
Prof Ashwin Malshe
Presentation made to
MS MMK Executives
207/04/2023
About Ashwin Malshe
● PhD (Marketing), MMS (Marketing), BE (Electronics)● Seven years of industry experience
Institutional sales
Analytics
● With ESSEC since July 2011● Multiple research interests
Marketing strategy
Marketing-finance interface
Consumer behavior
Social media marketing
● Blogging activitiesMicro-Positioning
Flirting with Finance
Doing Business in India
307/04/2023
Source of Data
● I use several sources of data to get the numbers reported in the presentation. Specific instances are noted on the slides. Wherever the source is not identified, the data come from the CIA World Factbook
Doing Business in India
407/04/2023
The Story of IndiaA BBC – PBS Documentary
Doing Business in India
507/04/2023
India – A Few Statistics
● 7th Largest country by area - 3,287,263 sq km (land and water)28 states and 7 union territoires
● 2nd most populous country in the world – 1.2 billion est.● Secular country
Hindu 80.5%, Muslim 13.4%, Christian 2.3%, Sikh 1.9%, other 1.8%, unspecified 0.1% (2001 census)
● 16 official languages!Hindi 41%, Bengali 8.1%, Telugu 7.2%, Marathi 7%, Tamil 5.9%, Urdu 5%, Gujarati 4.5%, Kannada 3.7%, Malayalam 3.2%, Oriya 3.2%, Punjabi 2.8%, Assamese 1.3%, Maithili 1.2%, other 5.9%
English is the preferred language for most of the commercial and political purposes
● Parliamentary democracyModel borrowed from British. Prime Minister is the head of the government
Doing Business in India
607/04/2023
Population Composition
0-14 Years 15-64 Years ≥ 65 Years0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
% Population
Doing Business in India
707/04/2023
Economy
● GDPPPP terms USD 4 trillion – 5th largest in the world
Official exchange rate USD 1.6 trillion
GDP real growth rate 2010 – 8.8% est. (World Bank)
GDP per capita – USD 3,500
Doing Business in India
807/04/2023
Agriculture Industry Services0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
GDP Contribution and Labor Employed by Sec-tors
% GDP% Labor
Doing Business in India
907/04/2023
Culture
● Conservative in several aspectsWomen, by law, are at par with men. In reality they are treated less than equal
Meritocracy is partially practised
Caste system is weak in the cities but still manifests strongly in the smaller towns
● Families matter more than individualsCulture is more collectivistic than individualistic
• Common to see people taking into account the impact of their decisions on others in the family or even a larger community
• Many decisions become “family decision.” For example, buying a TV, washing machine, or a car may not be decided by one person alone
• Group vacations are common too!
Doing Business in India
1007/04/2023
Culture
● More tolerance towards nonconforming idealsAs long as you don’t interfere with their way of life, tolerance to your practices is
guaranteed• India is perhaps the only country where Jews were not persecuted• Zorastrians (Parsis), the original inhabitants of Iran, live in India without
facing any pressure to relinquish their culture or religion• E.g., on Japanese culture
● There prevails a general sense of inferiority complex due to British occupation
● Many cultural aspects change from state to state
Doing Business in India
1107/04/2023
Political Economy
● Socialism sympathetic policies• Early influence of Soviet Union• A large vote bank resides in rural areas• Agriculture sector is still the largest employers of the uneducated people
● Caste and religion politics is important• Election results are still determined by non-economic reasons
• Caste (reservations in education and government jobs)• Minority religions may vote en-block• Changes in caste and religious policies don’t need huge expenditure and the
results are visible quickly in the form of higher percentage of votes• Poor people vote in exchange of minor benefits
• High levels of illiteracy and poverty combine to create a voter that can be manipulated easily by the politicians
Doing Business in India
1207/04/2023
Political Economy
● Corruption is growing in sizeA huge wealth transfer has been undergoing from the people of India to the
government officials and leaders• Corruption at multiple levels
– Ordinary people have to pay for the services that the government should provide them free of cost– Government officials may collect the appropriate fees but then won’t deposit it with the government– Ministers grant licenses to businessmen in exchange of partnerships, cash, or both– Bribes are paid to cover up irregularities or even crimes
Most of the ministers in power are hundreds and thousands of times richer than an average person in India
Doing Business in India
1307/04/2023
Political Economy
● Government favors rapid expansion of businesses in theoryIn reality bureaucracy has all but stopped the development in India
Very low investment in infrastructure• McKinsey Global Institute report identifies the challenges faced by India
● Weak regulatory enforcementLack of desire to make sure that the regulations are enforced
Corruption thwarts most attempts to enforce regulation
Government provides inadequate resources to regulators
● Uncertain legal structureIn modern economies legal protection to various contracts enables trade
In India legal system is slow as well as corrupt
Courts are overwhelmed by the pending cases
Contracts are not easily enforceable
Doing Business in India
1407/04/2023
Characteristics of Indian Consumer
● Price conscious● Rational
Usually conducts research before buying
Takes into account opinions of others• My personal experience is that Indian friends on Facebook as more
questions about which computer, phone, tablet, etc. to buy
Try to be discreet with large purchases• Potentially safety concerns but more importantly trying to avoid getting
noticed even by the friends and relatives
● Tends to save moreThere is no social security system in India
Doing Business in India
1507/04/2023
Entering India Market
Doing Business in India
Export LicenseFranchi
se
Contract
Manufacture
Joint Venture
Direct Investm
ent
1607/04/2023
Entering India Market
Doing Business in India
Export LicenseFranchi
se
Contract
Manufacture
Joint Venture
Direct Investm
ent
1707/04/2023
Opportunities: Examples
● Telecommunications● Infrastructure● Consumer goods
Doing Business in India
1807/04/2023
Telecommunications
China India USA Russia Brazil0
100
200
300
400
500
600
700
800
Million Mobile Phone Users
Mobile Users
Doing Business in India
1907/04/2023
Opportunities in Telecommunications Sector
● Mobile banking and payment• Most rural Indians don’t have access to easy payment modes such as credit cards• However, mobile phones penetration is deep in rural India• Safe mobile payment systems are gaining popularity
• Reserve Bank of India has introduced guidelines for mobile banking• Mobile banking transactions can be up to Rs 50,000 (USD 1,000) per day• Small transactions don’t need encryption
● Mobile gaming and apps• Mobile gaming in India is expected to grow at 75% per year over the next 3 years• Different estimates put the mobile gaming industry close to USD 1 billion by 2014• IT giants such as Wipro and Infosys are entering mobile app business• Outsourcing is now shifting to app development
Doing Business in India
2007/04/2023
Infrastructure
● MGI report covers many aspects● Opportunities are high in the following areas
• Transportation• Subways• Roads and bridges construction• Shipping ports• Airports
• Power generation and distribution• Energy prices are regulated by the government and weak contracts mean
that these investments can be in trouble if prices change dramatically• Special economic zones• Water purification, recycling, and distribution
• Industrial effluents• Domestic sewage
– Standalone systems
Doing Business in India
2107/04/2023
Case Study: HUL Pureit
Doing Business in India
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