The intense euphoria experienced by global multinationals at the thought of doing business in the Indian marketplace of nearly 700 million people was short-lived. Many consumer product companies found, to their disappointment, that the Indian consumer was very different from their home country consumer. For many foreign companies, doing business in India is gut-wrenching. Indian consumers can be difficult to read, and local rivals can be surprisingly tough. Political squabbles, bureaucratic delays, infrastructure headaches, and unprofessional business practises create one obstacle after another. Foreign companies are often viewed with suspicion.
But there are a few common factors in the success stories in which multinational companies have sold well in India’s consumer goods segment; these five factors best explain these successes:
Here’s my advice for maximising the above to make your own efforts in India pay off.
Eighty per cent of Indian demand for any industry’s products is expected to be in the middle or lower market segments. As a result, multinationals are tempted to replicate their global product offerings for similar segments. Beware: The products and price points that are competitive in India are often significantly different from those that work well in other countries. In particular, in India, companies must reach into the middle and lower-end segments or they may end up as niche high-end players, with insignificant revenues and profits. This is quite difficult for many multinational corporations to contemplate, as they are used to more mature markets – in fact, the price points and product mix decisions are very different even from the demand in the former Soviet Bloc countries embracing free markets.
A common myth is that the lowest price tag will always lead to quick gains. Indian consumers, even in the lower-end segments, will pay a premium if the value of superior features and quality is seen to far outweigh their cost. This is especially true of consumer white goods where the quality and service are key offerings. LG Electronics re-engineered its TV product 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 with a price differential of 10 per cent. LGE is now one of the top three consumer durable goods and electronics companies, with revenues of nearly $1 billion in India. Also, Toyota Motor captured nearly a third of the multi-utility-vehicle (MUV) market by offering a significantly superior product at a limited price premium.
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