Indian Market Characteristics
In this the 3rd part of my 4 part blog about India and its market, I talk about the major characteristics of the Indian market.
The Indian market is not exactly price sensitive but more cash flow sensitive. They like to spread every dollar as much as possible. Hence for example a leasing option or a deferred payment gains greater attraction than outright purchase. The whole motivation is to do more with less and if the option is to do less due to price, it’s usually the desire for more that wins. The single use shampoo sachet is said to be 90% of the Indian market as against the bigger bottles. While unit cost may be lower, the fact is that the vast population at the bottom of the pyramid can now afford to buy a single use shampoo sachet.
Generalists run most institutions in leadership positions than specialists. They multi task on various areas of a business, industry and technology. So you will have a government officer who runs the Tourism department one day and then the Railway department and then move to economic affairs. It is not even that he is so senior that subject matter knowledge is not important. He is very involved operationally.
Consequently, when something new, higher price, better technology is introduced the TRUST that the decision maker has about the story teller is what often decides the outcome. This is the most crucial aspect of doing business in India be it with government agencies or even private companies. if they trust you, they will listen to you more, question you less and will be ready to take risks for you.
Further to the above, a constant internal question is as about how the decision would affect the existing situation. For example if it means loss of job/business for a existing but competing organisation/system then the resistance is high. This is not to say that competition is not welcomed, but there is a "larger good" attitude that Indians are conditioned about when taking decisions. So even when you will have a private company shifting from vendor A to vendor B due to say lower price, the purchaser feels the pain of the vendor losing the business. He tries to prevent it or reduce it unless he is very unhappy with the vendor.
The resistance to anything new is high, but the first mover who tells the story and shows the picture becomes gospel truth and the standard for the industry as a whole. Again, once the trust is established, the first mover decides for his "customer" a lot of things. Herd mentality is high. Remember the Volvo bus story. Once they became popular and changed the way buses were built, you even had autorickshaws which sported the “Volvo” tag for a better rickshaw. Irrespective of what make bus you traveled in, people demanded a “Volvo”. Volvo became a tag for superior quality and comfort.
Consequently when the companies peers like Benz and Scania came in much later into the market, they had to raise the bar even higher to find acceptance. But Volvo had to to be the first to jump high and set a bar by demonstrating it. Their global reputation did not matter except in opening doors and being given the opportunity.
Everyone wants to protect themselves from accusations of having favoured someone or for failing by taking avoidable risk. So the first customer makes outrageous demands, but, once he succeeds all other customers follow the precedent set since they can say that “he did it, so we did it”. Consequently, there is a tendency to take incremental steps rather than jump orbits for the latest. There is also an attitude of slow and steady wins the race.
The constant question everyone asks irrespective of how popular or successful a product globally is – will it work and suit Indian conditions. Consequently, customers prefer to have a demonstration or proof of concept to bring in new technology. However much one can tend to feel that this may be a facetious question, reality is that field experiences often throw up completely unexpected challenges and they may have nothing to do with technology, but affect it drastically.
Once a new technology/solution is adapted by an end user, the pressure on them to again change or bring in options is drastically reduced unless there is a huge price benefit. So the first mover has the maximum advantages in setting the rules of the game so to speak.
All said and done the involvement of the government, their systems, their influence, and their decisions is widespread across the spectrum of the biz in some way - whether small or big. Consequently, it becomes crucial to identify this aspect by knowing the complete decision chain and working on it if need be from the beginning.
Most Govt departments and agencies tend to take the moral high ground by making the market a level playing field rather than leave it to the market to decide. So, a company/product can be artificially prevented from entry because the existing players gets affected. So while promoting B they will also help the existing A so they do not have huge disadvantages.
Notwithstanding being competitors in the market, there are informal communication channels between large purchasers when new products/suppliers are brought in to compare what prices they quote to the different purchasers. If exposed, the trust is lost and can have very damaging effects on a company. It is hence crucial for a company to cover all these risks when dealing with a customer.
In general the effort to reward ratio is low owing to the long complex chain of command and control involved in the market. For example in order to avoid an agency by being unduly pressured, the agency is clubbed with a completely unrelated group. For example the safety in Railways is under Aviation. While this maybe helps in undue pressure being exercised by a related agency, it also means that someone totally unrelated, uninterested and without the requisite knowledge can be leading the efforts. So the lower level operating staff become more powerful than the "management" in policy making.
India today is on the cusp of change. A whole generation of people who grew up understanding the need for freedom from Britain and being self sufficient while at the same time appreciating the superiority of the westerner has given way to a more self confident generation, worldly wise, supremely self confident and sometimes even arrogant.
Couple these with a basic Indian trait of being unable to say - No, I Dont Know, I cant do this, I am not capable, Not my job etc - and you have a lethal concoction that can explode in your face. The ability to say any of these things is perceived as weakness, as failure, as incompetence and so most don't say this. So judging and handling this HR challenge is a huge task for any company. Perceptions are very different as this picture will indicate.
While there are many more points to write about the Indian market, these will serve as a "Dummy's guide to doing business in India". By way of experience one can write a treatise on this subject.
The link to the 4th and last part of this blog.
Comments