BBL Summary (October 15, 2012)
Rural India: The Emerging Market
Founder & CEO, MART
Today's presentation will cover several topics. First, opportunities for Japanese businesses in India will be introduced. Next, the Bottom of the Pyramid (BOP) will be discussed. Finally, a question and answer session will take place in order to answer any questions which the audience may have. Japanese companies such as Toyota, Honda, and Suzuki first came to India in 1984 to sign joint-venture collaboration agreements with Indian companies. These collaborations for the most part were very successful. As an example, the Honda collaboration with Hero Motors in India produced more motorcycles last year than Honda did in Japan. A similar story is that of the Maruti Suzuki India Limited collaboration. Once again, Maruti-Suzuki produced many more vehicles in India last year than Suzuki did in Japan. This shows the great potential of the Indo-Japanese collaboration. However, in the 1990s as the Japanese economy started slowing down, Japanese companies started to focus more on domestic issues and less on India. In the last 10-15 years, many Korean companies such as LG Corporation, Samsung, and Hyundai have moved into the Indian market and enjoyed success. Hyundai has become the second largest car manufacturer in India. If Japanese companies had continued to maintain their presence in India, it is likely that Hyundai would not have been able to have become such a big player in the Indian market. India is a very complex country, whereas Japan is relatively homogeneous. There are 21 languages, presenting a significant challenge. Another issue is the culture. It is said that the culture changes every 10 kilometers. Officially, there are 56 socio-cultural regions. There are also large variations related to a multitude of parameters. Kerala has a literacy rate of 93% as opposed to Bihar with only 63%. Similarly, income varies greatly in different states. The income per capita in Goa is almost 10 times that of Bihar. With all of this in mind, India is a very difficult country in which to do business. Furthermore, India could be seen as being broken down into three distinct Indias. India 1 comprises 50 large cities. India 2 comprises about 8,000 small towns. Finally, India 3 comprises around 640,000 small villages. The consumer behavior of India one is similar to that of New York, Tokyo, or London. However, Indias 2 and 3 have very different consumer behavior trends due to low income levels and low exposure. Looking at TV ownership, in India 1, it stands at around 50% as compared to only 12% in India 3. One point worth noting is that the share of the gross domestic product (GDP) is similar across all three regions. Therefore, companies should make an effort not to ignore any region by using different strategies in relation to each India. As India is such a complex country, it may appear at first glance that it is not worth investing. This would be a mistake, as most of the developed markets such as that of the United States, Europe, and Japan have slowed down and now have almost no GDP growth. India's GDP has been growing at an average rate of 8% over the last 10 years and has a very large population. Furthermore, the average age is only 25 years old, which means that most Indians are at the beginning of the consumption curve. It is also estimated that consumer spending will rise by 360% in the next 10 years. Finally, India is emerging as a global innovation hub. On the basis of all that has just been mentioned, it would not be a good idea to ignore its enormous economic potential. Leading from this, of the 1.2 billion people in India, 600 million earn less than $1 per day, 530 million people earn $1-$4 per day, and 70 million people earn over $4 per day. By 2020, the annual household income is expected to triple. The number of people earning $1-$4 per day is expected to increase to 800 million people. Therefore, the potential...
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