Procter & Gamble’s India sales grew by over 21 percent in the second quarter of this year. India’s largest consumer products company, a unit of Anglo-Dutch Unilever, PLC, reported that its sales were up 9 percent. Michigan’s Amway registered an annual growth rate of 19 percent in India last year.
Enamored by these numbers — and encouraged by a new wave of reforms to retail, airlines, broadcast, and power sectors — executives who previously ignored India are making a dash for it. But many of them will jump headlong into disappointment, if not disaster. Here’s four common mis-perceptions that guarantee failure:
India is a Monolithic Country
Politically, India is a sovereign republic. But it’s composed of 28 states with 23 official languages. As a consumer marketer, you’re much better off thinking of India as a continent, much like Europe.
If you sell skin care products, for example, cool winters in northern states create dry skin conditions that simply don’t exist in humid cities such as Mumbai and Chennai. Skin textures also vary dramatically from Haryana in the northwest to Kerala in the south. So do preferences for fragrance: The largest selling soap in southern India is Santoor (from India’s own Wipro) which uses turmeric and sandal as key ingredients. But Unilever’s Lux and other brands are much more popular in the north and the east.
Furthermore, Indian consumers look at many product categories through the prism of social class. For example, vehicles such as Toyota’s Innova resemble the typical minivan or SUV favored by American moms. But in India they are perceived as commercial vehicles or taxis, and few self-respecting mothers who can afford one would choose to buy it. It’s beneath her class.
Don’t rely on a single India strategy. Understand the enormous differences across the country.
Let’s Leverage What We Learned in China
We commonly see European and American companies assign an India market entry initiative to their Hong Kong, Shanghai or Beijing office. Save yourself some trouble and manage India from India.
India’s business environment has little in common with China’s: India is a democracy with a vocal, vibrant free press and a stock exchange that is over 125 years old. Companies from Colgate Palmolive to Unilever to Procter & Gamble have successfully raised capital locally. Managers first hired in India can go and run marketing for western companies, from Mastercard to Reebok.
Let us also not forget that China is at least ten to fifteen years ahead of India since China liberalized in the late 1970s and India only in the early 1990s. Nor will India follow the same path of economic development as China. India will address its problems under distinct conditions — different infrastructures, geographies, cultures, languages, governments, and so forth.
Let’s Select a Distributor
What could be more reasonable? “We have one distributor in Mexico, another in Brazil, why would India be different?” asked a major home care company executive. After all, it’s a lot easier to manage a single distributor. In India, however, a distributor is often little more than an order taker with a limited rented warehouse. Consider that Unilever works with over 7,000 distributors in India. Very few entrants to India are well-served by having a single company represent them across India’s 28 states with a patchwork of state-level indirect taxes. The primary reach of most re-sellers is limited to a region, and often to certain kinds of retailers within that region.
Even if you’re going to work with joint venture partners, it may make sense to have more than one.McDonald’s boasts over 250 restaurants serving 500,000 customers a day across India. In north and east India, the company has a joint venture partner, Connaught Plaza Restaurants Pvt. Ltd based in Delhi; but for west and south India the company partnered with Hardcastle Restaurants Pvt. Ltd. Both partners are successful and Hardcastle recently bought out McDonald’s share to become a self-standing development licensee. Careful selection of the right number of partners is a key to success for any company entering India.
Jay is From India, Let’s Send Him There
American companies have a tendency to send expat Indians in the US to manage their India operations. This could be a deadly mistake.
Why? Very few of these expats have any experience with the India of 2012, a country and culture vastly different from the one they grew up in. Even if they travel back for holidays, they don’t come into much contact with the world of work in India and particularly with consumer marketing in India. And, an American may have significant international experience whereas an “Indian immigrant in America” may have blind spots on both local and world affairs.
When one of the authors (Gunjan) taught executive workshops at the California Institute of Technology, over a third of the managers attending were of Indian origin. “My boss wants me to travel to Chennai, but I don’t speak Tamil and I’ve never worked in India,” they worried. And rightly so. When Scott Bayman left his position running General Electric’s India business after 14 years, his Indian successor lasted a much shorter time and was eventually replaced by another American.
- Success in India comes through market segmentation
- Forget what you learned in China
- Find more than one partner in India, but do so carefully
- Don’t limit yourself to leadership with Indian roots, who have been away & not been an active participant of the NEW evolved Indian consumer market.