07. März 13
"Value for many" instead of "Value for money"
After arriving late at night in Hyderabad from Delhi we started our morning session with an intense wrap-up to reflect our learnings from many different and diverse business and expert contacts in Delhi in the previous two days.
We realized that our beliefs concerning the Indian market and chances for European companies in India had become more differentiated, modified, and somehow “disillusioned”.
India is an unbelievably huge country with more than 1.4 billion inhabitants, 28 states and a federal structure. Nevertheless, the purchasing power is smaller than expected from a European perspective.
According to a very experienced consultant, who supports European companies in their market entry to India, Indian middle class households have only 2.000 – 4.000 Euro per year available for extra expenses. Although the Indian middle class comprises about 200 to 300 million people, a sales volume of 1-2 million Euro for a Western SME entering into India constitutes a big success!
The highly intransparent governmental bureaucracy, the lack of practically qualified personnel and the traditional, hierarchical structure of Indian society influence the expectable economic growth in India.
Then why should western SMEs start their business in India?
The country offers an enormous potential for long-term oriented strategies focussed on internationalization. If only 5% of the Indian population becomes middle class, there is an additional target group of 70 million people, which is equivalent to the entire population of Germany.
Western companies could learn to reduce the multi-functionality of products to their core-functions, corresponding to the need of the Indian target group. For example, technical products should cost a maximum of 50 percent of the price in Europe. These products could also be sold in other less developed markets in the world. The key issue is: “Value for many“ instead of “Value for money“.
A reduction of functionality to the basics requires redesigning and rethinking products and processes. That is usually easier to manage with local expertise, as European engineers are used to develop highly sophisticated products and tend to be too complex in their thinking.
Although foreign SMEs will face a lack of directly employable personnel in India, an expert from Nehru University in Delhi described India´s youth as “hungry for education” as well as very resilient. The resilience stems from the daily challenges for Indian people organizing their life, work and family and is deeply anchored in the Indian culture and religion.
In our video we share some impressions from our excursion to Laad Bazaar and to Fort Golconda and our special insight into traditional Indian music.
