Indian Market Attractiveness

Amit Mehrotra, May 2005

 1. View of Indian Economy &
Demographics
>Second largest population
• 1.05 billion
• 1/3 < 15 years old
• urban 30%
>Fast growing economy
• GDP: $576 billion (2003)
• Real growth rate: 8.2% (2003)
>Indian Market to foreign investments
• Tariffs on imports coming down
• Restriction on Foreign ownership easing
• Annual FDI increasing ($3-$5 billion)
>English-speaking workforce
>Stable political environment

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 2.Real GDP Growth & Foreign Direct
Investment

9 7000

8
6000
7
5000
GDP Growth in %

FDI (in million $)

6
5 4000

4 3000
3
2000
2
1000
1

0 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004* 2005*

GDP Real Growth Rate FDI (in million US$)

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 3.Market View
Target Market

Development of urban « middle class » which represents 200 million

people (40 million households) with growing purchasing power.

The target market segments for foreign brands and lifestyle goods are
5 million households (25 million people) representing the Consuming
class and the Rich.

Consumer’s behaviour

Development of new consumption behaviour, with the advent of « department

stores » and apparition of a class of consumers younger, more urbanized with
higher purchasing power.

Lifestyle represents an increasing part in the budget of households

Consumers have become more sensitive to brand, variety and quality of service
and a new attractiveness for technological tools.
Sensitive to advertising and « perceived value for money ».

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 4.Structure of Indian Consumer
(Source:NCAER)

Consumer Annual No of Households No of Households % of Annual

Classes Income Rs. 1997-1998 projected (2006- increase
2007)
The Rich >Rs.215,000 1.2 million 5 million +17.2%

The Rs.45- 32 million 75 million +10%

Consuming 215,000
Class
The Rs.22- 55 million 82 million +4.5%
Climbers 45,000
The Rs.16- 45 million 20 million -8.5%
Aspirants 22,000
The <Rs.16,000 33 million 17 million -7%
Destitute
Total 166.2 million 199 million +2%
Households

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5.Annual Income by Households (Source:
NCAER)
90
Nb of Households (in million)

80
70 Nb of
60 Households
50 1997-1998
40 (in million)
30 Nb of
20 Households
10 2006-2007
0 (in million)
>Rs.215,000 Rs.45- Rs.22-45,000 Rs.16-22,000 <Rs.16,000
215,000
Income's brackets

Indian Market Attractiveness 6

 6. Market Spend

Capacity to pay

• Total consumption spending of Indian households

in 1999 was evaluated at $304 Bn = 69% of GDP
(Source: World Bank 2001)

• Population between 20-34 years old have a

disposable income of $10.5 Bn/year (Source: KSA
Technopak 2004)

• # credit card holders : 6 Million in 2002

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 7.Distribution / Retailing
• Late 90s and early 2000 -saw development of organized distribution &
• mushrooming of Departmental stores
• Now, Departmental stores offer the ideal distribution channel for foreign
brands
• # of new departmental stores has grown by 24% per year during the past
5 years.
• Growth in sales through department stores has been rapid : about 34%
annually. Almost 4 times the growth rate (9.4 %) of total consumer spend
during this period
• Customers patronising department stores are upper-middle & high
income class
• Department stores enhance a visibility and brand image, they stock
premium, high quality, fashionable products.
• Strong retail technology: department stores are IT savy, practice SRM
and CRM

Indian Market Attractiveness 8

 Distribution…continued
Shoppers’ stop runs the largest department store chain in India in terms
of sales
• Currently 13 stores : 5 in Mumbai:; Bangalore, Chennai, Hyderabad,
Delhi, Gurgaon, Kolkata, Jaipur, Pune
• Expansion Plan = 35 stores by 2007 (almost 3 times in the next 3
years)
• The company was established in 1991 by a leading player in the
real estate sector, the Raheja group which owns about 80% of
Shoppers’ Stop’s equity. Revenue 2003 = US$ 36m

Other major department stores chains in India

• LifeStyle International : 7 stores, revenue = US$ 30 m, 14 stores

more by 2007
• Westside : 14 stores in 10 cities, revenue = US$ 25m
• Ebony Retail Holdings : 8 stores located in North India, revenue =
US$ 15m

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 8.Entry Options
- Export - Import arrangement.
- Piggy Backing.
- 100% Subsidiary (FDI)
- JV
- Franchisee/Licensee

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9.Tools for Communication/Promotion
Indian Market has very well established and vibrant multiple tools
available to communicate to masses. The reach is rural as well as
urban due to well established satellite linkages.

• Paper/print media in multiple languages

• Electronic Media (TV, Radio, Internet, Cable
Network )
• Public Transport
• Sponsorship Events
• Customized advertising

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 10.The McKinsey Portfolio Planning
Matrix

High
Industry Attractiveness

Medium

Low

Low Medium High

Business Unit Competitive Advantage

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 McKinsey matrix… contd.
When the Industry attractiveness as well as Business unit/product competitive
advantage are High, strategy recommendations indicate that market holds
excellent profit potential and thus has to be BUILT/Grown.

I have placed a star in the BUILD box of the matrix for ADYA, because of following
competitive advantages

First mover advantage in the market.

Market position, i.e. market share relative to competitor.

Competitive position, i.e. Superiority in terms of quality, technology, distribution

relative to competitor.

Legal Approvals : In place.

Perceived Product value : is high relative to competition, ‘skimming the

cream’/Price
Mover advantage.

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 11.EXTERNAL Issues
1. a. Renew and strengthen relations with Sheraton Group - ITC Hotel chain
– Push TBF Professional Series
– Push 1631 model to all the remaining properties of Sheraton Chain

b. Develop business with all the other 5 star / 4 star hotel chain all over India, with
a different model and different pricing.
– Hyatt
– Taj Group
– Meridien
– Oberoi
– Nikko

2. Get an outside legal opinion about the role of Department of Legal

Metrology / Department of Weights and Measures on sale of Bathroom scales /
TBFs to individual customers for their personal use.

3. Identify and negotiate with retail chains, such as Shoppers Stop/ Westside /
Ebony / Life Style/ Cross Roads etc to carry ADYA across their network in India.

4. Negotiate and establish an arrangement with a Transporter and/or shipping

agent for import clearance, ware housing and delivery of ADYA products.

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 12.Internal Issues
1. Understand Management’s view about Indian market and the
region.

2. Review the Gulf/Middle East Region. If necessary, use my network

for pushing sales further.

3. Review the Pricing Strategy for Indian market.

4. Discuss tools of communication. The idea is to encash on the

competitive advantage of being the first mover.

5. Study the possibility of reduction in delivery time from CHINA, as it

affects the complete supply/value chain.

6. Review the payment terms for Institutional buyers, retail chains and
others.

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 End

I hope you found the information useful.

Please feel free to write to me
Amit MEHROTRAA
avsv1258@gmail.com

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