Over the past couple years, we have heard from one source or another about China becoming the next â€œsuper powerâ€ of the world. Despite the buzz about China, in the background, India is quietly, slowly, but surely making its presence known. With the U.S. economy, along with the economies of other developed nations, making a tenuous recovery, the search for a new frontier of economic opportunity and growth is becoming more urgent; it appears that India is fast proving itself to be that frontier. In one of the October 20, 2009 WSJ cover stories, â€œIndian Firms Shift Focus to the Poorâ€, (Click here) by Eric Bellman, discusses how India’s burgeoning poor are the next untapped market for durable consumer goods and services.
The article features a discussion of three examples of durable goods that exemplify this shift toward engineering durable consumer goods designed, marketed, and priced for India’s poor. These items radically improve the basic standard of living for many of the poor and include Tata Motors’ $2,200 Nano (a small vehicle analogous to the American SMART car), First Energy’s $23 Oorja stove (which burns three times more efficiently than a regular wood fire and produces significantly less smoke), and the $70 Godrej Little Cool Refrigerator (which features small size, portability, and a simpler design compared with larger refrigerators).
What is emphasized in the article is that these are not cheap knock-offs of Western products. These are entirely different products. In many cases technology used for larger-scale applications are redesigned and reengineered to create a product that is marketable to the lifestyle needs of India’s poor. And while the profit margins are slim, companies are planning to take advantage of the huge volume potential offered by India’s growing population.
The service sector is also tapping into the wealth potential offered by this formerly ignored sector of India’s population. Indian cell phone carriers have begun to offer $20 cell phones with $0.02 per minute plans. These companies report that they are signing up more than five million new subscribers per month to meet the â€œunexpectedly strong demand . . . in India’s villages and slumsâ€. One Indian entrepreneur, Anurag Gupta, has tapped into the demand of rural and village populations for banking services. His company, named Zero, offers simple mobile banking (similar to an ATM service) which allows villagers to withdraw or deposit a small amount of rupees using a smart-phone and a finger-print scanner. Gupta reports that â€œthe running cost of his â€˜branches’ is about $50 a month to serve hundreds of people dailyâ€.
One of the main points that became clear to me from reading this article is that India’s poor, rural, and village constituents have money and they want to spend it. Furthermore, they have demands similar to consumers of developed nations; but in order for this great economic potential to be tapped, goods and services must be tailored to meet the specific needs and lifestyles of this sector of India’s population. India’s engineers have risen to the challenge and are taking a leadership role in meeting these demands, when formerly they had devoted a majority of their ingenuity and R&D capabilities to U.S markets and markets of other developed countries. Now, they are turning inward to their home country to take advantage of growing opportunities.
Indian engineers are â€œreinventing products to cut costs and reach billions of people world-wide who live on less than $2 a dayâ€. Indian companies are gearing their market research to find out â€œwhat the poor want and how much they are willing to pay for it.â€ Once they’ve done their research, these companies then enlist their research teams to design new products at the necessary price points. All of this is made possible by one of India’s most notable assets- plentiful and inexpensive engineers. As an example, India’s Tata Motors is tapping into this source of ingenuity in developing its cars, â€œrethinking everything from the engine to the seats to the supply chain to keep the sticker price [low].â€ Furthermore, due to the growing number of TV networks, radio stations, newspapers, and magazines, India’s poorer population is becoming more aware of products and services available to it.
India is exploiting the very intimate and crowded nature of its slum, rural, and village communities to develop distribution networks for its new products. Door-to-door rural saleswomen have been very successful at selling inexpensive, portable water purifiers. Rural self-help groups and micro-lenders are leveraging their existing ties with smaller, poor communities to get products into consumers’ hands. Gupta’s mobile banking also reflects this ‘grassroots’ approach to distribution.
In thinking about the direction of the global economy, what role do you see India playing? How will India’s success in leveraging the untapped growth potential of its’ poor constituents influence the direction of innovation and marketing for other countries? What do you think this will do for the standard of living in India and abroad? Do you think it’s sustainable? What kind of impact will India’s success in these aspects help or impede the recovery and revitalization of the way the world lives and does business?
I encourage you to read this article if you have the chance. The article discusses how India’s innovation in product development and economic strategy is starting to revolutionize the availability of affordable healthcare for the country and how it may be the source for lowering health care costs in the U.S. Find out which big U.S. company is taking notice!