Earlier this year, Maruti Suzuki India announced that Suzuki Motors’ next world car would come from its Indian venture at Gurgaon, a New Delhi suburb. Shinzo Nakanishi, who took over as managing director from Jagdish Khattar in December last year, said that to begin with, the company plans to export 1 lakh units of the new model annually to Europe and the rest of the world.
That multinationals evaluate India as a hub for offshore manufacturing and sourcing is well documented.
Now, driven by unique consumption patterns and improved product manufacturing capabilities, international companies are increasingly testing products on the Indian soil before moving them into more mature markets.
Take Motorola. For about three years now, it has been launching products first in India, taking them global thereafter. In 2005, the company unveiled the gorgeous Moto Slvr in India and for 50 days after that the product was available only in this country before being rolled out to a worldwide audience. Again in 2006, the company launched the Motofone F3, the cheapest GSM mobile phone in India, in New Delhi, before taking it to other markets of the world.
In August last year, the company launched a successor to Motorola Razr, arguably the most famous phone in the world, in the Moto Razr 2, priced at Rs 14,999. The phone was next taken to Europe. Says Lloyd Mathias, senior director, sales and distribution, “Motorola recognises the Indian market is too large to ignore and has found in India a great testing ground because the customer is very discerning. India also has a market of young consumers whereas worldwide, the population of younger people is at the tapering end of the pyramid.”
Agrees Pranesh Misra, chairman and CEO of Mumbai-based Brandscape Worldwide Consultancy, “India is an attractive market because of the sheer size and the fact that there is an opportunity for all kinds of products. Companies realise that if their products are marketed well here, they can be taken to other markets with similar socio-economic profile. Second, ad rates in India are still very low compared to, say, Thailand, Indonesia and China, and therefore, a good ground for test marketing.
Finally, India’s young affluent working class is attitudinally similar to their counterparts in developed countries and are therefore likely to be early adopters of products and technology.” In other words, the cost of failure is low in this market.
It’s easy to understand why Motorola says India is a market “too large to ignore”. The mobile subscriber base in India is set to exceed 737 million (73.7 crore) connections by 2012, growing at a CAGR (compound annual growth rate) of 21%.
The country is expected to remain the world’s second largest wireless market after China in terms of mobile connections, says Gartner Inc. For the record, the total mobile phone subscriber base in India stood at 305.24 million at the end of August 2008, reported the Telecom Regulatory Authority of India. Needless to say, all these factors make India an attractive launch pad.
Which explains the strategy of Hyundai i10, the small car from the Hyundai Motor India (HMI) stable. India is the first and only country in which the car is made. Manufactured at the company’s Chennai facility, the city car is exported to over 70 countries. Positioned between the Hyundai Santro and the Getz Prime, the i10 is, in fact, the first Hyundai model to be developed and launched outside Korea. “HMI is poised to play a very important role not only in India but also in Hyundai Motor Company’s global plans as HMI becomes Hyundai’s global hub for small car manufacturing,” said HMC president Choi Jae-Kook at the i10 launch function in Delhi.
A host of other technology companies have cottoned on to the trend. In 2007, Nokia did a global launch for seven entry-level products in Delhi. What made the event so special was that it was the first time Nokia was doing a global launch in India. “India is one of the fastest growing telecom markets in the world making it a hot bed for ideas on consumption and motivations for mobility,” says Devinder Kishore, director, marketing, Nokia India. “India is also the No 2 market for Nokia globally and very strategic for us to realise our vision of making universal access a reality.”
Strategic reasons aligned to a company’s objectives may also be a trigger for the India-first strategy adopted by some companies. Some do it to introduce India-specific applications or language-specific products. Notable examples being those from Microsoft and, more recently, Nokia’s “Sare Jahan Se Acha” phone. Others are attracted by the demand for low-cost options given that Indian consumers are price-sensitive and more likely to choose products with fewer features and frills.
In tune with this trend, this May, for the first time in the company’s history, Xerox launched a range of eight products including mono printers and multi-functional printers (MFP) in India before another 162 countries where the rollout followed the India launch. Xerox has been present in India for over two-and-a-half decades, first through its joint venture the BK Modi group and then as the independent Xerox Corp since 2003. Not wanting to lose out on the market potential, Xerox has decided to adopt an India-specific strategy.
According to the company, its mono laser printers have a huge market in Eastern Europe and in other parts of Asia, and the company’s colour printer has a much bigger demand in North American and Western European market. What urged the company to shift its focus away from the US market is the fact that paper consumption in that country is dropping, whereas in India, the consumption of paper is set to double in the next eight years, from the current 7 million tonnes per annum, according to Indian Paper Manufacturers Association.
“India knowledge gathering” is the buzzword at Xerox, says Princy Bhatnagar, director, office business group (OBG), Xerox Corporation. “When India was chosen to be the launch pad, the company looked at specific features important to the Indian consumer—such as number of pages per minute. The WorkCentre 5016 MFP model, which was launched in India first, and then in other countries, had a nine-month concept-to-launch cycle.”
Of course, the multinationals with the most success in India are those that tailor their products and practices to the idiosyncrasies of this market—even when that means starting from scratch. No wonder, companies such as Motorola are investing a lot of time and money on localisation. Motorola’s India handsets are supposed to be more sturdy and boast of features such as louder ringtones to match noise levels in the country. The company also provides for extra large SMS and phone storage facility in India. For example, its phones sold in the country have the capacity to store 750 SMSes, whereas in the West, the capacity is about 150.
Products aside, companies such as Cisco and Hewlett Packard (HP) are actively launching their marketing campaigns in India.
HP’s unique India campaign includes the Noddy Pavilion Desktops, part of HP’s edutainment strategy. The product was launched last month and will be priced between Rs 26,000 and Rs 60,000. Says Shubhodip Pal, head of consumer marketing, personal systems group, HP India, “With the Noddy Pavilion launch, HP, for the first time, looked at what can be done locally.”
For its part, Cisco launched the second phase of its three-pronged—enticing, educating and engaging—strategy brand campaign, dubbed The Human Network Effect, in September in India.
The launch took place simultaneously in the US and in India. Cisco, one of the top five technology brands globally, gets 11% of its worldwide revenue from the Asia Pacific region, in which India is one of the top 2 or 3 contenders. For Cisco, a big lure in India is the SME (small and medium enterprises) market that adds up to about 7.6 million enterprises.
Also in September, Autodesk, a 2D and 3D design software company based in California, US, started providing certification through authorised training centres across 135 locations in India. India is the third country to launch this programme after the US and China.
Norman Buckberry, training manager for Autodesk, says, “The response for this certification in India from channel partners and authorised training centres has been great. According to an Autodesk survey, employers are becoming proactive in helping employees in attaining their technical certification and 41% of employers pay 100% of their employees’ technical certification costs and 12% of employers share the cost with employees for the same.” The company says it will consider itself successful if 1,000-2,000 people take the exam in the next one year.
All this adds up to show how the sheer size of the Indian market tends to overshadow every other consideration—be it economic slowdown, rising costs or security concerns.
6 months ago