Cracking the code on India

August 6, 2011

DISCUSSION TOPIC

Succeeding in the Indian Market 08-05-2011

Through a special arrangement, presented here for discussion is a summary of a current article from the Third Eyesight blog.

In most conversations we have had with international brands in the last two to three years, India consistently appears on the list of the top-five markets in which to expand. Over the last two decades, some European and North American brands have seen profits while others are wondering what fit of madness brought them to tackle this market.

Typically, when looking at a new market, the very first question anyone would ask is: What is the market potential for the brand? However, you should also be prepared to ask yourself: What need is the brand addressing and what is the value being offered by the brand? Just because a brand is huge somewhere else in the world does not automatically make it desirable to the Indian consumer.

While most brands want to target the Indian middle-class millions, their sourcing structure and strategy places them out of the reach of most of the population. Brands that have succeeded in creating a significant presence, maintaining their brand image and having a sustainable operating model, have almost uniformly had a significant amount of local manufacturing. Notable examples from fashion include Bata, Benetton, Levi Strauss, Reebok, among others. Domino’s and McDonald’s have also collaborated with and developed their vendors locally to bring down costs and improve serviceability.

Apart from the costs and margins, another important issue is that of the adaptability of the product mix. Brands that are sourcing locally and have a significant product development capability in India are also able to respond to specific needs of the Indian market better, rather than being driven by what is appropriate for European or North American markets. The famous “Aloo-tikki” burger by McDonald’s is a great example of a product specifically developed for the Indian consumers. Not just that, India is probably McDonald’s only market in which its signature dish, the Big Mac, is not sold.

Of course, flexibility in tweaking the product to suit Indian market can become a concern when it amounts to losing control over the brand direction and mutating away from the core proposition that defines the parent in the international market.

Another key question is: What is the degree of control that a company wants to exercise on the brand, the product, the supply chain and the retail experience of the consumer? The corporate structure itself may be determined by the internal capabilities and strategies of the international brand in their home market or other overseas markets. A brand that has presence through a wholesale business in the home market may not have internal capability or experience in retail and would look for an Indian partner who can fill in the gap.

During our work, we have come across both extremes — companies that want to manage the minute details of the India business out of their own head offices, as well as companies that are so hands-off that they only want to hear from their franchisee or licensee when things are especially good or particularly bad. While a balanced, middle-of-the-road approach would be the logical one in each case, in reality individual styles of the top management have a huge influence on the approach actually taken.

Discussion questions:  Do you agree with the author’s list of key questions brands should ask themselves when entering a foreign market such as India? Which aspects mentioned in the article — sourcing structure, product adaptability, control issues, etc. — tend to be most overlooked?

My post:

After many years of watching the experience of retailers and brands who have attempted to crack the Indian market, it is amazing to see new entrants repeat the same mistakes:  American (and other western countries) arrogance, assumptions around the vast quantities of ‘ready consumers’, and lack of partnering with local expertise.

Like most emerging markets, India is a country of vast potential but one which requires humility, patience and flexibility.  India is also a huge country with many distinct cultural and economic zones each of which require careful study.

My advice for low and mid-market products and services:  get in soon.  The Indians themselves are more than capable of developing and delivering what the Indian mass consumer desires.  Long term, and probably sooner than we imagine, only luxury brands and other difficult to acquire or duplicate products and services will need to be sourced internationally.  Next on the horizon will be the rise of the Indian international brand.  It is time for western and especially American companies to learn humility and understand the need for partners if they wish to have a long term global presence.

Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

What do you think?  Please add your comments and add to the discussion!

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Go to the full discussion at Retailwire.com:  Succeeding in the Indian Market

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IKEA irritates the Danes

March 18, 2008

DISCUSSION TOPIC:  Translating Retail Success Across National Borders

TOPIC SUMMARY:

There is yet another potential impact of importing and exporting that retailers are now starting to consider. Boasting 273 stores attracting some 583 million customers each year, IKEA, for example, needs to be aware of what people think and feel.

Both The Independent and The Daily Telegraph in the UK reported that Danish customers of the Swedish shop are less than happy with what’s being offered for sale or at least with what the products are called.

IKEA’s products tend to have names rather than numbers, a situation that has recently caused complaints from customers in Denmark, historically a rival of IKEA’s Swedish-based empire. According to The Independent, complaints have been made about some of the names chosen. Apparently those with Danish derivation are used for some of the retailer’s less salubrious, or lowly, products such as doormats, rug linings and toilet seats, for example.

Discussion questions:  Is the IKEA Danish experience unusual in the arena of global marketing? Where do retailers go to acquire the cultural education required to open without incident in new international markets? Is there are retail company or brand that you think best epitomizes how to go about expanding globally?

My post:

International expansion of brands and retailers always creates the potential for cultural missteps.  IKEA did not purposely named their products with names that would offend Danes.  Using names for their products vs. numbers requires them to either use different names in different countries, or choose to not care if one country has an issue with a name that is fine everywhere else.  

When a retailer or brand expands into a different country (or even a different state) it is incumbent upon them to do some due diligence in the new location, particularly regarding marketing and branding methods.  It would not have been a significant issue to rename a few of the IKEA products for the Danish market if indeed some of the names are offensive.

Examples of brands and retailers who have expanded globally effectively include McDonalds and DFS Galleria.  McDonalds offers key products like the Big Mac worldwide, but then adds menu items that relate to the local populace.  DFS Galleria, the Hong Kong-based purveyor of luxury brands in gallerias and airport duty-free locations throughout the Asia Pacific region, pays close attention to how each nationality communicates and shops.  In-store signage, associate language skills, and marketing efforts all support this.

Mike Osorio, your Dare to be Contagious! TM strategist

http://www.osoriogroup.com/

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GO TO THE FULL DISCUSSION AT RETAILWIRE.COM:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12829  

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