This post is part of a series following the “Pre-MBA World Tour,” organized by Shoaf and members of the class of 2010.
When most people think about the growing economy in India, their first thought probably relates to BPO (business process outsourcing). The BPO phenomenon in India was due to, among other things, a combination of low wages, a highly skilled labor force and the economic-liberalization policy of 1991. This scenario created a large flow of foreign direct investment into India’s IT and communications infrastructure during the tech boom of the late 1990s.
Although BPO has been a driver of India’s recent economic development (by putting India on the radar of investors around the world), the future of India’s emerging economy will likely be elsewhere. If you’re looking for the next wave of growth and opportunity in India, consider the new rising middle class of nearly 300 million people.
Because of the prevalent family-business model in India, much of this middle-market growth will likely come from privately held enterprises (rather than public companies) — so if you’re simply pumping cash into an ETF, you might just end up in a few, highly speculative investments. The best way to really capitalize on this opportunity will be to actively participate in the emerging economic system. Of course, this is always easier said than done.
So how do you become a competitive player in a new market with a total population of 1.2 billion people? The first step is to realize that India is an extremely diverse country with hundreds of languages, religions and ethnicities. Each of the 28 states (and seven union territories) in India has its own unique culture (and subcultures) that must be considered when developing marketing and distribution strategies.
It will be critical to understand not only the Indian psyche but also what physical and political constraints exist to get your products to market.
For example, in certain regions the postal system is not effective, because many residences don’t have accurate mailing addresses. So to reach their customers, many companies deliver mail, advertisements and warranty information through SMS text messaging. Even in Mumbai, I had a rickshaw driver explain how he checks his Facebook account and asks for driving directions through his mobile phone.
The other important consideration is learning how to deal with the political bureaucracy. Last week our tour stopped in Dubai, where it typically takes about six months to get a project through the planning stage. In Mumbai, a certain infamous flyover project has been in the planning phase for more than five years.
Stay tuned for our second blog post from India, as we plan to learn more about economic development and how to facilitate ethical business practices in a market where political corruption is an everyday fact of life.
Next stop: New Delhi