Friday, December 22, 2006

Why Invest in India?

Recently I wrote an article on how eager global giants are to enter Indian market. See: Joint Ventures is a preferred way to Enter India. The reasons why companies like HSBC, ABN AMRO, Starbucks, Wal-Mart, Ford, GM and others may not be obvious for most people living outside India. ( For that matter, it may not be obvious for most Indians too). But there are solid reasons for companies to be investing in India. The reasons are numerous - it ranges from market size, market opportunity and competitive moves, but that's just the high level reasoning. The real reasons can be seen by digging a little deeper.

Starting today, I will be writing a series of short blog articles - each giving out a different reason as to why a certain foreign companies must invest in India. The objective of these writings is to provide a deeper insight of the opportunities that exist in India for investors and entrepreneurs who are willing to take the risk and invest in India.

Why Invest? Ans:- Youth of India

Everyone knows that India has a large population. This large population offers huge opportunities in different demographic segments. One of such attractive segment is the youth or teenage population.

India is home to the largest population of teenagers anywhere in the world. India has about 115.3 Million teenagers!! This number even surpasses the number of teenagers in the US, Canada, UK, France, Germany, Italy and Japan combined. (BTW, these are called as G7 countries and they account for more than 80% of the global wealth). This astounding number of teenagers in India poses an immense market potential for a whole lot of products: Fashion accessories, Fast foods, books, education, clothes, music, electronics. Sports, entertainment etc.

Few early investors are already reaping the benefits of this huge teenage population: Levi’s, LVMH, Adidas, Nike, MTV, Disney, McDonald's, Pizza Hut, Domino’s, Subway, Pepsi, Coca Cola to name a few. But the market is still wide open for others to enter and capitalize on the potential.

Market Potential

  • 74% of the urban teenagers have cell phones
  • 81% of the urban youth use computers
  • 89% watch television daily
  • 73% listen to radio
  • 91% watch movies regularly
With the Indian GDP growing at close to 9%, India is poised to become the third largest economy by 2012 (surpassing Japan), India offers an unparalleled business opportunity for all. A study conducted by Business Today estimated that Indian youth in cities alone spends Rs 190,000 crore a year - $42 billion dollars!

Indian youth are highly brand conscious and are willing a pay more for a reputed brand. Erich Stamminger President & CEO, Adidas Brand, Adidas has this to say about Indian youth: "Indian consumers are very rational in their purchase decisions. For them , the brand name is important. I think they will consider entering your store only because of the brand you are but they always need a rational argument about functionality and utility of a brand before making the final purchase decision."

Another display of youth power in India can be seen at Louis Vuitton - a wopping 18% of all LVMH sales in India comes from the teenage customers!

Closing Thoughts

Economy is always driven by the market demographics. The population in the US, Japan and Western Europe is aging rapidly. This implies that the business which sell to teenagers & youth cannot expect growth from these countries. Instead companies must concentrate on countries which have a large youth population - like India. Several American firms have realized this and are actively exploring the market entry options. So as Starbucks is poised to open its first outlet in India in 2007, will Dunkin Donuts, Cafe Nero, Costa Coffee sit idle and watch Starbucks capture Indian market?

Also See:

Why Invest in India - Power Generation
Why Invest in India: Innovation & Creativity
Knowledge Management - The blood & lifeline of any company
Creating a Culture for Innovation and Protecting Intellectual Property - Part 1
Creating a Culture for Innovation and Protecting Intellectual Property - Part 2
Protecting IP Assets of an Organization
Types of Intellectual Property
Business Creativity and Innovation
Indian Style of Innovation
Joint Ventures is a preferred way to Enter India
Emergence of Indian MNCs
Global Retail Giants are Eager to Enter India

1 comment:

rohit said...

hello sir my name is rohit,i am doing my MBA .i have been through the articles you have posted and especially i am thrilled to see posting on airline industry ,and coming to the piont , i am doing a paper presentation on airline industry for MGMT fest on 21 feb , i gathered some information needed for it and once i have been through the term called as fog insurance ,in the websites on e paper not sure from which paper , what i want to know is: what was the effect of fog on the airline industry in various areas ?
what i remember when i read was, the loss estimated was 250 crores during that period , and for delay of every 4 hours it costs them 2 lakhs ,( rough idea), anything more than this is most welcome ,
waiting for a positive reply