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With a growing economy and a perfect demographic pyramid, India presents a significant opportunity for investors in search of growth.
However, the country also presents unique challenges. Accenture looks at five industry sectors in depth, identifying the market drivers, risks and success factors.
India offers a compelling target for investment, and its economy is expected to quadruple in the next decade. By 2020, it is expected to be the world’s fifth-largest economy.
India’s forward momentum is driven by the following factors:
A perfect demographic pyramid with 200 million people set to enter the workforce by 2025.
A low median age (25 in 2010), creating a sense of energy and vibrancy across the economy.
A growing middle class with potentially significant purchasing power.
Growing infrastructure spending, with private sector involvement expected to increase.
A large, low-cost talent pool.
A business- and investment-friendly regulatory and policy environment.
However, the Indian economy also faces the following challenges. India’s long-term outlook is dependent on how these issues are handled:
India struggles with a number of systemic issues, of which corruption may be the most serious.
India does not rank as a country in which it is easy to do business. Red tape is a factor, as is a range of environmental challenges across the value chain.
Thanks to the predominance of family-owned businesses, a hierarchical society and an educational system that favors rote-learning, Indian businesses are typically hierarchical; decision-making is centralized; and command-and-control management is the order of the day.
Using a mix of qualitative and quantitative criteria, Accenture has identified five sectors of interest to investors based on size and attractiveness.
Automotive. India is emerging as a key automotive hub, and the industry already features global and local original equipment manufacturers, component suppliers and dealerships. Key success factors include unique products and developing more extensive retail networks to service smaller towns and rural areas.
Banking. A major driver is the large inflow of household savings. Foreign banks face the challenge of a complex, three-pronged regulatory environment.
Communications. Strong growth has led to fierce competition. Success in this market hinges the ability to differentiate oneself from other companies. The move to data represents the next growth frontier.
Education. Huge demand, under-penetration and a shortage of infrastructure drive demand in this sector. Successful entrants to this sector tend to work across the value chain.
Infrastructure (roads). This report focuses on roads, although the sector is broad and includes power utilities, ports, airports, railways and urban infrastructure. Continued growth in both freight and passenger traffic has created an urgent need for road improvements, which are a government focus.
Companies hoping to enter India’s hustling markets successfully need to do more than build a new plant and launch a local advertising campaign. Other critical steps include:
Do your homework. Successful players make sure they fully understand the Indian market. Suzuki, for example, rose to dominance in India’s automotive market by catering specifically to the country’s need for low-cost products, and supported its extensive, portfolio with a huge distribution network.
Understand the customer. Mobile handset leader Nokia developed a comprehensive portfolio with unique offerings that address India’s special market characteristics.
Make the effort to engage local partners. Successful market entrants usually seek out local partners that fully understand the “ins and outs” of doing business in the market.
Realize that preparations can’t stop at the factory gates. Companies need to address requirements regarding the supporting infrastructure, supply and support networks, and other basics at an extremely granular level.
Prepare to engage government agencies and regulators actively. Companies need to track government policies and regulations closely and on a continuous basis.
Seek and empower talent. Successful companies often make a point of screening local colleges, universities and technical schools to get early access to graduating talent.
Rajesh Sennik led Accenture’s Strategy group in Delhi for more than three years until August 2011 when he relocated to the United Kingdom to join the Strategy group there. During his time in India, Sennik advised global multinationals on their India entry strategy and domestic companies (including promoter-led businesses) on how to grow and expand in India and internationally. In addition, he has worked with government departments on their transformations. Sennik has lived and worked in multiple countries, including the United Kingdom (and most of Europe), India, the United States and South Africa.
Ryan McManus is a senior manager in Accenture’s Strategy group, where he is involved in developing offerings and leads global operations. He has lived in several cities internationally and worked extensively around the world on global growth and operations strategy for both multinationals and growth companies. He lives in New York.
November 15, 2011
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