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The importance of competition

One of the stupidest comments I have read in recent times was the one made by the newly appointed country head of a fresh line of consumer electronics. In his excitement to sell his brand of products, he declared that China was 20 to 25 years technologically ahead of India. Mainland China, that is. Needless to say, the gentleman in question was selling a low cost Chinese brand not exactly known for its technological flair. Nor for quality. As a result, it has opened to what trade pundits in Bollywood would have called empty halls.

Indian consumers know exactly what is good, what is not. They are clever, informed, price canny and yet very technology savvy. They like to buy quality brands but not at prices that would make them look silly. I remember how Samir Jain as Vice Chairman of The Times of India group would spend valuable time poring over his international travel itinerary to ensure that he got the most efficient mileage and the best prices out of his agent. No, it was not because he was parsimonious. He wanted to simply make sure that he got the best deal at the best possible price. This is a typically Indian trait and explains why so many rich people or their wives actually do their own daily shopping.

Over the years, this could well diminish. People are becoming more status conscious. While the Internet is spawning home delivery stores all over the world there is no reason for shoppers in Bombay or Calcutta or New Delhi to remain different from the rest in an era in which everyone is wanting to desperately conform. But the Indian habit of driving a hard bargain and buying a good product at a good price is unlikely to yield way and, with greater globalisation, could actually increase simply because the choices are becoming that much more. Which is why, if you look carefully, you will find that only the good brands that are ready to sell at a realistic price are doing well out here.

After all, the average Indian spends 50 per cent of his pre-tax earnings only on food, as compared to 10 per cent in the United States if the International Food Policy Research Institute is to be believed. Fifty per cent! Which, post tax could go upto even 70 per cent! No wonder he puts so much effort into getting the price and quality right. Also, compared to people elsewhere, he has so little left to spend on other things (given his 50 per cent spend on food and his amazing propensity to save at least another 25 per cent, despite increasing consumerism) that he is extremely careful while making his choices. Instant purchases are always minimal. A lot of thought goes into buying anything.

Caution is a crucial virtue and even as choices increase, his expectations are also rising. He wants more and more for less and less. More quality. Better technology. Superior finish. Unbeatable style. Cheaper price. He is also getting it. In his colour televisions, Walkmans, watches, audio systems, furniture, laptops, mobile phones, cameras, crockery, cars. They are all becoming better, smarter, more affordable.

Initially the MNCs thought that they could dump anything on us and it would sell simply because Indian consumers were used to shoddy, local brands that shortsold quality, service and value for money. They soon figured out how wrong they were. KFC outlets went empty. Ford and Opal never took off. Mexx packed up and left. Akai was forced to change its local partner. Sony dropped its prices. Pierre Cardin shirts vanished from the shelves. Whirlpool desperately struggled to stay afloat. Panasonic was just heard of, never seen. Neither in homes; nor in shops. IBM got negligible market share. Baskin Robbins, after the initial hype, simply petered out. Even Mercedes Benz realised that the Korean van they were trying to sell in the Indian market under their brand name had no takers. Not unless they sold it at Korean prices.

Those who had presumed that the Indian market was a cakewalk suddenly found they were all wrong. The huge 350 million middle class they were told that was just waiting to lap up firang goods simply did not exist. What actually existed was a middle class that was less than half in number and far more informed about quality and pricing than they could have imagined. These buyers knew exactly what was available in the world and at what cost. They were also ready to do without things they could not afford. And, in any case, there was this hugely flourishing grey market that could feed their every need at affordable prices. They knew exactly where the cheapest Versaces came from. They knew which wholesaler sold Swatches at the best prices, where the best Rosenthals could be imported from without paying for them as per the company pricelist.

Of course, not all the brands that came in did badly. Many cut through the hoopla and spent quality time on designing the right entry strategy. A few of them were smart enough to figure out pretty early in the day that the only way to the heart of the average Indian buyer is through his pocket. Give him a world class product at a reasonable if not exactly affordable price and he will somehow beg, borrow and save to buy it. This explains the success story of Maruti cars, Aiwa music systems, Nokia mobile phones.

Many among those who started off wrong, changed their pricing policy midway and began to do better. Some of the older brands, like Philips for instance, rewrote their pricelist, brought out new products, new styles and refashioned their image. The car companies are also now introducing better and far more cost efficient models. While a slew of Indian brands, are fighting back with a vengeance and introducing improved products at equally competitive prices. Example: the home grown Tata Indica.

In other words, it is competition that is forcing Indian products to become better, cheaper. Just as we, in turn, are forcing international brands to bring to India their best range at the most affordable price. The sheer size and potential of the Indian market is making the MNCs more circumspect, more value conscious. While we have also realised that unless we focus on quality and cost, our brands are doomed. This realisation will slowly blur the dividing line between what we produce and what the MNCs bring in. The quality will come closer and closer. So will the pricing. Which is exactly as it should be if we want to be globally competitive.

That is how Japan became a world class manufacturer. That is how Taiwan, Korea and China improved their technology, relearnt skills, brought down costs and became exporting nations. This is the way India will also go once the protectionist era becomes history. Our talent base is phenomenal. Our skills are world class. Our technologists are among the best anywhere. The only thing we lack is the will to work to exacting standards.

Luckily, we have no option now. We have to compete. We have to learn what quality means in a free market. The walls we have built around us are already collapsing. We have no choice but to compete as equals with everyone else and win or lose on the basis of our price, quality and technology. Manipulating political decisions in North Block will no longer help.

It is time to become strong, self reliant, competitive and show the world that what we have done in information technology is just a blip on the screen. There is much more to come. We must show the world that India is ready for the next century. To take charge of its own destiny and, in the process, redefine its industrial might.

Pritish Nandy

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