Overcoming the Challenges in Market Intelligence for India

India presents lucrative business opportunities, but both foreign and domestic enterprises face formidable challenges in conducting business there. Dealing with construction permits requires around 195 days and 37 procedures while enforcing contracts requires 1,420 days and 46 procedures, for instance.

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Not surprisingly India ranks 133rd among 183 countries for ease of doing business, according to the “Doing Business 2010” Index from the World Bank. Conducting market intelligence in India can be equally daunting, says Peter Read, Senior Vice President for GIA Asia-Pacific.

India has the lowest rank among the BRIC nations. Low ranking for parameters such as starting a business, dealing with construction permits, paying taxes, enforcing business and closing a business have pulled India’s overall ranking in the index down.

Table: Ease of Doing Business in India, 2010 Rankings

Source: IFC–World Bank Doing Business 2010 report, includes 183 economies.

However, on the brighter side, India falls in the top 50 ranks for protecting investors, and access to credit parameters. India ranks 51st among 139 countries surveyed for the Global Competitiveness Index 2010-11 (published by the World Economic Forum) and scores higher than Brazil (58) and Russia (63). However, it still falls far behind China’s competitiveness, which is ranked 13.

In the World Competitiveness report, while India is rated highly on certain parameters including financial market development, business sophistication and market size, it fares poorly on various other parameters including core infrastructure and labour market efficiency among others.

What challenges do businesses face when conducting market intelligence in India? We ask Peter Read, Senior Vice President, Asia Pacific for GIA.

What are some typical challenges that clients you have advised face in India?

“India is a complex market due to regional diversity, the rural-urban divide, the presence of a large unorganized market and multiple legal and administrative systems. Further, lack of proper infrastructure facilities, bureaucracy, and corruption accentuates the challenges of doing business in India in general.”

Can you give any examples of foreign companies that have been successful in India?

“Companies that have understood the nuances of handling India’s complex business environment have been successful.

For instance, auto giant Hyundai was sensitive about the fact that Indian consumers attached a lot of importance to lifetime ownership costs while purchasing a car. It thus kept the fuel efficiency high, priced spare parts reasonably and incorporated other changes to suit Indian consumers. As a result Hyundai has emerged as a leading player in India’s small car market.

LG is another successful foreign player in India. It invested in feeling the pulse of the Indian consumers. For instance, it introduced a 6kg washing machine instead of its 4.5 kg model, keeping in mind the need of a large Indian household. Thus, market intelligence (MI) is very important for understanding the Indian business environment.“

In your opinion, what is the greatest challenge of conducting market intelligence in India?

“I would say it would have to be the presence of large unorganized and grey markets.

The grey market in India is swamped with a wide range of products ranging from electronics to cosmetics. These markets take advantage of the price sensitivity of Indian consumers. In the grey market for electronics, customers can get up to 20% to 25% discounts on prices at which these products are available in legal outlets.

Grey markets have flourished particularly well in the case of mobile handsets. A large number of mobile handsets are sold in the grey market, which include smuggled handsets, handsets brought by people travelling abroad and parallel imports. Since transactions in grey markets are not reported, it is difficult to assess the number of goods sold or revenues generated from such markets.

There also exists a large unorganized sector, which employs about 90% of India’s labour force and contributes 60% to India’s GDP, according to National Sample Survey Organization. The unorganized sector consists of ‘mom n pop’ businesses, which exist across industries such as textiles, automotives, engineering goods, food products, and so on.

These businesses may be formed as proprietorships or partnerships. The unorganized sector is characterized by high level of fragmentation, and activities do not get updated in the government records. It is thus challenging to assess the scale of operation and revenues of these businesses. Also, activities such as market sizing and identification of suppliers and competitors become very difficult due to the fragmented nature of the market. For instance, assessing the market size of car batteries is a challenging task, as about 90% of the market is unorganized.”

In view of such market complexities, how developed is the field of competitive intelligence in India?

“Competitive intelligence is a new concept in India, and a number of unethical means are being used to extract information. For instance, lot of ‘under the table’ dealings are required for extracting information from judicial or government officials. Industrial espionage, which is an unethical practice, is often used to gather information about competitors. In a scenario where unethical methods of data gathering are rampant, it becomes a challenge to gather information ethically.

It is critical to work with an intelligence partner who upkeeps high ethical standards.”

What can listeners learn from the webinar, Market Intelligence for India?

“First of all, we will give an overview of India’s states, as well as the major themes underpinning the country’s growth story.

We will also cover the challenges of conducting market intelligence in India and some best practices within the India market context. Two case studies will provide further insight into these best practices and demonstrate the unique environments amongst India’s states.”

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