THE EVOLUTION OF AN INTERNATIONAL MARKET: THE CASE OF INDIA Sivakumar Venkataramany, Ashland University, Ashland, Ohio, USA Balbir

B. Bhasin, Sacred Heart University, Fairfield, Connecticut, USA ABSTRACT This paper attempts to measure the market size and potential of India as the country has entered the international market scenario. India presents myriads of opportunities and countless obstacles simultaneously for the worlds global firms. Those firms with cross cultural understanding need techniques of improvisation to engage the aspiring middle class population that is left with sufficient disposable income. Keywords: Marketing Obstacles, Market Potential, Consumer Electronics, Infrastructure Challenges, Brand Development 1. Introduction Since the beginning of this century, not a single day passes without a few business stories about and from India as the country has dawned its golden age with a trillion dollar economy. The World Bank classifies India as a low income country for the reason being its gross national income (GNI) per capita being $850 or less. At the same time, Merrill Lynch estimates a growth rate of six percent until 2050. Sixteen Indian companies are listed in the US financial market commanding a market capitalization of over $120 billion. Despite an insufficient liberalization efforts and half-hearted privatization attempts, the country has become a coveted target for all multinational firms thanks to the huge marketing potential it wields. This potential does not merely stem from its huge population, just over a billion but from the shift in the mindset to seek and adopt consumer goods. The rising middle class that counts for more than a third of the population and the willingness to spend most of the disposable income justify the deemed prospects of the Indian market scenario. Indias supremacy in the software production and services market notwithstanding, its infrastructure leaves a lot to be desired for its sustained progress. The exponential increase in all commercial activities has opened up the skies for new airline companies that now require modernized airports. 2. Scholarly Literature in the Indian Context The comparison between India and China in the studies of foreign direct investment, economic reforms, privatization, balance of payments, exchange rate management, outsourcing, and international marketing has become prevalent and almost indispensable. In the sphere of international marketing, while China has aggressively adopted global branding, the growing size of the 250 million middle class calls for attention from all companies and diverse products [Chandra et al 2002]. India has engaged in internal development, regional integration, and conflict resolution with less emphasis on branding [Sun 2004]. Despite a narrowing trend in cultural dimensions [Hofstede 1991] in the last decade, the necessity of a framework of national perceptions of diverse cultural differences and ethical marketing norms is insisted by scholars and management professionals for pursuing international marketing in India [Paul et al 2006]. Betterperforming business relationships require a strong and continued commitment mix of distinct and interrelated variables such as obligation, behavior, value-based, affective and locked-in in the international marketing context [Sharma 2006]. India is not an exception to consumer ethnocentrism resisting foreign products and commercials [Kwak et all 2006] but its present global mindset provides a favorable environment to be receptive to products and information from foreign firms. Brand development and management in any new market like India requires managerial

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insight and improvisation as even a local fast food such as pizza is deemed foreign and managers need to respond to such perceptions [Eckhardt 2005]. Increased internationalization moves and export orientation by the local and foreign multinational firms in India suggest why international marketing efforts need to be distinct and different across industries [Oburai et al 2005]. Unless firms understand the differences in consumer perceptions of service quality between developed and developing nations, differentiated services may not be aptly offered [Malhotra et al 2005]. While standardization could lead to economies of scale for a multinational firm, the employment of local and natural channels of distribution seems to be a departure from the firms internationalization

strategy but, the uniqueness of India as market ensures success for such firms [Griffith et al 2005]. 3. Automobile Industry Most western economies have all advanced through their competitive edge in the automobile industry. India is rapidly building its manufacturing sector thanks to the skilled labor force. The automobile production has doubled in about five years but Indias focus is on the manufacture of two wheelers, as seen in Table 1 that presents the market in transition. The present infrastructure does not permit a rapid increase in the production of passenger vehicles.

TABLE 1 AUTOMOBILE INDUSTRY IN INDIA

Automobiles Production Trend 2001-02 Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers Grand Total 669,719 162,508 212,748 2002-03 723,330 203,697 276,719 2003-04 275,040 356,223 2004-05 353,703 374,445 2005-06 391,083 434,423 2006-07 520,000 556,124 989,560 1,209,876 1,309,300 1,544,850

4,271,327 5,076,221 5,622,741 6,529,829 7,608,697 8,444,168 5,316,302 6,279,967 7,243,564 8,467,853 9,743,503 11,065,142
Source: Society of Indian Automobile Manufacturers

The same trend is noticeable in Figures 1 and 2 that present the data for domestic market and export market in the last fiscal year. FIGURE 1 DOMESTIC MARKET SHARE

DomesticMarketSharein200607
Commercial Vehicles 4% Three Wheelers 4% Passenger Vehicles 14%

Two Wheelers 78%

Source: Society of Indian Automobile Manufacturers

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FIGURE 2 EXPORTS MARKET SHARE

ExportsMarketShare200607
Passenger Vehicles 20% Commercial Vehicles 5% Three Wheelers 14%

Two Wheelers 61%

Source: Society of Indian Automobile Manufacturers 4. Consumer Electronics Industry The consumer electronics industry in India is harnessing maximum benefits of inexpensive labor, raw materials, and abundant skills. Several foreign companies have established manufacturing facilities in India to serve the domestic and export markets. LG Electronics, Samsung (South Korea), TCL Corporation (China), Sony and Matsushita are only select examples of firms utilizing their operations in India to fulfill the needs of the domestic market and use the surplus capacity to service adjoining domestic markets. LG has announced plans to invest an additional $250 million in India during the next five years. Thanks to this keen competition, Indian companies such as Videocon Industries Ltd. and Onida have become globally competitive. A noticeable trend in the industry is the shifting focus of consumer durable companies toward rural marketing. Following LGs sustained rural marketing efforts, other rival firms like Samsung are adopting distinct strategies to capture the rural market. These companies have announces attractive finance and gift schemes to expand the customer base. The market value of the consumer electronics sector is presented in Figure 3.

FIGURE 3 MARKET VALUE OF CONSUMER ELECTRONICS

ConsumerElectronicsMarket
6000 5000 4000 MillionsofUS 3000 Dollars 2000 1000 0 2004 2005 2006 2007 2008 2009 2010 2011 Year Video Audio

Source: iSupply

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FIGURE 4 ADVERTISING BUDGETS A COMPARISON

AdvertisingBudgetasaPercentage ofGDP
2.00% 1.13% 0.95% 0.95% 0.34%

Malaysia

US

UK Source:Business Today

China

India

Presently, more than 21 million people are employed in the retail sector. Wal-Mart and TESCO are shaping up their entry through strategic alliances and malls based on various cities in the United States are rapidly entering several regions in India. Still, Indias international marketing is at its nascent stage. Firms are still unwilling to commit themselves to engage in sustained marketing efforts in order to spread the word and build their brand image. The paucity of the advertising budget as a percentage of the GDP in India is presented in Figure 4. Malaysia, another smaller developing country is able to place more emphasis on advertising than India.

5. Market Size and Potential While India does not seem to have a big market share in East Asia that includes China and Japan, still the market has a huge potential for sustained growth. Presently, the value of the market stands approximately at $1 trillion and is set to increase to $1.3 trillion within the next four or five years. Most industries are set to register an annual growth rate in double digits. The prospects of such growth are substantiated by the double digit rate of change in the gross national disposable income as shown in Figure 5.

FIGURE 5 GROWTH RATE IN GNDI

ChangeinGrossNationalDisposable Income
30% 25% 20% 15% 10% 5% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: Country Tables, IMF Year Book

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6. Conclusion The diversity of India in terms of its culture, weather, and language pose operational challenges for any marketing effort but, the political hazards present more obstacles. The traditional vendors in all retails sectors are likely to throw countless hurdles in the formation of an organized retail market in all regions. Unless the country takes wholehearted efforts to educate the illiterate vendors so that they can find suitable employment, domestic and foreign multinational forms will have to go through this battle before any degree of success is registered. REFERENCES: Chandra, Aruna; Ryans Jr., John K., Why India Now? Marketing Management, Mar/Apr2002, Vol. 11 Issue 2, pp. 43-45 Eckhardt, Giana M., Local Branding in a Foreign Product Category in an Emerging Market, Journal of International Marketing, 2005, Vol. 13 Issue 4, pp.57-79 Griffith, David A.; Chandra, Aruna; and Fealey, Tim, Strategically Employing Natural Channels in an Emerging Market, Thunderbird International Business Review, May/Jun2005, Vol. 47 Issue 3, pp. 287-311 Kwak, Hyokjin; Jaju, Anupam; Larsen, Trina. Consumer Ethnocentrism Offline and Online: The Mediating Role of Marketing Efforts and Personality Traits in the United States, South Korea, and India. Journal of the Academy of Marketing Science, Summer 2006, Vol. 34 Issue 3, pp. 367-385 Malhotra, Naresh K.; Ulgado, Francis M.; Agarwal, James; and Shainesh, G.; LanWu, Dimensions of Service Quality in Developed and Developing Economies: Multi-country Cross-Cultural Comparisons, International Marketing Review, 2005, Vol. 22 Issue 3, pp. 256-278

Oburai, Prathap; Baker, Michael J.. Vikalpa, International Marketing Strategies in India: An Application of Mixed Method Investigation, The Journal for Decision Makers, Oct-Dec2005, Vol. 30 Issue 4, pp. 11-23 Paul, Pallab; Roy, Abhijit; and Mukhopadhyay, Kausiki, The Impact of Cultural Values on Marketing Ethical Norms: A Study in India and the United States. Journal of International Marketing, 2006, Vol. 14 Issue 4, pp. 28-56 Sharma, Neeru; Young, Louise; and Wilkinson, Ian, The Commitment Mix: Dimensions of Commitment in International Trading Relationships in India. Journal of International Marketing, 2006, Vol. 14 Issue 3, pp. 64-91 Sun, Tracy. China and India: Contrasting Market Growth and Movements. Asiamoney, October 2004, Vol. 15 Issue 8, pp. 55-57 AUTHORS PROFILE: Dr. Sivakumar Venkataramany is the Associate Professor of Management at the Dauch College of Business, Ashland University in Ashland, Ohio. He earned his M.B.A., M.S., and Ph.D., at the University of Miami, Coral Gables, Florida. His teaching and research interests are in global finance, multinational management, emerging financial markets, competitiveness of global banks and privatization in developing countries, particularly India. Dr. Balbir B. Bhasin is the Associate Professor of International Business at the John F. Welch College of Business, Sacred Heart University in Fairfield, Connecticut and Luxembourg. He holds the Master of International Management (M.I.M.) degree from Thunderbird School of Global Management in Glendale, Arizona and a Ph.D. in International Business from the University of South Australia in Adelaide. He currently advises firms investing in Emerging Asia.

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