culture economy industry The 3 x 3 analysis of the Indian market. Entering INDIA Saikat Sarkar, May 2018, India 2

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1 Entering

2 The 3 x 3 analysis of the Indian market. Entering INDIA Saikat Sarkar, May 2018, India 2

3 Entering INDIA Saikat Sarkar, May 2018, India 3

4 There is no one such thing as Indian Culture. It has always been diverse and complex. And as a result, more often than not, misinterpreted. But what Indians do in their personal life isn t the objective of this section. What they eat, wear or sing has little bearing on our plan of entering this. So let s try to focus on how Indians are likely to behave as customers, and why do we do so. There are three distinct aspects of the business-behaviour of Indian customers that are important to consider Ambition Frugality Control Ambition /amˈbɪʃ(ə)n/ : a strong desire to do or achieve something. synonyms: aspiration, intention, goal, aim, objective, object, purpose, intent, plan, scheme, mission, calling, vocation, desire, wish, design, target, end, dream, hope We once were at the peak of human civilization, but that was thousands of years ago. Whether it was internal conflicts, or external attacks, or a combination of both that brought us down, is a subject of long debate. Bottom-line, we fell from grace. But, over the last few decades, we have been trying to get back up on our feet. To our dismay, over-population has led to scarcity. Scarcity has led to corruption. Corruption has led to greed. And greed has led to more scarcity (or more specifically, disproportionate allocation of resources). In the process, every Indian baby, right from the moment it sees the light of day, starts learning to fight for its survival. Struggle for existence we ended up implementing man-made Darwinism across every socioeconomic class. Thus, were sown the first seeds of ambition. The competitive nature and willingness to grow, thus acquired, is further fuelled by constant flow of global encouragement. A billion people have now got access to technology & education. India has the largest population of young and hard working professionals who are beginning to realize the worth of their skillset. Our increasing exposure to global best practices is pushing even the smallest of Indian entrepreneur to dream big. A billion people are looking for opportunity. A billion people are racing for recognition. Frugality /fruːˈɡalɪti/ : the quality of being economical with money or food; thriftiness. synonyms: thriftiness, carefulness, scrimping and saving, conservation, good management; caution, prudence, providence, canniness; abstemiousness, abstinence, austerity, asceticism, self-discipline, restraint, moderation, puritanism, monasticism, monkishness; miserliness, meanness, parsimoniousness, niggardliness, close-fistedness A penny saved is a penny earned. Yes, we know. But we are not talking about austerity or abstinence here. The frugality we are discussing here, is all about efficiency. It is about prudence. About utilization. Lean. Output over Input. Result over Resource. The Japanese mastered it first in terms of industrial efficiency. For Indians, it started off as a means to manage scarcity, but grew into whole lot bigger. It helped our entrepreneurs start small, and achieve break-even faster. It allowed us to compensate for the unavailability of hi-end technology and R&D. It made our products Entering INDIA Saikat Sarkar, May 2018, India 4

5 and services more competitive, and thus, feed the growing demand within the country, especially when purchasing power of 99% of our population was one of the lowest in the world. Frugality makes us hard negotiators, which may annoy the rest of the world at times. But at the same time, it is our frugality why the world looks to India as a principal destination to outsource in the fields of manufacturing, technology, medicine, banking services, consultative services, consumer durables, food, textile, chemicals the list just goes on. Reduce, Reuse, Recycle it s not our management principle. It is our way of life. Control /kənˈtrəʊl/ : the power to influence or direct people's behaviour or the course of events. synonyms: jurisdiction, sway, power, authority, command, dominance, domination, government, mastery, leadership, rule, reign, sovereignty, supremacy, ascendancy, predominance, hegemony; charge, management, direction, guidance, supervision, superintendence, oversight; influence; rareprepotence, prepotency, prepollency Carter (William Devane) : In this case, the syndicate will take the decision. Porter (Mel Gibson) : One man you go high enough you always come to one man who? Payback, 1999 The control in discussion here is about decision making. The size of the organization plays an important role in the way decisions are made. In smaller proprietary companies, decision making is mostly a single-point activity. In larger corporates, a team gets involved in the process, but the decision still narrows down to the desk of the boss. Although this is largely prevalent in India, this isn t uncommon in other markets as either. Our customers are mostly Tier 2 or Tier 3. Steel being the first stage engineering raw material, it sits at the very beginning of the value chain. In India, the Tier 2 and 3 companies are mostly small and owner driven. In case they are part of larger conglomerates, the units that we deal with will be under the leadership of a BU Head or similar. The power of control and decision making is limited to these heads or owners. One point decision making comes with one point responsibility. The accountability of success or failure of these small companies thus, lies on the owners. In many cases, their own money or family money is invested. This monetary risk makes these decision makers aggressive (in a good sense). The window of opportunity with such companies is usually small and calls for quick decision making, else it ll be a lost opportunity. The most important factor in closing a deal with these decision makers is CLARITY, BREVITY and SPEED of information. Indians are different and diverse, and hence, there s no single way to stereotype us. But there s one thing common across the land we learn and adapt very well. And that s a that will take us a long way. Entering INDIA Saikat Sarkar, May 2018, India 5

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7 The world goes all ooh and aah and what not, whenever India is mentioned in any global economic forum. One finds our mention in the analyst s review of Ernst Young, in the business review of Harvard, and even in the annual report of World Bank. Invokes a proud feeling in a billion hearts! But set apart the bedazzlement for a minutes, and come face to face with reality. Are we really worth the attention? Let s find out. Economy is a function of many variables and a subject of extensive research. Population, geography, natural resources, environment, government, regulations, currency, international relations, history, age, tradition, religion, profession all of these and many more come together to constitute the behemoth called Economy. Although it is a task next to impossible to cluster or generally prioritise these economic factors, let s still take a look at three of those that will help shape our strategy to engage in business with this. Resource Policy Projection Resource /rɪˈsɔːs,rɪˈzɔːs/ a stock or supply of money, materials, staff, and other assets that can be drawn on by a person or organization in order to function effectively. COASTLINE and MANPOWER are two of the largest assets of India. Coastline India has a coastline spanning km (4761 miles), forming one of the biggest peninsulas in the world. According to Ministry of Shipping, around 95% of India s trading by volume and 70% by value is done through maritime transport. It is serviced by 12 major ports and 200 notified minor and intermediate ports. It is so important for our that the government has allowed 100% FDI for port & harbour construction and maintenance projects. The government has also initiated National Maritime Development Programme (NMDP) to develop this sector with a planned outlay of USD 11.8 billion km coastline vessels handled per year 2017 Foreign Trade share by Value Marine Trade 70% 12 Major ports 200 Minor ports 600 Million T cargo per year Other Modes 30% 100% FDI Ports & Harbour USD 276 Bn (total export) USD 384 Bn (total import) in year 2017 Marine Trade 95% USD 11.8 Bn for development USD 9.1 Bn (steel export) USD 11.4 Bn (steel import) in year Foreign Trade share by Volume Other Modes 5% Entering INDIA Saikat Sarkar, May 2018, India 7

8 Manpower With a population of 1.3 Billion, India ranks 2 nd globally, next to China. But that s the easiest known information. Let s figure out what it means for the to have manpower as the most abundantly available resource. Retired / Ageing Manpower 14% Future Employable Manpower 45% Current Employable Manpower 41% The Median Age of Indian population is 27.9 years as estimated in July Which means this will have more than sufficient manpower for next 3 to 4 decades. 65+ y AGE COMPOSITION OF INDIAN POPULATION y y y 0-14 y Female (Millions) Male (Millions) Current Employable Manpower Future Employable Manpower A B C A : Advanced Industrialized States. Contain 32% of the total population. B : Moderately Industrialized States. Contain 42% of the total population. C : Low Industrialized States. Contain 26% of the total population. STATE-WISE POPULATION (Millions) Industrialization in this context indicates manufacturing and related industries that are of interest to us particularly. The Other states may enjoy economic status in terms of tourism, textile, trade, agri, real estate, services and so on. Thus, we see the Age Composition, together with the Geographic Distribution, makes our manpower an extremely favourable resource for the Economic Progress of this country. Add to that the growth in our Educational facilities, improvement in our Techno-commercial skillset. and the Ambitious nature (that we already discussed in previous chapter). Indian manpower is an asset like no other. Having said that, India is not just about its Coastline and Manpower. These are just two of the several factors that demonstrate the potential in this. There are perennial water-flows, favourable landscapes, sources of renewable energy, minerals & ores, and many other natural resources that make India a really attractive destination. Entering INDIA Saikat Sarkar, May 2018, India 8

9 Policy /ˈpɒlɪsi/ a course or principle of action adopted or proposed by an organization or individual. synonyms: plans, strategy, proposed action, blueprint, approach, scheme, stratagem, programme, schedule, code, system, guidelines, intentions, notions, theory, line, position, stance, attitude National Steel Policy The first National Steel Policy in 2005 sought to indicate ways and means of consolidating the gains flowing out of the then economic order and charted out a road map for sustained and efficient growth of the Indian steel. A lot has changed in this since 2005, and so have adapted the annual revisions of the policy. Let s look at the Indian steel and key takeaways from the latest NSP Induction Furnace 31% Blast Furnace 40% Capacity 125 Mi T Production 94 Mi T Electric Arc 29% Indian Steel Industry Setup World Steel Production (2017 Mi T) 208 Kg 61 Kg Per Capita Consumption Having said that, India is not just about its Coastline and Manpower. These are just two of the several factors that demonstrate the potential in this. There are perennial water-flows, favourable landscapes, sources of renewable energy, minerals & ores, and many other natural resources that make India a really attractive destination. SECTOR WISE FINISHED STEEL CONSUMPTION - CURRENT & PROJECTED CAGR Construction & Infrastructure % Engineering & Fabrication % Automotive % Other Transport % Packaging & Others % Total Finished Steel % Projections for Crude Production : 255 Mi T Finished Steel : 230 Mi T Per Capita Consumption : 158 Kgs Crude Steel Capacity by FY31 : 300 Mi T Entering INDIA Saikat Sarkar, May 2018, India 9

10 Make in India FDI & FII Taxation Cost of Credit International Trade Entering INDIA Saikat Sarkar, May 2018, India 10

11 Projection /prəˈdʒɛkʃ(ə)n/ an estimate or forecast of a future situation based on present trends. synonyms: estimate, forecast, prediction, calculation, prognosis, prognostication, reckoning, expectation A business is often called a going concern. Despite being an accounting terminology, it literally and aptly puts the emphasis on the long term sustainability of any commercial venture. Depending on the nature of its, every business has its own entry and exit barriers. Steel is a heavy, capital intensive. This sets both the entry and exit barriers high; we can t be a fly by the night service provider. A medium to long term viability is, therefore, a must before we consider investing our time, energy and resources into the Indian. Let s turn to the crystal ball then. Growth in Steel Consumption Growth in Automotive Sector Growth in Power & Energy Growth in Aeronautical Sector Growth in Defence Growth in Railways Growth in Space Programmes Growth in ABC (Architecture, Building & Construction) Growth in Infrastructure Entering INDIA Saikat Sarkar, May 2018, India 11

12 Economy Blank Slide Economy Blank Slide Entering INDIA Saikat Sarkar, May 2018, India 12

13 Economy Last Slide Economy Last Slide No wonder, all eyes are on us. Entering INDIA Saikat Sarkar, May 2018, India 13

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15 Industry Blank Slide Industry Blank Slide Entering INDIA Saikat Sarkar, May 2018, India 15

16 Industry Blank Slide Industry Blank Slide Entering INDIA Saikat Sarkar, May 2018, India 16

17 Industry Blank Slide Industry Blank Slide Entering INDIA Saikat Sarkar, May 2018, India 17

18 Industry Blank Slide Industry Blank Slide Entering INDIA Saikat Sarkar, May 2018, India 18

19 Industry Blank Slide Industry Blank Slide Entering INDIA Saikat Sarkar, May 2018, India 19

20 CONCLUSION Conclusion text Entering INDIA Saikat Sarkar, May 2018, India 20

21 Bibliography Steel Ministry publications Joint Plant Committee reports Finance Ministry publications UIDAI India publications Census India publications RBI publications Wikipedia Economic Times World Steel Association indexmundi.com tradingeconomics.com ACMA + SIAM reports ASPA reports IBEF reports Entering INDIA Saikat Sarkar, May 2018, India 21