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India's poor a good market

By Ashok Easwaran, Indo-Asian News Service
Chicago, Oct 6 (IANS)
The millions of poor in India are also a good market for multinationals willing to expand their base, says business expert C.K. Prahalad.
He said since India opened up its economy a decade back, the multinationals have only targeted its numerically few rich. But the companies would profit more by going down lower on the pyramid.
"India's poor can be looked upon either as an intractable problem or a potential market. If you look upon them as a potential market, they can be a source of innovation," said the professor of corporate strategy and international business at the University of Michigan Business School. He said multinationals needed to modify their marketing strategies to succeed in India. He said companies had underestimated the cost of product development. He pointed out that Kellogg lost 100 million dollars while trying to change the breakfast pattern that had existed in India for a hundred years. "You have to rethink product design," Prahalad warned. Saying packaging played a key role in wooing customers, he described India as the biggest market for shampoo in terms of tonnage. "The poor cannot afford a bottle, but they can buy a single use sachet for the equivalent of 10 cents. "Indians are unique in the way they link price and performance. "They want global standards but with local prices. People like Nirula's fast food but with the McDonald ambience."
He was speaking at a seminar on "Assessing and learning from India's economy" organised by the Consulate General of India and the University of Chicago Graduate School of Business.
He elaborated that in one market segment, Hindustan Lever makes 93 percent of its revenue making products for the poor against 22 percent from a high-end version of the same product. "Serving the poor is good business." Prahalad said India and China were markets that would play a big role in how multinational companies did business and in determining their management. "About 30 of Unilever's 200 top executives are Indians and 30 percent of McKinsey's partners are Indian. Naturally, they do good business in India." Software had put India on the global map, but Prahalad said the country should focus on a manufacturing base. "The Indian software industry was global from day one. There was no market for it in India. "India will have to get into manufacturing. You cannot build a complex country like India on the basis of software. India missed foreign investment in manufacturing from 1975 to 1995, but I don't think that will happen now." --Indo-Asian News Service