Getting a slice of the ‘Chindia’ pie

The numbers tell a tantalising story. China is the world’s number two economy. India is moving up fast and, by the latest World Bank measure, has already taken the number three spot.

Together, by 2020, they’ll have more than one billion middle class consumers spending ten trillion dollars a year, according to a Boston Consulting Group Study.

“The rise of these two nations is transformative,” says Jagdish Sheth, Professor of Marketing at Emory University in Atlanta.

A recent speaker at NUS Business School’s Asian Business Series, Sheth is the author of “Chindia Rising: How China and India Will Benefit Your Business.”

“Chindia” is not a term he coined, but it’s a term he uses when discussing strategies to succeed in these two fast-growing economies.

Participate and learn

“If those are the largest markets, and if you’re a truly multinational enterprise, you have to participate in that market and you have to learn how to adapt to the local marketing approaches.”

sheth280Competing in “Chindia” requires rethinking the whole idea of marketing, Sheth says.

Most marketing strategies are based on a Western model of competition among branded products and services. But in emerging markets a majority of all consumption is unbranded.

“So, the largest opportunity is actually, how do you make unbranded products and services into branded products and services? In consumer markets, this is very important because brands are not only revenue producers but they create assets,” Sheth says.

Just as Japanese and Korean companies have created globally-known and respected brands, Sheth expects the next major brands to come out of China and India.

This demand for brands is being driven in part by an increasingly brand-conscious middle class.

But it’s also spurred by advances in technology, including mobile phones and online retailing, which allow companies quick and direct access to consumers.

Furthermore as the consumer population of developed economies ages, companies are looking for growth in the emerging markets. And economic reforms in India and China have encouraged consumption among the populations there.

Affordable and accessible

The only thing that stopped China and India economically growing is not technology, it’s not capital, but it’s the environment

Jagdish Sheth, Professor of Marketing Emory University

So how do multi-national companies take advantage of these burgeoning markets? Sheth offers a few strategies that could be put to use.

First, he suggests converting non-users into users.

“Most marketers think OK, if I’m P&G I must compete with Unilever or if I’m a Coca-Cola I must compete with Pepsi. No. You don’t compete among yourselves. There’s a whole market out there.”

To succeed in these fast-changing markets, Sheth says companies must also democratise innovation, making products affordable and accessible for consumers at the base of the socio-economic pyramid.

Once established, these companies can implement reverse innovation, improving quality to reach the higher levels.

That’s counterintuitive to most MNCs, which Sheth says would go after the top of the market first.

He says it is also important for companies invest in packaging and design that takes local culture and customs into account.

Something to chew on

He took the interesting tale of Chiclets chewing gum as an example. Packaged eight pieces to a pack, as it is in Western markets, it failed in India. It turns out consumers only chewed a couple of pieces at a time and the rest would end up melting in the box in the sultry Indian climate.

ThinkAloud4With that research at hand, the gum was repackaged into two-piece packs – and it took off.

“In marketing we don’t talk about packaging and design as a core competency,” Sheth says, but in this case it made all the difference.

Even though he lumps the two economies together as “Chindia,” he cautions that they are two very different markets, and that only a few companies have done well in both.

Car makers like Nissan and Ford have succeeded in both markets, as have some appliance makers and consumer electronics companies.

In the fast-food sector Kentucky Fried Chicken and McDonalds appeal to the appetites of both Chinese and Indian consumers.

With their growing populations, growing affluence and easier access to consumer goods, it seems it will be hard to stop the dual economic juggernauts of China and India.

But Sheth says there are some obstacles ahead. The biggest being sustainability.

“I would say that the only thing that stopped China and India economically growing is not technology, it’s not capital, but it’s the environment.It is in the self-interest of China and India to massively invest in the environmental aspects,” he said.

He said China is serious about cleaning up its act and taking a lead on these issues. India on the other hand he says is not taking the environmental aspects as seriously.

China will also have to face its own aging population with Sheth predicting that will lead to a slowdown in its growth beginning around 2020.

That, coincidentally, is about the time he says India’s growth could really take off – provided it can improve its infrastructure to smooth out its distribution problems.

It also has to change its industrial policy to become more investor friendly.

But he sounds optimistic they will put things right and he says it will be very interesting to watch the two grow.

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