If U.S. manufacturers are going to be competitive in the foreseeable future, they'll need to access the growing market in India. With a middle class population estimated at between 215 million and 300 million and expected to reach 583 million by 2025 (according to the McKinsey Global Institute), opportunities for global-minded manufacturers are abundant, not only in servicing the needs of this market but in creating products adhering to new business models that ultimately will ensure future global markets.
According to Anil K. Gupta, professor of strategy and organization at the University of Maryland's Smith School of Business, manufacturers must view the market in India as three distinct segments: a top tier which will be immediately profitable, a middle tier which is where long-term growth is situated, and a bottom tier where a company won't see a profit but could break even while pushing the envelope on the innovation front.
"Designing new products, services and even entire business models to cater to these unique needs can yield innovations that can serve as cutting-edge sources of competitive advantage, not just in other emerging economies but also back home in other developed economies," says Gupta. The unique needs of the middle and lower tiers are low buying power, energy and raw material scarcity, environmental degradation and large populations.
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U.S. manufacturers need to be aware of the three distinct
market segments in India, and plan their growth strategies
accordingly, says the University of Maryland's Anil Gupta. |
Moline, Ill.-based Deere & Co., a manufacturer of farm and construction equipment, is an example of a company that had traditionally viewed the Indian market from its current product line, which was produced in the U.S., and had deemed the Indian market too small, according to Gupta, co-author of
Getting China and India Right (
Jossey-Bass, 2009). However, when Deere took a market-centric view, the company began to manufacture in India its new 5003 series of small, low horsepower, highly maneuverable tractors. It turns out this model is now popular with hobby farmers in the United States.
Seeking to serve the growing industrial market in India, the Timken Co., a manufacturer of friction management and power transmission products based in Canton, Ohio, announced in April the opening of its second manufacturing plant in Chennai, India. This plant will be located in a special economic zone at Mahindra World City. The new $25 million plant joins a plant located at Jamshedpur and a global technology center in Bangalore.
Timken CEO James W. Griffith cited the new plant as a "major step forward in our strategy of driving growth in global industrial markets," in a statement at the plant opening. "We will continue to make investments, both organic and inorganic, to take advantage of strong global demand in our targeted industrial growth markets." Nearly 80% of the production of this plant will be exported to the company's operations in the U.S. and the remaining will be sold in India. The Chennai facility will manufacture tapered roller bearings for customers in the global industrial markets.
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See Also
Doing Business in 21st Century India: How to Profit Today in Tomorrow's Most Exciting Market
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