November 07, 2009 09:38
The world is raving over China and India, which are increasingly referred to as "Chindia." There seems to be ceaseless admiration for the two nations as China has achieved some 10 percent economic growth over the past several years while India's economy has grown at an annual average rate of 9 percent over the last three years. Even during the recent global economic crisis China's economy grew 6.5 percent and India's 6.7 percent. Together the two countries have about 2.5 billion people, or 40 percent of the world's population.
Their economic growth so far could be just the beginning of something bigger. Global business conglomerates are naturally eager to enter Chindia. China's consumer market was estimated at 10.68 trillion yuan last year, up 21.6 percent compared to the previous year. It is expected to grow 13 percent this year to 12.26 trillion yuan as the Chinese government tries to shift its focus for economic growth from exports to domestic consumption. The Indian market is also is thriving thanks to aggressive government efforts to boost domestic consumption.
China's economy is practically a microcosm of the global economy. Each year around 35,000 companies enter the Chinese market, and by 2014 around one million foreign businesses will be operating there. The situation is similar in India's commercial capital Mumbai. A financial district is forming in the city's suburban area of Santa Cruz as an increasing number of global financial institutions enter the Indian market.
Both markets are enticing, but business people who have been working there advise that marketing strategies need to distinguish between different regions and types of consumers. Korean retailer E-mart succeeded in China by setting up regional bases in Shanghai and Tianjin, spreading out to nearby cities. "China is a huge country with a huge population," said Chung Min-ho, head manager of E-Mart in China. "It also has a diverse range of cultures so it is impossible to encapsulate China in one sentence. You need to break down the different consumer groups and develop a wide range of marketing strategies." The same goes for India. The income gap between the rich and poor there is so large that it is important to understand the characteristics of the polarized market to do business there, experts say.
But Korean businesses are doing well in Chindia, primarily because of efforts to localize. With top-notch technologies they are already well-known for, Korean companies have made sure that their products cater to the lifestyle needs of local consumers. The outstanding example is Hyundai Motor. Its Sonata mid-sized sedan manufactured in Beijing is specially configured to suit road conditions there. The best-selling Elantra compact includes interior, exterior and drivetrain features that are modified to match local road conditions, quality of fuel and consumer tastes. Comparable changes are applied to vehicles sold in India as well. Hyundai took the Indian market by storm by selling a compact with an elevated suspension to accommodate for poor road conditions. LG Electronics followed a similar strategy, offering products designed to withstand the power failures common in many parts of India.
There are other business challenges in Chindia. India still does not have business environment favorable to foreign companies. "It is essential to have everything documented and specified in print," said Choi Moon-suk, head of the New Delhi office of the Korea Trade-Investment Promotion Agency. "And if possible, it is better to enter the market alone rather than through joint ventures." China meanwhile still has many internal problems, while it has yet to completely solidify its status as a global leader.
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