| The stock indices have scaled new heights. The Islamabad SAARC Summit has apparently been far more successful than the most optimistic prognosis just a week before. |
| The PM has categorically stated in a recent TV interview that the NDA will be going to the general election on the agenda of development, jettisoning various regressive issues of the previous years. And the Indian cricket team nearly pulled off a dream series victory over the mighty Aussies! |
| Does this imply that all businesses can safely expect to post stellar results in 2004? The business environment does appear to be very highly conducive for almost all sectors of the Indian economy. Capital is easy to raise, and interest rates are quite bearable. The consumer is in a positive frame of mind as far as spending is concerned. |
| Notwithstanding the impending general elections, one can expect political stability. In short, the conditions are ripe for start-up as well as expansion of all kinds of new businesses. |
| This is precisely the reason why it would be a good idea for existing businesses and new start-ups to take a brief pause to assess the emerging opportunities more carefully. The all-pervasive hubris is likely to affect many, and hence we could see unbridled creation of capacity in various industries and services. |
| Undoubtedly, there will be an increased demand from the consumers but there is a risk that in the short and medium term, we could see creation of more capacity than the increase in demand. |
| Real estate is one such sector that has already started seeing an overwhelmingly optimistic interest from various investors "" if one were to take note of announcement of all kinds of projects, be it for housing or for commercial uses or for retail (including malls). |
| We are also likely to see substantially enhanced operational capacity in sectors such as textiles, steel, automobiles, bulk drugs and pharmaceuticals coming to the market in 2005-6 on the basis of the reported plans currently underway. |
| The investors/managements of such companies would have, no doubt, done some market study before committing such investments. However, such studies should also consider (if not already considered) the impact of WTO and thereby increased international competition both for the domestic Indian market as well as for the export markets. |
| Other important factors to consider would be the rising clout of major retailers in the developed markets that would lead to increased pricing pressures on the suppliers; demographic changes in various global and Indian markets that will have major impact on the absolute demand for various products and services notwithstanding the buoyancy in economy; changing 'value' perceptions of the Indian consumer who is now getting increasingly younger, smarter and more demanding and hence 'one size fits all' approach may no longer work; and finally "" in the context of the domestic market "" increasing number of goods and services that are finding their way in the consumers 'need and desire' basket, implying a very dynamic shift in spending patterns across various product and service categories leading to a far more intensified competition for getting a share of the overall spending by various consuming households. |
| What should the companies do as they plan for this growth in the market opportunity? To start with, they should increase the spending on market and consumer research (one major Indian FMCG company's chairman has actually proposed a reduction in their internal research budget but they were probably already spending too much). |
| The research should be carried across a wide range of consumer product and service categories rather than limited to their own core category so as to get a sense of cross-category competition. The research should also be done on the capacities being created by competitors and new entrants "" both from India and overseas. Once the opportunity has been well (and quickly) studied and conceptualised, companies must show dramatically increased 'speed to market'. |
| Only those companies will profit who can spot the opportunity early and can quickly come to the market with the appropriate product or service. Having done so, such companies should then go back to the starting point: study the market once again and spot new trends and thereby new opportunities! Arvind@ksa-technopak.com |
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