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China, India and the US: Tale of three titans
Shyam R. Chidamber
The US, China and India represent a large chunk of the world
• Over 33% of the world economy• Almost 50% the world population• 80% of the world wide pool of science and
technology Ph.D.s are from US, China and India
These scenes have become common place
The shape of things to come…
Traditional gaps are closing…
shanghai-new-york-mumbai
Caveat Emptor: Making simplistic observations on complex matters…
Nevertheless, here we go!
Three Similarities & Three Differences
Similarity 1: All three are large, heterogeneous
countries yet incoming firms see each as a
homogenous market
Staggering Failure Rate
• 90% of foreign firms fail in the US market
• 48% of all foreign firms fail in China in the first year
• Equally high failure rate of Foreign firms in India
Market Diversity
Markets are not homogenous; they have distinctly different
consumer preferences and smart companies realize this
Suburu built its US market presence with avid New England skiiers…
Think of specific sub-markets that are most amenable…
The US is several markets
Economic clusters in China
Clusters are sizeable
Two states: very different places
Kerala
Uttar Pradesh
Mickey D caters to Indian and Chinese palates
In Szechuan province: McDonald's "Numbing and Spicy" Premium Grilled Chicken sandwich. Note the Sichuan peppercorns and red chili peppers.
Meatless burgers in Gujerat (where vegetarianism is common)
Haier markets successfully to American urban college
students
Mahindra Tractor Commercial
Indian tractors to US family farms
US Customer Satisfaction rating: 97%US Customer Brand Loyalty Rating: 98%Fastest growing tractor brand in North America
Similarity 2: All three countries are combinations
of rich, middle class and poor consumers
US, China and India produce a lot of billionaires…
• US billionaires: 442• Chinese billionaires: 122• Russian billionaires: 110• Indian billionaires: 55 Forbes Billionaire Dashboard
…But all three countries have very high GINI (income inequality)
Behind the gates of the wealthyfood lies rotting from wasteOutside it's the poorwho lie frozen to death – Du Fu
Starting salary for a Beida graduate in Financial services: 3000 yuan/month
Price of Clarks Wingtip shoes: 1000 yuan
Firms seem to eye the rich…
65% of US households shop at Walmart; 25% of Walmart shoppers do not have a bank account
The US has a large (and growing) lower middle class
China: an urban middle class country
India is shaping up the same way…
Size of the worldwide
middle market:
$30 Trillion!!
Liquid Diary Products (LDP)
$15 Phones for the people at the bottom of the pyramid
Selling a billion 2 cent soap packets is a smart business
Similarity 3: Guanxi is important!
Traditionally considered important in China
Indian networks are deep rooted
Source: Emory University
Silicon Valley is a dense network of connections
Difference 1: Financial conditions are in different
stages of development
Overall Ranking:
USA: 2China: 23India: 40
US leads in non-banking financial services and in sophistication of financial markets
China lags even India in several key categories:
• Access to local equity markets• Ease of access to credit• Securitization of credit instruments• Penetration of life insurance products and services
India’s financial marketplace is lopsided. Highly developed IPO market, securitization, but low on legal enforcement of business contracts, regulatory framework, transparency etc…
America has a complex adaptive system of finance; Chinese and Indian
systems are in their infancy
Difference 2: US, Indian and Chinese firms (and
institutions) are different in their level of globalization
Assessment of firm globalization
Chinese and Indian firms are rarely truly global companies” unlike many US firms…
Not even one of these firms features in the top 100 global brands
Indian firms are even less globally well known…
But Indian and Chinese firms have joined the Global 2000 in record
numbers
And they are tapping global capital markets…
Difference 3: The three titans seem destined for different demographics
India has a potential demographic
advantage
Age disparity among the titans
India: Young and middle class
China: Old and middle class
US: Old and rich
By 2050…
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, … it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way…
Seems fitting for a tale of three economies…
Charles Dickens,1859: Tale of Two Cities
If a man takes no thought about what is distant, he will find sorrow near at hand.
The future is nearer than we think…we need to better understand it
Our problems are man-made. Therefore, they can be solved by man. And man can be as big as he wants. No problem of human destiny is beyond human beings. Man’s reason and spirit have often solved the seemingly unsolvable — and we believe they can do it again. ... In the final analysis, our most basic common link is that we all inhabit this small planet. We all breathe the same air. We all cherish our children’s future. And we are all mortal.
Words to remember…
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