"Market opportunities in China and India have long excited Western technology companies, with the expectation that in coming years they will dwarf all other markets," comments Charles Yen, Leader of Deloitte China's TMT Group. "TMT CEOs are under tremendous pressure to capitalize on these two emerging giants. However, this potential is matched by significant challenges."
Both countries have enormous populations and growing middle classes with disposable incomes that are steadily rising. China's middle class will grow to 100 million people by 2010, surpassing the population of the largest European country. India's upper middle class already numbers at least 62 million. These emerging segments represent potential markets for products and services that could be extremely lucrative and should not be ignored. However, continued growth in both countries will likely be restrained by shortages of resources -- from steel to water -- and by rising prices for everything from building materials to labor. In addition, India's billion- plus population is fragmented across hundreds of thousands of villages and hundreds of languages and its infrastructure remains undeveloped.
"The TMT sectors in China and India will certainly blossom as markets -- but that growth will be steady rather than meteoric," continued Mr. Yen. "To successfully capitalize on this vast potential, companies will need to make significant long-term investments in building local knowledge and understanding. They will need to master each country's massive complexity. And, they will need to maintain a long-term outlook based on measured expectations."
Short-term suppliers; Long-term markets
Sourcing from China and India is fast becoming a competitive necessity -- and for some TMT companies has been an imperative for many years. In the short term, it allows TMT companies to reduce costs and improve margins. In the long-term, it can also provide first-hand experience doing business in these increasingly important markets -- knowledge that will help companies capitalize on the opportunities that emerge as ownership restrictions are relaxed and disposable incomes rise.
Avoid the fallacy of "one size fits all"
TMT companies must recognize that China and India are diverse, heterogeneous markets. Although the two countries are often discussed in tandem, they are in fact very different on a number of key dimensions, including language, culture, literacy, consumer behavior and buying preferences.
The full report, "Be Prepared: Imperatives for TMT CEOs, 2005-2010," is available at: http://www.deloitte.com/dtt/cda/doc/content/Be%20prepared_Final_Dec05.pdf.
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