navigating india's complex market using actionable intelligence

Copyright © 2013 ValueNotes Database Pvt Ltd. All rights reserved.

Navigating India's complex market using actionable intelligence

May 2013


INDEX

About ValueNotes

Structure of Indian markets

CI strategies for India

Case studies


About ValueNotes

• Background• Experience • Recognition

4Copyright © 2013 ValueNotes Database Pvt Ltd. All rights reserved.

From data to decisions…

Background

Level of education Qualification

India’s premier research & consulting firm

Corporate office in Pune, India

Adherence to strong ethical framework

Established in 2000

Global partnerships


~ Over 100 CI projects in the India geography in the last 5 years

Experience in serving highly specific needs

Market potential in India for state-of-the-art power conditioning solutions and electric power distribution equipment of a US-basedmanufacturer

Opportunity assessment

Profiles of major chemical manufacturers in India, including information about their products, product strategies, pricing, revenues,organization charts, future plans, etc.

Competitor profiles

Pharma: competitive landscape for a psycho-active substance - assessed its therapeutic potential in India and China; and establishedthe stage of development by competitors

Product launch intelligence

Comparison of competitors of an MRO services company, on service focus, senior management experience, global delivery capabilities,ability to scale, BCP infrastructure, and implementation capabilities, etc.

Due diligence on hedge fund companies based in India

Niche non-dairy segment: investigated how competitors were able to price their products more competitively

Competitor practices / benchmarking / evaluation

Global market monitoring for over 20 companies

News monitoring


…ValueNotes’ research is highly regarded

Recognition

Our research has been quoted in the international media…

Awards

• Black Book of Outsourcing: Nominated to the top-10 ranking three years in a row (2007 to 2009)

• Nasscom Emerge 50: Nominated to the 50 emerging companies list in 2009

Nominated to present at several SCIP conferences

2011 Orlando, USA • Competitor profiling

2010 Sao Paulo, Brazil • Social media for CI

2009 Chicago, USA• The deep web unfolded: effective use of the

invisible web tools for CI

2009 Chicago, USA• Competitive intelligence offshoring: how

much is too much?

2008 Rome, Italy• CI in India - perspectives of a local

practitioner


Structure of Indian markets• Structural characteristics of Indian markets• Organized vs. un-organized sectors• Small scale industries (SSI) sector• Grey market• Diversity• Under documentation• Decentralized statistical machinery• Problems with Government statistics


…pose challenges for performing CI

Structural characteristics of Indian markets

Large unorganized

sector

High level of fragmentation

Large grey market

Unorganized - unregistered and/or unregulated

Very large number of small enterprises

Goods/services bought or sold, without paying taxes

Low level of documentation

Data/statistics on large chunks of economic activity is not collected and/or collated


… the unorganised sector is critical to the Indian economy

Organised vs unorganised sector

% GDP

% of Workforce

% GDP

% of Enterprises


…mainly comprises of proprietary firms

Micro Small and Medium Enterprise sectors

45% of industrial employment

50% of manufacturing output

40% of exports

8% of GDP

% of MSME Sector % of Registered MSME Sector


…make it more difficult to do CI

Grey market

Large grey markets, particularly in electronics, pharmaceuticals, branded clothing, etc

Grey market distribution is thought of as a viable solution for overstocking and over production

Difficult to size grey markets

India has a huge grey market for electronics where goods are sold at 20-25% discount rates

60-90% of iPods in India are sold in the grey market


Andhra Pradesh

Arunachal Pradesh

AssamBihar

Chhattisgarh

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and

Kashmir

Jharkhand

Karnataka

Kerala

Madhya Pradesh

Maharashtra

ManipurMeghalaya

Mizoram

Nagaland

Orissa

Punjab

RajasthanSikkim

Tamil Nadu

Tripura

Uttar Pradesh

Uttaranchal

West Bengal

West

North

South

East

Diversity

28 States and 7 Union Territories

22 officially recognized languages

Different taxation / regulatory norms across states

Regional cultural nuances

High differentials in income, education

Rural urban diversity

Different states have different levels of development and growth

It’s like doing business in > 30 countries!

The Indian curry


…key hurdle for effective CI

Under documentation

Fragmentation

Inadequate statistical machinery

Weak or no industry associations

Under documentation Immature market

Diversity

Large unorganised sector


Divergence in depth and breadth across states

Decentralised statistical machinery

CSOCoordination, standard

setting & training

NSSO Large scale statistical

surveys

Census of IndiaMinistries/Departments

Government of India

DES - Directorate of Economics and

Statistics

National Statistical Office

66 state subjects – including health, police, agriculture, libraries, museums, education, mining, gas, many

types of taxes, etc

97 central subjects

47 joint domain subjects

Co-ordination & Advice

Ministry of Statistics and

Program Implementation

Home Ministry


Government statistics may also need to be validated…

Problems with Government statistics

Existence of gaps in information

Delays in publication of results

Available data not easy to find

Large and frequent revisions of published results

Discrepancies in official statistics from different sources

Lack of transparency in statistical operations

Water pipelines is a key infrastructure area. There is no data on length of water pipelines in India, their age, materials used, etc.

- How can the government plan its investment?

As much as 40% discrepancy in the import figures of an engineering company as recorded by DGCIS

- How reliable are the import figures?


CI strategies for India• CI strategies in India• Getting to Government data• Heavy reliance on primary research• Identifying external touch points• Primary research• Approaches and methodologies• Question of ethics


CI strategies

…jugaad and innovation

CI strategies in India

High reliance on primary

research

Innovative methodologies –

proxies, extrapolation,

triangulation, validation

Low reliance on

desk research

CI Strategies


Published macro-economic data is quite good

Secondary information sources

As much as 40% discrepancy in the import figures of an engineering

company as recorded by DGCIS

- How reliable are the import figures?

Category Source Data AvailableData available (Rating 1-4)

Comprehensiveness Quality Recency

Economy

RBI, Economic Survey,

CMIE Economic

Intelligence Service,

Investment

Commission, IBEF

Macro data

Micro data

Research & Analysis

Paid databases

Trade

Ministry of Industry &

Commerce, RBI,

Economic Survey, FICCI,

IBEF

Macro data

Micro data

Research & Analysis

Company

data

CMIE Prowess, Ministry

of Corporate Affairs,

CRISIL

Macro data

Micro data

Research & Analysis

Paid databases


Some industries are reasonably well covered

Information sources



Telecom

COAI, TRAI, Ministry of

Information Broadcast,

Industry magazines,

published research

Macro data

Micro data

Research & Analysis

Paid databases

Auto

ACMA, SIAM, ARAI,

WIAA, industry

magazines, published

research

Macro data

Micro data

Research & Analysis

Paid databases

FMCG

CIFTI, Ministry of Food

Processing Industries,

IMRB, AC Nielsen,

published research

Macro data

Micro data

Research & Analysis

Paid databases




Banking & Financial Services

RBI, IBA, AMFI

Macro data

Micro data

Research & Analysis

Paid databases

Real EstateBAI, CREDAI, ACRI, published research

Macro data

Micro data

Research & Analysis

Paid databases

Chemicals

Ministry of Chemicals & Fertilizers, industry

magazines, ICMA, ISCMA Indian

chemical portal, published research

Macro data

Micro data

Research & Analysis

Paid databases

Engineering

Dept. of Chemicals & Fertilizers, TIE,

industry magazines, published research

Macro data

Micro data

Research & Analysis

Paid databases

… but most industries suffer from a lack of quality micro data

Information sources


Look in the right place…

Getting to government data

Identify which government departments are the touch-points for the activity to be researched

Contact the government department/ explore their websites

Right to information can yield unpublished data that is available with the authorities

Key Government touch-points

Industrial licensing

authorities

Regulators

Tax authorities

Environmental agencies


…so you can get (virtually) any info you want

Heavy reliance on primary research…

Competitors

Bankers Customers

Sources

SuppliersIndustry associations

Dealers/Retailers

Distributors

Industry experts

Ex employees

Recruitment consultants

Government agencies

Social networking associations

and others


…..gave us a validated information on the plans

Identifying external touch points

Construction contractors

Distributors and suppliers of raw

material

Neighboring units and local grapevine

Local HR consultants for blue collar

hiring

Logistics service provider

Expansion plans of a pharma

company in ruralUP

Every transaction leaves a trail….


…need appropriate approaches

Primary research

References and connections important

Cultural diversity & sensitivity

• Language

• Background of respondent

• Interpreting responses

• Gift giving versus money giving


…multiple approaches to obtain reliable intelligence

Approaches and methodologies

Validation & triangulation

Use of proxies & multipliers

Extrapolation

Validation

Validate each assumption, data point and also triangulate the total market size

Multiple sources for one data point

Industry experts

Market intermediaries (distributors, traders, dealers, retailers, etc)

Upstream and down stream estimates for intermediate goods

Proxy indicators


Ethical CI is the only sustainable approach…

The question of ethics

Unethical ways of gathering information are

prevalent in India

‘Under the table dealing’ required with public

authorities like the police, judiciary and

bureaucrats

Misrepresentation is common

Ethical CI

Honest recommendations

No misrepresentation

No conflict of interest

Laws of the land


Case studies

• Indian consumer finance market• Food ingredient manufacturer losing market share


Understand borrowing patterns in lower & middle income groups

Purpose

Lenders

Market Dynamics

Growth

Profitability

Undocumented, unorganised, fragmented….

Indian consumer finance market

Market Segmentation By type of loan By type of lender By income of borrower

Future Estimates

Growth DriversProduct innovationIncreased penetrationInterest RatesDemographics

Competitive Analysis Product comparison Profitability Strategies to target LM

Customer Decision Making Product comparison Availability/ Service

levels Customer perceptions

Market sizing Urban LowerMiddle Class


Fragmentation, unorganised sectors and no documentation…

Challenges

Challenges Solutions

Definition of target groups Secondary research

On the demand side: No literature on lending/ borrowing

patterns for low income groups

Intensive primary research - 300 odd interviews across 4

cities

High degree of difficulty in conducting interviews:

suspicion among respondents

Use of appropriate approaches for different respondent types – language/ wording of questions, mode of interview, etc.

Working out costs and loan yields of unorganized lenders Multiple measurements allowed validation and triangulation

Supply side: multiple informal lenders & lack of lender data Validation and triangulation of every data point


High reliance on primary research

Methodology

BanksMoneyLenders

Pawn Brokers

CreditCo-ops

LENDERS Occupation

Location

Market size By Lender By Purpose

Market SegmentationGrowth

Total Market

Growth Projections

Products & Economics

BORROWERS

NBFCsOthers

Chit Funds

Income

Secondary Research

Demographic data, data on some organized players, potential contacts, definition of target segments, etc

Primary research Primary research


Marry field data with demographic and secondary data

Analysis and validation

Field Data – 300 interviews in metro, tier 1, tier 2 and tier 3 cities

Average borrowing per year per household for salaried individuals in each city

Average borrowing per year per household for self employed individuals in each city

Average borrowing by purpose

Average borrowing by type of lender

Demographic data

Number of households in the appropriate income group in each city

Demand side estimates

Supply side estimates

Field data + secondary data – over 60 interviews with lenders to low income borrowers

Average lending and terms of lending

Estimated number of lenders per city

Valid

ate


Market size estimated in the range of $4.8 – 6.1 bn in 2003

Findings

Value of borrowing by lender Value of borrowing by purpose


CI in undocumented, unorganized, fragmented markets

Food ingredient manufacturer losing market share

MNC food ingredient manufacturer losing market share to very small regional competitors

How is their product of high quality?

How are they selling at a low price?

How have they built up their distribution chain?

Company backgroundSourcing and cost structure

Distribution

Company history Promoters and their stakes Company financials Manufacturing facilities and offices

Technology Equipment Raw materials Manufacturing

Sales and distribution network Margins across the distribution

chain Promotions and incentives Discounts


For challenging data requirements, primaries and more primaries…

Challenges

Challenges Solutions

Competitors small private companies with complex company structures

Relied on ROC documents and a LOT of primary research (over 70 respondents in all)

No literature on the product or industryInterviews with industry experts, food technology institutes and

large number of distributors and customers

Import data not reliableAugmented import statistics with calls to suppliers in China, Malaysia, etc.

Customers and distributors spread all IndiaLarge number of interviews with distributors and customers of all sizes across cities of all sizes

Many diverse sources of informationBuilt up the picture like a jigsaw with bits from multiple places. Lot of validation involved.


High reliance on primary research

Methodology

Field visits to offices and manufacturing locations of

competitors

Secondary Data

Lists of distributors across cities customers across cities Food technology institutes and experts suppliers of raw materials equipment manufacturers Import data for key ingredients

Primary data

Customers Competitors (multiple levels) Distributors Importers Food technology experts Raw material suppliers Equipment manufacturers Ex- employees of competitors

Jigsaw

Pieced together to obtain actionable intelligence


Creativity in sourcing information ensured success…

Findings

Profiled activities of 3 key competitors and analyzed their strengths and weaknesses

Identified competitors’ sources of raw materials and hence the source of their cost advantage

Intelligence on competitors’ distribution strategy

Identified opportunities and threats for the clients

Identified multiple areas for cost reduction, identified alternate sources for equipment, raw materials & packaging

Recommended restructuring of terms with distributors -Need for greater flexibility in terms and level of paperwork

Analyzed future plans of the competitors and their implications for the client

Unearthed a plan by a competitor to set up a large manufacturing unit using technology support from a Chinese equipment supplier


Competitor profiles

Competitive benchmarking

CI process consulting

CI learning and

development

Marketintelligence

Rumourconfirmation

M&Aintelligence

Partner identification

Due diligence

Opportunityassessment

Thank youLook forward to your feedback…

www.valuenotes.comIndian Markets

www.sourcingnotes.comOutsourcing Intelligence

www.valuenotes.bizResearch & Consulting

ValueNotes | Pune, India | T: +91 20 6623 1700 | E: [email protected]

navigating india's complex market using actionable intelligence

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