The only way for India Inc to have 'Apple' like status...
In this issue:
» Have interest rates in India peaked?
» Woes for the cement cos. doubled
» India would beat China in terms of growth?
» Will the Middle East crisis lead to another oil shock?
» ...and more!
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At this point of time, it would be good to take a step back and analyze the main reason for shrinking margins for India Inc. True that input costs have been going up. This is partly the result of supply side constraints and partly the result of the influx of easy money. This has led prices of essential commodities like steel, copper, etc. to reach dizzying heights. The result being that the companies have witnessed lower margins.
But we ask as to why these companies have been unable to just increase their selling prices in line with the increase in input prices? Why have they allowed margins to shrink? The answer from most of the managements would be that they cannot do so as their products will lose their competitiveness. So does that mean that the only edge that the Indian companies have for their products is their lower costs?
No wonder India Inc is cribbing about higher input costs. Instead they should be looking inwards. They should target product innovation so that they can gain pricing power. If they have pricing power then higher input costs would stop impacting margins so drastically. Take the case of Apple. Apple products are priced much higher than its competitors. But it is still able to grow its top-line consistently as customers are willing to pay the higher price. The reason – product innovativeness. The products are technologically far superior to that of the competitors'.
So if India Inc wants to succeed and insure its margins, then product innovation is the only way. Only then will they have the pricing power that will protect them against all odds.
Do you think product innovation would help combat margin woes for India Inc? Share your comments with us or post your views on our Facebook page.
01:30 | Chart of the day | |
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* Growth from 2010 to 2015
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Emerging markets like India are in a fix. The RBI has been raising interest rates like nobody’s business. But, further rate hikes may just stymie growth. The government has an ambitious target to reduce fiscal deficit. But, with rising fuel and food prices, subsidies will also have to proportionately increa se. Ditching subsidies will increase public anger against a government which has been shaken by various corruption scams. All in all, without sustained effort into green-technology, electric vehicles, and carbon trading, we are still at the mercy of the Arab world, and the price of one precious commodity, black gold.
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04:55 | Today's investing mantra |
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10 Responses to "The only way for India Inc to have 'Apple' like status..."
Dinesh
Mar 6, 2011But the fact remains that Indian consumer is value driven. Product like an i pad makes sense for West but not for the Indian consumer...innovation is not just adding features but actually adding value
Naren
Mar 5, 2011Contrary to popular opinion, the country does not have adequate competition. It really is competition that drives innovation. Private enterprise and inviduals will go the extra mile to make more money. For innovation to take place, the entire ecosystem needs to improve. There has to be IP protection. Corruption has to be eradicated. There isn't level playing field for everyone. Those having connections with high offices can get preferential quotas, allocations, etc. The recent scams great examples. Now even the top officials in the judiciary and the army don't have clean records. The country has some of the greatest minds and skilled people, yet people are impoverished and poor. What a waste of talent.
jagdish sanghvi
Mar 4, 2011You are absolutely right about innovation. India has yet to learn it when it comes to the products and services for use in India and for the Indian public. This is the pseudo socialist legacy of Nehru and Gandhi (not Mahatma) who nationalized the whole country and killed the competetive/innovation spirit which resulted in nothing but the monopoly and corrupt practices. For eg Premier Padmini, Ambassador cars and arrogance of MTNL, and Indian Airlines, etc. To top it, Indian enviornment found another very easy way out of any situatuion-- that is by corruption!! This is also one kind of innovativeness but has hardly takers abroad where the rule of law prevails.
Only those Indian businesses who are forced to compete with foreigners have learnt, and well learnt, to compete and innovate, such as Infosys, TCS etc.
It will still be a long time before monopoly and corrupt practices are erased from India and businesses learn to compete not on the basis of prices but innovation and maintain their margins--eg. Proctor and Gamble, Nestle etc.
MK
Mar 4, 2011yes indeed it will help..as currently india is growing on cheap
labor advantage it will not last of ever.We would gradually need
to shift from cheap Labor based economy to innovation based
economy.
For this we would need a proper education system..in-spite IIT'S
and other hot shot engineering colleges we haven't yet
manufactured a simple microprocessor which would compete with
even outdated Pentium 4
--
more over we are dependent on other nations for our defense
needs..BIG SHAME
recent example 10.2 Billion $ MMRCA deal
we are struggling to complete 4th gen fighter aircraft(20 year
old project) LCA tajes
We have even failed to manufacture a Tank (Arjun) and are
continuously importing tanks from Russia(T-90)--on the other
hand even our rival nation Pakistan has made indigenously Al-
khalid tank
we are happy with moon landing but we forget that the ISRO
rockets were using Russian Cryogenic rocket engines and when
ISRO tried to use its own engine the Test failed
--
Bonus:
when some one here is comes out with a innovative product ..we
are not aware of it
eg: Adam notion ink pad
we don't promote our local search search engines
(guruji.com)MADLY GO TO GOOGLE.where as chinaese always do
searches on baidu.com
there is lots more..perhaps another time..
Shome suvra chakraborty
Mar 4, 2011The marginal product of capital should be greater than the rental cost of capital if the financing cost is increased.Value engineering allows that only value added costs should be passed to the customers. Flexible budget and variance analysis are important measures for cost control.Sub optimization should be avoided. Whatever activities be taken in the value chain a co can't exist without product development keeping in mind that whichever segment you target there are price sensitive customers.
prem
Mar 4, 2011Apple commands a premium because of its Brand power.
India may have fantastic products but our businessmen have never
focussed on creating world class Brands for which customers are
willing to pay a premium
ATUL PRAKASH GARG
Mar 4, 2011India gained world attention due to its GDP growth which were unrelated to it's external trade. This surprized the world as generally countries grow piggy back on the growth of the leading economies.
After 500 years of plunder, India's wealth is coming back in the form of investments in the Capital Market of India as well as Foreign Direct Investment & Collaborations.
Even though price differential is a selling point for goods and services as compared to prevailing World prices. Innovation in products & services has always been the key in providing corporate profit multipliers.
Consultants, innovative technology, shared research in Indian Universities sponsored by the doyens of India's Industrial behemoths is ABSOLUTELY ESSENTIAL.
The United States of America prides itself in knowing how it can dominate world economics by using ALL THESE TOOLS EFFECTIVELY AND IN A CONCENTRATED FORM. We need to learn from them and not allow this Indian Growth Opportunity to be snatched away from us merely because we are short sighted in the way we run our business in India.
Education is fine, however the application of intelligent understanding of day to day situational problems is finer ! Indian Industry must innovate and keep India in the lead. We are in a marathon and not in a sprint and hence consistent outwitting the developed economies is the only answer.
The Developed economies are now forming integrated cartels of Companys & have gone to the extent of even amalgamating their Capital Markets. They have the audacity to ask India to list our company's on their Newly Integrated Exchange -----HOW CLEVER OF THEM !
Conclusion: Innovate or Perish.
Atul Prakash Garg
sagar
Mar 4, 2011Apple like innovation for a 'segment' can be a valid reason to beat competitors and dominate. It's great because the segment has that craze for technology etc. Economical is the key to make Indians crazy. Innovation should be brought to cut down process cost. Bring better technology or invest in researches for long term benefits.
dk
Mar 4, 2011Innovations can be the answer in the technology segment, but not always the answer in the brick and mortar business as many a times there is not much to innovate..(like a industry who manufactures Saria (Iron rods) etc. the price of iron ore and carriage cost is bound to have an impact and the margin pressure cannot be always passed on to the customer and there is very little chance to innovate. Margins have always been a matter of concern for each and every industry in an growing inflationary economy but eases out with the matter of time as the growth follows. Till then the forward or backward integration in the industry can also be an answer (obviously for the large houses ).
Babu Philipose
Mar 10, 2011Yes, product innovation would not only help combat margin woes for India Inc., but it is the best and only solution to survive in this chinese market.