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Let the Games Begin

Getting India and China Right, Speaking of Books event

By Rasshmi Shankar

On October 27, 2009

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This week Dr. Anil K Gupta and Haiyan Wang held a seminar through Speaking of Books on their new book titled Getting India and China Right. What could have been an hour long spiel about why we need to buy their book turned out to be a compelling and urgent message outlining the reasons for the growth of the two emerging economies and how American companies can compete. Throughout the seminar a quote from tennis great, Rod Laver kept running though my head: "The time your game is most vulnerable is when you're ahead. Never let up." Dr. Gupta and Ms. Wang are sending out this same message to America in their book.

As of this moment, the United States is still ahead of the curve when it comes to our place among the world's economies. We are still the world's largest economy in both nominal value and purchasing power; and we still maintain a high GDP per capita. But does that make it okay to feel safe about our economy in the future and keep things continuing the way that they are? No, not so much. According to Dr. Gupta, the Ralph J. Tyser Professor of Strategy and Organization at the Smith Business School, and Ms. Wang who received her MBA from Smith, the global landscape is changing at a rapid pace. To put the change into perspective, in 1950 the US GDP was twenty times that of China's, and now it is only three and a half times that of China's GDP. According to their conservative predictions this means that China's GDP will catch up to ours by 2025, and India will follow in about fifteen to twenty years. So in the next fifteen to sixteen years, things are going to start looking a lot different. While this argument was convincing, I couldn't help but think that I've heard it before, and wonder what we could do to stop the "inevitable". However the authors presented some riveting reasoning which helped cap my skepticism.

India and China have "mega market" economies where their market size will be bigger than the US' market size. These "mega markets" have "micro customers" though. For example, China has the 3^rd largest economy but their per capita income is 1/16^th the U.S. What does that mean? They have low buying power right now, but have large markets on the whole. However, by leaving this large bulk of people untapped because we think they aren't rich enough to buy from us, means that only we are losing out. By catering specifically to their needs and being more innovative we can tap into this market and benefit greatly. India and China also have huge platforms of innovations where their output of engineers and scientists are the two largest in the world and growing. The patents given to China and India are also the fastest growing according to Dr. Gupta and Ms. Wang. What does this mean for us? If you ask me, we need to start lowering the cost of education so that more people can afford to send their kids to college and start increasing our own output of innovation. However, the government also needs to help speed up our patent process and help push innovation. Despite the poverty in these countries, they are succeeding because, according to Dr. Gupta, the poverty is the "nursery of innovation." We have gotten too used to our conveniences and need to understand that things are going to become far more difficult for us if we don't jumpstart our economy. India and China are also the springboards for the new generation of competitors right now because of how highly innovative they are becoming. It doesn't help us that so much outsourcing is taking place because it is so much cheaper to hire someone in one of these countries. For a blue collar job in India it would be about $1.00 per hour but in the US it would be more than $20.00 per hour to hire someone. All four of these things are playing out simultaneously and so we need to be aware of each and attack each of them at the same time.

Dr. Gupta and Ms. Wang suggest that American companies cannot just look at these markets for cost reduction purposes. We need to start looking at the different markets present in those countries and get moving. American companies need to become market centric and create opportunities for these larger markets even if it means changing the product to better suit their needs. Companies need to stop looking only at the top 5% as buying power and instead adapt to the country and go after the middle market. Overlooking diversity and complexity is the biggest mistake that American companies who are trying to go after these markets are making. Just because we have researched one or two big cities in these largely diverse countries doesn't mean that the rest of the areas are going to have a similar consumer make up. To succeed, each site needs to be well researched. Doing research doesn't mean that companies just hire people to Google information about these places. To truly succeed, companies must go there, learn from experiencing the cultures, and adapt their products based on what they find.

The United States can survive in the future and stay on top if companies keep this global mindset and integrate across differences. When graduating from a business school, it might be more beneficial to look at emerging companies with this type of mindset instead of corporate giants that are set in their ways. We can't fear the future or shy away from it assuming the worst; instead, we need to attack the problems head on while we are still ahead. Like Yogi Berra once said, "The game isn't over, until it's over."