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SOMEDAY YOU WILL REAP WHAT YOU SOW India: The New Global Business Opportunity

SOMEDAY YOU WILL REAP WHAT YOU SOW India: The New Global Business Opportunity. Arun Maira The Boston Consulting Group. San Francisco. Intense competition between firms in developed countries in their own developed country markets Competition between firms for customers in developing countries

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SOMEDAY YOU WILL REAP WHAT YOU SOW India: The New Global Business Opportunity

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  1. SOMEDAY YOU WILL REAP WHAT YOU SOWIndia: The New Global Business Opportunity Arun Maira The Boston Consulting Group San Francisco

  2. Intense competition between firms in developed countries in their own developed country markets Competition between firms for customers in developing countries Emerging of new competitors from developing countries Pressure on prices and margins PRESSURES ON COMPANIES IN DEVELOPED COUNTRIES Need for innovations in products and business models

  3. THREE OUT OF FOUR EXECUTIVES PLAN TO INCREASE INNOVATION SPENDING IN 2005 How will your company’s investments in innovation change this year? Percentage of respondents Source: BCG 2005 ITC Survey

  4. Are you satisfied with the financial return on your investments in innovation? MOST EXECUTIVES ARE NOT SATISFIED WITH THE RETURN ON INNOVATION SPENDING Percentage of respondents Source: BCG 2005 ITC Survey No Yes

  5. Average life of new models (Europe) Increasing models and decreasing sales per model (US Market) Life (years) Number of vehicle models(1) Avg. total sales per model(2) Year of introduction Case Study: Automobiles INCREASED COMPETITION IN DEVELOPED MARKETS REQUIRES INCREASING INVESTMENTS IN NEW CAR MODELS • Total number of models of cars and light trucks • (2) Average total annual sales per model • Source: Automotive News

  6. R&D/Product development Component manufacture Assembly Case Study: Automobiles INDIAN AUTOMOBILE INDUSTRY HAS DEVELOPED CAPABILITIES UP THE VALUE CHAIN Global average development cost of new car > $600m Tata Indica- $350 m M & M Scorpio- $150 m Very high quality: 1 Japan Quality Medal and 5 Deming Prize Winners- largest number outside Japan Exports growing 30% per annum; 80% to 'developed' countries Low capital intensity, BEP <100k units/ annum (Global BEP is 150-200k units/ annum) Total Manufacturing Cost 20- 30 % less than USA

  7. Case Study: Healthcare and Pharma COSTS OF MEDICINES AND HEALTHCARE SOARING IN DEVELOPED COUNTRIES Annual Household Expenditure on Healthcare Total USA Healthcare Spending CAGR UK: 9.2% CAGR Ger: 6.2% CAGR: 10.9% US$(‘000s) US$ Trillion (EST) Source: EIU, Literature Review

  8. Case Study: Healthcare and Pharma R&D COSTS & PRODUCTIVITY OF US PHARMA PROBLEMATIC

  9. Case Study: Healthcare and Pharma LOW COST, HIGH QUALITY MEDICAL CAPABILITIES AVAILABLE IN INDIA Quality a Key Factor Healthcare Cost Differential Cost Saving 80% 91.2%92.5%98.8% 97.7% • Not just cost advantage: • The success rate in the 43,000 cardiac surgeries till 2002 was 98.5% • India's success in 110 bone marrow transplants is 80% US$ Source: IBEF, Literature Review

  10. USFDA Approved Plants Outside USA DEVELOPMENT (Example: Disease- Psoriasis) • DRUGS IN USA • Cost of development- hundreds of million dollars • Amgen antibody- $10.00/ dose • Cost of treatment- $20,000 • INDIAN DRUG • Time for development- 3 years • Cost of development- $4 m! • Cost of treatment- $50 !! Case Study: Healthcare and Pharma COST EFFECTIVE AND GOOD QUALITY DRUG DEVELOPMENT AND MANUFACTURE

  11. Potential surplus population in working age group (2020) Russia Ireland Czech Republic 0M -6 M -1M -2M U.K. Italy -17M China 2M -3M -10 M -9M Japan -2M 2M U.S. Turkey France Pakistan Iraq Israel 19M Iran 7M 47M 4M 0M 5M 3M Bangladesh 5M Egypt Vietnam Mexico India Philippines 4M Malaysia 1M 5M 3M Indonesia Brazil INDIA HAS A LARGE RESERVOIR OF HUMAN RESOURCESReaping What You Sow Note: Potential surplus is calculated keeping the ratio of working population (age group 15 – 59) to total population constant Source: U.S. Bureau of the Census International Data Base; BCG Analysis

  12. INDIA'S OPPORTUNITIES Small volume, high variety, low cost mfg MASS MANU- FACTURING REMOTELY PROVIDED SERVICES      SOMEDAY REAPING WHAT YOU SOW INDIA'S LEGACY INDIA'S STRENGTHS • Vertical integration • Small volumes, but growing • Logistics & infrastructure problems • Domain knowledge • Software capabilities • Remote delivery possible

  13. INDIA EMERGING AS A "KNOWLEDGE SERVICES" HUB IN THE WORLD Skilled people; Low costs; IT capabilities; English Remotely delivered services Import of customers to service in India Transaction processing Design and analysis Research and development Valueadded tourism Leisure tourism Industry    Information Tech Pharma/Healthcare Education Services Auto/ engineering Chemicals Financial Services              Source: BCG Analysis

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