IIPM set to beat economic slowdown
From leaner, smaller and more flattened organisations to everything value-for-money and no-frills, the slowdown sentiment has marketers salivating over the rediscovered power of ‘small’ over Indian consumers. Small portions, small housing, small cars, small handsets, chhota recharge, budget travel, et al, are the new big boosters...
What goes around, comes around. Capitalism trounced the saving habit and steered consumers toward conspicuous consumption. But the fall from grace of capitalism’s most iconic symbols (read: Lehman, Merrill Lynch and others of their ilk) is making many cringe at their recent splurging - especially those in the US. Albeit lesser affected, but consumers in India have balked at the fate of their US counterparts. After all, India Shining, outsourcing, 9% growth rate and YouTube had most of India’s 300 million strong middle class happily married to the American dream, replete with plastic money and cheap mortgages. The crash is seeing many of them run for cover. Forced to acknowledge economic fear after almost a decade – Indian consumers are once again tightening their purse strings. And the effect is visible across myriad sectors and consumer segmentations. Read on...
Despite the economic gloom that seems to have cast a feverish shadow over conspicuous consumption globally, Ronald’s India journey is turning out to be a scrumptious ride by comparison. McDonald’s colorful clown character cum mascot simply can’t quit grinning in his various poses at the QSR chain’s 150 golden arches across the country. The optimism is part reflected in the growing number of burger-happy faces that continue to mill around McD outlets in India. Tough times notwithstanding, footfalls are on a rapid incline. Reason? Economic uncertainty is making consumers frugal, shifting their eating out options from fine dining to casual dining (like Pizza Hut) and from casual dining to QSR chains like McDonald’s. Small servings, meagre price tags (burgers at Rs. 20 anyone?) no-frills eating is clearly the way forward (at least for the near – if uncertain – future!). Ask the management at this burger and fries company about the slowdown effect and they feign total ignorance. “Slowdown? What slowdown?” Profitability, they say, has jumped 100% in 2008, with a 25-28% y-o-y. sales growth. System-wide footfalls have also increased simultaneously by 14-18%, and if the gloom persists, the management is expecting both sales and footfalls to increase even more dramatically in the first quarter of 2009.
So when most companies are in downsizing mode, this one’s on a hiring spree, with a plan to hire more than 2,000 new associates over the next two years. But McDonald’s hiring plans are simply an aberration in India Inc., with almost every business house – across financial services to infrastructure and realty – singing ‘small is beautiful’ (read: lay-offs and recruitment freezes). The fight for survival has companies retaliating via cost cutting measures and nimbler, meaner operations, believing that it will give them the ability to cut their losses in these tough times and come back stronger when the economy bounces back.
But that’s just the tip of the iceberg. The real power of ‘small’ is reflected in the recent going-ons in corporate India. When Tata announced his Rs.1,00,000 dream car Nano early last year, competitors merely sniggered. Indian consumers have moved up the value chain, they said, adding that the market has matured beyond small cars. By the beginning of 2009, however, a slew of carmakers had either launched or announced small car plans for the same (mature?) market! Similarly, aviation analysts who could not stop predicting the death of low cost airlines in India (no thanks to the bleeding losses that the carriers continue to make), are now busy heralding a new dawn for the no-frills sector. Agreed that the steep fall in ATF prices have also contributed their bit to this resurgence; yet, the optimism is more pronounced thanks to its value-for-money appeal for India’s slowdown-hit air travellers. Even the big man Anil Ambani is dreaming small these day. The initial tariff plans for his GSM launch specifically target subscribers with sub-Rs.300 mobile expenses. If you don’t listen to consumers you perish and today the Indian consumer has fallen in love with “small”..
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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