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

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SOMEDAY YOU WILL REAP WHAT YOU SOWIndia The
New Global Business Opportunity
Arun Maira The Boston Consulting Group
San Francisco
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PRESSURES ON COMPANIES IN DEVELOPED COUNTRIES
Need for innovations in products and business
models

• 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

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THREE OUT OF FOUR EXECUTIVES PLAN TO INCREASE
INNOVATION SPENDING IN 2005
How will your companys investments in innovation
change this year?
Percentage of respondents
Source BCG 2005 ITC Survey
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MOST EXECUTIVES ARE NOT SATISFIED WITH THE RETURN
ON INNOVATION SPENDING
Percentage of respondents
Source BCG 2005 ITC Survey
No
Yes
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INCREASED COMPETITION IN DEVELOPED MARKETS
REQUIRES INCREASING INVESTMENTS IN NEW CAR MODELS
Case Study Automobiles

• Total number of models of cars and light trucks
• (2) Average total annual sales per model
• Source Automotive News

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INDIAN AUTOMOBILE INDUSTRY HAS DEVELOPED
CAPABILITIES UP THE VALUE CHAIN
Case Study Automobiles
Global average development cost of new car gt
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 lt100k units/ annum
(Global BEP is 150-200k units/
annum) Total Manufacturing Cost 20- 30 less
than USA
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COSTS OF MEDICINES AND HEALTHCARE SOARING IN
DEVELOPED COUNTRIES
Case Study Healthcare and Pharma
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
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RD COSTS PRODUCTIVITY OF US PHARMA PROBLEMATIC
Case Study Healthcare and Pharma
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LOW COST, HIGH QUALITY MEDICAL CAPABILITIES
AVAILABLE IN INDIA
Case Study Healthcare and Pharma
Quality a Key Factor
Healthcare Cost Differential
Cost Saving 80 91.292.598.8 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
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COST EFFECTIVE AND GOOD QUALITY DRUG DEVELOPMENT
AND MANUFACTURE
Case Study Healthcare and Pharma
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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
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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

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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
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Information Tech Pharma/Healthcare Education
Services Auto/ engineering Chemicals Financial
Services
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Source BCG Analysis