Prime Minister Narendra Modi has launched the ambitious ‘Make in India’ programme to encourage multinational and Indian companies to manufacture in our country. Will the initiative succeed? India has some major advantages – a cheap labour force and a potentially big market. However, a lot will also depend on what India ends up specialising in.
That is because, like companies, countries end up specialising in certain products, and buyers around the world hold distinctive beliefs about products and brands from different countries. Thus:
- Japan has developed a reputation for cars and electronic products. Sadly, this reputation, built over forty years, is slowly being eroded by South Korea and now China.
- The US has an enviable reputation for hi-tech products, mass consumer products, soft drinks, toys, cigarettes, fast food brands, entertainment and jeans.
- Germany has always had a reputation for engineering excellence.
- France has always been seen as a country that makes great wines, perfumes and luxury goods.
- Switzerland has always been associated with watches.
Of course, there are brands from other countries that have become leaders or are perceived as leaders in their categories; or example, Ikea from Sweden, Nokia from Finland (till the company missed the smartphone revolution) and, increasingly, Samsung (and LG) from South Korea. And there are some products that are totally associated with their countries/regions – Scotch whisky from Scotland and vodka from Russia and Scandinavia.
There are some other points that are also worth noting:
- It makes sense to play up the ‘Made in…’ aspect if there are positive connotations of a country with a specific product category. Frankly, today, not many people are going to opt for a product that has been made in India.
- Some countries start with a specific perception/imagery but this can change overtime. For example, prior to World War II, Japanese products were seen as inferior and of poor quality; however, by the 1970s, that perception had changed quite dramatically.
- Today, Chinese products imply cheap quality, akin to Japanese products of the first half of the 20th century. But this is likely to change fairly fast. As everyone knows, almost all high end products of many companies (for example, Apple) are made in China; once Chinese brands learn the art of marketing, one will see Chinese brands entering the world market. Lenovo is a Chinese brand that is becoming acceptable around the world. Some brands like Xiaomi are also growing globally at a furious pace. Once more Chinese brands start getting accepted outside China, a perceptual shift is bound to happen. The only danger is that many Chinese brands are still playing the ‘low price’ game rather than introduce premium brands that can compete on quality with the best.
What about India? We can certainly become a production hub for a number of multinational brands. However, in the long run, we will have to specialise. Today, we have some comparative advantage in ‘services’ thanks to the BPO boom and we will need to see how we build on this advantage. But on the manufacturing front, we will possibly have to differentiate ourselves from the Chinese at the premium end – bio-technology, pharmaceuticals, fine engineering etc. It is unlikely that we will be able to compete directly with the Chinese on their manufacturing prowess.
The next decade or so will show the world what India is capable of. Only then will global consumers develop a definite BELIEF about products that are made in India.
Visual courtesy: https://www.flickr.com/photos/72004698@N00/