Download - Technology & business in india
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I. Market
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Untapped Market
• Developing countries have large untapped Market
• India has 1 billion people– 180 million households
• What is the market size ?
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Example 1
• In mid 1980’s– detergent market was small
• Surf was used by 1 to 2 percent households
– Nirma reduced the price by a factor of three• market size increased immensely• detergent reaches almost 15 percent of
Indian households today
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Example 2
• Cable TV– did not exist in Indian homes in 1992– today reaches 40 million homes
• costs Rs 60 to 150 per month• affordable to almost 50% of households
• TV reaches about 75 million homes in India
• Black and White TV at Rs 1200
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Example 3
• Less than 5 million homes had telephones in 1990
• Introduction of– one fourth rate STD tariff in the night– STD PCOs everywhere
• As a result– over 20 % of Indians today make STD calls
• STD PCO available on every street and in every small town
• PCOs contributes to 20 % of total income for DOT and MTNL
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Market Size depends on Affordability
• Nirma made detergent affordable• low operation cost made cable TV
affordable• STD PCO coupled with night-time
STD tariff made STD calls affordable
on the other hand . . .
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Is Telecom and Internet Affordable ?• Investment required to install a
telephone and Internet line: Rs 35,000– with 15 % finance charges, 10 %
depreciation and 10 % operation and maintenance cost• Rs 12,000 annual recurring revenue (Rs 1000
per month) required per line• not affordable to more than 2 - 3 percent of
Indians
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Telecom Affordability in India
Total number of Households = 180 millionAssumptions: 7% of family income spent on communications
35 % of investment required per year to break even
0
10
20
30
40
50
60
70
6500.00 12500.00 25000.00 40000.00
Network Cost per line (in Rs)
% o
f H
ou
se
ho
lds
(C
um
ula
tiv
e)
64%, 6500
32%, 12500
8%, 25000
1.6%, 40000
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Affordable Telecom and Internet• India requires Rs 10,000 per line
Telecom and Internet connection
– will be affordable to 50 % of Indian households
– India will then be a market for 150 to 200 million Telecom and Internet connections
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sum up - market
• Indian and developing countries market is very large
– but at affordable prices
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II. Technology
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R&D focus in West
• Telecom connection in West costs $ 1000 per line– needs a $ 350 annual recurring revenue– $ 30 per month affordable to 95% of population
in West
• Bringing down costs does not further expand market in the West – focus of R&D shifts to providing a larger
basket of services at same cost
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Enhancing features and services
• Same phenomenon in Personal Computerin 1983 : PC with 8088, 128 KB memory, mono
monitor costs $ 1000
today : PC with Pentium processor, 128 MB memory, color monitor, large HD, CD costs $ 1000
• but there is no low-end $ 100 PC– because $ 1000 is affordable at large in West– focus on enhancing features rather than reducing
costs
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Technology from West
• Technology developed for Western market and affordable in West
– affordable to only 1 to 5 % of Indians
– not affordable at large
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R&D tasks for India
• costs of products need to be brought down further by a factor of 3 to 5
– will make it affordable at large
– market size in hundreds of million in India
– large market in other developing countries
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But is such cost-reduction possible ?• Why not ?
– A challenge for R&D• attempt what does not appear to be possible
and make it happen
• Rewards are great– large Indian and developing countries market
In bringing down costs by a factor of 3 to 5, one becomes technology leader
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that it is possible…. an example
• Efforts of TeNeT group at IIT Madras– aim to bring down cost of Telecom and
Internet connection• from Rs 35,000 to Rs 10,000 per line
• last five years of effort– incubated five product companies at IITM– developed WiLL, DIAS, FiLL and NMS
products– brought down costs to Rs 18,000 per line
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corDECT Wireless in Local Loop
To PSTN
To Internet
35/70 kbps Internet plus simultaneous telephone
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Direct Internet Access System dsl on copper
to PSTN
Internet
Always ON permanent Internet connection
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In a similar way . . .
• Technologically possible to bring down cost of home PC
– from current Rs 25 - 30 K to Rs 5 - 10 K
– has a large market in India
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sum up - technology
• Developing countries require
– Disruptive technological Innovation*• expands market drastically with an inferior
product• soon the new product overtakes the old even in
quality
The Innovator’s dilemma : Clayton M. Christensen
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III. Distribution
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Indian economic sectors
• Organised sector– works 200 to 225 days a year, 6 to 8 hours a day
• self-employed sector– works 300 to 325 days a year, 9 to 12 hours a day– manpower costs 1/3 to 1/4 of that in organised
sector– STD PCO, cable TV, milk distribution, roadside
shops• make goods and services affordable at large• a challenge to make business plan for this sector
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Large Market penetration
• To make a product or service affordable at large require– the use of self-employed small sector
• to achieve 150 to 200 million telecom and Internet connections– imperative that Access network, the most
expensive and difficult part of telecom network, is franchised
– operated like cable TV connection
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Sachet economy boom
• Pay and use in very small quantity– affordable, even though expensive in long
run• shampoo, paan-masala• PCO• Internet Kiosk
– Can technology provide low-cost telecom and Internet access for infrequent use • shared infrastructure
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sum up - distribution
• Innovative distribution mechanism required to expand market
– involving self-employed small sector a must
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IV. Business Challenges
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From Services to Products
• India has made a mark in service sector– providing sophisticated and simple service– but with quality– can we take service sector to small towns
• Can we make a mark with products in the world– without having significant home market for
these products– or can we tap potential home market
• and prepare for world market
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sum up
• India presents a unique business challenge– has a large potential untapped market
• of size equal to that of the rest of the world (excluding China)
– require affordable products to be designed– innovative mechanism to produce and
distribute– sound business built on values
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Old and New Economy Values• employees are naukars
• or partners in every sense
• shareholders taken for granted• management is a trustee of shareholders
• where will customer go• customer is God
• vendors to be squeezed• strong vendors make you strong
• one has to manage law• business conducted legally in letter and in spirit