Profitable growth strategies for the next 4 billion Learning from Indian Innovations

Transcription

1 Profitable growth strategies for the next 4 billion Learning from Indian Innovations 24-26

2 Content Growth Horizon (s) Emerging Middle Research Profitable Growth Strategies - Growth - Profit - Mindset Financial Approach Relevance for you Slide 2

3 Growth Horizon(s) Slide 3

4 The Next 4 Bn countries provide a growth horizon that is particularly relevant over the coming decade NEXT 4 BN HORIZON 7 Bn Population HORIZON 1 HORIZON 2 Upper 1bn Middle 1bn Target population Next 4bn Income level > $ 12,196 $ 3,946 - $12,195 $ $ 3,945 < $ 995 Yrs of education Urban (%) Low 1bn Difference Middle vs. Next 25% 45% Mobile phones (per 100 people) Internet users (per 100 people) Cars (per 1,000 people) % 54% 84% Sources: World Bank Slide 4

5 This Next 4 bn is congruent with some of the key growth geographies over the coming decade 55,000 50,000 * Size of Bubble = Population United States 45,000 Japan France Germany 40,000 United Kingdom 35,000 30,000 25,000 20,000 Russia 15,000 Brazil Argentina 10,000 South Africa Mexico Algeria Indonesia 5,000 Angola China Egypt Kenya India 0 Senegal Pakistan Nigeria ,000 GDP/Capita ($ $), ,000 Real GDP Growth, 2011 (%) Rich (>$12,000) Middle ($12,000 - $4,000) Emerging Middle ($4,000 - $1,000) Low (<$1,000) Source: IMF and World Bank Slide 5

6 Emerging Middle Slide 6

7 Within India, a 600 million strong emerging middle is the focus of our research India s Population Distribution (millions) 1.19 Bn Re Household ($*/day per capita) Classification 1.36 Bn 2021 (Projection) 2010 (%) > 8.5 L, ($10) Upper Middle L, ($5-$10) Middle % 23% L, ($1.7-$5) Emerging middle % <1.5 L, (<$1.7) Low % Sources: PWC Analysis, NCAER (National Centre for Applied Economic Research), CMI. All figures are reported at 2010 constant prices Slide 7

8 Remarks by Sanjeev Kumar, CFO of Coca-Cola India 1 Relevance of this market for Coke 2 Opportunities & Challenges Slide 8

9 Research Profitable Growth Strategies Slide 9

10 What are key challenges for profitable growth in this segment? GROWTH Is this horizon relevant? How much growth from this segment in 5-10 years? How to market and sell to this segment? PROFIT The right business model for profit? Systems and processes required to drive this model? MINDSET Understanding needed to connect with customers? Mindset needed internally to address this market? Do these innovations give you an advantage in addressing other Horizons? Slide 10

11 Our research looked at Profitable Growth leaders and practitioners as well as case studies New Value Propositions GROWTH Shift in Mindset MINDSET Innovative Business Models PROFIT Alam - Emerging Middle Citizen (Rs 15K per month) my children should have a better education CEO - Mobile Company This segment is mainstream for us, with 30-40% of our revenues over 5 years Innovation Leader R.A. Mashelkar More for Less for More should be the mantra for success Case study analysis to document strategies of Pioneers and leaders Data on trends and solutions relevant for India Slide 11

12 DEMOGRAPHICS The Indian emerging middle class will constitute a $1 Trillion economy by 2021 with a young, largely rural base $ 1 Trillion economy Double from now 30% of Indian economy Significant demographic shift and aspiration for change Young and Rural Median age < 30 yrs ~ 70% Rural Rapid Change Food less important Ceremonies, Education etc. Slide 12

13 GROWTH Growth requires understanding unique aspirations positioning and customization for this segment Aspiration Tradeoffs Understand the very different aspirations, influencers, and tradeoffs of this segment Design Product or Service with the specific needs of this market Beyond Cost Position Position product and services beyond cost, pricing beyond functional considerations Platform Customization Design product and services with a few key features, but tailoring it for diversity Slide 13

14 PROFIT Profit requires scale thinking, collaboration and use of technology with offline interventions Ecosystem Collaboration Extract value by creating an ecosystem, collaborate with the unorganized sector Create a scalable business through collaboration, Technology and offline Modular Scale Smart Reach Have a modular design, aggregate local demand and think scale from the beginning Cluster marketing and distribution, create local financing mechanism, enable through technology and offline Slide 14

15 MINDSET A mindset that creates trust in a unique way backed by performance measures and disruptive thinking Create trust with this segment and drive business by measures and disruptive thinking Trusted Endorsement Values & Metrics Disruptive AND Build the brand with aspiration in mind, but using word of mouth to drive awareness Drive this business with broader values and incubate it with different metrics Disruptive changes required in this model alongside AND thinking Slide 15

16 PROFITABLE GROWTH FRAMEWORK Idea cellular took a path that consolidated its position in this market before moving up Targeted Emerging Middle Smaller town licences to start the business Customized for rural and lowincome consumers Distribution network of 1,520 branded service centers Strength to Move up Source: analysis, primary research Slide 16

17 PROFITABLE GROWTH FRAMEWORK We see our profitable growth framework comprising 6 key themes and 3 enabling mindsets GROWTH MINDSET Trusted Endorsement PROFIT Platform Customization Values & Metrics Ecosystem Collaboration Disruptive AND Slide 17

18 Financial Approach Slide 18

19 Financial approach in one case followed a different approach in the Adoption, Acceleration and Steady State Adoption Acceleration Steady Phase Revenue COGS Gross Margin SG&A Operating Margins Asset Investment Asset Turnover ROCE Source Analysis Slide 19

20 Relevance for you Slide 20

21 Resulting innovations can be used to address other horizons 1,500 HORIZON 1 HORIZON 2 NEXT 4 BN HORIZON 1,200 Pop pulation (M illions) Source: PWC Analysis, World bank, IMF Slide 21

22 Where are you in this journey? Where are your different businesses? Organizational Situation Next Steps Not Present Entering Steady State New Horizon Assess X X Design X Construct X Implement Operate & Review X X Slide 22

23 How do you create profitable growth in this Horizon? POTENTIAL Demographics and growth: Opportunity and Growth Consumer trends Lateral research Aspiration Tradeoffs: Competition and Substitutes ASSESS & DESIGN Beyond Cost Position/ Mass Customization/ Disruptive AND: Consumers Strategy Pricing and Market positioning Innovation strategy Trusted endorsements: Branding and Messaging DESIGN & CONSTRUCT ENTRY STRATEGY STEADY STATE/ NEW HORIZON OPERATE & REVIEW CONSTRUCT & IMPLEMENT Modular scale Value Chain Design Smart Reach Sales and Distribution Alliances Finance and Regulatory Quality Control Operations Management Training, Recruitment, HR OPERATING MODEL Slide 23

24 Thank you! 2011 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, refers to PricewaterhouseCoopers Private Limited (a limited liability company in India), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.