No hits without market intelligence: FIEO Chief
Faculty of Management Studies of Banaras Hindu University organized a National Workshop on "Overseas Market Intelligence & Logistics: The Exporters Perspective" on 23rd February at Varanasi. While addressing the Workshop as the Chief Guest, FIEO President Mr. Ganesh Kumar Gupta spoke about how market intelligence could help an exporter outsell his competitors in international market. He also explained how poor logistic facilities were thwarting integration of Indian farmers with global market and sought industry status for logistics. Excerpts from his speech:
"India’s exports have always contributed its mite to the economic growth process. At the time of independence, our share in global trade was close to 3%, but thereafter, it continuously declined to touch as low as 0.5% in 1991. Beginning mid-1991, the Government of India introduced a series of reforms to liberalise and globalise Indian economy. Reforms in the external sector of India were intended to integrate the Indian economy with that of the world. Ever since, India’s approach to openness has been cautious, contingent on achieving certain preconditions to ensure an orderly process of liberalisation and ensuring macroeconomic stability.
This approach has been vindicated in recent years with the growing incidence of financial crises elsewhere in the world. The policy regime in India with regard to liberalisation of the foreign sector has witnessed paradigm shift and we have begun to move away from import substitution to export promotion.
Our share in world trade is now consistently increasing and touched 1% by the end of calendar year 2006.We are very much on track to increase our share to 1.5% by 2009. We have observed a healthy growth in exports during the last few years with diversification and expansion of export basket as well export market.
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Mr. Ganesh Kumar Gupta, President, FIEO addressing the gathering |
Government also realized the importance of this vital sector, which now contributes to 15% of GDP (though international trade contribute to a third of GDP), and played a key role in facilitating exporters with various export promotion measures and tax neutralization schemes so that taxes are not exported and the competitiveness of our exports remained intact.
If we talk in terms of value, India’s merchandise exports increased from US $ 53 billion in 2002-03 to US$ 126 billion in 2006-07. The sustained high growth rate of merchandise exports at more than 20 per cent during the last four years is more than twice the current growth of Gross Domestic Product (GDP).
Export is a dynamic and vibrant business where one cannot afford to neglect the changes happening in overseas market. We all know that marketing is understanding and satisfying the needs of customers through exchange process and are aware of the 4 P’s of marketing i.e. product, price, place and promotion.
In export business, any of these Ps may change compared to domestic marketing, depending on various factors like market size & segmentation, regulation & legislations, customer needs, usage, distribution channel, trends etc. and one has to be quick enough to have such information i.e. the market intelligence to establish and sustain market share in a particular country.
Export business is affected by various internal and external factors and one has to keep himself abreast of that. Let me place an example before you. Let us say that you are exporting product X to a particular country A and you are doing pretty good in that market for quite some time. Now country A enters into a Free Trade Agreement (FTA) with Country B under which it is allowing import of product X a lower duty/duty free entry into its country from country B. This would result in lowering the landing price of product x when imported from country B, making your product uncompetitive in terms of price. Obviously, this would hamper your market share in that country and so you have to adopt suitable market strategies to enter other markets or you may also plan to set up your base in country B to do manufacturing or part manufacturing to satisfy relevant Rules of Origin and further export your products to country A, to retain your share.
Now let us take another example. You have a good market for a product X in country A. Now, to survive its domestic industry, Country A puts non-tariff measures like registration procedure or compliance with certain standards or social clause or alternatively puts higher import duty on products X. So one has to be very quick to gather such information on a timely basis, before the measure is put into practice, to have a profitable business proposition.
Friends, we all know that each business and each market is unique. Market intelligence begins at the most elementary level by painting the ‘big picture’ of a given global market through social and economic statistics such as population data, demographics information and per capita and total consumption levels. Businesses within every sector and at all levels can benefit from market intelligence. The key facts that it can help you uncover include: which distribution channels would best suit your products; the effect of indicative pricing strategy; which routes to market would be most effective for your business structure and how your company sizes up against your competitors.
This information can also help you to understand consumer behaviour and purchasing trends. The exporters, who could see early sign of recession in US in 2007, quickly lessened their dependence on US market and made inroads in EU to sustain their exports while others suffered massively. The benefits of market intelligence can also be seen in strategic planning operations, product marketing, brand evolution and new product development. The information gathered can help to target new brands to their most relevant market and devise appropriate strategies for entering new markets.
Without market intelligence, it is going to be a lot more hit and miss. In the competitive modern world, having good market intelligence can count for the difference between success and failure. Researching the markets you sell in, gives you an understanding of the buying and selling patterns you are dealing with, and helps you develop your brand in line with current consumer behaviour. Good business decisions need to be based on good information.
Friends, I feel that the other part of the Workshop i.e. logistics is an embedded part of one of the P’s of marketing i.e place. It is the delivery of the right product, at the right time at the right place.
Logistics is the art of managing the supply chain and of managing and controlling the flow of goods between the point of origin and the point of consumption in order to meet customers’ requirements. It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging.
Logistics has become an industry in its own right, enjoying sustained growth over the past years. The sector is very big, and will grow bigger in the next few years with huge investment planned in road, rail, air and warehousing. The Rs 4,50,000 crore industry employs nearly 40 million people though it is yet to get an industry status.
India spends about 14% of its gross domestic product on its logistics system, as against 8% by developed nations. This does not mean cheap transportation, moving or storage but only underlines the huge inefficiency costs that we have to bear in logistics.
Logistics are affecting agro exports in particular. Despite producing 11 per cent of the world’s vegetables and 15 per cent of fruits at very competitive costs of about 53 per cent and 63 per cent of average global prices, India’s share in global fruits and vegetables trade has remained at only 1.7 per cent and 0.5 per cent, respectively.
India’s international transportation costs are 20-30% higher than in other countries. Moreover, India’s share of exports to any destination declines by 10 percentage points for every 1000 km increase in the distance and any market that is beyond 14,000 km from Indian borders is unlikely to be catered by Indian exporters. The ship turnaround time in India is 3.42 days as against 10-12 hours internationally.
Our present port capacity is 465 million tonnes, which needs to be augmented to 1000 million tonnes by the end of 11th Five Year Plan (2007-2012). You will be surprised to know that each day’s delay in shipment adds to 0.5% of the FOB value, as per an estimate made by the World Bank. Therefore, 10 days’ delay in shipment would add 5% to the cost of the product making us uncompetitive.
An industry status to logistics could facilitate in removing bottlenecks such as streamlining of policies; better image for the industry; easier access to finance; industry/commercial tariff for power and water and creation of government body/association to interface between the government and the industry.
