My friend Saibal and I exchange views on different things, and his brother Probal also takes part in discussions. He is a young man, as defined in Indian politics- he is on the wrong side of fifty. He has earned his spurs in the fierce market place and has got a good experience and knowledge of of the prevailing market conditions. Once in a while he also gets upset like any other proud person. I am sharing with you verbatim, his feelings about the Indian and international market place.
The Japanese management companies in India, have developed this new policy of saying that if they switch over from an imported component to an Indian part, then the spare part should be at least 30% lower in price.
I was wondering why? Are we so cheap as a country or as a community? Are we cheap people? Are we as a country, responsible for this situation? Over the years, we have perhaps unnecessarily announced that our labour and designers are cheap. Indian IT professionals charge much lower rates, minimum wages have been horribly low in India, something like 126th in the world today ( used to be 144th only a few years ago ), the manufacturing cost is low in India etc.
We should all ponder, and our next generation should ensure that they command more respect and charge rates commensurate with their talent. Hope we become an expensive country someday, and the costly tag does not only belong to the Mercs and BMW’s.
I have no intention to insult anyone, but the end result has been unfortunate. I will share with you some examples from the automotive industry. The doyen of the Indian business announced years ago that his company would come up with the cheapest car in the world. This was the beginning of gaffes galore. What does the word cheap indicate? Though the intention was good, in practice, it was a marketing disaster! Why was the term cheapest used, instead of affordable? It was a matter of perception. Are we poor at English or we think that we are destined to manufacture cheap cars? Sometime after the introduction of this vehicle, a vehicle caught fire on the road, while someone was driving. The next day, there were photos splashed in all the newspapers. On the same day in Pune, a brand new Japanese sedan also caught fire while it was parked and entirely burned down. But this news was not allowed to splash the way the cheap car caught fire. One more marketing failure? One more marketing failure was the highest version of this car sold the most! In India, cars are bought and used as a status symbol! Who would want to purchase something tagged as “Cheap”?
If such is the thinking in a large company, then many of their decisions also follow the same path. The results also follow a similar trajectory. The whole ecosystem becomes “Cheap”. Now the question is why Japanese and German products are expensive? A simple explanation would be that their products are top of the line products. I will not write about the details of their industry at the end of the second world war. When I was in school, there was a derogatory term used for Japanese toys- in Marathi the word used was कचकड्याची. If you wanted to buy cheap / कचकड्याची buy Japanese toys; this was the reputation of Japan in the early ’50s. In a couple of generations, people started recognising Japanese products as top-end products. How did this happen? Pride, hard work and urge to become the top country for manufactured goods. Cars, Electronics and other products were the areas where the Japanese concentrated. Toyota, Honda, Sony, Toshiba became household names globally. They decided the group of products, and competed hard with global players and beat most of them. Germans were the ones who fought hard with the Japanese. In their range, the products were superior in quality and with competitive costs. Like the Germans have Mercs, and BMW’s, the expensive cars, the Japanese have their Shinkansen trains. These are superior quality trains and are very expensive.
I will share a couple of anecdotes. Someone was going to travel to Japan for work, and he was going to move from place A to place B in Shinkansen. He wrote to the Japanese, “I am going to catch a flight from B. How much buffer time should I keep so that I do not miss the train?” He got a reply, ” From the train station at B, the airport is 30 minutes away. You do not need buffer time because Shinkansen is late only when there is a major earthquake.” I am sure this was written with pride.
A Rolls Royce car engine failed in Paris, and the car was towed to a dealership. After inspecting the vehicle, the customer’s driver was told that he could collect the car at 9 am the next morning. He did get the car at the appointed time, all running and it was neatly washed and cleaned. How did they manage it? Pride, coordination and excellent customer service plus marketing. They had found out that repairing the engine within such a small period was impossible. They spoke to their headquarters in the UK. A brand new engine was shipped to Paris in a chartered plane, and a happy customer took his car back the next day morning.
Saibal, we need to become expensive in our thinking and our deeds. We should have pride in what we are doing. If your sense of achievement gets hurt, you should be able to walk away from the situation. Your business plan should consider such costs. Airlifting of the engine from London to Paris was such an event where financial damages were immaterial. I have walked out of such situations in our software business a couple of times.
Indians are still mentally two hundred years behind. In Northern India, people boast about how they haggle about the price of vegetables. If the vendor says fifty Rupees, people demand it for ten Rupees and ultimately buy for thirty Rupees. It is our thought process of buying everything cheap; it does not make us competitive it makes us “Cheap”. It gets converted into a mindset of selling and buying low-quality stuff. When I buy apples, I buy top quality apples. I choose the apples and then ask the price. A bit of haggling is ok, but if you want a product for less than half the price, the quality of the same will be proportionately bad. When we buy a car, the first question asked is कितनी देती है? – what is the mileage it gives? We do not bother about other specifications and performance. In short, we are the least bothered about quality. All we want is “Cheap” everything!
Till we, as a society, do not change our mentality, how will we get the quality products? Here I have discussed only a couple of products, but there are products like fans, mixers, refrigerators and so on. There is the service industry. IT industry is a big player in services. After twenty years of a good run, they want to remain the service providers; we do not want to make world-class products. These companies are flush with funds, but since they do not have any roadmap to come out of the service industry and make their own products, they spend this money on repurchasing their own shares. These acts are big negatives for the share market. Hence their valuation also does not change- a sorry state of affairs.
When you do not want to go up the value chain, how shall we become an expensive country? It is our mindset that needs to change first. In many foreign countries, I have seen plumbers, electricians who are proud of their trade. It is slowly happening in our country too! My electrician is a superb artisan, but I had to teach him to clean up the work area after finishing the work. Our big shots in the IT industry, who do not want to go up the value chain, need to clean up their cobwebs. They should want to become proud and say, “We are expensive, but once you come to us, you will not go anywhere else!” I have heard the Japanese saying this often!