Wednesday, May 10, 2006

Chinese math and Indian middle class

Businesspundit has a post titled "Please stop with your Chinese math"

...The presenter went on and on about how huge the market was for his product, and how they "only needed to get 3% of the market to..." Oh no. Not again. An entrepreneur friend of mine sitting next to me turns and says "nice Chinese math." I nod. "Why didn't someone warn him?" I say...

Its not just entrepreneurs who fall into this trap. Back in 1991, when India slowly opened its doors to the world, there was a queue of companies who wanted to come in. At that time, India was supposed to be home to the middle class, the class which was almost a billion strong and if "we crack even 10% of this market" was a common saying. Today, of course, we know better that the Indian middle class is anything but middle. It can be rich, lower middle, well to do but they are all aspiring.

Many companies floundered using this math. Businesspundit puts it nicely

Market numbers are important, and so is breakeven analysis. Present these numbers as part of your plan, but don't act like the low percentages mean they will be easy to reach.

Many companies have learnt it the hard way that the Indian consumer cannot be caught via Chinese Math!

3 comments:

Nikhil Narayanan said...

" we know better"
link needs to be edited..plz check...

Neelakantan said...

Done! Thanks!

S said...

I read an article once by a venture capitalist in the tech sector in the US in the late '90s. He said he saw a lot of business plans that pointed out how successful the business would be, even if it only got 10% of the market. After he saw a couple dozen business plans, each assuming ten percent of the same market, it occurred to him that some of them weren't going to make it.