India and the ‘Million Dollar Club’ conundrum - by Martin Crawford

For many multinational companies (MNCs) based in the USA or Europe, expanding operations into India seems like a lucrative opportunity. With its massive consumer base, rapidly growing economy, and favourable demographics, India presents a tantalizing prospect for companies looking to tap into new markets. However, despite the promising potential, foreign companies often find themselves facing a common dilemma: the Million Dollar Club trap.

What is the Million Dollar Club?

During a recent trip I took our newly-appointed CEO to visit our team at Acclime India , we were chatting to Yajna Prakash , Senior Partner, when he explained to us the common trap many foreign companies fall into when they enter the Indian market known as “The Million Dollar Club”. ?This is a term used to describe those companies who are ‘stuck’ with economic activity – usually revenues - falling below 1 million USD, thereby signifying failure. India neither moves the needle for the group or, worse still, is seen as a fundamentally challenging market not worthy of further investment.

Many companies entering the Indian market with high hopes and expectations often find themselves disheartened when they don't hit this magic number. ?They start questioning whether the market is right for their product or if there was a miscalculation in their strategy. Izzy Silva and I were staggered to learn how many companies have fallen into this trap. Yajna Prakash estimates that a large proportion of the 18,000 US-based companies that have entered the India market are trapped in the Club, and these include prominent brands; even Kellogg’s and Hershey had to adjust strategy and relaunch in India.

Understanding the root cause

One of the primary reasons for falling into the Million Dollar Club trap is a lack of understanding of the Indian market dynamics. What works in the West may not necessarily work in India. Companies often fail to realise that the Indian market requires a tailored approach. Products may need to be redesigned or repackaged to cater to the unique preferences and needs of Indian consumers. Another key reason is that the foray into the market has been distributor-led, and that partner has under-performed. Here is a list of the common thinking that leads companies into the trap:

-??????? The product does not fit the market.

-??????? India is a price-sensitive market, where cheaper products sell more.

-??????? Pouring resources into the venture will be a waste.

-??????? There are transparency and visibility issues regarding partners and market dynamics.

Finding solutions

Breaking the one-million-dollar mark in India requires a strategic approach and a willingness to adapt. Rather than abandoning the market prematurely, companies should explore solutions to overcome the challenges they face. The solutions that Acclime India has developed include:

Localisation & product redesign

One effective solution is to localise and redesign the product specifically for the Indian market. This could involve adjusting the features, pricing, or packaging to better align with local preferences. For example, companies like McDonald's and Domino's Pizza have successfully adapted their menus to cater to Indian tastes by offering vegetarian options and localised flavours.

Resource allocation

Another approach is to invest more resources into cracking the Indian market. This includes hiring the right people, increasing marketing efforts, and allocating sufficient budget for expansion. Often, setting up an entity in India (subsidiary/ branch office/own employees), rather than dependency on third-party distributors, helps companies sail through the initial teething problems. Companies need to recognise that India is a diverse and complex market that requires a long-term commitment.

Ritualisation

An effective strategy for penetrating the Indian market involves ritualising your approach to align with its rich social tapestry. By leveraging local festivals, rituals, and sports events, businesses can tap into the cultural pulse of the nation, resonating with the preferences and sentiments of consumers. Adapting products and marketing initiatives to these occasions not only fosters a deeper connection with the target audience but also enhances brand relevance and visibility in a diverse, dynamic and sometimes cluttered market.

Importance of the right consultant

Seeking the guidance of the right consultant is crucial for MNCs entering the Indian market. A consultant with deep expertise and understanding of the local market can provide invaluable insights and support throughout the expansion process.

Acclime India is one such consultancy that specialises in offering comprehensive support to foreign companies, not just in India but also across Asia, the Middle East and Africa. Beyond the usual professional advisory and corporate services offerings, Acclime India actually selects green/brownfield locations, designs factories and warehouses (with in-house architects and engineers), oversees construction, establishes partnerships for the clients and secures distribution channels.

For more than 20 years, Acclime India’s team of experts have provided tailored solutions that are specifically designed to help companies break free from the Million Dollar Club trap and achieve success in India. Much of their success has come about through the power of networking and building relationships with government, industry sectors, start-up hubs, academia and more. Companies such as Barilla are turning to the team to help them re-envisage the India market, and I am confident of the impact the team will make.

Conclusion

Both Izzy Silva and I found it thoroughly invigorating to spend time with the Acclime India team learning of the pitfalls foreign companies make in their market entry and the solutions the Acclime team have developed. This level of consultancy goes well beyond our customary offerings, and we look forward to engaging the team to assist clients fully develop greenfield projects in all the territories where Acclime operates.

Thanks for reading. Leave a comment with your thoughts on the subject, happy to hear your opinion and continue the conversation.

And if you think Acclime can offer any value or support to your business in Asia, reach out to me or leave a message to my team, we’ll get back to you promptly: [email protected] .