india rising in competitiveness 2010
TRANSCRIPT
Rising Indian competitiveness
Raghuram Sudhakar
August 2010
Roadmap
Introduction
Competitiveness diagnostic
CEO voices on India
Case Study: How GE is disrupting itself
Road ahead for India’s exports to U.S.
Key takeaways
Investment in/sourcing from India is expected to increase since India
fares well on all five critical factors
Desire to invest in / source
from India
Competitiveness Quality reliability Dependability Resource
availability
Climate for
Investment
Second only to
China in
manufacturing
competitiveness
Rapidly expanding
capabilities in
engineering
design and
development and
embedded
software
development
Largest number of
Deming award
winners outside
Japan.
153 recipients of
TPM Excellence
award from Japan
Institute of Plant
Maintenance
(JIPM) committee.
Democratic
regime
Economic and
political stability.
Rich talent pool of
scientists,
researchers, and
engineers
Large, well-
educated English-
speaking
workforce
Investor friendly
policies. (Liberal
policy on
Technology
collaboration)
Cost effective
production
facilities.
Large domestic
market.
Critical factors for foreign investment/sourcing
Source: Deloitte and US Council on Competitiveness - 2010 Global Manufacturing Competitiveness Index; ©Deloitte Touche Tohmatsu, 2010
Investment and Technology promotion division, Government of India
Western businesses in the future would not prefer China or India, but China
and India
Rank Country Index
score
1 China 10
2 India 8.15
3 Republic of Korea 6.79
4 U.S. 5.84
5 Brazil 5.41
6 Japan 5.11
7 Mexico 4.84
8 Germany 4.80
9 Singapore 4.69
10 Poland 4.49
Global Manufacturing Competitiveness Trend
Rank Country Index
score
1 China 10
2 India 9.01
3 Republic of Korea 6.53
4 Brazil 6.32
5 U.S. 5.38
6 Mexico 4.84
7 Japan 4.74
8 Germany 4.53
9 Poland 4.52
10 Thailand 4.35
Source: Deloitte and US Council on Competitiveness - 2010 Global Manufacturing Competitiveness Index; ©Deloitte Touche Tohmatsu,
2010
Current competitiveness Competitiveness in the next 5 years
Indian manufacturing companies are on par with the best in the world from the
quality perspective
Source: “India Inc. Passes the Quality Test,”, Business Standard, January 4, 2010
• India has the largest number of
Deming Award winners (21) outside
of Japan, in comparison with
Singapore (1), Taiwan (1), Thailand
(9) and U.S. (3)
• 153 companies have achieved Total
Productive Maintenance (TPM)
Excellence Award for their total
productivity management practices by
the Japan Institute of Plant
Maintenance (JIPM) committee.
“Nano has revolutionised the global automotive thrust towards affordable cars and Godrej’s Chotu Kool will do
the same for the white goods industry, as Sony’s walkman and the Apple iPod and iPhone have done.”
-Surinder Kapur, Chairman, Sona Koyo Steering Systems
Defects in Manufacturing
100ppm
500ppm
1%
10%
1975-88 1998-2000 2006 2008 2009
% of India’s GDP from
Manufacturing
29%
Evolution of quality in Indian Manufacturing (1988-2009)
Quality excellence of Indian Manufacturing
Indian CEOs are optimistic about the manufacturing sector's competitiveness
Source: PricewaterhouseCoopers 13th Annual Global CEO Survey (2009)
21%
24%
47%
31%
37%
42%
Services
Manufacturing
Delined Stayed the same Improved
Do you think that India's manufacturing/services sector has declined, stayed
the same or improved in terms of global competitiveness since the financial crisis began?
Total = 62
CEO voice on India’s manufacturing competitiveness
Global CEOs expect most jobs to be created in Brazil and India in 2011
Source: PricewaterhouseCoopers 13th Annual Global CEO Survey 2010
20
25
14
30
18
30
23
23
27
10
7
9
7
15
17
17
13
7
9
7
19
10
15
3
13
23
27
Global
US
UK
Australia
Canada
Korea
China & Hong Kong
India
Brazil
Increase by less than 5% Increase by 5-8% Increase by more than 8%
What do you expect to happen to the headcount in your organization globally over the
next 12 months?
Total = 1198
CEO voice on job creation in the future
More are set to mark their presence in India in the coming years
Source: PricewaterhouseCoopers 13th Annual Global CEO Survey 2010, Harvard Business Review October 2009
“The structural shifts have already begun. The emerging markets, if you will, are a critical component of the
business environment that we have to compete in. So whether it be the BRIC countries, where we have to
have a strong presence, our clients are demanding that we be in emerging markets. Brazil, Russia, India and
China are markets that we are investing in. We have a very strong competitive position in those markets, and
we will continue to grow it.”
- Michael I. Roth, Chairman and CEO, Interpublic Group, US
India will probably be the second biggest economy in the world by 2035. How much longer can we call that
an emerging market?
- David Rubenstein founding managing director of The Carlyle Group
“I don’t even want to talk about your growth plans for the U.S. You’ve got to triple the size of your Indian
business in the next three years. You’ve got to put more resources , more people, and more products in
there, so you’re deep in that market and not just skimming the very top. Let's figure out how to do it.”
- Jeffrey R. Immelt, CEO of General Electric in conversation with his senior manager – the head of a major
business unit
CEO voice on expanding presence in India
General Electric is into reverse innovation today – developing
products in India and distributing them globally
REVERSE
INNOVATION Developing products in
China and India and
distributing them globally.
GLOCALIZATION Developing high-end
products at home and
adapting them to other
markets around the world
Developing a $1000
handheld
electrocardiogram
(ECG device) for
rural India
Decision in 2009 to
spend $3 billion in
the next 6 years in
creating at least 100
healthcare
innovations to lower
costs, increase
access and improve
quality.
Selling the same in
US, where they are
pioneering new
uses for the
machine.
Plan to create a
separate P&L for all
GE businesses in
India and giving
India considerable
power to tap GE’s
global R&D
resources.
Case study: How GE is disrupting itself
Then Now
Stages of GE’s disruption
GE badly needs low-cost
innovations to not only
expand beyond high end
segments in India, but to
also pre-empt local
competition from creating
similar products and using
them to disrupt GE in rich
countries.
Source: Govindrajan, V, Immelt, Jeffrey and Trimble, Chris, “How GE is disrupting itself,” Harvard Business Review, October 2009
South Asia 18%
U.S. 16%
China 16%
Middle East 11%
E.U. 6%
Russia 3%
Other 9%
None 11%
Don't Know/Refused
10%
Indian CEOs were asked: Which of these will be your most important market
outside of India when economic recovery arrives?
Total = 62
Indian CEOs expect U.S. to be the second largest market for Indian
goods and services after South Asia
• Over the past 10 years, the
shares of Indian exports going to
South Asia, China and the Middle
East have grown, while the
United States and Europe shares
have shrunk.
• In that same period, India’s share
of total world exports grew from
just over 0.6% in 1998 to nearly
1.5% through the first five months
of 2009.
Source: PricewaterhouseCoopers 13th Annual Global CEO Survey (2010)
Important overseas markets for India
0
1
2
3
4
5
6
7
8
9
10
0 50 100 150 200 250 300 350
Cu
rre
nt
Man
ufa
ctu
rin
g C
om
pet
itiv
en
ess
Ind
ex
US Imports (all products) in 2009 ($ billions)
China
India
Republic of Korea
Brazil Japan
Mexico Germany Singapore
Thailand Canada
UK
India lags behind other countries in its imports to U.S. but with high
competitiveness, there is scope to climb up the ladder
Source: Deloitte and US Council on Competitiveness - 2010 Global Manufacturing Competitiveness Index; ©Deloitte Touche Tohmatsu, 2010
TradeMap Statistics
National Competitiveness vs Share of US imports
Note: US imports above include only products, not services
India is an important and inevitable destination to global executives
for it strengths and rising competitiveness
Summary
India is a favorable destination for global investment, considering it satisfies all five critical factors for
investment/sourcing.
CEOs around the world feel that India is where competitiveness is rising, most jobs will be created in
the future and is a strategic location for future expansion.
Companies like GE are already disrupting themselves through reverse innovation – developing
products in India and distributing them globally.
Though India lags behind other countries in its imports to U.S today, high competitiveness will propel
its growth in the days to come.
Key takeaways
END OF PRESENTATION