In this global economy, know what market(s) are important to develop and roll out new products.
According to CIA World Factbooks from 28 March 2011, US GDP was $15.68T while India’s only $1.84T. USA’s GDP was 9 times more than that of India. In terms of GDP per capita, while India’s ranked 130th at $2,625.09, USA ranked number 8 with $45,759.46.
With these facts, it is no surprise that USA is where the companies want to do business in. If you can make it here in US then you can make anywhere. Right?
If that is the case then why is that the company like WhatsApp who pretty much is non-existent in US and yet wildly popular in India and Facebook paid astronomically to acquire them even when they haven’t made a single dime yet? Or the waves Apple is making in India to make their IPhones available widely where the Androids rule for now. Facebook is proposing basic free Internet so more and more people would get on Facebook.
If you just look at the GDP, it wouldn’t make any sense. Why any company will largely focus on India?
Well the answer is that if you are comparing these two countries, you have to look at more numbers than just GDP. For example, the purchasing power where US stands at number 1 at $16.24T, India isn’t too far at number 3 with just below $5T. In GDP real growth terms, India’s economy is growing at staggering 7.2% compare to US at below 3%. India’s labor force is ranked number 18, three times more than that of USA. India’s population is 1.3B compare to US population of 350M.
If you look at these numbers, it is no surprise to sell in more quantity in India if you have the right product. Forecasting in terms of hundreds of thousands of quantity is easier there than in US. For a startup to sell hundred thousand units in India in first year isn’t that hard. So if you make $10–20 only per unit, you’ve crossed the million dollar mark in your first year. Not bad for a start. With the cheap labor there, your margins are even bigger. When I consult with a company and mention these facts, it is amazing to see the light bulb coming up that they didn’t think about it. I help them figure out the roadmap to launch in India and how they can be successful there.
Now I am not saying that a startup shouldn’t focus on US. USA is still the largest consumer market and that is a good news for any company. But a startup (I know I am mentioning startup here too often but any company) should think about India as well considering that when they succeed in India, they get cash flow to compete in US where the competition is harder since it is a lot bigger consumer market than India at least for now.
In the end however, as a business owner you have to decide what makes sense to you.