Five years ago Business Line quoted Prof Jagdish Sheth, Charles H. Kellstadt Chair of Marketing in the Goizueta Business School at Emory University, when he observed in an address that marketing was losing its pre-eminence. Things have gotten worse, notes Prof Sheth in conversation with BrandLine from Atlanta. Excerpts:

‘Marketing losing its pre-eminence': How has that changed since 2006? Have things gotten worse?

It is getting worse over time and there are some reasons for that. Other initiatives and functions that demand more urgent action relevant to investors and CEOs have taken precedence. The slowdown of 2008 has only helped in delaying everything else — everything perceived as non-critical to survival. Marketing is seen as a driver of top line growth, and when survival — not top line growth — is the priority, it does take the back seat.

The second non-intuitive reason is that typically most marketing dollars were organised around domestic markets, but the growth lies elsewhere — in the emerging markets. Companies based here don't know how much to allocate for distribution, advertising or innovation in emerging markets. They are figuring things out. Also, in emerging economies, there is increasing uncertainty in their minds for a variety of factors. Political uncertainty in West Asia would be an example.

With home-grown companies in India, marketing traditionally has tended to lose out. Historically, except for a couple of them such as the Tatas or Birlas to some extent, most of them came out of trading houses. So their buying and selling skills are in focus and they're used to a low-value, high-volume game. The problem with Indian enterprises is that they are not used to their own innovations. It is a trading mindset and the culture is price-driven. As a result, you don't think much about the marketing side of things. In India, growth by new customer acquisition will soon become a thing of the past in categories such as telecom.

What is your outlook for companies in the space and is there scope for global play, like Bharti has shown?

There is no question that within the Indian sub-continent, consolidation is inevitable among cellular service providers. I wrote this book on the Rule of Three a while ago. I can see it becoming much more mainstream now for telcos in India. There are too many licences. Another factor is the policies. Through them, the industry is partly controlled by the Government. The Government must encourage rather than come in the way of a free market with pure competition.

Companies in India should migrate customers to smart phones as quickly as possible. They will also have to diversify into other information highway businesses, be it on mobile or cable. Cable content on handhelds and video on mobile are clearly the future of increasing value.

With Indian telcos, the key weakness is that entities don't have the scale to go truly global. But they have to think to be part of a global architecture. Bharti has shown the way — Indian telcos will go global through other emerging markets as against advanced markets. Foreign companies have no choice but to come to India. Indian companies must attempt to grow into global entities. America invented the technology and commercialised it, but lost the plot. American carriers missed the whole global phenomenon.

Across categories, which are the countries that Indian companies should look to enter?

Indian enterprises will expand from a market viewpoint and a resource access viewpoint.

You have to wake up to the change in demographics of advanced markets. Post-World War II, we saw nations of mass consumption. Now, the same countries are becoming multi-cultural societies. There is no mass market anymore in these countries. You have to look at the entire range of what would appeal to different people within each country and what you can offer.

If you ask me, the US is the best market for Indian companies to enter. I say this because of the large cosmopolitan and diverse nature of the market that is the US. The UK is perhaps ahead of the US in terms of a mixed population and we have already seen Tata enter through Tetley and Corus. By 2020, the minorities of America will collectively be the majority. Some of the States already have non-whites as the majority.

There will be more and more niche opportunities, and I would urge Indian companies not to play in the ethnic market. Whether it is pickles or condiments such as ketchup, Indian companies must figure how they can make these for the mainstream aisle. Indian companies can improvise and do much better on these, especially with Indian tastes becoming mainstream. Look at what Italian cuisine has done to Americans. Brits today consume Indian curry more than fish and chips.

The second major expansion should be into countries where there are natural resources. India is a nation of resources, which is great, but as we expand globally, we need to invest in countries with rich natural resources. These would be in Latin America, maybe Africa, pockets of South-East Asia and Central Asia.

Companies must also go where their future competition will come from. It is obvious that Chinese companies will become MNCs and will compete with Indian companies. Be it carbon or steel or even appliances, they will be there. There are two other nations from which MNCs are taking on the world — South Korea and Japan.

In other markets, what is the scope for collaboration, and co-opetition as strategies for Indian companies?

Collaboration is much easier. In industries such as IT and pharmaceuticals, where the cost of R&D is very high, co-opetition is a norm. But there are watchdogs in evolved markets to check if you are fixing prices.

There are a bunch of survey mechanisms in the US to check if the coming together of two companies is leading to monopoly. There are also norms where you cannot share information in certain industries through common databases. In some cases, the co-opetition model becomes untenable because of the regulatory framework.

Indian companies have to learn how to do joint ventures. In the old days, foreign companies had to have joint ventures with Indian companies. Now it will have to be the reverse, especially in countries in Latin America and Africa.

Your views on privatising India's national carrier …

We have analysed the topic in our book Deregulation and Competition – Lessons from the Airline Industry . There are some lessons that India can learn from the evolution of the airline industry in different markets.

The Rule of Three came into play in the Indian aviation industry in the past when multiple airlines gave way to Indian Airlines, East West and Jet. The Rule of Three is again emerging and is considered inevitable. In this scenario, it remains to be seen if the State carrier will benefit or if they will be among casualties.

There are some key advantages that Air India has, that can make it the dominant player in the Indian aviation industry. Unions, management and political leadership have to be ready to change. People are flying for the first time, it is a growth market, and presents the perfect timing to change the architecture.

The problem is not that Air India is a legacy airline. The problem is that they are unable to let go of the legacy mindset.

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