China Plus One Strategy

Reading Time: 3 minutes

What is China Plus one strategy?

The COVID-19 pandemic ravaged the whole world and disrupted the entire global supply chain. It prompted companies to invest in other countries around the world to not depend on China wholly. This strategy is called China plus one strategy

How did China manage to attract initial foreign investment?

In the early 1980s, there was a spike in labor and manufacturing costs in western
countries. This made Western companies shift their manufacturing base from their
native countries to China, where cheap labor, low production cost, and enormous
domestic consumer markets for the companies to invest.
 

Significant reasons why companies are looking for alternatives to

Chinese?

           A) The political ideology that China follows.
           B) The spike in labor cost.
           C) Geopolitical conflicts with neighboring countries.
On the other hand, the consumer market in India is already established and ready with cheap and skilled labor. Promoting employment of the youth will be highly beneficial for the country’s economy and attract foreign companies to the country.
 

How can India appeal to foreign investors?

Tariffs: Decrease import taxes on raw materials and machinery. The tax levied on raw material imports is about 40.8% and 29.8% after GST on machinery, making foreign companies think about their options upon investing in India.
China Plus One Strategy

Infrastructure: make transportation and infrastructure better and invest in special economic zones to attract labor for the factories.

      A) The road connectivity in the country poses a significant problem as the quality of             roads is below average in some parts of the country, which causes a delay in                   transportation and increases the cost of maintenance of the vehicle.

      B) The airports and seaports are still not capable of handling a large consignment.

      C) A faulty logistical approach also poses a problem that leads to companies                         reconsidering their options.

      D) Invest in making good schools and hospitals around these economic zones to                  ensure the quality education of children of labor.

Address the power problem: Govt has to focus on giving power at a subsidized rate and invest in renewable energy sources to remove dependence on fossil fuels.

       A) Invest in modernizing power transmission to long distances. Most of the power                lines are still not underground, which poses a problem during natural calamities.

       B) The government has to ensure that the power is supplied to each part of the                      country so that the factories in remote areas can function smoothly.

 

China Plus One Strategy

Try to promote the growth of small-scale industries and establish a communication channel between these small-scale industries and the MNCs and promote collaboration between them.

Promising stores of natural resources.: Ensure a proper supply of water and metals and minerals to these regions.

Try to make the policies & transactions transparent and make the system less corrupt. Also, there should be a reduction in government red tape, and the role of bureaucracy in making industries should be reduced.
 
Strongly investing and introducing new technologies and communication channels in manufacturing and transportation. The government has to aggressively support and promote skill development to ensure jobs for the country’s youth.
 
Resolve political ideologies and avoid clashes to ensure peace in the areas and attract the interest of foreign companies.
         A) The Center has to cooperate with the state governments to reduce the clash between the center and the state.
         B) Ensure stability with proper policing in the area to prevent antisocial elements from wreaking havoc and preventing rioting.

Marketing Strategy behind Rs.999 tags & 10% extra quantity

Reading Time: 5 minutes

INTRODUCTION

You must have seen products being priced as Rs.999 rather than Rs.1000, though there is just a difference of Rs.1, the former one is preferred more and has been a successful marketing strategy. Let’s find what’s behind this strategy.

What goes through the mind while making a purchase of a product which uses this strategy?

a) First round to the closest rounded values and judge the quality of the product.

b) Second to quantitatively assume the incentive of getting a product of higher quality at a lower price.

Psychologically the incentive felt while pricing 999 instead of 1000 is much

higher than that of pricing 998 instead of 999, so in a way we can say that the value of ₹1 is different in different situations.

 

There is one more strategy that has been in the trend since a long time, i.e., offering a 10 or 20% extra quantity for a similar price as before.

 

This strategy works on rational person only if he/she has a reference to compare with. For e.g., if you go to the store and see two products A and B having the same price but different quantities.

 

PSYCHOLOGICAL ANALYSIS OF HUMAN BRAIN

Marketing Strategy behind Rs.999 tags & 10% extra quantity

Psychological analysis is a clever marketing strategy adopted all over the world. 

Is 999 smaller than 1000? Obviously yes.

 

But it looks much smaller to the subconscious mind. 1000 is a 4digit number and 999 is a 3digit number, so subconsciously our mind decides that 999 or 899 or 799 is a similar group but 999 and 1100 aren’t. Thus, a smaller number of digits in price tag gives impression of cheaper product.

 

THE BLACK MONEY – DISADVANTAGE OF THIS PRICE TAGS

Marketing Strategy behind Rs.999 tags & 10% extra quantity

We all often visit showrooms. Let’s imagine we purchase an item worth ₹999.

So, it’s quite genuine that we don’t ask for ₹1 change in the name of our status symbol.

This same ₹1 when collected in bulk, results in increasing black money in our country. It may sound like contribution of ₹1 will be insignificant when we are

talking about the whole country.

But let’s make it clear from an example.

Suppose a company has 250 retail outlets in INDIA. Daily if 100 customers will drop their ₹1 then the company will make ₹ 250*100*30 i.e. ₹7,50,000 per month. Means unknowingly we are adding a good amount to black market.

DIFFERENCE IN TAXES

Marketing Strategy behind Rs.999 tags & 10% extra quantity

By pricing the products Rs.999 over Rs.1000 has one major benefit to the business as the new GST rules are different for different price ranges.

 For instance, Garments costing less than Rs. 1000 will attract 5% of GST whereas if the price exceeds Rs.1000 (including 1000) it attracts 12% of GST. Hence directly a margin of 7% is created.

Hence if the price is Rs.999 rather than 1000 the buyer has to pay less amount of GST, and obviously this makes this marketing scheme very efficient, as no one wishes to spend more money on taxes.

 PSYCHOLOGICAL PRICING

 

Marketing Strategy behind Rs.999 tags & 10% extra quantity

As we all know the brain has two zones normally, one for feeling and emotional and another is for analysing and aptitude stuff. Basically this 999 and 1000 concept is just a mind game, we think that 999 is coming in 900 range so it’s cheaper than 1000 but we know that the only difference is 1 RS in this.

 

So, what is the reason behind this? Why our brain got tricked by this simple marketing strategy?

 

The main reason is that our brain reads from left to right, the first digit of the price resonates with us the most and it creates an optical illusion of getting something in the lower number series, say when it is written 999, it psychologically gives an effect that we have purchased something in the range of 900 something. But we know very well that this 900-1000 or 99-100 is not varying vastly, the only difference is 1Rs and this difference creates a vast impact on data processing that happens in our brain. And because of these, people don’t bother to pay 1Rs extra to the shopkeeper while buying something because for them at that moment ,1 Rs is nothing in front of 1000 or 900.

 

 

(Fun Fact: The numbers ending with 9 are also called “charm numbers” or “magic numbers”) 

 

SHRINKFLATION

Marketing Strategy behind Rs.999 tags & 10% extra quantity

Shrinkflation is the process of items shrinking in size or quantity, or even sometimes reformulating or reducing quality, while their prices remain the same or increase.

Most consumers do not generally check the size of a product. Someone who loves potato chips, for instance, may not realize if his or her favourite brand reduces the size of the bag by 5%, yet will almost certainly be able to tell if the price goes up by the same amount.

The combination of shrinkflation and giving extra 10% is an effective marketing strategy. 

 

E.g., Chips of 10 Rs weigh 25gm. Decreasing its size to 20gm and giving 10% extra is an effective marketing tac-tics. Overall, the product weight decreased to 22gm but nobody observed it as they think it’s giving an extra 10% so weight must be increased.

 

MAGGI – THE RISE AND FALL IN PRICES

The Nestle’s flagship product Maggi, a very popular instant noodles in India, the price of a small packet of Maggi was Rs.10, but at some point, of time the price was increased to Rs.12 resulting into decrease in the demand and less sales, as most of the people didn’t like to pay the odd Rs.2 as well, leading the company to reduces its price from 12 to 10 again but by reducing the net weight of the product, resulting into again gaining those lost footfalls.

 

Although the price remained to 10, but effectively the price of the product was increased as now the weight was reduced by almost 30gms but, then also people didn’t care much about it as compared to the increase in the MRP. And now many products are using the same strategy of maintaining the MRP, but on the cost of quantity and quality as well.

 

Although, both the above-mentioned marketing strategies are successful and are used widely. But, the effect of reducing from 1000 to 999 is much more than increasing the price from 1000 to 1001, and giving extra 10% quantity, this also comes in accordance with the prospect theory put forward by Daniel Kahneman and Tversky that the effect of a loss of the same magnitude is higher psychologically.

(Daniel Kahneman and Tversky: Nobel 2002 in economics and psychology)

The Bulls Of the Bear Indian market

Reading Time: 7 minutes

It is not just the health of the masses that the coronavirus pandemic has hit, but almost all the aspects of normal life. Businesses, markets etc., are no different and have received a big blow. Profits plummeted, and most companies were pushed to run in losses making some companies bankrupt too. However, there were some businesses, startups that not only managed to stay afloat but thrived in these times of crisis. Innovation being a key to beat the covid blues. There was a myriad of opportunities for new-age startups and investors to tap into, given the rise in demand for a variety of services . A bull market is a term for the stock market when the securities rise, and a bear market is when securities fall for a sustained period. This blog focuses on those Indian based or originated startups, businesses, newly turned unicorns etc., who developed and flourished in this pandemic, when most of the economy was about to hit rock bottom, thus becoming bulls of the bear Indian market.

Healthcare 

Healthcare was an industry that constantly had hopes hooked to it in the pandemic. Doctors, nurses, medical professionals were the need of the hour. From the business point of view, pharmaceutical companies, telemedicine, online medical consultations etc., had profits jumping many folds. The startups that prospered in the healthcare sector were:-

    • Serum Institute of India:- With net sales of INR 5,446 crores amidst the COVID-18, Serum earned a net profit of INR 2,251 crore. Or a net margin of 41.3%. Serum Institute of India the vaccine manufacturer that has become pivotal to India’s recovery from this pandemic.
    • Practo:- Practo reported a 500% spike in online medical consultation under lockdown.
    • PharmEasy:- E-pharmacy is the most important e-commerce sector in this ongoing pandemic. Due to home confinement, people are finding it very inconvenient to get their prescriptions and over the counter (OTC) medicines, so instead, they switched to telemedicine like PharmEasy, Netmeds etc.
    •  Bioline:- Based in Indore, Bioline India was founded by Neeta Goel and her late husband Rajeev Goel in 2001 to manufacture and supply affordable medical equipment to the masses. During COVID-19, the demand skyrocketed for this once slow-moving product.
    • Zyro care:- Kamayani Naresh, a retired Indian Navy officer, claims to have developed a long and sustainable solution to boost immunity — zyropathy. A Delhi-based company that provides food and herbal supplements.The Bulls Of the Bear Indian market

       

Education

With schools shut down all across the globe, the education sector underwent quite a revolutionary state. The education system required expeditious reforms to avoid the education of thousands of students coming to a standstill. EdTech startups saw a boom in their market. Online classrooms and courses came to students’ rescue. The businesses that burgeoned in the education sector were.The Bulls Of the Bear Indian market

    • Unacademy:- Unacademy beat the pandemic to enter the prestigious list of unicorns in India. The EdTech firm raised around Rs 1,125 crore in a funding round led by Softbank Vision Fund 2 and participation from existing investors, including Facebook.
    • Byju’s:- Byju’s is one of the top e-learning startups of India, which is surpassing all its competitors and has become one of the few decacorns in Indian startup history after crossing $10.5 Billion valuations in the midst of this pandemic.
    • Gradeazy in Surat:- After their first startup had a false start in 2018, Surat-based Dishant Gandhi and Alok Kumar found a new opportunity to satiate their hunger for entrepreneurship with EdTech when the lockdown started, and all the schools and education moved online. The duo launched Gradeazy in June 2020 to enable educational institutes to conduct online examinations for just Re 1 per exam.

Media and Entertainment

With the freedom to go out and carry our daily routines being curbed, it was evident that people were going to turn to TVs and other platforms to while away the extra time in hand. The media and entertainment industry in India put up a great show in 2020.The Bulls Of the Bear Indian market

    • Dailyhunt:- News and content aggregator Dailyhunt has become India’s first tech unicorn focused on vernacular content after raising $100 Mn funding from Google, Microsoft and Falcon Edge’s Alpha Wave Incubation at a unicorn valuation.  
    • Khabri:- In one of the newest startups, which was launched in October 2017, Khabri is India’s first and the fastest growing digital audio platform. Khabri provides audio content in regional languages where anyone can create, listen or discover in the app. As a great initiative, Khabri has introduced the COVID-19 helpline for the visually impaired population of India as a massive outreach program.
    • According to Inc42 Plus, the media and entertainment sector received a total funding of $877.8 Mn across 85 funding deals last year, compared to $561.27 Mn in 2019, led by online video startups like SimSim, Trell and other TikTok alternatives.
    • NeeStream:- A popular OTT platform in South India. With several new films being released on the platform, NeeStream has been witnessing a rise in subscriber numbers.

Finance and Technology(FinTech)

The Bulls Of the Bear Indian market

    • Razorpay:- Bengaluru-based payments gateway Razorpay entered the unicorn club in October 2020 when it raised $100 Mn in its Series D round, led by GIC and Sequoia Capital India. The funding round also saw participation from the company’s existing investors, such as Ribbit Capital, Tiger Global, Y Combinator and Matrix Partners. 
    • Pine Labs:- Noida-headquartered Pine Labs became the first unicorn for the year 2020, after its corporate round in January, led by New York-based financial services major Mastercard. Founded in 1998 by Lokvir Kapoor, Pine Labs provided its services to over 100K merchants in 3700 cities and towns across India.
    • Zerodha:- Bengaluru-based Zerodha was founded in 2010 by Nithin and Nikhil Kamath and offers stockbroking services. The company has claimed to have over a million active clients who trade and invest and is now valued at around 7000 crores or 1 billion approx.

E-commerce

A study showed that Indian e-commerce grew 84% in 4 years owing to the Covid-19 impact. When it was not possible to go out shopping, products were brought to individual doorsteps. A giant boom in local, national and international e-commerce startups is a testimonial to it. The Bulls Of the Bear Indian market

    • Flipkart:-Flipkart witnessed new user growth of close to 50 per cent soon after the lockdown.
    • Bigbasket:-Bigbasket has had a huge inflow of orders as more and more consumers are preferring to order essentials and groceries online amid COVID-19. Bigbasket has added around 10,000 new workers to meet the massive influx of orders, which shows the shift to digital platforms in need of the millennium.
    • Custkartin Bokaro:-Custkart has its own factory near Bokaro that produces merchandise, and all the workers come from the nearby villages.

Miscellaneous

    •  Nykaa:- Mumbai-based omnichannel lifestyle retailer Nykaa entered the unicorn club after raising around $13.6 Mn from its existing backer Steadview Capital. The funds were raised as part of Nykaa’s Series F funding round. 
    • Cars24:-  Gurugram-based online used car marketplace Cars24 entered the unicorn club by raising $200 Mn in a Series E funding round led by DST Global.
    • Rooter:- One of India’s biggest Sports community platforms, Rooter has raised $1.7 million (~ Rs 12.4 crore) in a pre-series A funding round at a time when almost all sporting activities have been seized across the globe. The Esports platform plans to capitalise on its upcoming Esports and gaming content and communities. Rooter engages its fans with user-generated live audio and video content. 

Gaming

    • Paytm First Games registered a 200% increase in user base.
    • After the ban on the popular Chinese short-video app TikTok under 69A of the IT Act, its alternatives, including Trell, ShareChat, Chingari, Bolo Indya, Mitron, Roposo, Moj and Josh, among others, started gaining massive popularity and traction in the market. 
    • Games like FAU-G, Mask Gun and others emerged as alternatives for many users in India after PUBG Mobile’s ban

Podcasting

    • India is witnessing an unprecedented boom in podcasts, and it is a country with 22 modern Indian languages and around 720 recognized dialects. The linguistic diversity in India is increasing the demand for the information available on various platforms in vernacular languages. With a growth rate of 33 per cent, the vernacular internet ecosystem in the country is thriving.

The pandemic has an impact on economies and businesses throughout the world and will keep doing so for even some time in the future. It is no doubt now that opportunities can be squeezed even from the most diabolical of times. The pandemic has proved to be both an edge or stumbling block for establishments and enterprises across the globe. 2020 was a year of crisis, and crisis is where innovation thrives. 

Keep Learning

Keep Hustling

Be the bear!!

Is an MBA necessary to be successful in business?

Reading Time: 3 minutes

India has the 3rd largest startup ecosystem in the world; with a steady year-over-year (YoY) growth of 8-10%. Home to 55,000 startups, 34 unicorns, and 52 promising startups with a potential to become unicorns by 2022. India is a bustling land for startups and entrepreneurs with cut-throat competition at every stage. According to a Nasscom and Zinnov report, over 1,600 tech start-ups were registered in 2020, making it the highest ever added in a single calendar year.

With such hovering contention, you need to have an extra edge over your counterparts to succeed and to make it big in the current business scenario. So, with this notion, we CEVians, had a debate session on the topic  “Is an MBA necessary to be successful in business?”

Is an MBA necessary to be successful in business?

MINUTES

In favour of the idea:

  • An MBA program covers a range of concentrations or specialisations that allow students to acquire the fundamentals as well as expertise in a specific aspect of a business, such as finance, marketing.
  • You get to meet and interact with like-minded people; which is an opportunity to build a powerful network and connections.
  • This degree is not just theory, the curriculum involves various case-studies of real-life business scenarios.
  • It’s easier to gain relevant working experience for a person with an MBA because it is considered a valid credential among recruiters. While for a person without an MBA, it is a tougher task. 
  • Investors are more likely to invest in a firm if it has a person with credentials and experience. In case of lack of proven experience, having an MBA degree can bring better reliability for the firm.
  • After setting up the business, people with an MBA can plan the future strategic plans for stabilization and further expansion of the company.

 

Against the idea:

  • An academic degree doesn’t guarantee knowledge; practical experience is more valuable.    
  • MBAs are expensive; better to invest that capital in your business idea.
  • In today’s world, you can easily learn about the necessary concepts through readily available learning resources on the internet and MOOCs.
  • For professional networking and work-related opportunities, there are various business-focused social platforms like LinkedIn, AngelList, where you can easily connect with an investor or a recruiter.
  • An MBA will only help you manage risks or avoid unnecessary risks, but setting up a business from the ground is a completely different story which they cannot ‘teach’ in business schools.
  • MBAs were originally designed to meet the demands of ‘administering’ the business in the early 20th century. Since then, the specifics of customers and the business environment have completely changed.

CONCLUSION

A professional degree like an MBA can certainly help you in understanding businesses better; it is not mandatory. Nothing can guarantee success in your business. According to a report, out of every 5 business leaders, 2 do not have an MBA or a postgraduate qualification. This further ascertains the fact that pursuing an MBA or not, is explicitly a matter of choice.

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