Luxury Car Market in India Essay

The Luxury goods industry is a very wide industry comprising of products from watches, jewellery, perfumes, expensive wines to yachts, expensive pens, and clothes. Goods for which demand increases more proportionally as compared to income, are known as ‘Luxury goods’, in contrast to a â€Å"necessity goods†, for which demand increases less proportionally to income. Some luxurious goods are bought due to the tag implied of a status symbol, such goods tend to signify the purchasing power of those who buy them. These goods are not always better in quality or appearance than their less expensive substitutes. The main purpose of purchasing these goods is to display the wealth of their owners. The industry is said to be highly cyclical and the driving force behind the growth of this industry is wealth worldwide, while the economic growth and conditions of various regions affect this industry. Jewellery has been part of the Indian civilization since ancient history. They were in fashion since ancient civilizations as Harappa and Mohanjodaro. Made out of almost any material, jewelry is basically adorned to highlight nearly any body part. Be it the traditional jewelry or the latest ones which are increasingly in demand, i. e. the costume & imitation jewelery. There is no dearth when it comes to accentuating the beauty with varied imaginative & stunningly designed jewelry items. This report has focused on luxury product categories & jewellery. The report provides an overview on the size of the market, importance of luxury goods, target market, problems faced and the various driving factors as well as the latest trends. The major global luxury market players have been profiled. STATEMENT OF RESEARCH QUESTION? The Indian gems and jewellery sector is also largely unorganized at present. There are more than 15,000 players across the country in the gold processing industry, of which only about 80 players have a turnover of over $4. 15 million. I want to evaluate the problems faced by the jewellery sector and come up with measures to help make the sector more organized. ?The rise of the middle class population in India is estimated to be around 120-150 million. Keeping this in mind I want to potray the market potential of luxury goods in India. ?India as a Manufacturing Hub for Global Luxury Brands. I want to study and evaluate methods adopted by major countries and conclude the possibility of India being the manufacturing hub for global luxury brands. THEORETICAL RATIONAL The advent of foreign luxury brands is in a way an indicator of the promising India growth story. Looking to reap early mover advantages, these brands have set up shop in our country. The Indian luxury market, currently in its growth stage needs to address key concerns like the lack of adequate retail infrastructure and limited availability of trained workforce for the trade if it wishes to promote luxury retail in the country. The world today is looking at India, and the products coming out of it. Our skills pool speaks of the highest level of craftsmanship and creativity as it has evolved and been refined by many generations that carry on the trade. India is also well poised to be an outsourcing destination for foreign luxury brands. The obvious benefits that India has to offer such as low labour costs, superiority of fabrics and customization, gives it an advantage over other mass producing countries. To achieve the objective of promoting indigenous brands and positioning India as a future manufacturing hub for luxury goods, consolidation in the industry is imperative. The need of the hour is for the industry players to create a sophisticated business model supported by financial and legal footings, and for the government to develop the requisite infrastructure. India’s luxury sector has gained significant speed. It has the potential and resources, to outshine other developing economies. Thus the route is chalked out and the objective is known. If the road can be cleared of challenges and impediments, luxury retailing in India will have a smooth drive ahead. THE EXPECTED IMPLICATIONS OF THE RESEARCH PROJECT FOR ORGANIZATIONS My research on luxury goods and jewellery is innovative because it brings together analysis of national discourses about Indian market with a study of the practices and choices of the Indian government and the luxury goods and jewellery sector. I believe this research can be helpful to the nation, development agencies, and indigenous organizations. I am particularly committed to sharing the results of my analysis with the Jewellers Association in India and hope that my work will not just be an extraction of truths, but will give them information with which they can help make the sector more organized. PRELIMINARY LITERATURE REVIEW Attempting to break into markets overseas is generally more challenging than trying to expand into new domestic markets. Globalization is the process of social, political, economic, cultural and technological integration among countries around the world. (Hodgetts / Luthans / Doh, 2006:pg. 7). Evidence of growth is seen by increased levels of trade, capital flows and migrations; a lot of changes in the environment have taken place. India is the world’s second most populous country; it has traditionally had more than its share of political and economic problems. The per capita GDP remains low, but the recent environmental trends have boosted thus helping to bolster a large middle and upper- class market for goods in the luxury and jwellery industry. The industry is dominated by family jewellers, who constitute nearly 96% of the market. Organised players such as Tata with its Tanishq brand, have, however, been growing steadily carving a 4% market share. As India’s jewellery market matures, it is expected to get more organised and the share of family jewellers is expected to decline. There are more than 6,000 players in domestic diamond processing industry. The average gestation period for setting up a diamond cutting and polishing unit is 15 months. The low gestation period, coupled with low capital cost allows easy entry into the sector. This has led to the industry being largely characterised by a large number of small scale players. However, just as in the case of jewellery, the share of the organised sector has increased significantly in recent years due to an increase in demand for better and finer quality of finished goods. India Gems and Jewellery Industry – Highlights Jewellery market size – $13 billion Diamond jewellery – $1. 2 billion Gold jewellery market growth year on year – 15% Diamond jewellery market growth – 27% (By bharatbook. com Dated: Jul 24, 2008). According to market reports, around 6- 7 million Indians can afford to buy luxury goods but hesitate to do so since they are unfamiliar with brands and products. With a growing millionaire base in India, the luxury market is growing annually at around 35% CAGR (The Economic Times: August 10, 2008) If India keeps the last three years average growth at 9%, the income levels of consumers is expected to almost triple by 2025. By 2025, it is estimated that India will become the fifth largest consumer market, rising from 12th largest today. High disposable income and a largely young population will drive consumption patterns upwards. With a huge youth populace below 25 years and having a 17% share of the world working population, India presents a huge market for brands across the spectrum. It is estimated that 52% of luxury customers are in the age bracket of 25-34years old. By 2033, the active age group 25-45 years is expected to be around one third of the population. With the average age of potential luxury consumers decreasing, the country is a goldmine waiting to be tapped. Given the core strengths of the manufacturing sector, India can well become a manufacturing hub for global luxury brands. Already brands like Louis Vuitton and Frette are looking at India as a manufacturing base for their products, but there are others who simply source their requirements from India. It is estimated that the manufacturing of luxury items in India can grow to US $500 million13. This manufacturing capability if harnessed properly can propel India as one of the leading destinations for manufacture. The cost advantages, particularly in labour intensive sectors like leather and accessories add to the advantage of the country. Luxury in India To be successful in India, it is both necessary to gauge the financial potential as well as the mindset of the Indian luxury consumer. This will help in bringing forth the right product offerings to the Indian consumer as well as targeting them better. Qualitative Insights 1. According to a study by American Express, ‘Inside the Affluent Space’, the mindset of the Indian consumer is a desire to prove that â€Å"I’ve Made It†. This can be related to the luxury categorization which is based on the fact that luxury is seen as a reward, both for achievements in life as well as showcasing these achievements to others. 2. The Luxury Marketing Council Worldwide has established a chapter in India, with the aim of promoting luxury in India. Their task will also be to build synergy between various luxury brands interested in India by way of sharing of consumer insights as well as best practices. 3. Even the Asian region is not uniform in its preference for luxury in terms of need fulfilment. Therefore, it becomes important to delineate the needs of the Indian consumer from the other Asian regions to target them better. This agenda gains importance because many Indians look at acquiring luxury from places such as Hong Kong, Tokya, China etc. Eg. It is interesting to note that Singapore consumers are more of connoisseurs compared to Hong Kong consumers who want Talk-Value from their luxury goods. 4. Hindustan Times has been at the forefront of driving the luxury revolution in India by organizing two Indian Luxury Conferences in the last 4 years. To add to it, it also brings out a monthly supplement of luxury goods available in India, thereby creating awareness for the luxury brands. Quantitative Insights. 1. As far as quantitative estimates are concerned, there will be 135,000 millionaires (in US dollar terms) in India by 2009. 2. The affluent market is set to grow at a rate of 13% in India, and by 2009, there will be approximately 1. 1 million affluents here. 3. The wealth potential of India’s affluents was to the tune of US$ 203 billion as of 2005. HYPOTHESES Keeping my literature review in mind my hypotheses would contain: Aim †¢The aim of this research is to study the different entry strategies and analyse which strategy is the most appropriate for luxury goods and jewellery in India. Objectives †¢Develop a case study on Indias luxury goods and jewellery industry and its progress to date and to seek secondary information that relates to entry strategies in the luxury goods and jewellery business. †¢Study the luxury goods and jewellery industry environment and Indias modifications. DATA SOURCES AND THE JUSTIFICATION FOR THE CHOICE Secondary Data Source The secondary data source would be documentary data: books, electronic media, and articles published in journals and newspapers which would help to answer the research question. Primary Data Source. To validate the finding of the research, interviews will be taken from the people who are in the jewelry and luxury goods industry. Semi structured interviews will help in putting across our research question and also listening on the topic area which interest the interviewee. Questionnaires data under this would help me to evaluate the general perceptions. Sample Size of primary Data Large qualitative methodology will be adopted for primary data collection. A survey conducted by e-mail questionnaire. A sample size of a few questions will be analyzed and interpreted with an approval from the supervisor. Method of Data Collection The literature search will aim to be comprehensive, but restricted access to primary literature. The collection of primary data will be based on a survey; the number would be restricted due to the restrictions of time to complete the project and resources to support it. I intend to collect data from luxury goods and jewellry industrialists who include manufacturers, exporters, traders, agents, lecturers, and students through questionnaire. Surveys and questionnaires will be administered on paper, in different formats. All may take place in person, or by mail, over the phone or via Internet/ Email. Data Analysis Both qualitative and quantitative techniques will be used in this research. The data obtained from the questionnaire will be analysed using quantitative technique. An interview and data which is collect from secondary source will be analysed qualitatively.. Interview data will be transcribed and then analysed qualitatively. Here, qualitative research would be used explore and understand peoples beliefs, experiences and attitudes. And quantitative research would be all the numerical data which would be from the surveys and questionnaires. RESEARCH DESIGN Dissertation Time Plan. MonthActivity December 3rd/4th weekStart thinking about the research ideas and data collection January1st/ 2nd weekLiterature searching and define objectives. January 3rd/4th weekLiterature searching/ writing. Submission of proposal Febuary1st/2nd weekDrafting of literature review/ working on Research Methodology/Conduction Interviews/ Meeting the tutor and taking a feedback February3rd/4th weekChecking literature review/ Analysis of the data collected and linking theories to the case study. July 1st/2nd weekMeeting tutor and check for final revision. July 4th weekSubmission of final draft. METHODOLOGY TO BE EMPLOYED The research for this dissertation would be done using multi-methods this is because different methods can be used for different purposes in this study. The research would have an inductive approach as I would collect data from companies and bring out responses to the research questions. The time horizon would be cross- sectional because this study is of particular trend, and not longitudinal analysis as they are made on observations over a period of time. The data collected would be by multi-methods i. e. qualitative and quantitative. These methods would be used to study the changes in environments. There would be secondary data to analyze the changes within the context of the organization. Details of any ethical considerations and steps taken to meet potential ethical concerns. Luxury goods should not be confused with the moral legitimation of their consumption. Especially if you are yourself a merchant who profits from the trade in luxury goods. Spending money on luxury goods, does good to the poor by inducing them to exert the industry, rather than keeping them idle. Hence creating employment for the poor. This kind of justification takes the issue of motivation for granted, that is, it assumes that people desire to consume luxury goods with a good conscience, thus keeping money in circulation. The following steps can be taken to meet potential ethical concerns: †¢Raising awareness of the code with subsidiarys. †¢Evaluation of the ethical monitoring programme. †¢Further monitoring of additional high risk suppliers from whom the company sources goods †¢ †¢Respect the use of banned substances/chemicals and provide an â€Å"alert service† to the retailers. References Books †¢ Charles W. L. Hill (2003), International Business †¢ Financial Times Management (1999), Mastering Global Business. †¢ George S. Yip (1992), Total Global Strategy. †¢ Gill, J. and Johnson, P. (1997) Research Methods for Managers (2nd edition), London, Paul Chapman. †¢ Harold chee, Rod Harris (1998), Global Market Strategy. †¢ Helen Deresky (2006), International Management, 5th edition: Managing across borders and cultures. †¢Hodgetts, Luthars, Doh (2006), International Mangement: culture, strategy and behaviour(6th edition), America, Mc-Graw-Hill/Irwin. †¢Isobel Doole, Robin Lowe (2004), International Marketing Strategy: analysis development and implementation. †¢GEMSTONES By Ronald F. Balazik †¢Fortune Magazine, 2007 †¢Mintel International Group, 2006 Websites †¢AmCham Shangai, http://www. amchamshanghai. org/AmchamPortal/MCMS/Presentation/Publication/Insig ht/InsightDetail. aspx? 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The Magazine, The Luxury Institute http://www. luxuryinstitute. com/about/news. html †¢Forbes, 2005 http://www. forbes. com/2005/06/22/luxury-wealth-trends-cx_sr_0622luxury. html †¢Wikipedia, http://en. wikipedia. org/wiki/Concierge_medicine †¢Forbes, 2005 http://www. forbes. com/2005/06/22/luxury-wealth-trends-cx_sr_0622luxury. html †¢WWD The Magazine, The Luxury Institute http://www. luxuryinstitute. com/about/news. html †¢The Economist, August 2007. http://www. economist. com/business/displaystory. cfm? story_id=9005244 †¢US Chamber of Commerce, January 24, 2007 http://www. asiapacificms. com/articles/korea_counterfeits/ †¢http://www. iltm. net/en-gb/press/pressreleases680. cfm nation master. com Articles †¢Luxury goods market in India keep its cool – 10 Aug 2008, †¢The Kirk Report Problems With Luxury Goods -TUESDAY, OCTOBER 23,2007 †¢Market for luxury goods: THE CASE OF THE COMIT? – COLBERT By Giacalone, Joseph A Publication: Southern Business Review Date: Fall 2006 2006 †¢Why The Luxury Market Continues To Roar by Alf Nucifora.