It may be decades before China or India delivers the full potential that many technology companies are impatient to realise, according to a new report from Deloitte’s Technology, Media and Telecommunications (TMT) practice.

“Market opportunities in China and India have long been a subject of discussion, with the expectation that in coming years they will dwarf all other markets,” comments Jim Sloane, UK managing partner for industries at Deloitte. “TMT companies are under tremendous pressure to capitalise on these two emerging giants. However this potential is matched by significant challenges.”

Both countries have enormous populations and growing middle classes with disposable incomes that are steadily rising. These emerging segments represent potential markets for products and services that could be extremely lucrative and should not be ignored.  However, continued growth in both countries will likely be restrained by shortages of resources - from steel to water - and by rising prices for everything from building materials to labour. In addition, India’s billion-plus population is fragmented across hundreds of thousands of villages and hundreds of languages and its infrastructure remains undeveloped.

“Despite these challenges, China and India both have potential which cannot be ignored. Demand for TMT products and services are expected to grow strongly over the next few years. As an example, estimations have suggested that by 2010 between them these countries will purchase more than 250 million PCs. India is the preeminent supplier of offshore services, and its recently de-regulated newspaper sector is one of the fastest growing in the world. China is the dominant force in technology manufacturing for the mass market, and its mobile phone market - at over 360 million subscribers - is already larger than the population of most nations.

“The TMT sectors in China and India will certainly blossom as markets – but that growth will be steady rather than meteoric. To successfully capitalise on this vast potential, companies will need to make significant long-term investments in building local knowledge and understanding,” continues Sloane.
 
“They will need to maintain a long-term outlook based on measured expectations. Many of the foreign enterprises enjoying success in China and India today have been doing business there for decades, and their current returns are the direct result of a significant long-term investment in local knowledge and understanding.”

Key recommendations for TMT sector companies looking to capitalise on opportunities in India and China:

1. Treat China and India as key suppliers in the short term and key markets in the long term
   Sourcing from China and India is fast becoming a competitive necessity – and for some TMT companies has been an imperative for many years. In the short term, it allows TMT companies to reduce costs and improve margins. In the long-term, it can also provide first-hand experience doing business in these two increasingly important markets - knowledge and understanding that will help them capitalise on the opportunities that emerge as ownership restrictions are relaxed and disposable income rises.
   
   
2. Avoid the fallacy of “one size fits all”
   TMT companies must recognise that China and India are diverse, heterogeneous markets. Although the two countries are often discussed in tandem, they are in fact very different on a number of key dimensions, including language, culture, literacy, consumer behavior and buying preferences.
   
   
3. Prepare for the emerging middle classes
   India has a growing middle class whose disposable income is rising steadily. So does China, although this is currently smaller. These emerging segments represent a lucrative market for products and services.

ENDS

Notes to editors

Imperatives for TMT executives, 2005-2010 The 21st century has, so far, been both difficult and productive for the global technology, media and telecommunications (TMT) industry. The combination of difficult economic conditions, volatile relationships with the financial sector, fickle consumer behaviour and general insecurity following the bursting of the dotcom bubble have provided some of the significant challenges that TMT CEOs have faced. However, the steady and cumulatively disruptive advances in bandwidth, processing power and digital storage have helped to redefine existing markets and creating new opportunities on an unprecedented scale. For more information download our full report entitled, Imperatives for TMT executives, 2005-2010.

About Deloitte
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