Unpacking Sales in India: Learning from Other‘s Mistakes
In the dynamic Indian market, where diversity is the norm and consumer preferences evolve rapidly, navigating the realm of sales requires a nuanced understanding of the unique challenges and opportunities that abound. In the pursuit of success, every misstep can serve as a valuable lesson, and examining the mistakes made by others becomes a crucial aspect of refining one’s approach.
This blog explores the Indian sales ecosystem as we delve deep into the experiences and blunders of businesses that have traversed this diverse marketplace. From misconceptions about cultural nuances to misjudgments in product positioning, we aim to dissect the missteps made by various players in the industry.
The yield management dilemma
Yield management is a tpe of dynamic pricing process that aims to maximize a company’s overall return through optimized pricing. It adjusts prices in real-time according to market demand to optimize capacity efficiency and increase profits.
Numerous industries have mastered the art and science of maximizing revenue through dynamic pricing and capacity management, such as hospitality, retail, commodity trading, transportation and logistics, aviation, etc. Companies adjust their prices in real-time, depending on demand, booking dynamics, and other variable factors to optimize their profitability.
However, our case from the logistics industry shows that yield management in India can generate (short-term) profits under certain circumstances and frameworks, but it can also cause lasting damage.
Exploring a specific case
Our case study, a global leader in the logistics industry, had achieved a dominant market position among European companies in India for decades, which was lost within a few years due to serious changes in strategy. The detailed analysis of developments and decision-making processes is an instructive example of how yield management geared towards short-term yield growth can cost long-term market share.
The starting point
The company held an almost monopoly-like position in logistics in southern India, which was characterized by the close connection between the Indian technology companies, the American Silicon Valley and the large Indian “ethnic colonies” on the east and west coasts of the USA. The transport route went from India to Europe and from there on to the US. The Indian goods that remained in Europe (about 1/3) were replenished with goods from European customers.
The dilemma
Despite this strong position, the company decided to reduce capacity for the Indian market in favor of the more profitable U.S.-Europe route due to overly focused yield management. This decision was based on maximizing revenue per unit in the short term, but overlooked the long-term implications for the company’s presence and influence in the Indian market.
With regard to the control parameters set in the system at the time, the situation was as follows: The yield per unit on the US <> Europe route was more lucrative than the yield per unit on the India <> US route. So the capacity for Indian customers was reduced, so that many Indian customers could no longer choose the India <> Europe connection. The paradoxical situation arose that, despite continuing demand, the company only served the India <> USA route to a very limited extent.
As a result of the company’s unilateral capacity reductions, competitors were able to quickly fill the gap and significantly reduce the company’s previously superior market share. The former monopoly position was undermined by short-term yield management that ignored the long-term strategic importance of the Indian market.
The long-term damage
The company’s decision to neglect India had a serious impact. When the Indian market gained significant importance a few years later, the company found itself in a weakened position, characterized by reduced market shares and a weakened negotiating position. The company went from being a market leader to one vendor among many, significantly limiting its chances of succeeding in one of the world’s fastest-growing markets.
The long-term damage became evident when the global focus shifted back to the Indian market. The Indian market, supported by an annual GDP growth rate of over 6%, and with a rising middle class increasingly international, became a battleground with increased competition and reduced margins.
The company’s market share fell dramatically, and orders fell accordingly. Other logistics providers increased their frequencies and capacities to meet demand. Indian customers, a loyal customer group that values quality and reliability, turned to competitors.
The analysis
The irony of the situation lies in the fact that the company’s original strategic goal was to become the leading European logistics company in India. However, this vision could only be realized if the U.S.-India corridor was effectively served. This is where management errors and overly focused yield management came to the fore.
The prospect of the future
India is projected to grow its logistics revenue to $380 billion by 2025 and become the world’s third-largest economy before the end of this decade. Our case study underscores the critical importance of a balanced and future-oriented growth strategy. Companies operating in highly competitive and dynamically growing markets such as India must therefore carefully balance short-term profits and long-term market presence.
Yield management, as critical as it is to optimizing revenue, must be viewed in the context of a broader, strategic vision. In global competition, especially in thriving markets such as India, a dynamic, flexible, and forward-looking view is essential to ensuring sustainable success and growth. The ability to mentally block out short-term gains and see the long-term impact of decisions made today will define the companies that will be at the forefront in the coming years.
Do you want to avoid the mistakes of others? With our more than 20 years of experience, we are happy to support you in optimizing your market position in India.