As soon as you talk about doing a business in India, people immediately send an advice your way that target International market because you have cost advantage.
Really? Without any context?
Let me start with the things everyone understands. Branded electronics, laptops, computers, printers are all cheaper in the US. And as an acquaintance, who recently returned from the US, discovered that if they wanted to live their life with US brands here – in toys for their kids, in clothes and in other day to day things, life becomes costlier than US here.
Why? Because things don’t become cheaper just because you are in India. Things become cheaper when Economis work that way. Some of the reasons why certain things are cheaper here
- People are cheaper – so software services are cheaper.
- Something is manufactured locally using low cost input and people and hence it is cheaper.
- Equipments used are manufactured locally or imported at subsidized rates; so the output is cheaper.
And similar other reasons. Economics has to play a part in making something cheaper. Hence Gems is cheaper than M&Ms, but if you want to buy M&Ms in India (assuming they are available and are imported), they are going to be costly. Only if M&M owners decide to handle the production and supply chain locally, could it become chepaer here.
Coming to business,similarly many things are not cheaper in India. Web hosting is costlier in India than in US or most of Europe. Bandwidth is costlier and probably electricity too. Most of the computer equipments are costlier. Logistics is costly too (bad infrastructure?). And the list can be made substantially longer.
Why do I care? Because Print on Demand, my dear American and Indian friends, is not cheaper in India 🙂 The equipments and supplies are mostly imported and while I am not sure of this, it is likely that a subtantial amount of duty is paid on them. Unlike offset printing, local, cheaper equipments and supplies are not in the market and even if some jugad is there, it won’t match the quality. Logistics – don’t even get me started on that. That can fill up a decent size book.
So, next time you think of cost-arbitrage, do think of the business at hand first. A heads up to the aspiring entrepreneurs as much as to the advisors 🙂