identify the accelerator mind-set. Speak to entrepreneurs in China or India, and they talk of their ten-by-ten strategy of growing tenfold in ten years. If this sounds extraordinary—even unattainable—in the West, it sounds perfectly rational in the East. Today, in China and India, there is a determined, can-do attitude, and the word impossible is not one commonly heard on the lips of business leaders. Strategy is as they see it: a big-picture vision, colossal dreams, and no limits on opportunity. They do not feel beholden to anyone or bound by textbook business rules and the constraints of commonly held business logic. They start with a clean slate, focus on a specific opportunity, scale up or refocus as needed, learn by doing, and drive relentlessly forward.7 We introduce the notion of a boomerang effect. The impact of more than two billion consumers wanting more—more foodstuffs, water, housing, transport, luxury goods, education, and health care—will be inflation in supply-constrained commodities, price volatility, scarcity of some resources, and hypercompetition to meet consumers’ needs. The boomerang effect will spread far beyond China and India.
8 We warn of the hit-the-wall scenario. What if China and India do not continue on the path of marvelous straight-line growth? Political instability, natural disasters, bursting asset bubbles, rotten and corrupt institutions, the failure of government entities to invest in the future—each of these could cause projections of growth to veer dangerously off course, with cataclysmic consequences for China, India, and the companies that are pinning their hopes on the new and dynamic generation of consumers. This is why we say that it is important to factor these risks and hazards into any scenario planning process. It is important to be alive to the possibility that the story of “Asia Rising” could change into the story of “Asia Uprising.” The successful future development of China and India depends upon the ability of their leaders and citizens to solve many difficult challenges.
9 We portray the left-behinds—millions of people who, for all the success of the Chinese and Indian economies, remain disconnected and disgruntled with their lot. For now, they offer limited commercial opportunities, but they could offer the prospect of a second wave of growth as the Chinese and Indians pursue policies to foster social harmony.
10 We maintain that there is no inevitability about the decline of the West. We are profoundly optimistic—yet, we think, measured and realistic—about the opportunities in China and India and the positive impact on the global economy, on companies, and on individuals. It was not so long ago that political commentators and historians were talking about the triumph of the West. Now they are talking about decline and the fall of the American empire. But we do not consider this likely. On average, American and European consumers are vastly richer than Chinese and Indian consumers—and this is not going to change anytime soon. If Americans and Europeans adopt the accelerator mind-set, opportunity and growth will rebound. We believe that the consumer revolution is a winner for all, a force for good that can benefit everyone. The new interactions between East and West are energizing, enlightening, and empowering—and ensure that companies and their leaders look far beyond the horizon to a world of infinite possibilities.
We hope you use this book to see the market opportunity in China and India through the eyes of consumers moving from D income to C income, from C income to B income, and from B income to A income. We offer a checklist of requirements for success along with our assessment of risks and how to mitigate them.
The Structure of the Book
The $10 Trillion Prize is arranged in three parts, which are preceded by an introduction (chapter 1).
In chapter 1, we tell the story of the dramatic growth in consumption and quantify the size of the commercial opportunity: the $10 trillion in annual spending that the consumer markets of China and India will generate by the year 2020. We explain how consumers’ rising income—which takes them, in many cases, from subsistence to middle class—seems like the wheel of fortune: they truly feel as though they have won the jackpot.
We draw on BCG’s proprietary studies of Chinese and Indian consumer attitudes and take a panoramic view of the new generation of spenders, exploring the underlying passions and preferences that influence their buying behavior. These consumers have high aspirations, are optimistic about the future, and are eager to enjoy their first taste of affluence.
In part I, “The Rise of the New Consumer in China and India,” we identify the fortunes to be made at the top, middle, and bottom of the income pyramid. We contend that to really succeed in China and India, you must know everything there is to know about the new consumers, which means dissecting the markets into segments based on wealth, education, attitude, geography, age, and gender. The analysis is based on BCG’s proprietary market segmentations of the two countries.
In chapters 2, 3, and 4, we examine the rising middle class, the superrich elite, and the vast hordes of “left-behinds.” In chapter 5, we take the reader on a virtual tour around the countries, traveling to the cities and the rural districts. We describe two revolutions: one relating to infrastructure, the other to agriculture. In chapter 6, we examine the development of the female economy in the two countries.
Part II, “Preferences, Appetites, and Aspirations,” digs deeper, providing detailed portraits of the new consumers as they go about their daily lives—as well as the companies that serve them with the right products at the right price and with the perfect mix of ingredients, design, and packaging. Chapter 7, “Food and Drink,” focuses on the different tastes of the new consumers and profiles companies meeting the demand, including Kraft (Oreo cookies), Tingyi (noodles), Cofco (French wine), PepsiCo (Kurkure), and Pernod Ricard (green tea and Chivas Regal whiskey). We describe the key turning-point decisions made by these companies’ top executives to change the formulation, distribution channel, or marketing of their products to reach new consumers.
Chapter 8, “House and Home,” examines the rise of home ownership and the companies meeting the need for financing (HDFC), decoration (Asian Paints), and household appliances (LG Electronics). Chapter 9, “Luxury,” looks at the new consumers’ growing appetite for expensive goods and highlights companies such as LVMH and Gucci (leather goods, watches, and apparel) that are capturing market share. Chapter 10, “Digital Life,” investigates the lives of the digital generation, examining how consumers are using the Internet and mobile devices, and how companies such as Bharti Airtel, Taobao, and Nokia are prospering by meeting these consumers’ needs. Chapter 11, “Education,” focuses on the thirst for knowledge, with parents going above and beyond to pay for schooling that will give their children a head start in life, and students—including superachievers—who are prepared to dedicate their lives to fulfilling their parents’ dreams as well as their own.
Part III, “The Lessons for Business Leaders,” draws together the takeaways from the corporate stories in The $10 Trillion Prize. Chapter 12, “Paisa Vasool,” examines one of the most powerful strategies for success in China and India, as well as in the rest of the world. Chapter 13, “The Boomerang Effect,” looks at the global impact of the race for resources. With more money, consumers have started to spend as never before, and this has driven up the demand for food, water, copper, iron ore, cement—the building blocks of modern life. This increased demand is giving rise to the boomerang effect—price volatility, inflation, and the disruption of comfortable expectations in the West. Chapter 14, “Fast Forward,” introduces the accelerator mind-set and features profiles of business leaders and company founders whose approach to business and life explains their good fortune and provides a useful model to foreigners looking to replicate their success. Chapter 15, “The BCG Playbook,” reflects on the size of the commercial prize and features BCG’s guide to captivating the newly affluent consumer.
The $10 Trillion Prize concludes with an epilogue that sets out the opportunities for individuals in the West—the original consumer kings.
The Contest
