The long standing debate of FDI in retail has finally seen a palpable policy change. The Government of India now allows for single-brand and multi-brand retail companies to invest 100% and 51% respectively through FDIs. However, besides getting a positive nod from the apex court there has been resistance politically as well as from the local retail community.
The latter’s largest concern stems from the potential loss of business and the inability to compete with large organised retail brands. An understandable concern, although data from other countries with FDI in retail should help calm some nerves (Read). According to me, not only would this make the local retailers more competitive and organised in their business practices, it will most definitely uphold the virtue of “Customer is King/Queen”, simply put consumers would have a wider range to choose from.
Impact on SMEs
I am more excited about the impact and influence it would have on the SME sector in India. Let’s take the example of IKEA the multinational furniture brand. End of April, IKEA’s investment proposal of setting up 25 exclusive stores across India with an investment of $1.9B was approved by the government. This has a direct impact on the SME market in India engaged in the retail sector. Although the 30% mandatory local sourcing rule has been discontinued, it would only make economical sense for IKEA to source locally. Further, the brand would be looking for business partners within India to absorb into its elaborate supply chain.
Given this backdrop, IKEA and the likes of such multinational brands planning to enter India, would be looking for professionally run business organisations as their partners. Hence I say, this is the best time for SMEs within India to seriously consider investing in branding activities, to ensure they are looked upon as preferred partners to these large multinationals.
How Branding can Help SMEs
(image source: http://brandtwist.com/wp-content/uploads/2013/05/working-in-branding.jpg)
It can be noticed most SMEs, especially the B2B company’s focus primarily lies in bettering their operations, and consider expenditure on core branding to be frivolous. In an already highly competitive scenario accentuated by the new FDI policies, the “customer” has wide variety of vendors to choose from and product/service differentiation is low, the “Brand” and all its attributes are the key decision aiding factors for a customer, in this case the multinational companies. Seeking business partners to aid them in successfully entering and thriving in India, the multinationals would seek equally professional organisations to partner with. Given the large investments IKEA makes on building and sustaining its brand’s value globally, any SME who values and nurtures their brand would definitely be looked upon with higher regard by the likes of IKEA.
Branding positively contributes to almost all aspects of the business establishment and has a direct impact on the company’s image internally as well as externally. It aids in creating a unique or differentiated value proposition, articulating a clear and concise positioning, defining or refining the internal value systems, internalising the brands promise, providing tools for consistent visual identity from the logo to all marketing collaterals just to state a few. When all this is done in a cohesive manner, the brand/company undergoes a transformation towards a better image, reputation and eventually better business. A company who invests in building a brand communicates to its customer’s current, past and potential that they are a professional body with strong fundamentals with a long term strategy for their business.
To say the least
Having said all that, it must be understood that branding alone cannot win and more importantly sustain businesses. It can create differentiation, affinity and sharpen business practices all of which in turn help positively impact the business and build value for its various stakeholders. If an SME has not till date considered branding as a fundamental part of their business practices, there can be no better time. The race is tough and its only going to get tougher.