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India’s next generation is expected to become a burgeoning class of young professionals who want an upper-middle-class income—and the lifestyle to go with it. This market is exactly whom a group of second-year MBA students at Chicago Booth targeted in a winning business plan for the second annual India Business Idea Competition. Six teams entered the business plan competition, held in March and sponsored by the student-led Booth India Club and Etihad Airways, which offered the winners a $1,000 cash prize.
The winning business plan addressed two challenges faced by young professionals living outside India’s marquee cities, like Bangalore and New Delhi: the rickety infrastructure that makes traveling a few kilometers a day-long trip and the growing appetite upwardly mobile Indian women are developing for fashion. Booth students Vishal Goel, Vijay Reddy, and Harshad Mali developed a business plan for an online retail store, selling designer clothing, cosmetics, accessories, and fragrances.
A woman traveling 86 miles from a nearby second-tier city to Bangalore, the booming high-tech center where Reddy grew up, would have to spend hours walking to the public transit stop and sitting in smoggy traffic on a hot, cramped bus. And that’s four hours for just a one-way trip. She could avoid the crowd with her own car, but not the traffic.
Also, “high costs associated with maintaining inventories of recognized, high-end brands reduce the variety these local stores are able to offer these women,” according to the business plan’s needs assessment. “An average boutique carries about five to ten products from only two or three major brands and sells them at a huge premium.”
“Plus, if you’re a young woman, there are security issues, and you don’t want to go through this much trouble for a bottle of CK One perfume,” said Reddy, a student in Booth’s Weekend MBA Program, focusing on entrepreneurship and finance.
Reddy, Goel, and Mali plan to take their entrepreneurial ambitions back to India, and the competition helped them anticipate what venture capitalists expect. Goel and Mali presented the plan in front of the other two finalist groups, plus a panel of judges that included international venture capitalists and marketing specialists.
The purpose of the competition is to expose future entrepreneurs to the planning process, as well as to get more Booth students to think about India’s business prospects. “There is a lot of investing going on in India, and more people are looking at India as a target market,” said Gururaj Sulibhavi, also a Weekend MBA Program student and co-chair of the Booth India Club. “The Booth India Club and this competition offer a glimpse at what’s happening. It’s refreshing to know how much wealth exists, even in India’s small cities.”
India has the second-largest population in the world, at nearly 1.2 billion. About 34 percent of the labor force works in professional services, and Goldman Sachs predicted last year that India’s GDP will increase 8.7 percent in 2011. Reddy went with the Booth India Club last December on a two-week trip to study this proliferating business landscape and talk with top heads of corporations. His trip confirmed that his peers’ approach to business has changed drastically.
“I came to the United States 10 years ago; in India, it was about getting a good job with a large company,” Reddy said. “Now, there is a lot of free capital and more confidence. That paradigm has shifted for young people to start their own companies. This competition gave us the confidence to take this business plan to the next level. This idea is not just a dream.”
Taking advantage of India’s potential not only requires solid ideas, but training on what works. “At Booth the faculty is acutely aware that the way things are done in the US doesn’t always replicate in other countries,” said Pradeep Chintagunta, Robert Law Professor of Marketing and a judge in the competition. “I think the value proposition in the winning group was laid out quite well, touching on the access conditions in India, and they thought through how to implement it. [For international business ventures], and especially in countries with poor road infrastructure, you have to think differently about how you can make your product or service accessible.”
— Kadesha Thomas