Blog #1 - How Cultural Values Affect the Business Market in India

Over the last decade, there has been a growing interest by a lot of international companies in expanding into India. Amazon, Uber and Netflix are some of the notable companies that are trying to harness the value that is inherent in the Indian economy and its people. As the second largest country in terms of population in the world, and a country that is transitioning into capitalism from socialism, India is an attractive prospect for most businesses targeting the consumer class. This is one of the reasons why a lot of startups have been able to obtain capital from venture capitalists simply owing to the size of the untapped market in India.

The diverse and varied culture that is a part of India and the recent increase in the number of startups result in a lot of confusion and hesitation from a lot of big players since they do not want to take a wrong step. In every developing country, the middle-class consumers constitute the majority for businesses selling products that are neither essential nor a luxury. India also falls under the same category with lower and upper middle-class consumers being the most willing in purchasing new products and improving their quality of life.

Due to the developing state of the nation and the high concentration of people in the lower middle-class income bracket, budget products that provide reasonable or good value at a low acquisition cost have had the most success in India. Flagship and luxury markets exist but are limited to the upper middle-class and upper-class parts of the population which do not constitute the majority. For example, in the mobile phone industry, Xiaomi and Samsung combined constitute nearly 50% of market share and other companies like HTC, OnePlus and Apple are reasonably successful but do not dominate the market. Xiaomi and Samsung provide the largest collection of budget products which is the biggest reason for their market share.

However, education is one of the most important cultural values in India. This is almost on par with purchasing good value products or not throwing away money unless necessary which results in a characteristic stinginess particularly in the middle class. During my time in India, and growing up in an upper middle-class family, I was able to witness how hesitant Indian people are including my parents in spending money on entertainment or electronics which are often deemed unnecessary or too expensive to invest in. However, education holds such strong value and respect in India, that all these restrictions go out the window when a child’s future is involved. India produces the highest number of engineers every year in the world and has a huge number of private tutors at the high school level who are highly sought after for additional lessons and coaching.

This niche was perfectly utilized by educational technology startup Think and Learn Private Ltd, which released its digital learning app BYJU’s in 2015. This was a period when broadband internet was becoming cheaper and easily accessible in India. In the same year, Reliance infamously launched Jio, a new mobile network that redefined the meaning of cheap mobile internet and voice calling in India. Jio’s introductory launch offer provided free voice calling and internet for close to 6 months at no cost. So, when BYJU’s learning app released, it received 2 million downloads in the first three months.

BYJU’s was initially released as a free product with video lessons for students in kindergarten up to 12^th grade. As of October 2019, BYJU’s is the 4^th most valuable privately held company in the world with a valuation of nearly 6 billion dollars. Today, BYJU’s offers video packages for secondary school math and science on a subscription basis at around 30000 to 40000 rupees, which is the rough cost of a year of education at a decent private school in India. Would large numbers of Indians be willing to spend this kind of money on any other commodity? Absolutely not.