Just as simple as it gets…..!
It was widely speculated till last week that the Indian rupee will further depreciate to Rs 70 to the USD. That is a mind-boggling number if you have been tracking the Rupee constantly for the last five years. At the peak of the recession period, during 2008, the rupee strengthened significantly to the USD. The magic number was below 40. Forward 5 years hence, and the Rupee hit a staggering low of Rs 68 to the USD. That is a sharp increase of over 75 percent in 5 years. And a lot of that has come in the past 7 months. The Re has gone from a 52 – 53 range to an all time high of a little over 68. This can be disconcerting for the government that shielded its economy to a great deal from the recession but is now struggling to come to terms with the present high inflation and low growth scenario. Although a slew of economic reforms have made this volatile currency appreciate in the past one week, it is still at an alarming high of Rs63 to the USD.
So where does this leave us? Common man is unable to cope with inflation, the interest rates are high and hence the growth is being halted. There seem to be a bottomless pit for India and with elections around the corner, there is likely to be more uncertainty and volatility in the near future. There is however one glimmer of hope for exporters. The clever ones will benefit hugely from this depreciating rupee and will be able to make amends by almost making a profit in excess of 15% to their regular margin on exports. Although as an economic backdrop this is a highly unstable situation, firms who concentrate highly on exports have suddenly seen more profit in their account as the Rs continued in downward journey.
There is no secret as to why all IT stocks have risen to an all time high. They are essentially an export driven segment of the economy, which rely on orders from USA and Europe mainly among others. This Rupee depreciation also happens overlap with the best period in US economy and Europe economy, growth wise, in the past 5 years. Increase in orders and a very high Rupee has aided the IT companies’ a lot.
Exports in terms of profits will be the key driver for the export oriented companies, but imagine the situation of becoming competitive in the marketing just because you can now supply a product for 4 USD that previously you could not provide even at USD 4.4 (10 % less). Although your margin in both cases will still be the same but now you can be more competitive than you were 5 months back and suddenly all doors that were price sensitive are now opening for your benefit. Companies like to make money in 2 ways. Either increase your profits or increase your sales. Both ways you make more than what you did the quarter (or year) before. It is a good platform to exploit.
There are concerns to this too. Customers are getting smarter and with media so involved these days, consumers are slowly playing catch up. The depreciation in the Rupee has been widely publicised in the media and hence the customers want a drastic reduction in present prices, trying to capitalise on the increased profit margin of the manufacturing firm. However it is still a weak force and it is upto us to capitalise on this situation before it becomes too late.
In a small world, where globalisation has taken us closer to another step in business models, many people still downplay the relation between Economics and Marketing. Business and Economics go hand in hand and many youngsters look at this as a tag line; not what this means in absolute terms. Marketing is closely related to business, after-all business development is a “subset” of Marketing.
The economics of different countries give an unique opportunity for marketers to exploit the market. I remember my father telling me how he successfully developed a marketing in IRAQ, a tardy place now, after the US invasion and how business, as many would think, would be difficult to come by. Associated with a bottling company, my father told me the market is always open for people and this gives a unique opportunity for us marketers and sales people to dictate terms as they (IRAQ) are starved for choice as no one wants to deal with all the mess created there. Their Economy was just not growing and people were unable to do business with the world. The best place to be in at this point is a company that can provide IRAQ with some services they need at a premium price with all terms and conditions as per the seller as opposed to a buyer’s conditions in a competitive market (terms like advance payment, Rates in USD/Euro etc..). Ofcourse not every struggling economy is a possibility! During the recessionary years of 2008 – 2012, not many were successful in selling to Europe and/or USA. However this was a different case as compared to IRAQ, which was struggling post a high profile war and inadequate government.
On the flipside, the booming economy of African countries – Ethiopia, Angola, Nigeria are once again a marketing persons delight. The countries are growing in double digits and the domestic consumption is very high and the best part is, not many people want to do business with them as they are labelled cheats! I started marketing and sales in Africa and i was amazed with the wealth they have to start a new business line in partnership. I had strict terms for delivery and payment which was not a problem for them. Bills racked up to USD 35000 per transaction and an upfront payment was made before release of goods. I was awestruck with the potential power marketers will have and the opportunities available.
“International Marketing” is slowly catching up with people and colleges are now making this – once elective – into a required course in Marketing. It baffles me that some colleges treated this and some still want to consider this as an elective for students. There should be more correlation between Marketing and Economics and this knowledge should be in abundant supply in all colleges and universities alike.