Choosing China Or India
By Jack and Suzy Welch
Which country has the best business prospects in the long run—China or India?—Ravikiran Prabhakara, Bangalore, India
Don't we wish we knew the definitive answer to that question! Doesn't everyone? That's why there are so many books, articles, speeches, research papers, and even blogs on the topic. It seems that everyone not already playing in the global market is trying to figure out which of the two emerging powerhouses to bet on.
Our opinion is neither. Or both. Or either one. What we mean is, the choice between China and India is entirely situational. Both countries have advantages and disadvantages. The only way to pick between them, if you must, is to find the right match for your business. That means figuring out which country is best equipped to help you win. It's as simple as that.
O.K., maybe determining that match isn't so simple. There's tons of information out there, lots of it contradictory, and most big companies have already sorted through it all for their own conclusions. But for a small or midsize company still in the process of considering globalization, we would offer a four-part framework as a way to think through the China-India conundrum. It's based on the assumption that economies have four ingredients that facilitate success: political stability, infrastructure, local and export markets, and the "human grrr factor"—not a technical term, but you know what we mean. China and India each have some portion of these ingredients. The question is not which has more. It's which has the right amount for you.
POLITICAL STABILITY. If that's what your business desperately needs (say it must make huge capital investments), India is the better fit. Yes, it's riddled with corruption. But its top team, led by Prime Minister Manmohan Singh, is said to have real integrity.
The downside of India's form of coalition democracy, of course, is a bureaucracy that moves slowly—as in cold molasses. Meanwhile, China was able to clear a province of 1.9 million people and, within 15 years, complete the colossal Three Gorges Dam, which will generate 18,000 megawatts of electricity annually. But regard for China's speed advantage has to be tempered. It is in the midst of a massive experiment, trying to wed economic freedom and political collectivism. Will the marriage last? Maybe, but in the worst-case scenario, its collapse could put foreign investments at risk of outcomes that include confiscation. In other words, the lower your outlay to get started, the more attractive China becomes.
INFRASTRUCTURE. By contrast, if infrastructure is what your business needs to succeed, advantage China. It has 10 times as many express highways, for example, and its power costs 40% less. You wouldn't ever pick, say, Mumbai to build an electricity-devouring aluminum plant to serve global markets. But you wouldn't be off base to plant your global ad agency, movie studio, or call center there.
MARKETS. The edge goes to China when it comes to local markets. Its GDP is almost three times that of India, and it has more consumers with buying power. China's industrial buyers also beckon, thanks to the country's manufacturing sector. India has long concentrated on its service sector at the expense of manufacturing. Indeed, India's only local market advantage could be that it's easier to enter and survive in because, well, it's just so much less competitive than China.
As for exports, it's China again, as the country's manufacturing productivity and process-improvement skills overwhelm India's. You can go it alone there, form a joint venture, or do contract manufacturing to feed your global supply chain. Only in high-tech manufacturing does India offer an edge to exporters, but probably not for much longer.
THE GRRR FACTOR. That's the mixture of ambition, energy, and passion that magically fuels economic growth. Every business wants as many people with grrr as they can get their hands on. So which country has more? It's a split decision. China excels at process creativity, India at innovation. But for grrr in general, you can't discount the sheer ferocity of the Chinese. Obviously, we are talking broadly, and exceptions abound. But our experience is that because more Chinese people are willing to work at such insane intensity, their productivity is difficult to beat.
Still, what good is grrr if the country with more of it might implode?
Which brings us back to where we started. Look, your question is not an either-or. It's a what-who. What do we need to win, and who can give it to us? Our framework won't answer those questions beyond a reasonable doubt, but it can start you on the road to globalization. And after that, your only question may be: Why didn't we start sooner?
Jack and Suzy Welch look forward to answering your questions about business, company, or career challenges. Please e-mail them at thewelchway@BusinessWeek.com For their podcast discussion of this column, go to www.businessweek.com/search/podcasting.htm