When it comes to international markets, the number of Indian firms using differentiation competitive strategies is higher than Chinese, says a study by the Indian Institute of Management, Ahmedabad (IIM-A). In other words, more Indian firms compete internationally through better products and services than Chinese firms who compete through low cost strategies.
Titled 'International Competitive Strategy Choices: Comparing Firms in China and India', the working paper has been co-authored by Rakesh Basant, an IIM-A faculty member, along with other Chinese scholars Ping Lv, Monica Plechero, and Xie-Lin Liu.
"When comparing the two countries, our main findings show that even though, in their respective domestic markets, Chinese firms seem to be more specialised in differentiation strategy than Indian firms, in the international market the proportion of Indian firms that are pursuing competitive strategies, and in particular differentiation strategy, is higher. This may partly be due to the fact that the Chinese domestic market is much larger than that of India and seems to be maturing faster," the paper states.
The paper is a research collaboration between Indian, Chinese and Swedish researchers to understand emerging internationalisation strategies of Indian and Chinese firms, the two major emerging economies.
"The results should benefit firms who wish to understand internationalisation processes and researchers in this area," says Basant. The sample surveys were down in the Beijing region in China and the Pune region in India. Elaborating on the differentiation and hybrid strategies while competing in international markets, Basant says, "Firms can compete (internationalise) either through lower cost or better products or services. While the former is termed as low-cost strategy, the latter is known as differentiation strategy. Products or services can be better in terms of quality, product or service characteristics or features and branding. All the three may also be combined. R&D can help develop new features and advertising can be used to build a brand around it. if firms use both differentiation and low-cost strategy, it is known as hybrid strategy."
As per the working paper, the large domestic market size and the emergence of multiple customer segments seems to be creating differentiation options for Chinese firms, which do not seem to be available on the same scale for Indian firms in their domestic market. "However, Indian firms are increasingly building differentiation or, to some extent, hybrid strategies to access international markets, partly because they do not have the low cost advantage that Chinese firms enjoy. Consequently, differentiation seems to be the emerging appropriate option for Indian firms," the paper further states.