CONTENTS

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A snip at the price

The recession gives parsimonious innovators a chance to go global

Cobbled together from carts, old cars and anything else to hand, the improvised vehicles used by Indian farmers are often known as jugaad. The term also has a much broader meaning – referring to an innovative, low-cost way of doing something – as goods and services are provided in India at a fraction of the cost of those in developed countries. Ingenuity is a necessity when resources are limited and customers have little money. In a global recession it also provides a way for companies in India and China to expand into foreign markets where consumers are seeking better value for money.

Asia’s cost-cutting innovators reject the notion that purchases of certain items only take off when consumers’ incomes reach specific levels, says Rama Bijapurkar, a consultant, speaking at a recent conference organised by the Centre for India and Global Business at the Judge Business School in Cambridge, England. Instead of selling items in small quantities to the rich while waiting for everyone else to pass the relevant “income threshold”, they re-engineer their products into cheaper ones to unlock mass markets right away.

Anil Gupta, of the Indian Institute of Management, helps run the Honey Bee Network, which encourages grassroots innovation in a number of countries. The projects he has been involved with include a refrigerator built from clay, which uses no electricity yet can help keep vegetables fresh for several days, and a cheap cropduster in the form of a sprayer mounted on a motorcycle.

Innovation also takes place at a higher level, especially in the growing number of sophisticated research- and-development (R&D) laboratories in China and India. China is already close to overtaking Japan in research spending: over 300 multinationals have opened R&D centres in the country, says Peter Williamson, visiting professor of international management at the Judge school. Many firms began by using Chinese engineers and scientists, who are paid about a quarter as much as those in Europe or America, to adapt products for the local market. But now, he says, they are developing products for world markets.

There are also home-grown innovators such as BYD, a Chinese electronics firm. It has developed lithiumion batteries that are unusually cheap and easy to make. It has succeeded in reducing costs from $40 a battery to less than $12. Earlier this year BYD’s automotive subsidiary unveiled a plug-in electric-hybrid car at the Detroit motor show. Thanks to the firm’s cheap batteries, it could sell for about half the $40,000 or so that the Chevy Volt, a plug-in hybrid under development at General Motors, is expected to cost.

Other examples in China include ZPMC and Zhongxing Medical, says Mr Williamson. ZPMC hired a small army of 800 design engineers to produce container-management systems which customise for individual ports. It has now captured half the world market in harbour cranes. Zhongxing Medical, borrowing technology from the aerospace industry, has produced an X-ray machine capable of producing digital images directly. Although not as sophisticated as some fancier models sold by Western firms, it is suitable for most routine applications, such as chest X-rays. And it is produced for almost a tenth of what GE and Phillips used to charge for specialised digital X-ray machines, even after those companies cut their prices.

Perhaps the most famous cost-cutting innovator in Asia is Tata Motors, India’s biggest carmaker. In March it launched the Nano, which in basic form costs 100,000 rupees ($2,100). A fancier version of the car is expected to be launched in Europe and America in about two years.

India’s prolific and low-cost film industry, which churns out some 12,000 movies a year, is also going global. Although Indian films have long had a foreign audience, new co-production deals with Hollywood should increase their reach. Reliance Entertainment, for example, signed a deal with a number of American production houses last year. Rohan Sippy, a Bollywood producer, told the conference that Hollywood studios are keen to do deals with Indian filmmakers so that they can make for themselves cheap song-and-dance “masala” versions of American movies before Indian studios beat them to it. Whether Western firms can truly learn the ways of the jugaad, however, remains to be seen.

May 28th 2009

From The Economist print edition

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Guide

☺COMPREHENSION

I. Explain the following.

1.to cobble

2.to churn out

3.to sign a deal

4.to overtake in spending

5.to unlock the market

6.to re-engineer a product

II.Answer the questions.

1.What meanings does the term ‘jugaad’ have?

2.What makes Chinese and Indian scientists more and more inventive in their pursuit of profits?

3.What makes it possible for Asian producers to catch up with their Western rivals?

4.What are the most ingenious inventions presented by Asians to world markets?

☺WORD STUDY

I.Complete the crossword puzzle.

R 1.E - E N G I N E E 2.R I N 3.G

R

5.

U

C

Down:

1.to make or become greater in extent, volume, size, or scope; increase

2.to carry out investigations into (a subject, problem, etc.)

3.the origin or essentials

4.inventive talent; cleverness

5.not plain, requiring skill to perform; intricate

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Across:

6.producing constant or successful results

7.to make (something secret or concealed) known or public; divulge; reveal

8.using the minimum required; not wasteful of time, effort, resources, etc.

II.Add the appropriate noun to each group below to make three compounds each time.

1.……………. department

laboratories costs

2. …………….. threshold flow bond

3. …………….. market consumption production

4. ……………..investigation rating segment

III. Use a compound from each group in Exercise II to complete these sentences.

1.Science never stands still and innovation takes place in numerous … … all over the world.

2.They have never been able to wait for their customers to pass the relevant … …, they have always provided them with products at budget prices.

3.All those who can afford a luxury will never condescend to buying … … goods.

4.Much work lies ahead: we are to do some research, to select … … and think about an appropriate advertising campaign.

IV. Match the following words and phrases as contrasting ideas.

☺FOLLOW-UP ACTIVITY

Divide into several groups. Each group is supposed to present a new cost-cutting technology that will enable their company to expand into foreign markets where consumers are seeking better value for money.

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