Friday, February 01, 2013

How the western recession is the real beginning of great news for India!

Arindam chaudhuri, editor-in-chief, Business & economy

Yes! Indeed the western recession is really the beginning of good news for India! But to understand that, I’ve to take you away from the topic of western recession for a while... to the Japanese recession! For years, I’ve admired the Japanese style of management as a management teacher and given its examples in scores of my workshops. However, over the last one decade or so, I’ve been continuously facing one key question from my workshop participants – mostly CEOs from top corporations of India Incorporated. Their question to me invariably has been, ‘If the Japanese management style is as wonderful as described, then why has Japan been in a recession for the last decade and more?’ This question is what I guess one needs to understand first, if one has to really understand the beauty of the current western recession. My answer to this question has always been very simple. I believe culture plays a very important part in shaping up economies. What succeeds in one culture fails somewhere else. Kenichi Ohmae, a famous strategy guru, wrote in his bestseller, The Mind Of The Strategist, that if you want to sell a new kitchen appliance to a Japanese housewife, you have to first enter a Japanese small-sized kitchen. And then, from the stacked kitchen appliances on the kitchen shelves, you have to tell her which one of them is to be thrown away to make way for the new appliance. Well, they are all excellent in quality. Long lasting. And tough to throw! And that’s why the Japanese economy has been in a recession for a decade now.

Because culturally, these Buddha lovers are basically non-materialistic. And however much rich they become, unlike Americans, they cannot just keep throwing and buying endlessly. And once they have almost everything they need, there is a saturation point. After this point, there are primarily three kinds of demand. Replacement demand, new product demand and FMCG demand. And that can’t keep giving an economy a double digit growth rate! Add to that Japan’s rapidly aging population and negative population growth rate (the Japanese Ministry of Health forecasts that even till 2050, they won’t have a positive population growth rate). That’s exactly what happened with Japan.

Source : IIPM Editorial, 2012.
An Initiative of IIPMMalay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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