February 2016 Edition of BEACON, A Monthly Newsletter by SIMCON. Inside this issue: About Us Our Team INDUSTRY ANALYSIS : Tourism Industry Brand Analysis: Apple Case Study Analysis: Kellogg's Concept of the month: Boomerang Effect

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Contents
ABOUT US
OUR TEAM
INDUSTRY ANALYSIS
BRAND ANALYSIS
CASE ANALYSIS
CONCEPT OF THE MONTH:
BOOMERANG EFFECT

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OUR PRESENCE
ABOUT US
VISION
The SIMCON - SIMSREE consulting club is an
initiative started in 2012 for those students in
pursuit of excellence in management consulting
and strategic management. Aimed at creating
awareness among the students about consultancy
as a discipline, the club strives to maintain strong
relations with top consultancy firms and provide
platform to craft highly skilled & competent
consultants from SIMSREE. The club is a resource
for information about consulting and a place for
students to obtain real-world consulting experience.
SIMCON provides an avenue of interaction among
faculty, students and alumni through competitions,
live projects, guest lectures, and conclaves. For
this purpose the club has also been publishing its
monthlynewsletter– BEACON (BE A CONSULTANT)
and maintains a FACEBOOK PAGE where latest
news and development in the consulting industry
are posted.
MISSION
To create awareness amongst the students
about consulting industry & its latest trends.
To maintain strong relations with top
consultancy firms.
To provide platform to craft highly skilled &
competent consultants from SIMSREE.
To provide exposure to students via
competitions, live projects, guest lectures &
conclaves.
Contributions invited:
To make this feature a successful effort, we seek continued involvement and contribution from our readers, that is YOU. We
invite articles, research papers, and trivia on themes related to consulting. Be it industry news, consulting trends, a joke, a
cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts and mail your
entries to simcon.simsree@gmail.com.
Best Regards,
SIMCON - SIMSREE CONSULTING CLUB

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OUR TEAM
SANANDANDESHPANDE
NIKHILRAO
AMEYAMAHABAL
CHITRAWANI
deepesh jethwani
prathamesh indani
Sushil Gurav

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OUR TEAM
ARPIT agrawal
ASHAYDHURI
HUZEFABODABHAIWALA
KARANCHOPRA
NAMANCHANDAK
praCHIKORE
SARANGKULKARNI
YOGESHMOHATA

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TOURISM
INDUSTRY ANALYSIS

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Industry Overview
The tourism industry in past few years has emerged
as one of the largest and quickest growing economic
sectors globally. Its contribution to the global GDP
and employment has increased significantly in past
decades. Increasingly, tourism is emerging as a
prime category of services exports worldwide. With
increasing tourist inflows over the past many years,
it is also a significant contributor to Indian economy.
According to research by Ibef.org three sub-segment
of the service sector comprising of trade services,
repair services and hotels contributed nearly US$
187.9 billion or 12.5 per cent to the GDP in 2014-15,
while growing the quickest at 11.7 per cent CAGR
over last five years.
As estimated by the World tourism Council its total
contribution to GDP is forecasted to grow at 12 per
cent per annum during next decade. Rising income
levels and changing lifestyles, development of diverse
tourism offerings and policy and regulatory support
by the government are major growth drivers for travel
and tourism sector in India.
As per KPMG reports this industry is expected to
generate around 13mn jobs across sub-segments such
as Restaurants (10.2mn jobs), Hotels (2.3mn jobs) and
Travel Agents/Tour Operators (0.5mn). The Ministry
of Tourism plans to give full support to the industry
meeting the increasing demand of skilled manpower
by providing hospitality education to students as
well as certifying and upgrading necessary skills of
existing service providers with these efforts India has
moved up 13 places to 52nd rank in Tourism & Travel
competitive index
However, the sector faces plethora of challenges due to
lack of quality tourism infrastructure, global concerns
safety of tourists in India, disparate passenger tax
structures across various states and lack of adequately
trained and skilled manpower. While several plans
and programmes by various government bodies
have already been devised for tackling these major
obstacles, successful implementation would be critical
to accelerated sustainable growth.
Forms Of Tourism In India
India offers range of tourism options due to its vastness
and diversity, attaching tourists from countries across
the world. The country boasts of natural resources
and treasures like mountains, ocean, deserts, seas,
valleys, rainforests etc. on one hand at the same
time world-class health infrastructure on the other,
which provides varied kind of tourism option such as
adventure tourism, rural tourism, sustainable tourism/
eco-tourism, cruise tourism, golf tourism and medical
tourism to the travellers.
Market Size
• The number of Foreign Tourist Arrivals (FTAs)
has grown steadily in past couple of years reaching
around 7.103 mn with 4.5% growth during
January–November 2015. It is projected to grow
to 15.3 million by next decade.
0
5
10
15
20
FY25PFY15FY14FY13FY12FY11FY10FY09FY08FY07FY06FY05
Foreign Arrivals (In Million)
3.9
5.35.1
4.4
6.66.3
5.85.3
7 7.4 7.1
15.3

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• The number of FTAs in November 2015 was
815,000, registering an increase of 6.5 per cent as
compared to previous year.
• Foreign Exchange Earnings (FEEs) through
tourism during January-November 2015 period
was Rs 1,12,958 crore (US$ 16.94 billion), growing
at a rate of 1 per cent over same period last year.
0
5
10
15
20
25
FY15Fy14FY13FY12FY11FY10FY09FY08FY07FY06
Foreign Exchange earnings from tourism
in India (US$billion)
8.6
10.7
11.8 11.4
14.2
16.6
18.4
17.7
19.7
15
• The number of tourists arriving on e-Tourist Visa
during the month of October 2015 reached a
humungous total of 56,477 registering a growth of
1987.9 per cent or ~21 times as compared to just
2,705 tourists in October 2014.
• Online hotel bookings in India are expected
rise exponentially by 2017 due to the increasing
penetration of the internet and smart phones.
Growth Drivers
Major Player Across The Segments
Hotel And Restaurants
The Hotel & Restaurants Industry has contributed
between 1.2% and 1.5% of the GDP over the last 7 - 8
years. Some major players are
• ITC Hotels
• Asian Hotels
• The Oberoi Group of Hotels
• Hotel Leela Ventures
• Indian Hotels
• Hilton Hotels
• Marriott International
• Radisson Hotels & Resorts
Tour Operators
AsperestimateofMinistryofTourism,therearenearly
6000 travel trade companies and firm comprising of
tour operators, travel agents and tourist transporters
Major Players
• Thomas Cook India Pvt ltd
• Cox & King India Pvt Ltd
• Kuoni India Ltd
• Raj Travels & Tour Ltd
Porters Five Forces
Threat Of New Entrants- Low
• Government regulation of direct FDI in retail
restricts entry of foreign retailers
• There is low level of proprietary travel knowledge
and asset specificity. This makes it relatively easier
for new players to enter industry and does not
provoke very aggressive rivalry from existing
players
• For start-ups to boom significant scale is necessary
to negotiate profitable deals
• Due to a highly fragmented market , travel
agencies in most parts do not have access to ready
distribution channels
• Online channel though growing rapidly but is
primarily selling air and rail
Bargaining Power Of Buyers- Moderate
• While buyers are fragmented, their diminishing
brand loyalty and ability to switch for most
products and services gives them reasonable
buying power

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• Buyers are fragmented with diverse retail buyer
and corporate buyer profiles
• Switching costs for buyers is minimal as brand
loyalty is low/diminishing
• Mounting threat of backward integration as buyers
can now directly buy from suppliers (hotels,
airlines etc)
Bargaining Power Of Suppliers- Low
• Suppliers usually sell commodity products with
concentration & ability to sell directly gives power
to suppliers like airlines.
• Attempts by suppliers to sell packages and complex
itineraries not very successful
• While suppliers concentrated in some areas
like domestic airlines, there is widespread
fragmentation in hotels, tour operators, car rentals
etc.
• There is no significant cost to switch suppliers
and products like airlines, car etc. are fairly
commoditized and travel agency cannot typically
buyout suppliers like airlines
Threat Of Substitutes- Low
• Low Threat of Substitutes, as travel moves up the
list of household priorities
• Travel being a discretionary spends is poised
to gain and with India witnessing a growth of
discretionary spend as % of income industry is
estimated to grow from 30% in 2005 to around
70% by 2025.
Intensity Of Rivalry- High
• Indian tourism Industry is Highly Fragmented
with organized players barely 15-20% of the
marketplace
• Large disposable incomes in town like Lucknow,
Jaipur, Coimbatore etc. serviced by family run
unorganized players
• Rivalry Intense because of low switching costs, low
levels of product differentiation, perishability of
products diversity of rivals
Recent Investments
With the rise in the number of global tourists and
realising India’s potential, many companies have
invested in the tourism and hospitality sector. Some
of the major investments recently in this sector are as
follows
• Fairfax-owned Thomas Cook has acquired Swiss
tour operator Kuoni Group's business in India and
Hong Kong for about Rs 535 crore in order to scale
up inbound tour business
US-based Vantage Hospitality Group has signed a
franchise agreement with India-based Miraya Hotel
Management to establish its mid-market brands in
the country.
Thai firm Onyx Hospitality and Kingsbridge India
hotel asset management firm have set up a joint
venture to open seven hotels in the country by
2018 for which the joint venture will raise US$ 100
million.
ITC is planning to invest about Rs 9,000 crore in
the next 3-4 years to expand its hotel portfolio to
150 hotels. ITC will launch five other hotels - in
Mahabalipuram, Kolkata, Ahmedabad, Hyderabad
and Colombo by 2018.
Goldman Sachs investment banking arm, has
invested Rs 255 crore in Vatika Hotels.
Japanese conglomerate SoftBank will lead the Rs 630
crore funding round in Gurgaon based OYO Rooms
founded by Ritesh Agarwal.
MakeMyTrip will acquire the travel planning website
Mygola and its assets for an undisclosed sum, and
will together look to re-focus on the online travel
segment.
Road Ahead
India’s travel and tourism industry has good growth
potential. The booming medical tourism market in
India is projected to reach US$ 3.9bn in size this year
having grown at a CAGR of 27 per cent over the last
three years, according to a joint report by FICCI and
KPMG. Also, inflow of medical tourists is expected to
cross 320 million by 2015 compared with 85 million
in 2012. The tourism industry is also looking forward
to the expansion of E-visa scheme by government of
India which is expected to double the tourist inflow to
India. Rating agencies like ICRA estimates the revenue
growth of Indian hotel industry strengthening to 9-11
per cent in 2015-16. India is projected to be the fastest
growing nation in the wellness tourism sector in the
next five years, clocking over 20 per cent gains annually
through 2017, according to a study conducted by SRI
International.
References
IBEF – Indian Tourism Industry, WTTC, CCI – Tourism In
India, KPMG – Travel Tourism Sector Report, Statista – Travel
And Tourism Industry In India, Indian Chamber – Tourism
Sector Note

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APPLE
BRAND ANALYSIS

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College dropouts Steve Jobs and Steve Wozniak
founded Apple Computers, Inc. on April 1, 1976 with
a vision of changing the way people viewed computers.
Jobs and Wozniak wanted to make computers small
and user friendly for people to have them in their
homes or offices.
Apple Inc. uses the Apple brand to compete across
several highly competitive markets. Apple's brand
has evolved as it has expanded its range of products
and services. Originally starting in the late 1970s with
desktop computers and then laptops in the 1990s, it
took over 20 years before the company expanded into
its first major new product area with the launch of
the iPod in 2001, followed by iPhone in 2007, iPad in
2010, and now Apple Pay and Apple Watch in 2014.
Apple Timeline
2015
2014
2014
2011
2008
2006
2002
1997
1992
1991
1987
1976
1977
1983
1984
1991
1993
1993
1998
1999
2000
2009-
2010
2011-
2012
2007
Jobs and Woz Found Apple
Fearing financial ruin, the third co-founder—Ronald Wayne—relinquished his 10 percent
stake in the partnership for only $800 less than two weeks later.
Apple II
The Apple II largely designed by Apple co-founder Steve Wozniak was the company’s first
successful mass-produced microcomputer. The Apple II series sold around six million units
and remained in production until November 1993.
Apple Lisa
Lisa was the first Apple computer to offer a graphical user interface. But its slow processor,
high price tag ($9,995) and lack of compatible software, among other things, led to poor
sales. The Lisa only sold about 100,000 units.
Macintosh
Apple debuted the Macintosh personal computer with the now-iconic Ridley Scott“1984”
commercial that aired nationally during the third quarter of Super Bowl XVIII. It was later
renamed the Macintosh 128K when a more-advanced model was introduced -- offered a
nine-inch monitor, a 3.5-inch floppy disk drive, and came with a keyboard and mouse.
PowerBook 100
The PowerBook 100 wasn’t Apple’s first portable computer, but it was more successful because
it cost a fraction of the price and weighed considerably less. The PowerBook was eventually
replaced by the MacBook Pro series.
Macintosh TV
The Macintosh TV was a Mac Performa 500 computer that could switch to being a TV set.
Only 10,000 were made before Apple ceased production in February 1994.
iMac G3
The iMac G3 was released following Steve Jobs’s return to the company. With the help of
Jonathan Ive, the iMac marked a new design direction for Apple with its translucent casing and
“Bondi Blue” color. The iMac G3 helped Apple turn around its financial problems.
iBook G3
Influenced by the iMac, Apple released its clamshell iBook G3 notebook in an array of colors.
The series was replaced by the MacBook in 2006.
Power Mac G4 Cube
The Mac G4 Cube was most memorable for its unique shape. But the desktop computer was
expensive ($1,800) and did not include a monitor. Six months after its debut, Jobs admitted that
demand for the Cube wasn’t what the company had expected, and discontinued the product in
July 2001.
iPod
Apple introduced the original iPod, putting “1,000 songs in your pocket.”The company later
introduced the iPod mini, iPod shuffle, iPod nano and iPod touch., since its debut in 2007 Apple
had sold 100 million iPod touch units by May 2013.
Apple TV
In 2007, the Apple TV set-top box was announced by the Cupertino, Calif.-based electronics
giant. It was designed to let you wirelessly play music, video and photos from your computer to
your TV. The product is now in its third generation, and has sold more than 25 million units.
MacBook Air
Steve Jobs introduced the MacBook Air – billed at the time as the world’s thinnest notebook – by
pulling it out of a manila envelope. It measured 0.16 inches at its thinnest point, but still packed
in a full 13-inch display and keyboard. The MacBook Air helped popularize ultraportable laptops,
and has helped the Mac gain PC-market share in the U.S.
iPad
Apple’s attempt at the PDA wasn’t very successful but the tablet proved to be a different story. The
original iPad had a 9.7-inch touchscreen, and the company later launched the iPad mini and iPad Air.
As of January 2015, the company has sold approximately 260 million iPads.
2001
Apple Newton MessagePad
The Apple Newton MessagePad was the company’s first personal digital assistant (PDA). It
ran on the Newton operating system and featured handwriting-recognition software.It was a
flop, and Apple stopped developing Newton OS products in February 1998.
2007
2008
2010
iPhone
In 2007, Apple launched the iPhone. Since then, the company has sold more than 700 million
iPhones, and has helped Apple become the world’s most valuable company.
Apple Watch
Billed as the company’s most personal device yet, the Apple Watch made its long-awaited debut in
September 2014. Part smartphone companion, part fitness tracker, part mobile wallet, the Watch
requires an iPhone, and ranges in price from $349 to $17,000
2015

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Apple Brand STP
Apple's brand position has evolved, but today's brand
is still consistent with these early promises.
Apple's core competence remains delivering
exceptional customer experience through superb user
interfaces. The company's product strategy is based
around this, with the iPhone,Mac, iCloud, iTunes, and
the Apps Store all playing key roles. The distinctive
feature of each of Apple Pay and Apple Watch remains
the customer experience of an elegant user interface
and simplicity of use.
The Apple brand got revitalised when the iPod was
launched in 2001.Since then Apple has worked hard
to harmonize and migrate its brand and its product
strategy closer together, to achieve today's position.
In Steve Jobs own words Apple is a "mobile devices
company" - the largest one in the world. The company
renamed itself Apple Inc. rather than Apple Computer,
signifying Apple's move beyond being more than a
computer company.
It now defines itself more broadly than being just a
devices company. It has blended its digital content
services like Apple Music, iTunes, iBooks and App
Store to be a key part of its value proposition to Apple
device owners.
Apple’s product pricing is on the higher side. It targets
high and middle income groups who are ready to pay
a premium price in return for an exceptional piece of
technology.
Apple targets youngsters and adults who want to stand
apart from the crowd. It offers very superior aesthetics
in its products which outshine other products in its
category.
Apple Brand Architecture
The company maintains a "monolithic" or master
brand identity where everything is associated with
the Apple name from a brand architecture viewpoint.
Apple's current line-up of product families includes
not just devices with apple name in it, but also iMac,
iBook, iLife, iWork, iPhone, iPad, and now iCloud.
However, even though marketing investments around
iPad are substantial, Apple has not established an "i"
brand. While the "i" prefix is used only for consumer
products, many of Apple's consumer products (eg
Mac mini, MacBook, Apple TV, AirPort Extreme and
Time Capsule, Safari, QuickTime, and Magic Mouse)
do not use it.
The 2014 move to establish the Apple Pay and Apple
Watch brands has in fact drawn its newest business
areas to be even more closely associated with the
Apple name. The brand identity of Apple Music, Apple
Pencil, Apple Pay and Apple Watch is simply the Apple
logo combined with the word which describes their
function
The Apple Brand Personality
Apple’s branding strategy focuses on emotions. The
starting point is how an Apple product experience
makes you feel. The Apple brand personality is about
lifestyle; imagination; liberty regained; innovation;
passion; hopes, dreams and aspirations; and power-
to-the-people through technology.
The Apple brand personality is also about simplicity
and the removal of complexity from people's lives;
people-driven product design; and about being a really
humanistic company with a heartfelt connection with
its customers.
The Apple brand is loved by its customers and there
is a real sense of community among users of its main
product lines.
The brand equity and customer franchise which Apple
embodies is extremely strong. The preference for
Apple products amongst the "Mac community", for
instance, not only kept the company alive for much
of the 90's but it even enables the company to sustain
pricing that is at a premium to its competitors.
It is arguable that without the price-premium which
the Apple brand sustains in many product areas, the
company would have exited the personal computer
business several years ago. In recent years, this strength
in brand preference has flowed directly to Apple's
profits - the company has dramatically improved its
manufacturing costs, while still maintaining very
strong brand equity.
The Apple Customer Experience
The huge promise of the Apple brand presents Apple
with an enormous challenge to live up to.
The company understands that all aspects of the
customer experience are important and that all brand
touch-points must reinforce the Apple brand.
To expand and improve its distribution capabilities
Apple has opened hundreds of its own retail stores
in key cities around the world, usually in up-market,
quality shopping venues.
The Apple Retail stores give prospective customers
first-hand experience of Apple's brand values. Apple
Retail visitors experience a stimulating environment
where they can discover more about the Apple family,
try out the company's products, and get training and
practical help on Apple products at the shops' Guru
Bars. Apple retail staff are helpful, informative, and let
their enthusiasm show without being brash or pushy.
The overall feeling is one of inclusiveness by a
community that really understands what good
technology should look and feel like - and how it
should fit into people's lives.
References
Marketing Minds – Apple Branding Strategy, Macworld

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MTV
BRAND ANALYSIS
KELLOGG'S
CASE STUDY ANALYSIS

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Introduction To The Case
India became extraordinarily tough market for
Kellogg’s because it had to change ingrained eating
habitsofconsumers.Itpassedthroughdifferentthough
difficult phases of life-cycle before it has become the
strongest player in breakfast cereal category in India.
Presently, Kellogg’s is estimated to hold about 60-65
percent of India’s Rs. 400 crore worth of breakfast
cereal market. While introducing a new product
category, it was not easy for Kellogg’s to establish a
foreign brand into Indian market where food habits
of people change after a few kilometres. The journey
of Kellogg’s from failure to success is discussed in this
case.
Background
Kellogg’s is one of the most successful Global brands
from U.S. which was world’s leading producer of
cereal and convenience foods. The products are
manufactured in 18 countries and sold over in 180
countries. It is hugely popular breakfast cereal brand
that is being sold in 160 countries with sales turnover
of over $9 billion. On its initial entry into the Indian
market, it used similar marketing mix which it had
been using in other Global markets.
When Kellogg’s first entered India in 1994, it heavily
bet on transforming the Indian breakfast cereal
market through switching breakfast habits of Indian
consumers who were used to hot breakfast foods.
The company wanted the Indian consumer to change
its traditional habits of having either Idli Dosas or
Paranthas in their breakfast and these habits too
varied from region to region with the northern region
preferring Paranthas and southern region preferring
Idlis, and Vadas etc. and the western region preferred
alternatives like Poha. They wanted them to make an
instant switch from their own traditional habits to
start having the healthier breakfast cereals which was
a huge challenge for the company.
Initial Blunders
In its initial advertisements, Kellogg’s showed that
what Indian public was having in their breakfast was
not at all healthy which hurt the sentiment of the
typical India ladies who had been serving traditional
breakfast for ages to their families. The advertisement
negatively affected the mindset of major influencers
and initiator groups in the Indian families. Also the
kind of breakfast which Indians were having was
available in many varieties at cheaper prices than
Kellogg’s modern breakfast of corn flakes. It was
enormously difficult for the company to convince
them to leave their traditional food or breakfast
options and replace it with cereals. In addition to this,
the company could not understand another cultural
aspect that Indian consumers have had warm milk
in their breakfast whereas; the corn flakes (cereals)
were preferably used with cold milk. Even when they
consumed it, they found that crispiness of flakes were
completely eroded as soon as they were dipped into the
warm milk, thereby losing the points of positioning
which promised the flakes to remain crispy when it is
to be consumed. Due to all the problems that Kellogg’s
was suffering from, its sales declined.
India Specific Strategies: A Turnaround
After learning several lessons from the initial mistakes,
Kellogg’scompletelyrevampeditsmarketinginitiatives
as well as brand building programs and made it India-
specific. First of all, to overcome the price sensitivity
of Indian consumers, it launched small sized pack at
Rs. 10 only for Indian market. Then, they decided to
tap the Indian public’s love for Hollywood superstars
by launching a limited edition Kellogg’s Chocos Spider
Man 2“web-designed cereal”.
The use of few specific words taken from Indian
language – Hindi, such as Corn Flakes with Iron Shakti
and Calcium Shakti in the launch of new variants gave

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it a local feel which was a good initiative taken by the
management. Packaging was used as an effective tool
for brand communication with consumers which gave
the brand an on-shelf differentiation from, though a
handful number of, its competitors.
It also started some other brand building initiatives
by portraying itself as a socially responsible citizen,
whereby it started recycling and reusing materials,
improving the access to health and human services in
the local communities.
Thesemoveshaveshownthatthebrandwascustomized
specificallyfortheIndianmarket,andnewvariantswere
introduced for the Indian consumers. It also launched
the sugar coated Froasties as Indians wanted to have
food that was good in taste. Moreover, it launched
Chocos Wheat Loops coated with chocolates to widen
the product choices. The company reduced its costs
to be ableto make its offerings affordable for the price
sensitive Indian customers by localizing the whole raw
material and packaging material requirements.
Also the company decided to appeal to the larger
masses in order to increase its presence in the Indian
market. It set up its manufacturing facilities in
India in Taloja near Mumbai, to reduce the overall
transportation costs and undertook many other steps
to be able to succeed in Indian market. To make the
brand more acceptable among the female consumers
the brand launched a new product Kellogg’s Special
K for women who want to regain their fitness levels
and chose Lara Dutta (a famous Bollywood actress) as
their brand ambassador for this variant, whom female
consumers could identify with as women aspired to be
fit like her.
Future Plans
Kellogg Company views India as a very important
market with a great future. Taking a longer-term
perspective, Kellogg India is planning to continue
its investment in communication of categories and
brands to grow the breakfast cereal market.
Conclusion
All these initiatives taken by the Kellogg’s for
repositioning of its brand helped it in gaining around
60-65 percent of the market share of the breakfast
cereals market and hence became a market leader. To
expand its business further, the company has decided
to promote the brand as an evening snack as well.
References
Translate Media – How Kelloggs Failed And Then Won In India,
Research World, IBEF – Kellogg India

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BOOMERANG EFFECT
CONCEPT OF THE MONTH

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Millions of households in China & India are on the
verge of entering the new middle class. Number of
people in this class will be increasing at a very high rate
over the next decade. Greater quantities of everything
necessary for the ‘good life’ will be demanded by this
class. These things include food, cars, electronics,
high-quality health care and clean & safe water. In
both countries people are changing their diet. They
are including more dairy, fresh vegetables, nuts and
in China high protein foods including chicken, fish,
pork and beef. This huge surge in the consumption
will present new economic prospects but it will also
invite significant consequences.
and Indian consumers purchase more--and then less-
-of various goods requiring specific commodities.
This volatility in demand and in turn consumption
will heavily affect the fate of Western producers of
these commodities. In supply-constrained markets,
prices will swing wildly as month-to-month import
changes, inventory fluctuations and new production
capacity. This effect on western producers is known as
Boomerang Effect.
Companies that use these commodities will need to
improve their skill sets. They will have to learn to use
a range of substitute materials and develop an ability
By the year 2020, per capita income in China and
India will nearly triple and these countries will boast
around 2 billion economically able consumers. There
is an estimate that a child born in China in 2009 will
consume on average 38 times more over his or her
lifetime than one born in 1960. In India, a child who
came into the world in 2009 will consume on average
13 times more than one born in 1960. Consumers
in two countries will collectively spend at least $10
trillion per year by 2020.
The wave of consumption will offer various business
opportunities across various industries and product
categories. But, this wave will also bring some
consequences with it not just in India and China but
worldwide. This wave will generate huge demand for
globally traded commodities like corn, fertilizer, steel,
cotton, cement, oil, gas and electricity. This year-on-
year increasing demand will boomerang across the
globe. This demand will also drive the demand for
commodities which are supply constrained and will
push up the prices of these commodities. But this
demand would be very volatile in nature as Chinese
to change prices accordingly to maintain margins.
They will have to learn how and when to stockpile
inventories.
If a middle-class U.S. family of four is having a Sunday
dinner of roast beef with vegetables, salad, milk, and
butter-pecan ice cream for dessert. If four servings of
each item currently cost a total of $27 ($9 for the roast
beef, $4 for the vegetables, $4 for the salad, $4 for the
milk, and $6 for the butter-pecan ice cream), the very
samemeal,in2020couldverywellcostupwardsof$52.
Specifically, if the demand and in turn consumption of
chicken, pork pecans continues to accelerate in China
and India then middle-class households in the U.S.
and Europe will face a major problem: in real terms
food prices will be higher.
On average, incomes of families in U.S. have stagnated
during the past decade, and prediction between now
and 2020 is that, real income in the U.S. will grow at
a compound annual rate of only about 0.4%. It is very
difficult for a family who hardly pays $27 for a dinner,
can afford spending $52 in just four years from now.

18. VOLUME 04BEACON
FEB 2016
16
ISSUE 02
Consumption Of Crops
The supply of most crops, including corn, is inelastic
in season—the crop planted is the crop available. The
agriculture industry can supply any crops only to the
extent that it is able to produce. Productivity is largely
a function of rainfall and other weather conditions.
The demand in China and India, for these and other
such crops will create problems. By the end of the
current decade, the percentage of global GDP by
China will grow by 4% and that by India will grow by
1%. This growth will be driven by capital investment,
education, and expanding worker skills in China and
India. On the contrary, during the same period, the
U.S. share of global GDP will shrink by 3%.
Conclusion
The boomerang effect is real. Over this current decade,
we will see how the growth in demand from Chinese
and Indian consumers will lead to higher demand for
commodities and an associated squeeze on energy,
water, and food supplies. The shortages will have
many adverse effects that will mean higher prices for
everything from cars, motors, and appliances to jeans,
T-shirts, and leather shoes.
These global trends may lead to food riots worldwide.
The agriculture and water wars can be avoided and
people everywhere can have the food and water
they need to survive. If the world is going to ensure
these outcomes then we will require a revolution in
sustainable agriculture. The impact of this revolution
will depend on new investments to enhance water
conservation and provide reliable innovations in
irrigation, improvements in farming methods and
Government policies which are in favor of export
growth.
References
BCG Perspectives – The Boomerang Effect, Podbay