Up until recent years, the majority of global purchasing power resided primarily in the United States and Western Europe.
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In the past, these industrialized nations had an advantage because of their superior technology to the rest of the world.
Greater technology allowed their companies to function more efficiently and thus, generate more profits to be used for spending. However, these technological improvements have now reached other parts of the world. Along with globalization, it has helped facilitate the rapid modernization of the two most populated nations on Earth: India and China.
Even though both countries are still significantly behind the established markets of the United States and Europe when comparing purchasing power per individual, the sheer number of potential consumers should attract entrepreneurs, just as California was the destination of choice for people during the gold rush.
The increase in purchasing power in India and China has led to a growing middle class in which workers have access to the latest advancements in professions such as engineering.
The multitude of citizens that are well-educated has created an almost endless supply of cheap, sophisticated labor. This has clearly led to innovations that have helped transform the economies and cultures of both India and China.
Entrepreneurs who are seeking to develop a global business should therefore first look first at how their products will succeed in India and China. To be able to do that however, they must understand how the economic situations presently and what they will be in the future for both countries.
Comparing and Contrasting India and China
While both India and China are growing at a good clip, there are certain advantages to each that one should be aware of. In particular, the potential of an entrepreneur being successful in India is good mostly for the fact that India has already readily adapted to the influx of Western companies.
These prior working relationships would serve as a basis for an entrepreneur starting a business in India. Moreover, having a democratic government and policies that encourage entrepreneurship would probably allow India to reach its goal of being a market leader.
While India may prove to be more advantageous in the long-run, China remains the most sought after international market in the present day.
China still favors communism as its form of government, but some facets of the Chinese government have accepted the benefits of American capitalism. Combined with low-cost labor, this has led to a manufacturing boom that has proved to be profitable for several Chinese companies. A globally dominant manufacturing industry would ensure that entrepreneurs can continue to invest in their own businesses or other businesses in China.
However, not everything is rosy with regards to entrepreneurial potential in India and China. Both countries pose different types of problematic issues for entrepreneurs. In India, for example, there is a very tightly regulated system that seems to dampen the aspirations of entrepreneurs. Furthermore, while the middle class is steadily growing, there is still a significant amount of poverty remaining that affects the overall entrepreneurial environment. With regards to China, the obvious issue limiting the ability of start-ups and new businesses is the government itself.
It is hard for an entrepreneur to gain a foothold on the Chinese market due to the fact that the government applies policies that gives an advantage to Chinese brands and businesses. However, this practice is being increasingly criticized and China is now trying to level the playing field between its domestic companies and foreign companies.