Entrepreneurs find fertile ground in Cuba

 

Harold Sirkin , Contributor, Forbes

 

Recent technology advances have given manufacturers the ability to quickly and inexpensively design products for local markets. Not all such products are high-tech, however; sometimes they’re the exact opposite.

 

In 2008, for example, the Indian automaker Tata Motors introduced the four-passenger Nano, an inexpensive no-frills car that originally cost around $2,000. Prices have risen since then, but the concept still holds: Give consumers a simple, useful product they can afford – in this case, basic transportation.

 

Today, several other companies have begun competing in the low-cost auto niche in an effort to reach similar customers, including Bajaj and Maruti Suzuki in India and Chery and Geely in China.

 

Localization takes on other forms as well. The Chinese appliance maker, Haier, found that repairmen were being called to unclog the drain pipes of customers’ clothes washers in rural China. The reason for the clogged drains, they discovered, was that customers were using the machines to wash sweet potatoes. Haier responded by modifying the machines to include a “vegetable wash” cycle.

 

This isn’t much different than what U.S. entrepreneurs Horace Clemmons and Saul Berenthal have in mind in Cuba. With permission from the U.S. and Cuban governments, the former IBM colleagues are planning to manufacture inexpensive, low-tech tractors for the island’s small farmers, which should enable them to increase production. The tractors will not only be built for Cuba, but in Cuba.

 

There’s certainly a need there. Even with one in five Cuban workers involved in agriculture, the country currently imports about 80% of its food. Increasing the productivity of the island’s private farmers, who recently were given government permission to sell some of what they grow, could change that.

 

Manufacturing and markets go hand in hand, of course. I’ve written before about the millions of global consumers who a few years ago were scratching out subsistence livings in Africa, Asia and Latin America, but today are working in factories, assembly plants and call centers, purchasing many of their daily needs from others.

 

The buying power of these hundreds of millions of entry-level consumers created new markets and unprecedented opportunities for companies willing and able to produce simple, low-cost products designed with these consumers’ needs in mind, rather than stripped-down versions of Western products.

 

Many companies rose to the challenge. Some, like Tata and Haier, got in early. Those forward-looking and nimble enough to create lower-end products with fewer bells and whistles are now reaping the rewards.

 

In 2012, when my colleague Michael Silverstein wrote The $10 Trillion Prize, he calculated that between 2010 and 2020, Chinese and Indian consumers alone would purchase some $64 trillion in goods and services.

 

Chinese consumers, he estimated, would spend some $41.5 trillion, with annual expenditures increasing from $2 trillion in 2010 to more than $6 trillion a year in 2020. Last year, at the half-way mark, consumer spending was in the neighborhood of $4.2 trillion.

 

Indians, Silverstein estimated, would spend a total of $22.5 trillion, with annual spending rising from $991 million in 2010 to $3.6 trillion in 2020. Last year, at the half-way point, the total was around $1.3 trillion.

 

While the Cuban market is by comparison tiny, as I noted earlier this year, Clemmons and Berenthal are right not to ignore it. I gave the reason in my 2008 book, GLOBALITY, “No market is too small or remote to offer some kind of valuable resource, cost advantage, or market opportunity.” That holds for Cuba.

 

A small, inexpensive, stripped-down, low-tech tractor wouldn’t be appropriate for most U.S. farms. But it may be just the right medicine for Cuba’s malnourished agricultural sector.

 

For Clemmons and Berenthal, Cuba provides a “market opportunity.” For Cuban farmers, Clemmons and Berenthal provide a valuable solution.

 

 

Cubanálisis - El Think-Tank

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