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ContentsABOUT 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 monthly newsletter – BEACON (BE A CONSULTANT) and maintains a FACEBOOK PAGE where latest news and development in the consulting industry are posted.

MISSIONTo 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

SANANDAN DESHPANDE

NIKHIL RAO

AMEYA MAHABAL

CHITRA WANI

deepesh jethwani

prathamesh indani

Sushil Gurav

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OUR TEAM

ARPIT agrawal

ASHAY DHURI

HUZEFA BODABHAIWALA

KARAN CHOPRA

NAMAN CHANDAK

praCHI KORE

SARANG KULKARNI

YOGESH MOHATA

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TOURISMINDUSTRY ANALYSIS

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TOURISMINDUSTRY ANALYSIS

Industry OverviewThe 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

5.35.14.4

6.66.35.85.3

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

10.711.8 11.4

14.2

16.6

18.417.7

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 RestaurantsThe 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 OperatorsAs per estimate of Ministry of Tourism, there are nearly 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 ForcesThreat 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 InvestmentsWith 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 AheadIndia’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.

ReferencesIBEF – 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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APPLEBRAND 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

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Jobs and Woz Found AppleFearing �nancial ruin, the third co-founder—Ronald Wayne—relinquished his 10 percent stake in the partnership for only $800 less than two weeks later.Apple IIThe Apple II largely designed by Apple co-founder Steve Wozniak was the company’s �rst successful mass-produced microcomputer. The Apple II series sold around six million units and remained in production until November 1993.Apple LisaLisa was the �rst Apple computer to o�er 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.MacintoshApple 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 -- o�ered a nine-inch monitor, a 3.5-inch �oppy disk drive, and came with a keyboard and mouse.PowerBook 100The PowerBook 100 wasn’t Apple’s �rst 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 TVThe 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 G3The 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 �nancial problems.

iBook G3In�uenced 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 CubeThe 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.iPodApple introduced the original iPod, putting “1,000 songs in your pocket.” The company later introduced the iPod mini, iPod shu�e, iPod nano and iPod touch., since its debut in 2007 Apple had sold 100 million iPod touch units by May 2013.

Apple TVIn 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 AirSteve 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.iPadApple’s attempt at the PDA wasn’t very successful but the tablet proved to be a di�erent 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 MessagePadThe Apple Newton MessagePad was the company’s �rst personal digital assistant (PDA). It ran on the Newton operating system and featured handwriting-recognition software.It was a �op, and Apple stopped developing Newton OS products in February 1998.

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iPhoneIn 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 WatchBilled as the company’s most personal device yet, the Apple Watch made its long-awaited debut in September 2014. Part smartphone companion, part �tness 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 STPApple'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 ArchitectureThe 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 PersonalityApple’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 ExperienceThe 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.

ReferencesMarketing Minds – Apple Branding Strategy, Macworld

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MTVBRAND ANALYSIS

KELLOGG'SCASE STUDY ANALYSIS

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Introduction To The CaseIndia became extraordinarily tough market for Kellogg’s because it had to change ingrained eating habits of consumers. It passed through different though 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.

BackgroundKellogg’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 BlundersIn 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 TurnaroundAfter learning several lessons from the initial mistakes, Kellogg’s completely revamped its marketing initiatives 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.

These moves have shown that the brand was customized specifically for the Indian market, and new variants were 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 PlansKellogg 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.

ConclusionAll 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.

ReferencesTranslate Media – How Kelloggs Failed And Then Won In India, Research World, IBEF – Kellogg India

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BOOMERANG EFFECTCONCEPT OF THE MONTH

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BOOMERANG EFFECTCONCEPT OF THE MONTH

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 same meal, in 2020 could very well cost upwards of $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.

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Consumption Of CropsThe 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%.

ConclusionThe 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.

ReferencesBCG Perspectives – The Boomerang Effect, Podbay