Porter’s Five Forces Analysis of the Indian Electoral Market

Introduction: Drawing an analogy between Economic Markets and Electoral

Landscape

Outside of the family, economic markets and various governmental bodies

dominate and define power relationships more than any other forces. Politics
and markets interrelate in many ways. Government actors may manipulate the
economy, sometimes for self-interested reasons, and economic forces may
directly and indirectly influence the outcome of electoral contests.
It is therefore unsurprising that public choice theorists and other scholars have
borrowed economists’ descriptions of economic markets to describe the world
of politics. These scholars view political competition and influence as taking
place in a market place where influence is bought and sold. Electoral markets
have been described as a multi-sided market where the development of the
product, ie, the political party happens simultaneously with the development
of the consumers, ie, the voters.1

Scenario
Baba Ramdev wants to float a political party for the upcoming Loksabha
elections in 2024. The party mainly wants to operate in the Ganga-Yamuna
doab region, colloquially known as the Cow belt of India and includes states
like Haryana, Rajasthan, Delhi, UP, Bihar, Jharkhand and Madhya Pradesh.
He has approached us with the proposal and wants us to advise him on the
viability of the plan. For the same, we shall do a porter’s five forces analysis of
the Indian electoral market and analyse whether entering the ‘industry’ makes
sense for him or not.

As discussed before, this would require drawing an analogy between the

electoral landscape and economic markets.

1. Richard L. Hasen, The Political Market Metaphor and Election Law: A comment on
Issacharoff and Pildes
1) Existing Rivalry
To know about the rivalry/competition existing in a consumer market, we
ideally look at the market share of the companies already operating in the
given market and also the number of players operating in the market. In India,
there are close to 2000 registered parties, but for an analysis of the market, it
is prudent to restrict ourselves to the major players who have a meaningful
existence in the market. This number is close to 15-20 parties.
For electoral markets, the level of competition can be gauged from two
parameters, viz, the vote share and the seat share of the parties in the last
general election.
Vote share refers to the share of votes that a party received out of all the votes
cast in that election. Seat share, on the other hand, refers to the total number
of seats that a party won out of all the seats in the house, in this case,
Loksabha.
While vote share is an important parameter that every party looks at in that it
helps to gauge the foothold that a party has in its desired electorate,
eventually, it is the seat share that matters. Due to the First-Past-The-Post
system that India follows, it is possible that a party with not a very high vote
share manages to gain a significant seat share.
Following is the breakup of the 2019 Loksabha elections for the two
aforementioned parameters:
Party Seat share
BJP 55.80
INC 9.55
DMK 4.24
AITC 4.05
YSRCP 4.05
SS 3.31
JDU 2.95
BJD 2.21
BSP 1.84
TRS 1.66
Others 10.32

Party BJP INC AITC BSP SP YSRCP DMK SS OTHERS

Vote 37.36 19.49 4.07 3.63 2.55 2.53 2.26 2.10 22.22
share
We see that BJP is clearly the leader on both the parameters. It polled close to
40% of the total votes cast and bagged 55% of the seats. After that, however,
the scenario gets really murky with all the parties competing vigorously to be
the next big player. With the exception of INC, all the other parties are
primarily regional players and therefore for Ramdev’s party to have any
meaningful existence in the market it will have to dislodge those parties in
their home states or replace congress as the primary opposition.
“First election; to make someone else win. Second election; to lose. Third
election; to win.” This oft-quoted saying refers to the development of a new
political party. The aim in the first election should be to make the primary
opposition lose and reduce competition. In the second election, it should be to
emerge as the primary opposition. And in the third election, a party should put
all its weight behind winning the election. Therefore, we would like to argue
that while it might not be possible to win the election the first time around in
2024, Ramdev’s party should still aim at making its presence felt across its
target landscape and emerge gradually as the primary alternative.

Existing Rivalry: High (But it still makes sense to enter the market)

2) Threat of New Entrants

Technically speaking, floating a new party is a very easy task. The requirements
are laid out in the Representation of People’s Act, 1951 and section 29A deals
with the registration of new parties with the Election Commission of India.
However, it is not just making a new political party that Baba Ramdev is
looking at but also having a meaningful existence and winning seats and
gaining vote-share.
Let us look at some of the factors that work as a barrier to entry for new
political parties:
a) Duverger’s Law- French jurist and sociologist, Maurice Duverger gave the
theory that elections that follow the First-Past-The-Post rule tend to favour a
two party system rather than a multi-party one. What it means effectively is
that for the smaller parties to have any meaningful existence it becomes
imperative to form a coalition to mount any significant challenge. Therefore, in
the present scenario, Ramdev’s party will have to target becoming the primary
opposition to BJP or run the risk of becoming just another player in a large
coalition of smaller parties.
b) Capital intensive- The Election Commission of India imposes limits on the
expenditure incurred by a candidate, but not political parties, on their election
campaign. Election campaigning is a costly affair with most of the expenditure
of the parties being spent on rallies, advertisements, etc. This might deter a
new party from entering the fray. However, Ramdev’s party will not lack funds
as his company and several other corporates will be willing to back up the
party.
c) Ideological/Identity block- For any party to float itself nationally, one of the
biggest barriers is the existence of innumerable identity groups within India
and the need for the parties to align themselves with certain groups or
ideologies which, in turn, makes it difficult for them to project themselves as a
party for all.

Threat of new entrants: Moderate (Again, for Ramdev, it makes sense to enter
the market as he has the funding required to survive as well as having a large
base of followers across the Cow Belt)

3) Bargaining power of Suppliers

It is first important to define who are the suppliers for a political party looking
to venture into electoral market. The question we first need to ask is, what do
political parties need?
a) Funding- First and foremost, in the present scenario, any party to contest at
the national level requires large amount of funds. This mostly comes from big
corporate houses that in turn want favours form the parties if they come into
power. Since it is a symbiotic relation, the bargaining power of corporates is
moderate.
b) Workforce- Any party needs a cadre, or foot soldiers. This is derived from
the general population. Currently, BJP boasts one of the largest and most
efficient cadres in India. For Ramdev, this will not be a very difficult job as he
already has a huge following through his career as a yoga guru.
c) Leadership/Enterprise- This refers to the Tharoors and the Jaitleys of a party.
These are the people that provide thought leadership to the party. For any
charismatic leader to join your party, it is important that he sees a good career
for himself and the party in the future.

Bargaining power of the suppliers: Moderate

4) Bargaining power of the Consumers

As discussed above, electoral markets are a multi sided market where the
product is developed alongside the consumer, product being the political party
and consumers being its voters.
Consumers could be categorized as individual voters, identity groups as well as
grassroot workers of the party.
Individual voters do not have a very high bargaining power. However, identity
groups formed along the lines of caste, religion, language enjoy a moderately
high bargaining power, especially when it comes to regional politics. For
ramdev’s party, it’d be prudent to woo voters across identity groups as they
want to have a national presence.
As for the grassroot workers, they also serve as consumers as they consume
the ideology of the party and sell it to the final consumers, ie, the voters.

Bargaining power of the consumers: Moderate

5) Availability of substitutes
Substitute for a mobile phone could be a tablet or a laptop. For a carbonated
beverage, it could be non-carbonated beverages, energy drinks or non-alcohlic
beer. However, it is tricky to figure out what could be the substitute for
political parties in an electoral democracy like that of India.
One substitute could be direct democracy(as has been implemented at the
lowest rung of government in India. See: Panchayati Raj System) which would
make political parties redundant. However, this is practically impossible for a
democracy as large and multi-faceted as India.
Another substitute could be one-party rule or dictatorship like in China which
again makes the existence of other political parties redundant. However, in a
democracy as robust as India, it is hard to imagine such a scenario ever
happening.
Therefore, one would be wise to conclude that multi-party democracy is here
to stay in India and there is no viable threat of any other system substituting it
in the foreseeable future.
Availability of substitutes: Negligible to Low

Conclusion
Having analysed the five forces that affect the electoral market we would like
to advise Baba Ramdev that it would be wise to enter the electoral market for
2024 elections. However, the groundwork for the same has to be laid much in
advance for which we suggest that he starts the work latest by 2020 and by
2022 make his desire and intent public. The primary target for 2024 should not
be to win but to come close to becoming the main opposition to the
incumbent party. The Indian elections pie is quite big and attractive and there
is enough space for his party to enter it. However, he must also realize that he
needs to provide some points of differentiation from the BJP, because both of
their ideologies have a significant overlap.