Overcoming obstacles when entering India
There is no doubt that India is a huge market but it requires persistence and a change in approach before you can expect to reap dividends.
India plays a crucial role in an increasingly globalised world. But unlike other territories where multinational corporations (MNCs) have been able to capture market share using the time-tested formulae of the western world, applying those to India is a challenge. The people, mindsets and culture are all very different from what European and American nations are used to.
But for those willing to take on the challenge, here are five top tips:
- Finding your niche
Invest time and effort in visiting India and understanding your market.
Many companies see India as one big market of 1.21 billion people with a per capita GDP of US$3,700. In fact, this is a country with 22 recognised languages and numerous dialects, where individual purchasing power differs dramatically from high-net-worth individuals to the destitute. Besides, different communities have distinct behavioural patterns and consumption habits. Yet it is uncommon for businesses to carry out proper market research when entering India.
It is imperative that you travel across the country and define your market clusters. These can vary by state, city tiers or consumer profile. While this may require significant time and effort, the pay-offs are likely to be substantial.
- Building personal relationships
Take your time scouting for and developing a relationship with your prospective local partner. Don’t be too quick and anxious to complete the task and move on.
Companies with limited experience in India often find that when they deal with local partners it isn’t clear where discussions and tasks are headed. Indians are a context-oriented society so it is quite common for them to mix business and personal relationships. They like to meet often and it may sometimes appear (to the representative of the foreign company) that not much has been achieved. Traditional business houses are also strongly hierarchical. Subordinates may not openly contradict their superiors. This means that discussions and follow-up action takes more time than is seen in other countries.
A large dose of patience is needed as business deals in India start slowly and pick up pace only after trust has been established. Trust is seen as the key to a successful business partnership.
- Recruiting and retaining talent
Invest in developing both the capabilities and loyalties of your employees. The long-term benefits will far outweigh the initial costs.
Another grouse of MNCs trying to set up operations in India is that while it is easy to find many graduates, it is difficult to hire real talent. Despite the fact that not many graduates in India are truly market-ready, companies such as Infosys, Wipro, TCS, IBM and Accenture have successfully developed local talent in an extremely cost-effective way, leading to sizeable profits. In fact, a large number of successful companies have set up their own in-house training centres in India. It is essential that you are open to investing in the training needed to bring new recruits up to speed.
Family is an important focal point in Indian culture so a family-minded person is likely to look for stability and a work-life balance rather than simply going after a higher salary. Engaging with employees and having a good recognition/rewards system in place is vital.
- Navigating regulations
Appoint experienced consultants who are aware of the regulatory and tax environment in India. This can generate significant cost savings.
India has a plethora of laws and regulations, which see frequent updates. Foreign companies are likely to find it difficult to navigate this complex and ever-changing maze of regulations. Advice from experienced and reputable local consultants who know how to deal with the numerous regulatory bodies and their requirements can lead to significant savings by way of availing incentives, getting duty credits/set-offs and avoiding compliance hassles.
- Managing distribution costs
Find the right supply chain partners and work closely with them to develop your distribution channel.
India may not necessarily be as cost-effective as one might expect. Often companies tend to focus on marketing, only to realise much later that distribution is the key to success in India.
While you may have a distributor in place, you should still be hands-on in deciding on and developing the entire distribution channel. This can be time-consuming, but in a country where modern retail has a mere 8-10% share of the total retail sector in value terms, it is imperative for you to actively manage the supply chain right up to the last mile. Accordingly, your choice of distributors is vital. Unlike other countries where a distributor is usually an established and institutional vendor, those in India still require some handholding. Therefore, a partnership approach to distribution is a useful strategy.
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