India Business Forum
The notes below are from a panel discussion that took place at the India Business Forum in Auckland in October 2008.
Key success factors for foreign companies doing business in India
India is a large, comparatively young market, with great variation in market conditions and business customs across its numerous regions. As a challenging market where foreign companies are quick to come and go, foreign business people will find they will need to spend time in the market, visiting several times, before they are taken seriously.
Indian business people can be tough negotiators and will often expect a high level of commitment when it comes to backing up a product or service offering. The way business is conducted in India can be less formal than in other parts of Asia, but foreign business people will find that they are expected to enjoy India and participate in its social life and the family life of business partners.
Here are some further insights offered by the panel into what New Zealanders need to be aware of in order to do business in India successfully:
The size of the Indian market
- When it comes to joint ventures in India, a single joint venture may not make sense in a market as large as India.
- Visit India often so that people can get to know you and understand that you are a long term player.
- There is no compensation for time spent on the ground in India. Avoid managing the relationship from a distance – it’s far more effective to have the New Zealand representative working alongside the Indian partner.
Main categories of foreign firms entering the Indian market
Three main models for companies coming to India:
- Large manufacturing companies like automotive companies that see India as a viable market in itself, but also want to take advantage of lean and low cost world class manufacturing, go into India to take that knowledge across their international networks ventures building and build market share in India. Joint venture partnerships in manufacturing in India can persist for a long time.
- Service companies bringing a capability or technology to apply within the Indian market.
- Companies that access the Indian consumer or SME business environment by partnering to gain access to sales and distribution networks rather than creating them on their own. Once they’ve developed their own capability, joint ventures in this category are more likely to go their own way.
Opportunities for New Zealand businesses
In general large-scale manufacturing within the Indian market may not fit with the structure of the New Zealand economy. Opportunities are more likely to lie in the area of providing services and exporting New Zealand products and ideas to the Indian market.
The spin-off effects of the revolution in modern retailing are creating many opportunities for New Zealand businesses.
Be prepared to adapt
India will not adapt to your company; instead, you will have to modify your behaviour to fit local business conditions. Don’t expect to impose your business model unchanged on your Indian business partners. Cultural alignment is vital, as is recognising that it is your company that will be doing most of the adaptation.
It’s easier to change your way of thinking than to change that of India with its population of one billion. If you have an excellent product or service business model and it works well in New Zealand, it will also work well in India if you are prepared to adapt it.
You may have to change your product extensively. You can’t change the pre-existing systems of India – you need to adapt, make the necessary changes, and move on.
Visit frequently
It is important to indicate commitment to the Indian market by visiting frequently. Because many foreign companies come and go in India, prospective business partners may be sceptical about how long a foreign company will stay. Initially you may find people wait to see you visit India a few times before things start moving.
Characteristics of Indian business culture
You may be asked to provide the best product at the lowest price. Indian businesspeople, especially those working for the larger companies, can be very tough negotiators.
Products and services have to be at the right price, but also your commitment to the company can add value. Price is important, but not the only issue. You need to back up your product offering with a service.
Most companies in India are family-run businesses. Decision making is very centralised around the heads of families and highly trusted, close family advisors, who may have been working with the family for decades. While day to day you will interact with professional management, key decision will be made by senior members. Therefore it’s important to develop close relationships with the full set of family management, rather than just the professional managers.
When success strikes, it pays to be prepared for large orders. Things can start off small, but suddenly huge orders can come through and you need to be prepared for when things take off. Dealing with large customers wanting something immediately can help you grow as a company, but you need to be prepared for such a contingency.
Be prepared to work outside the Monday to Friday working week. If your client has a problem, you and your staff may be expected to work through the weekend to fix it.
Ties through the Commonwealth can help New Zealand firms to develop business relationships in India and make it a more relaxed place to do business than, for example, China or Thailand.
Consumer behaviour
Branding in India is very important. You can customise your product to a certain extent. Foreign brands are very popular. Made in New Zealand or the US is valued and people are prepared to pay a premium for it.
See also:
► Business research reports on India
Questions?
Contact James Penn
Telephone: +64 9 368 1435
Email: jpenn@asianz.org.nz
