Home / Country Focus: India / Business in India – a family affair
Project part-financed by the European Union
India has often been referred to as ‘incredible India’. While Ken agrees with this, he says it is now also worthy of the title ‘credible India’. The Indian economy has grown by an average of 8% in recent years and it now has become a major global player across a wide range of sectors.
“People think of India as an emerging market,” says Ken. “But there is no doubt that over the last five or six years India has really come of age.”
Although India has already undergone a significant amount of growth, it is forecast for even bigger things in the coming years. It is predicted to become the 3rd largest economy by 2030 with a population greater than that of China.
Although Ken admits that not all parts of India are growing and that the infrastructure is a ‘bit creaky’, overall the market is in transformation. The country has abolished its import licensing in most sectors and is opening up others for investment, with the service and manufacturing sectors in particular growing very fast.
“It is often said that China has won the manufacturing race and India has won the service sector race,” says Ken. “But don’t underestimate India as a manufacturing centre.”
In terms of entering the market, Ken believes any company would be wise to start with the expert help of UK Trade & Investment (UKTI). Companies will be given guidance on the best method of researching the market, which is very important before taking any potentially risky steps.
A visit to the market is essential if you want to do business in India and companies are advised to go on a trade mission to India for their first visit to gain a better understanding of the market. Such missions often meet with people at top levels with whom it would be almost impossible to meet on a private trip.
Consumers in India are now very technologically minded and for this reason for a company to be successful it is important for it to target the market with advanced products. Most products are available in India and the best opportunities lie with niche products and services.
“You can no longer think of India as a place to shift yesterday’s technology,” says Ken. “Indian consumers want tomorrow’s technology.”
It is also important for companies to consider whether their product will be compatible in India – for example will it work in India? Will it withstand the heat and humidity? Will it cope with wide fluctuations in voltage? These are all practical implications that could have a huge effect on whether or not a product is saleable in another country.
India is also a very price sensitive market. Exports to India attract import duties. A company may sell its product for £10 in the UK, but this could be extortionate in India and there may be other local alternatives available at a much lower price. Therefore companies wishing to sell in this market may need to consider manufacturing part or all of the product in India, where the labour is much cheaper.
As with many other countries, there is a range of market entry strategies available. It is possible to access the market by using an agent, a distributor, a joint venture or a wholly owned subsidiary. However, if going down one of these routes, Ken advises: “Think very carefully about your partner and their motivation. Try to understand what your partner’s real agenda is.” And take independent professional advice when drawing up agreements. These should include commercial issues such as producing a business plan, pricing and payment streams, protection of intellectual Property Rights (IPR) and methods of dispute resolution.
When it comes to actually doing business in India, most companies should find that Indians are very positive about doing business with the British. The two countries have a long history of working together and many Indians will have family members living in the UK. However, the way the two countries actually go about doing business can differ significantly.
“There are many multi-national companies in India, which generally operate on international standards,” explains Ken. “However, the majority of companies you are likely to be dealing with will be ‘old India’, or family run businesses – usually run by the brothers. Everything they do is for the benefit of the family. “You have to bear this is mind when dealing with them. Their decisions may not make sense to you from a business point of view but they might from a family point of view.”
Indians are extremely hospitable people and want to do business with people they know well. So it is important for UK business people to take time to build relationships.
“This means you will need to go to India more than once,” Ken explains. “In fact, you will need to go regularly and you will need to build flexibility into your programme. Indian’s don’t always see the need to hurry.”
Although English is the language of business in India, Ken advises that occasionally there is scope for misunderstanding or misinterpretation.
“The people you will speak to will inevitably be speaking in English, but may say words that you have never actually heard. For example the word ‘prepone’ is quite commonly used in India, as the opposite of ‘postpone’, so it would be used for example to bring a meeting forward. When you say you haven’t heard of it they are completely flabbergasted.”
As previously mentioned, family is of great importance in India, and for this reason it is possible for a business meeting to turn into a family affair.
“You really know you have made it if you get invited to meet the family and if this does happen take a small gift such as chocolates or flowers,” suggests Ken. “And if you go for a business meal and they bring the children along, take that as a compliment.
“Above all, when trying to build relationships, be patient. In India, business will take a lot longer than you think. And one final tip is to make sure you take plenty of business cards. In fact take three times as many as you think you will need – and you’ll still probably run out!”
