India – Still a land of opportunity for business

Adrian Mutton, CEO of Sannam S4, which helps UK companies explore opportunities, then set up and expand in India, outlines the key issues which companies considering the Indian market must bear in mind.

The government continues to bang the drum for UK companies looking for opportunities in overseas markets. Vince Cable discussed the setting-up of 40 new overseas Chambers of Commerce to provide more on-the-ground assistance to first-time exporters during his recent encounter with GrowthBusiness.

He also said that he would be visiting India before the year is out, and will be taking a select bunch of SMEs with him to hopefully open some doors.  With Boris Johnson and David Cameron (the prime minister has been twice this year which is unprecedented) both leading trade delegations to India, together with numerous visits by more junior ministers, there is no doubting the government’s eagerness to help UK companies tap into a market of some 1.2 billion people.

When asked about the opportunities in India, I resist the temptation to break them down into sectors. If you have a product and service that sells in the West that is not simply a ‘me too’ product, if you can maintain quality control and figure out the challenge of distribution and can compete with local equivalents (of the same quality) on price, there is tremendous scope.

However, I am not ashamed to admit that after 20 years of doing business in India, I am still learning. But, I’m in good company as even the country’s leading business advisors need to keep on their toes as economic reform continues and policy changes.

So here are a few tips which I hope will be useful for those who are considering expansion into India.

1. India is not the same

Just because the language of business is English one should not assume that the business practices and working culture bare any comparison to those found in Europe – and that you can run an Indian business like a UK one.   

The challenges that exist in India are found elsewhere in the world, some are however, more apparent in India than others. Bureaucracy, corruption, cultural differences, time zones, IP protection, the efficiency of the legal system and flip- flopping government policy all pose serious challenges and take time to understand.

And the sheer size of the country can also be daunting.  India operates as a state-driven country with differing laws in each state. Uttar Pradesh, a state in the north of India, has a population of almost 200 million. If it was a country it would be the fifth largest in the world.

Varanasi, Uttar Pradesh

The state of Uttar Pradesh is home to Varanasi and Agra

2. Patience and investment

Many advisors might give a different impression but India is simply not a market where you can simply turn up and be guaranteed an immediate 1 per cent of the market. It takes thorough planning and a cautious and pragmatic approach. A fully-fledged assault into the market with all guns blazing is not a wise approach.

3. Research is vital

Take time to actually understand the market by talking to potential users of your products and services on the ground, not just to distributors or partners. This will give you a much better understanding of the market and consumer needs. Regular visits are fine – but if you don’t get beyond your hotel or meeting rooms, you will never really understand the market in which you are seeking to be successful. 

4. Pricing

Get the pricing of your product right. You may have figured out there is great interest in your product or service and a demand – but at what price? You may think that just discounting it by ‘x’ per cent from your UK or other emerging markets price will do the trick, but you can save a lot of wasted time and energy by really getting to know what price the market will pay – not what you think it will play. Once you know these numbers, build a business model around the reality. Many foreign firms make losses for years in India because their margins vs cost remain out of synch.

5. People on the ground

Of the various bits of advice I share with clients, one is that you must ensure that however you operate in India, whether direct, through a distributor or in a JV, that you do so as any local business would. This means employing locals (even if they are working in a JV or overseeing a distribution channel) to represent your interests and run the business as if it has always been Indian. 

Identify one or two key recruits to start with. Work to get them committed to your business and philosophy, train them in the UK before they begin and then listen to what they have to say. You can expect to recruit someone with tremendous local and relevant sector experience in your business line – after all there are after all 1.2 billion potential employees.

But you have to consider your local employees’ culture. It may be surprising to you that a job title change is more important than a pay rise, but that is often the reality. Workers in India are different culturally, have different expectations and need to be managed accordingly. If you want to avoid high levels of attrition or overpaying your employees to keep them on board, get support from a local HR expert to keep your team happy.

Bangalore, India

Having people on the floor can be important in cities such as Bangalore

6. Be committed

When you establish some sort of presence in the market, whether it’s via a distributor, partner, incubator model or by establishing your own legal entity, do not assume your personal responsibility and time commitment will reduce; it will not. 

Any successful approach to the market will generate more enquiries, more sales leads and plenty of new opportunities – certainly in the initial stages, the follow-up will need to be supported by you. Factor in more time responding to such requests and, probably in the short- to medium-term, more time on the ground in India ensuring your platform is suitably established.

7. Getting started

Setting up a local legal entity for foreign companies is feasible for most sectors these days but compliance is a huge challenge in India. I often come across foreign companies that have already started operating in India but are not yet incorporated (typically incorporation takes between three to six months), are employing locals and breaking numerous laws.  To use the infamous quote, in India it really is true that you don’t know the things you don’t know.

However, there are companies that do know such as Sannam S4. Using a third party to help with incubation and start-up enables you to cost-effectively and legally put your toe into the water and get to know the lie of the land before you formerly establish a commercial entity.

The more support you have with the administration of starting-up, the more time you will have to focus on business development meetings, get to know your target market and work through what you will actually need to provide and how you will provide it.

In general, whether you are considering establishing a factory or outsourcing elements of your existing business or exporting and services to sell in India, opportunities here are plentiful.

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.