Note: IndustryWeek posed a few questions to Gunjan Bagla author of Doing Business in 21st Century India: How to Profit Today in Tomorrow's Most Exciting Market, about best business practices in India.
Q: You talk about the unique aspect of negotiations in India. What key points do a manufacturer who is either setting up shop in India, sourcing from India, or selling to the Indian market need to know?
A: Negotiations in India often take much longer than in the West. If the Indian partner goes back and forth on certain issues, understand that there's not necessarily any ill-will, malice or deception in this process. It may simply be a manifestation of the Indian partners getting more comfortable with the idea.
Take time to build trust with your business partners in India, if you choose to partner. In the event of a dispute, courts in India are not very helpful so you want amicable resolution to the extent possible. If you invest time and effort in the relationship, it becomes much easier to find amicable solutions. Find a partner with whom you can negotiate an amicable divorce if and when necessary.
Some local factors can be more confusing than in the West: for example the ownership or lease rights of the property where the facility is located. In some parts of India, shop floor employees may speak different languages so drawings and process instructions need to be very robust. Transportation within India will punish the product and its packaging far more than one might expect so be sure that your product will survive this process.
Also in many cases, we help our American clients set up a company of their own with no Indian partner. In most industries this is legally possible; it is also desirable if you prepare appropriately and have the right guidance.
Q: In your book you discuss the fact that domestic companies have an advantage. Can you give some examples of these companies and suggest ways for U.S .or other countries to compete with domestic manufacturers?
A: If you want to sell tractors in India, you will find Mahindra to be a strong local competitor. If you want to send aircraft, H.A.L. a government owned entity, is a company that you must content with as a supplier or partner. The incumbents understand the market and are firmly rooted -- very often, you must adapt your products, your pricing and your packaging to local needs before you will even get a chance to considered. Selling obsolete American technology into India may worked in the past, as a way to extend the product life cycle; it's no longer successful in the face of strong local competition. Establishing some local manufacturing and using local materials if appropriate can be helpful. Onsite service and repair is far more important in India than in the west (even for products that could easily be shipped back to the depot for repair.)
Q: Do you suggest that U.S. companies partner with an Indian-based advisor when trying to enter the market for the first time?
A: Entering the India market without a sophisticated advisor can be disastrous. India is a confusing place for the new entrant and it is very easy to jump to the wrong conclusions when getting started. The large consulting firms have offices worldwide. Boutique firms that specialize in a country (India) or in a particular industry are often the most effective. The advisor can be based in your home country or in India, as long as they are bi-culturally savvy and spend enough time in both countries. Some India-based consultants who don't have a deep appreciation of western values tend make short-cut assumptions about American clients that can be counterproductive. For example. one common myth in India is that American companies are not cost-conscious: some parts of the Indian system have a built-in American premium for the same product or service that other would pay less for.
Q: What particular sectors in manufacturing will grow in the future?
A: India should see growth in electronics manufacturing, automotive manufacturing, machinery and capital products, aerospace and defense products. Mid- to-low volume manufacturing of any kind should grow as well as any manufacturing that requires extensive training or complex skills. Manufacturing that involves local design engineers is an asset. Companies often prefer India, in products where IP security is a crucial issue. As electric power availability improves in India other forms of manufacturing will become competitive in India.
Very high volume or low-skilled work (such as toys, appliances, household goods, fireworks,) is often better handled by China, but we do find exceptions. For example manhole cover casting from India is very competitive.
Gunjan Bagla is the author of Doing Business in 21st Century India: How to Profit Today in Tomorrow's Most Exciting Market. He is the managing director of Amritt, Inc. which advises Western companies on doing business in India and China. http://www.amritt.com/ For information on the book visit: http://www.amritt.com/Doing-Business-In-21st-Century-India.html