Over 1.35 billion people live in India. It’s the world’s second most populous country. This makes the country very attractive to many businesses with a wide range of products and services to sell.
The thing is – the Indian market is huge and full of potential. The people have a real strong purchase power and therefore the market is saturated with untapped potential.
However, a number of foreign companies have had problems penetrating the Indian market and taking advantage of the large, lucrative, business potential and opportunities that exist there.
One of the reasons more major companies have not been able to make inroads into and become successful at doing business in India is because they often attempt to impose traditional business practices and models on the local population.
Learn the Indian Way Of Doing Business
Traditional global best-practices don’t work in the Indian market. Companies that have tried typical global business models like sole ownership of distribution have encountered raising costs as well as dampened market penetration.
That’s because India’s fragmented market requires multiple-channel handoffs.
Plus, the country’s labor laws can make it very expensive to organize certain types of distribution operations. To be successful companies have to contract out their product distribution to local entrepreneurs. This will enable them to increase market penetration and cut costs.
Trying to do it all alone, is a recipe of disaster and a big business mistake in this market.
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One large global automobile company was able to become one of India’s largest manufacturers because they added an Indian presence to their operations.
They built a local plant and created a local research and development facilities in order to help them better understand how to attract Indian customers. The company also hired a brand ambassador who was a well-known Indian figure.
As a result, over a period of 10 years the company has seen its market share and its profits consistently grow at the amazing rate of over 40% each year. Adding an Indian presence has made a dramatic difference.
A tactic that can be implemented when pursuing this strategy is –
- Creating a Social Media Account that is Localized For the Indian Audience – Almost all big brands use this tactic. For example, Netflix has a Netflix India Twitter and Instagram handle. Here’s a guide on making it work on Twitter.
- Creating a blog that is localized for the Indian audience – Business Insider, Forbes are key proponents of this strategy. If you search for Business Insider in Google or go to their homepage, they redirect you to the India version of their site which is businessinsider.in.
Related Read: How to Fund Your Startup in India
Considerable Inroads Being Made
A growing number of businesses have been able to make considerable inroads into the once seemingly impenetrable Indian market.
They have begun to understand that trying to impose old tried and true global business practices and models only leads to limited success in certain niche markets within India and not to large scale market leadership.
To take advantage of the vast potential of the business opportunities available in the local Indian market, many businesses have now begun to change their approach to doing business in India by listening to local consumers and business advisors.
In fact, this following video by CNBC shows just how Dunkin’ Donuts failed in India.
Tapping Into India’s Talented Population
Another method foreign companies have used over the past two decades to make their business operations in India become prosperous and successful is tapping into the large pool of talented, well-educated, people in the country.
In the past, some foreign companies imported their workforce and tried to make them adapt to doing business in India.
Many companies have come to realize that India has a depth and breadth of talented individuals with the skills, training, expertise, experience and innate knowledge of the local practices necessary to help any company to be successful.
Point of note: Countries all over the world outsource their IT works from India.
Always remember to enforce a company culture when hiring talents to work in your business. A good startup culture can make or break a business.
Guess what the best startup culture is?
One that resonates with your personality.
If you are a guy who loves fun at work-place, keep the atmosphere lit. If you’re a guy who focuses on quiet, uninterrupted focused work, keep the culture like that and hire people who sync with your culture.
This is why it is always important to find out your type of entrepreneurial personality first.
Maximizing Economies of Scale
Drawing on the lessons they learned while attempting to do business in China, many multinational companies have begun to maximize economies of scale in their business operations.
They have hired Indian workers to build the facilities to manufacture their products in India, trained local workers to handle the manufacturing processes and used their knowledge and experience to dramatically increase output levels.
As a result, their fixed per-unit costs have decreased, the quality of their products has improved and their return on investment and profits are increasing more each year.
The growth rate of many foreign companies doing business in India is often only about half of what the sector can deliver. The key for them to take their growth to the next level is fully embracing the Indian way of doing business and treating India like a second home market.
Several best-practice examples are beginning to emerge. They include better understanding India’s labor laws, working closer with local entrepreneurs and better understanding how to attract top Indian talent and appeal to, engage and build mutually beneficial long-term relationships with consumers in India.
In order to fully realize India’s potential, it is essential for companies to display an exceptionally strong and visible business commitment to the country.
That includes investing in local talent and facilities, empowering their local operations, paying closer attention to Indian consumers’ needs and embracing the customization that’s required to better serve the local market.
Executives of large corporations interested in doing business in India must give lots of thought to the most effective and efficient ways to enter the market. That includes adopting approaches like joint-ventures.
Many global economists are expecting India’s economy to grow by more than 8% annually over the next few years, even after the Corona-Virus pandemic.
That’s among the highest economic growth rates of any major emerging economy. Over the next decade, India could be the source of over 20% of the global revenue growth of mobile handsets and several other product and market categories.
For many companies their future depends on them being able to raise their game and improve their ability to be successful in India. It’s essential for their survival and growth they properly position themselves to have a significant market share in India’s emerging economy.
So, What’s the Problem in India?
The only problem in India is its archaic labor laws and interference in the operations of the manufacturing sector by bureaucracies. This is why, Indian economy is called a “red tape economy”!
However, new labour laws are in the horizon. A bill has already been passed in the Parliament by the ruling party and considering the overwhelming majority of the ruling party, it is of no-surprise that the Bill shall be passed very soon.
Businesses that hope to win in India must build operations and management systems that are country specific. They must also avoid the short-term profitability trap and commit to building and empowering Indian organizations.
Bringing in expatriate company heads often makes the company susceptible to becoming victims of short rotation cycles which can inhibit the execution of their long-term strategy.
A commitment to winning in India means creating policies to help the business to successfully survive the inevitable cycles and volatility by supporting the workers and entrepreneurs.
When the leadership of any company is serious in their commitment to their operations in India, they can enjoy many benefits. It can do well both as a joint venture or a standalone business.
Some companies launch aggressive marketing campaigns to promote their products and service and have it financed by their global headquarters rather than raise prices in India to cover its cost.
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That enables the Indian subsidiary to quickly be able to take command of its operations. That type of commitment and support has led some companies to become industry leaders in India.
Autonomy And Support
Providing the subsidiaries of multinational companies in India with the support and high levels of autonomy they need makes it easier for them to adapt to market conditions as they change and remain viable and profitable.
Empowering local management is critical to improving any Indian unit’s performance. Shifting the axis of governance toward an Indian business unit that’s stronger, knows the Indian market and can directly connect to the company’s global leadership when making major decisions facilitates better strategy development, execution, accountability and faster growth.
A Successful Growth Strategy
Local empowerment that drives innovation and entrepreneurialism, decreases the time it takes to bring new products to market and creates a vast array of lucrative opportunities in India helps to create a successful growth strategy.
Adding strong, capable, Indian middle managers that help facilitate successful execution is critical to companies that prioritize continuing professionalization of Indian subsidiaries.
To enjoy long-term success in India, companies must look beyond short-term solutions and measures and have the vision and commitment to put effective long-term policies, systems and structures in place.
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Author Bio: Ted Lowe is the content marketing head at Empirepromos.com. He loves watching Brooklyn 99 and Impractical Jokers.