Make in India
In this the 4th and last part of my 4-blog series on doing business in India I try to cover what it means to succeed in India. What you need to do.
Importantly, it must be understood that doing business in India means dealing with different types of industry classified, treated and protected differently resulting in different behaviors. So, you have the small-scale sector, medium scale, large scale, public sector, large private sector, government sector. Apart from the idiosyncrasies of different types of people, geographies that I have spoken about earlier, you now need to factor in these idiosyncrasies of industry type.
First a small secret that must be known. When an entrepreneur starts a business, it is always small and gets classified as small-scale industry. He gets tax breaks, gets lesser paperwork and gets many more advantages. Normal human behavior is to expect that he will grow, become big and thus not only outgrow the hand holding but also become more socially responsible. But no, many have multiple small-scale businesses by starting a new entity the moment they reach the thresholds which starts denying them benefits. So, it is perfectly possible that a person manufacturing say a million items of item X will be doing so from 10 legally different units each making only a hundred thousand. So, he is big, yet small. So, while how you approach him is crucial, more importantly it is how well you get to know him.
The risk in this situation is that you may be dealing with a “large” guy you think is small and thus either ignore him or treat him as unimportant.
So, the first lesson which as always is about pricing.
Get the price right:
This “get the price right” is easier said than done. But then you need to discover the price with time by not pitching yourself too high but, yet high enough for you to come down and find the equilibrium point. The moment you price low, the value perception is lost. Too high, you get shut out. As mentioned earlier a combination of deferred pricing, leasing, rentals, and such would be a better strategy to follow. Crucially it is important, whether small or big, that you engage with the customer without getting dragged into a price discussion till such time you know why the customer wants your product. Most important is that customers however much they may focus on price, still think and believe that low price means low quality and you can just find yourself losing the perception battle.
As mentioned earlier Indians want to do more with less, so its cash flow and not price that’s often the issue. People may compromise on “quality” “features” if they can do more for the long run.
Replicating global models:
As was mentioned in earlier parts, your global experience is only a guideline to work here. It is no benchmark. In India adapting the so called global attitudes, strategies, practices, etc in a rigid manner - failure is more likely rather than success. So, whether it is about dealing with customers, vendors, or even partners, prepare to learn new tricks, new attitudes and new ways to do business every minute till you tell yourself – gosh there was so much I didn’t know what I didn’t know.
Appearances are deceptive:
As mentioned earlier, you may meet a person who is doing a hundred thousand and you may judge him accordingly from what you see. But he is 10 times bigger. Different geographies, people come across differently. You will meet a millionaire in one area who dresses and behaves like he is just above poor, and then meet another who is poor but behaves like a millionaire.
You may find yourself dealing with a confident and assertive woman or a man who comes across as a chauvinist. You may find that a woman is not given her due status & expected to carry out a traditional role but at the same time revered as a mother figure. Whenever you start comparing the status of women in India and back home in the western world just remember – India elected a woman Prime Minister in 1966 and the reins of power in India have been with a woman for 25 years in the last 70 years whereas USA is yet to elect even a woman Vice President till date. Such contradictions are par for the course across the spectrum of doing business.
The first thing hence is to walk into every meeting with an open clear blank mind and make no judgement's till you have experienced the person and the business.
Logistics:
The infrastructure and the resultant logistics is a nightmare. There is a huge amount of you don’t know what you don’t know. The number of surprises are one too many. But guess what – the system works and quite efficiently at that. The following picture will give you an idea of the logistics challenge that every company faces.
India has a myriad of roads and traffic from wide wonderful highways to narrow by lanes. Often depending upon what you are transporting, doing a dry run is the best idea that you can have. Again depending upon what you are transporting, the experience may actually teach you many things that you missed or assumed.
Most importantly, be it personal travel or logistics, try always to ask the time taken, distance rarely matters. Don’t guess the time by getting the distance. You will be late.
Lack of focus and homework:
Its fashionable and even impressive to say that you are entering the Indian market back in your global corporate headquarters. But remember that it conjures up different images and impressions and you can have someone think that market size is a Billion people while another thinks your product is so great it will sell. So always remember to specify the target market size, the local market situation for your product. If not, what usually happens is that actual results are very different compared to assumed expectations and however successful, you may actually fail or lose money.
For example, the middle/ upper class section of society in India which buy cars will in many cases have a driver unlike in western economies. So, a car manufacturer who focusses on giving the driver all kinds of bells and whistles forgetting the passenger will fail because his actual customer sits in the back seat. So, this focus on homework cannot be overemphasized.
Exchange rate:
When you talk of spending 1 dollar, the Indian must talk of spending 80 Rs. So, it’s critical to understand this in every situation be it purchase, sales, equity, etc. Learn to think in both currencies and get the impact. You may just understand the person across the table much better.
Communication:
The communication medium in India is vastly diverse and at least to my mind, however much internet and online transactions are popular, there is still a huge population out there that still wants to touch, feel, meet, know the person. So be it discussions or sales, personal relationships still play a vital role in the chain. This may actually increase the cost of transaction initially and from a perception point of view, but in the long run and from an opportunity cost standpoint, this actually pays off hugely.
Also, the way you present your solution makes a big difference. For example, indicating a total price for an item with various sub components can be self-defeating. Instead indicating a lower minimum price for the base item and then indicating prices of various add-ons will not only help customers better understand the product offering but also judge the price better.
Flexibility in every action:
Right from product design to food recipes, operating procedures, etc you will need to be flexible to succeed. The taste of food across India is different and a “we never tinker with our recipe” will only bring you grief. In one case, the overseas company SOP required that workers have no “jewellery” on them and many Indian ladies wear certain jewellery that is linked sentimentally to their spouse. It was almost impossible to disagree with either requirement but yet the work had to be done. We found simple innovative solutions that involved a lot of education, counselling and effort while the foreign partners were stamping their foot in frustration. So, while many things are very important, in India nothing is holy (except possibly the cow 😊) and companies must be prepared to be flexible to adapt. Failure to do so would mean loss of time, money and even success.
For instance, a company like Benz not wanting to dilute their global standing on their products, understanding the Indian market, preferred to create a new brand “Bharat Benz” with a more Made FOR India product. Today it is not only a big success but also popular overseas. If Benz had stuck to their high horse of their brand and product designs, they would never succeed in India.
Broad philosophy:
You will hear fancy phrases like “Think Global, Act Local”. In India, you need to “Think Local, Talk Global, Act Local and Progress to Global”. However complicated that sounds, here is where local teams make a difference. Having a local partner, a trusted local leadership team will mean the crucial difference between success and failure. Parachuting a Indian origin leader from overseas may not always be the best idea. It’s always more prudent to have an open-minded foreigner with a competent local manager to work in tandem to achieve success.
The broad philosophies to have would be flexibility, patience, sense of humour, ability to function in chaos, understanding the inability to meet schedules, dealing with ambiguity or insufficient information etc.
Trust me that if you put an Indian into a situation where you have insufficient information, insufficient procedures you will have high chances of success as against any global expert from an advanced country. The following comment explains an Indian manager.
Attitude:
This can make or break a business across the spectrum. An approach that is perceived as arrogant, condescending whether in product presentation or even behaviour is the assured pathway to failure. As mentioned earlier there are a myriad of issues to grapple with and these avoidable mistakes must be avoided. Remember the guy across the table also wants to progress, wants to become you, wants to succeed, and if you don’t understand his limitations and challenges and react accordingly, he will not say anything. But he will not buy your story and his old boys network will get a negative signal about you, leaving you frustrated across the market.
Many a foreigner is big built as compared to Indians, and their behaviour here becomes even more crucial since you cannot create an impression of being physically intimidating, aggressive or superior even in something as simple as greeting a person.
Overestimating the market size and economy:
India has a population of 1.2 Billion but the actual market for a product could be hardly a quarter of that. So, don’t make assumptions based on population. Too many companies make this mistake, too often for this to be even funny.
Secondly, while labour is indeed cheaper, the cost of real estate is so humungous that it overtakes even a New York. Couple that with higher interest rates, collaterals that banks ask for when providing loans and the real picture is not as one thought.
Finally, the cost when manufactured in India is surely cheaper and creates a trust that nothing else can bring.
People matter:
In India, there is a strong personality cult and often the organisation or even a department is identified with the leader. So, every person however big or small is an individual in his own right. This is not about egos but just a trait that they matter, they have a role to play and are critical to the business. Anyone misjudging this can quickly find themselves turning a simple situation into one that is filled with egos, resentment and anger.
Just because someone speaks the queens English doesn’t make him a westerner. His mind still thinks like a local and if you were to put a simple arithmetic problem in front, most likely he will do the numbers in his native language tongue.
Like it or not there is a feudalistic nature in many, more so in some regions, though that is decreasing, albeit slowly.
You can’t fly in and out of India and having shaken hands and assume that the issue is solved. The stated intent, the real intent, the shaken hand and the famous Indian nod don’t mean a thing till the paperwork is done. Also in many cases the signal of where you stand is known from the most subtle and simple hints and gestures. These are far too many to explain here. A simple gesture of inviting you to share half a cup of your hosts tea conveys a lot more positivity than the formal dinner you were given in a star hotel.
Time:
The one thing you will find is that many do not value the time or the appointment schedule. Apart from a streak of indiscipline there are many more reasons and it is hence important to be prepared to have your schedules go “wrong”. A person spending anywhere between 2 to 4 hours per day in commuting to work, is unlikely to be very worried about how much time you lose. A call from his superior will make him drop everything else and give that person the priority. But on the other hand, the same person will happily work 12 to 14 hours a day and even on weekends without complaining. So, this “time” factor works both ways depending upon which way you look at it.
Inability to say NO:
The typical Indian is loath to say NO. Even his nod is deceptive. You don’t know if he is saying yes or no, if he understood you or not. So, the best thing is to repeat whatever has been agreed and seek confirmation. They are also loath to say – “I don’t know” “This is not my job” etc. Each such negative is perceived as “incompetence” and “failure”.
Also, Indians in general avoid “disagreements” and “conflicts”. These are not looked upon as professional incidents but as personal issues. So, while you will find an enthusiastic YES and agreements you may find silence and reluctant “Maybe” where there is disagreement.
Hence, you may just need to spend some extra time to understand these and deal suitably as you deem fit. If not, you may just go back home with what you thought YES from a person who isn’t in agreement with you, doesn’t know how to do the job and which was maybe not even his job in the first place.
Faith and Luck:
Almost all Indians have an abiding faith in their own religious or spiritual beliefs and luck. Luck can otherwise be called destiny or fate. So, reactions to certain situations and incidents can appear vastly different from the western world which can sometimes shock people. Also, one may find elaborate ceremonies and auspicious times and such when initiating something important. Respecting these and even participating in them can endear you to your business associate. Also remember however orthodox and rigid they maybe within their own family, they are completely flexible with the “white” skinned foreign visitor. So, learn to embrace and participate, not just your business associate, his whole family will support you.
Rules and Laws:
If one were to study the laws and rules of the country, they are so good that they date back to over 150 years old in many cases. But at the same time, they provide ample room for interpretation, and therein lies the rub. The person you are dealing with especially in government bodies, knows every law and every loophole associated with the law. Based on how you handle the situation and him, you confront the law or find a way to meet it. And it’s not always about corruption which is another common mistake that westerners make in their assumption.
For example, the import duty on say a car could be 125%. But import the car without the tyres and fix them in India, the duty may be very low. Such loopholes are not stupidities but more to attract you to set foot in India, to put your flag into the ground, to make a commitment.
Hospitality:
A philosophy in India is how the guest is like god. So, the foreigner is very often feted, treated, greeted, wined, dined and celebrated with lavish hospitality and treatment when in India. While the Indian may not exactly expect the same level of treatment from his foreign counterparts, it is important to note that these things are what build and strengthen relationships. Quite often the deals, the sticky points, the disputes and such are resolved over the dinner table than in board rooms. Issues are discussed in advance over such dinners so that the board meeting the next day doesn’t become a debating contest.
Legal and Liable:
Corporate attorneys or legal eagles have no place during the process of building and cementing the relationship. They find no place even in deciding the contours of an agreement. They are best brought in AFTER you have agreed on all issues so they can draft the legalese while you have a drink together. Expose your attorney, bring him in with legalese from the beginning is a sure-fire way to embark upon a relationship that’s most likely to fail. As repeatedly said across the blogs, TRUST and RELATIONSHIP is the bedrock of all associations in India.
Last but not least, the concept of liability, especially public liability is far different from what is commonly understood in western economies. Even in a perceived dangerous situation, the laws may indicate limits on what can be the liability and these can be far far lower than in any western economy. Unlimited liability is unknown here.
Consequently, even doctor patient relationships are built on trust and belief and the outcomes attributed to fate/destiny/gods will barring for outright negligence. Failure to understand & appreciate this, can by itself cause self inflicted hurdles to success not to speak of cost escalation.
Relationships:
At the cost of repetition, the bottom line to succeed in business in India is to establish “TRUST, SINCERITY OF INTENT and PERSONAL RELATIONSHIP”. These take time, experience but without these you may just find yourself having a fantastic honeymoon followed by a bitter divorce leaving you wondering what went wrong. Relationships can mean the difference between success and failure whether in the board room or court room or in the market.
Some examples:
Coca Cola walked into the Indian market by taking over the Indian market leader with Thums Up and discontinued the brand and overnight lost huge market share to Pepsi who were struggling to beat Thums Up.
Pizza Hut grappled with fixed recipes for years before changing to meet local tastes and get success.
Nokia plastered every small kiosk with their board at little cost and created their brand awareness and became the market leader though Motorola struggled.
Both Ford and GM came into India with cars that were perceived as outdated, did not show the nimbleness required and lost the market to Hyundai and Suzuki.
Sometime back Hyundai in India had the tagline – Drive home a Relationship. That in essence captures what it means to do business in India and succeed.
In closing, while it is often understood that the Bhagavad Geeta is a religious treatise of Hinduism, the fact is that it is more like a lesson in life and management. Most Indians even if they may not have actually read or imbibed the writings in this book, have imbibed it’s essence due to the elders in the family and society. Just like Hinduism, it’s a way of life. Some of the following quotes will give you a glimpse of what it means so as to understand the Indian when you do business with him – never mind if he is educated or not, that’s irrelevant.
There is a fatalistic attitude to life which in terms of crisis and failure end up being a source of strength
Also the links to my previous 3 blogs which need to be read in totality and together can serve as a guide to doing business with/in India are as follows.
Part 1:
Part 2:
Part 3:
Comments