Dial INDIA… It’s Diwali
Many folks see the merit in large corporations investing to grow their business in India, but what are the prospects and potential for mid-sized overseas corporations to do so? Do they have deep enough pockets to ride the roller coaster and survive long enough until the end of the “samudramanthan,” to taste the fruit (I spoke about this phenomenon in my earlier post, Whither India)?
But first, as with all things good in India, it is important that we herald all beginnings as an auspicious occasion. And what better time than Diwali, the “festival of lights” which Hindus celebrate this month. Diwali symbolizes the victory of righteousness. This festival commemorates Lord Rama’s return to his kingdom Ayodhya after completing a 14-year exile. Diwali is also considered to be the festival of the Goddess of wealth and prosperity, Laxmi.
Diwali is derived from the Sanskrit word Deepavali which means rows of “diyas,” or clay lamps. The lighting of small clay lamps signifies the triumph of good over evil.
For business communities, Diwali signifies the beginning of a new accounting year. It is the time to shop or start new ventures.
Diwali is certainly an auspicious time for those who have not yet embarked on their India journey to do so. And for those that are invested here, to double your resolve. India is transforming for the better (I will explain more about this transformation in my next post).
So, what is the recipe for success for mid-sized overseas businesses? What should their approach be? How difficult is it really to start a business in India? I know, there are too many gory stories out there. Am I going to burn myself? What approach should I take before loosening my purse strings? These are certainly not unfair questions to ask.
In the late ’90s, one such business that I worked for as their first employee in the country, took the plunge and invested in India as a part of their growth strategy (in the communications space, catering to B2B customers). Their worldwide revenue was below $100M at that time. The India bet paid off and in later years, India became an important market and a hub for a number of different activities. I had the opportunity to script their success story and execute it. There were many learnings that I would like to share with you as you embark on your own journey to this great land:
- India is Not One Common Market. There is a new India every 100km. The way business is conducted and transacted changes from city to city. To be considered a serious player, it is important to be a part of the community and demonstrate your seriousness to the local market by having a physical presence. The Indian customer wants to see this commitment before doing business.
- Marking Your Presence in the market through the liaison office route is a good place to begin. A good and reputed accounting/advisory firm can help you get the approvals from the Central Bank for this. The cost of entry is low and costs a few thousand dollars (Note: A liaison office license does not allow you to buy or sell in the country. It allows you do business development and marketing. But, this is a great first step).
- Set Up an Office. Remember, having physical presence is critical. Decide which city offers the best potential for your business and start with one location. Yes, you can travel to other cities to transact business, but costs will go up.In terms of office space, India has world-class commercial real estate infrastructure. You should begin by starting your operations in a business center and then gradually move to your own rented space over time. I have started several operations in business centers and they have great facilities and work well.
- Hire a Strong Country Leader. This is the single most-critical step. Hire someone with in-depth local market knowledge and experience. Your Indian country leader has to have a profile which is different from that of typical sales manager that you may be hiring in other markets. Look for someone with a good educational background and as a rule, an experienced profile which is twice that of what you would look for in your home market. As an example, if you look for someone with 8 years of work experience as a district manager in the US, look for someone with 15 years experience in India to lead your India liaison office. Do not compromise here. Hire top grade talent and invest in this person ahead of the business curve. A number of global and local head-hunting firms operate in India. They understand the local market and the talent pool available.
- Build Strong Local Partnerships. If you begin as a liaison office, this is a mandatory step. However even if you decide to set up a subsidiary (because you want to have a buy/sell entity) from day one, building local partnerships is important. To start with, identify one good local partner and motivate her or him to invest in growing your business. Do not fall into the temptation of forming multiple partnerships too soon. Build critical mass with one partner before appointing more. There is nothing worse than having three partners for none of whom you are a strategic play.
- Support Services and Infrastructure. For B2B businesses, it is important to build credibility and trust with customers particularly after sales. India has many good third-party service organizations that can support you in this endeavor and can integrate well into your processes. India’s vast talent pool and entrepreneurial spirit can be leveraged to great benefit.
- Build Your Brand and Identity. In a complex market like India, this can be challenging. With limited marketing dollars, your options get limited. I recommend that you leverage public relations to help get your message across. PR is more cost-effective than advertizing, but it is important to get it right. Of course if you are in consumer goods, consumer-durable or mass-market player, advertizing is a pivotal component of your marketing mix. However for the rest, PR offers great opportunity. India has leading PR and Advertizing firms which understand what global organizations want. They can assimilate your messaging quickly and help you adapt this to the local market. Indian customers want to buy from someone who not only has good products, but is well-known locally, has a good reputation and is committed to the Indian market. A good country manager can use PR extensively to get the message out. Being a known quantity in the market is not just a sufficient condition, but a necessary one. Democracy does offer advantages!
- Advisory Board. Set up an advisory board, as it plays an important role in advising, forging new relationships and even optimizing your strategy. Unlike boards of companies, there are no stipulations in India around the setup and administration of an advisory board.
- Expansion. After your first year of operation, build a three-year plan. As a part of this, evaluate the setting up of business operations in multiple cities (at least three major markets). Also evaluate the merits of moving your operations to a subsidiary model which will give you greater flexibility.
It is an exciting time to be in India. The process is not as daunting as many think. I encourage those who are not here to go ahead and take the first step, and what better time than this Diwali? May Goddess Laxmi bring prosperity to you!
To learn more about guest blogger Manjoj Chugh, please read his bio and stay tuned for more posts.