Tips and strategies for conducting business operations in the second-largest country in the world: India.
As a bank executive in India, Ram Narayanan was fascinated by the similarities and differences between his native country and the United States.
"I have always admired America's achievements and felt that if only American technology, management and capital [could] be married to India's excellent human resources, the possibilities would be limitless for the good of both countries and the world," he says.
Narayanan came to the United States 13 years ago and married Loral, an American of Anglo-Saxon origin, shortly thereafter. Now they are president and executive vice president, respectively, of Janaky International Corp., a resource and service company in Kenmore, N.Y., that is devoted to promoting American interest in India. They know firsthand that navigating complex market and cultural differences takes time and patience - but it can be done.
Human Resources
India's sheer numbers make it an attractive market. With 16 percent of the world's population, India is the second-largest country in the world, according to the Ministry of External Affairs. It is also the fifth-largest economy in the world, according to Janaky International's web site, which was set up and is maintained by the Narayanans.
However, it's more than numbers. K. Thomas Chandy, visiting assistant professor at Indiana University's Kelley School of Business, was born and raised in India and has worked for large companies there and in the United States. Because of India's large pool of educated people and skilled laborers, "I would think its biggest resource is people," he says. "If you go about it right, people are extremely loyal and will work very hard."
And just about every major computing company, Chandy adds, has an establishment in India whose primary task is developing software. Perhaps that is because India has the third-largest pool of scientific and technical personnel in the world, according to information provided by the Consulate General of India in New York. The country has a well-developed research and development infrastructure, with expertise in nuclear energy, space technology, satellite communications, remote sensing, electronic switching systems for communication, parallel computing, pharmaceuticals and computer software. A large network of engineering and technical colleges helps support this.
India's diversified industrial base spans almost all areas of manufacturing activity, according to the New York consulate. And power, communication and transport services are now being upgraded.
Of particular advantage to Americans is the fact that English is the language of business in India. "After 200 years of being part of the British Empire, lots of people speak English," Chandy says. Also, the country's legal system is based on British common law, which is where the American legal system has its roots.
Reforms undertaken since 1991 have given new momentum to India's economy, according to the Ministry of External Affairs. Employment is up; poverty is down. Exports have boomed, and inflation has declined. Also boosting India's economy are a strong entrepreneurial base, a large pool of professional managers, a well-developed marketing and advertising sector and a relatively inexpensive labor pool.
India also boasts a vibrant capital market and an investment climate that treats foreign investment on a par with domestic investment, says the New York consul. India has a well-developed financial sector that grew and diversified rapidly in the 1980s. Corporate performance is on the rise, and several multinational companies are operating successfully there.
Goods and Services in Demand
"The speed with which leading consumer and industrial multinationals and leading foreign brands are entering India reflects confidence in both the size and prospects of the Indian market," say the Narayanans on their Web site. A boom in consumer spending has been fueled by improved economic factors and the growth of the consumer finance business, they add.
The Narayanans cite a World Bank estimate that places India's average annual household income at $6,452 in U.S. dollars. However, they add, there are growing numbers of people with significantly higher incomes. This is especially true in rural areas: Rural consumers now account for more than 70 percent of the market share for radios, bicycles, cigarettes and mechanical wrist watches, according to information provided by Janaky International.
According to Trade Compass, the best prospects for selling U.S. goods and services in India are aircraft and parts, telecommunication services and equipment, computer software, electric power generation and urban mass transportation. Luxury items are also in demand, says Chandy, "but those are small potatoes."
Starting Strong: What American Businesspeople Need to Know
Succeeding in India means not underestimating its complexity or overestimating its possibilities, say the Narayanans, whose Web site includes a chapter on market entry strategy. Understanding the potential also means being aware of the pitfalls.
The Narayanans caution that those who wish to do business in India will face a government that, despite reforms, still moves slowly. Although India's infrastructure is being upgraded, it has not quite caught up with the country's economic growth. Power demand shortfall, poor road conditions and low telephone penetration (1.4 percent if the population) present challenges for American businesspeople. The Indian market is also widely diverse, with 17 official languages and six major religions.
The key, they say, as in all business ventures, is to have a plan - setting goals, analyzing the costs, choosing the best location, considering partnership, understanding India's legal and business particulars and having an exit option just in case your venture doesn't work out as planned.
A recent article in the Economic Times Business Guide to India takes an edgier approach to the current business climate: "For India's corporates, the world is getting meaner, tougher, more complex. Long accustomed to depending on the government to dictate the course of industrial activity, as well as to blaming policy-makers for most of their woes, corporate India is suddenly finding that there's no longer any point. … The message is crystal clear - the ball's in your court."
Managing chaos effectively, says the Economic Times, will be the most critical factor in any operation in the year ahead. Businesses are advised to clarify goals, streamline operations, implement strict cost controls and have early warning systems in place. "Essentially, it's the old adage - be prepared for the worst, and plan for the best," says the article's unnamed author.
The article cites the example of Coopers & Lybrand, whose international clients were wary of entering India: "C & L moved on to woo Indian business houses. It's important to identify and take advantage of the windows of opportunity that arise."
Chandy says large companies tend to expand into India for two different reasons: to sell equipment there and to use India as a source for developing and making products, such as software.
Location is crucial: "No decision will have as much impact on a company's success in India as this one," say the Narayanans. "Every state government is competing for business, and each offers an array of incentives intended to maximize the return on investment."
Choosing a suitable location also depends on the nature of the business, Chandy says. "If you're a big company, you'd pretty much have to have an office in Bombay and an office in Delhi." Bombay would also be a good location for opening a one- or two-person office to test the waters, he adds, although it is now one of the world's most expensive cities.
Bangalore, which he says is becoming known as "Silicon Plateau," is another developing area for high-tech operations.
Smaller businesses would be well-advised to base their offices on what they want to do, he says. If they're selling automotive parts or leather goods, for example, Madras would be a good location. Calcutta is the spot for tea companies.
It's important to know your market, the Narayanans say, and anticipate problems that may arise. For example, McDonald's has had to adapt to a culture that considers killing cows a sacrilege, is 40 percent vegetarian and is "very fond of spices." Kellogg faced a loss when breakfast cereal did not catch on with Indian consumers. The companies overestimated the ease of a middle-class shift to Western products, underestimated the strength of local competition, and overestimated the value of their reputation, the Narayanans say.
Although its labor pool is skilled and educated, India is a long way from creating a truly efficient labor market, the Narayanans say. An employer with more than 10 workers cannot fire them without permission from a government labor commissioner, which is virtually impossible to obtain. In a densely populated nation, where poverty is still a problem despite economic gains, "labor is so sensitive an issue that government officials speak only of protecting and creating jobs," they say in their chapter on entering the Indian market.
However, this, too, shows signs of change. Many companies, both foreign and domestic, bypass the regulations with subcontracting or early retirement. State governments, which compete with one another for investment, are encouraging this trend, they add.
Knowing the Territory
As a relatively new arrival to this country, Ram Narayanan faced a challenge not only as an Indian businessman in America, but as an Indian man married to an American woman. "Culturally, a vast difference seemed to separate us," he says. It took a couple of years and much determination to work through the adjustments. "Since then we have been, as the storybook says, living happily ever after. It's a great partnership!"
Businesspeople have similar adjustments to navigate: Commitment and a willingness to learn are essential.
India's relative poverty is often disconcerting to Americans, Chandy says. "I was back in India this past summer, and I was struck by how much things had improved," he says. "The beggars in the streets are almost gone, because people have food to eat. But it's not a developed world." Problems such as petty corruption have also improved, he adds.
Traffic in India moves on the left side of the street, British style. Mixed in with the cars are motorcycles, motor scooters, motorized rickshaws, trucks and carts. "The driving seems a little crazy coming from here," Chandy says. "One of the things I would tell any American is, 'Don't drive.'" Instead, he suggests getting around in a chauffeur-driven car, which is inexpensive and fairly reliable.
A more relaxed perspective of time is also important. Americans should not get upset if things do not run right on schedule in India, Chandy says, because they frequently don't. Taking the time to get to know people is essential. "You do business with somebody by getting to trust them, and you trust them by getting to know them, and you get to know them by talking about non-business things," he says.
Little things like body language can make a big difference. An up-and-down nod is understood in America as indicating "yes." In India, "yes" is signified by rocking one's head from side to side.
Chandy once sat in on a sales talk given by an American engineer to a group of Indian engineers. "At the end of the talk, he asked, 'Is this clear?' Everybody kind of shook their heads, and he thought they were saying no," he recalls.
Frustrated, the American launched into his talk again from the beginning. His Indian audience, taken aback, wondered why. The misunderstanding dawned on Chandy, who took the American engineer and one of the senior Indian engineers aside. "I kind of helped them think through this head-nodding business," he says. "Once they realized what had happened, they both laughed about it, but it could have been the end of a great relationship."
In Indian culture, anything important must be done with the right hand; the left is traditionally reserved for personal hygiene. "Even if you're left-handed, you don't touch food with your left hand. If somebody gives you a gift, you never accept it with your left hand; that's an insult," Chandy cautions.
"There's a whole bunch of different things like that, which you've got to get to know as you live there," he says. "Most Indians who do business with Americans would be understanding enough, but if you pay attention, people don't have to make excuses for you." Learn about India's history and politics, both ancient and modern, he advises.
None of this will happen overnight, says Ram Narayanan: "The most important quality Americans need to show while dealing with India is patience. It's absolutely necessary to look at India from a long-term perspective."
Help Is Available
In addition to the sources mentioned within this article, the following Web sites and resources offer further help and information for doing business with India:
General global business
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