Whether it’s the links to a colonial past, exoticism, its sheer size or seductive growth rates, British firms keep going back to India, despite the steep challenges of doing business in what is an extraordinarily complex market.
1 Jul 2016
Few prospective trading countries trigger the degree of excitement and fear among business owners as India. Its contradictions don’t end there. Home to some of the world’s best software engineers, India also has among the world’s highest levels of illiteracy; large dynamic cities yet a society that is still largely rural; a consumer culture fascinated by the West but also where very few foreign brands have achieved success.
High anxiety is never far away when tackling India’s notorious bureaucracy, corruption and canny local operators, as well as its richly nuanced and complicated culture.
Gateway to India
Heavy-handed taxes and government quotas historically shut out many foreign firms. Both mean that foreign businesses have tended to partner with a local firm before making a go of India.
India has recently set about removing most of its trade barriers, reducing tariffs to around 13 per cent from an average of 71 per cent in 1993. Free trade agreements between India and the UK are currently being negotiated so the landscape is set to change again in the near future.
Taking on the Indians
Even the most successful global firm can find itself outfoxed by a much smaller Indian operator, even one with a sub-standard rival product. Competing with a local company means tackling one of five realities: Indian firms know how to grease the wheels; they can and will undercut the prices of western companies; they’re better plugged in to India’s idiosyncratic distribution networks; they can adapt products for local tastes (for years the dual-sim mobile phone had left big phone companies in the dust); or are better skilled in marketing to Indians.
Nation of shopkeepers
Supermarkets and big retailers have often struggled to crack India’s legendary hyper-local shopping culture. Tiny owner-run kirana shops dominate India’s towns and cities, their unfamiliar retail structure stumping foreign firms looking to break into India. There are more than 14 million such shops in India, with only four per cent bigger than 500 sq ft. Kiranas operate on tight margins, typically running a 10 per cent margin on stuff they sell.
Mall culture has arrived in India’s big cities in recent years but it’s e-commerce – fuelled by smartphone adoption – where the most fascinating battle is taking place. More people are predicted to be online in India over the next 15 years than in any country. The £11bn spent shopping online in India last year is set to multiply seven times by 2020.
State by state
Although India’s 29 states don’t have their own laws, they do have their own quirks and are run by governors keen to demonstrate why their state is different to the others. Those boundaries are further complicated by the administrative divisions within them: India has 22 official languages, including Hindi and English, as well as seven major religions and six main ethnic groups.
Best cities for business
India’s software hub is home to tech companies such as Infosys, Wipro and ISRO, as well as major educational institutions. A direct Air India flight to San Francisco is in the pipeline (which would be the world’s longest) to link the two software hubs.
If Mumbai is India’s New York, then Chennai is its Detroit, thanks to a booming car industry that turns out 30 per cent of India’s automotive output each year.
Located on the edge of New Delhi, Gurgaon became a corporate hub in the 1970s after Suzuki based its manufacturing plant there. The city now hosts 250 Fortune 500 company offices, including the Indian headquarters of Coca-Cola, IBM and Microsoft.
The former port city is south Asia’s commercial heart. Thriving music, film, fashion, food and finance industries continue to attract people looking for an opportunity, despite its sky-high rents and horrendous traffic.
India boasts one of the world’s richest and liveliest media markets. TV, newspapers and, of course, film all form massive parts of the national culture. Bollywood and cricket dominate the national discourse and its stars often endorse dozens of products at the same time. It also has one of the few successful newspaper industries in the world, with more than 82,000 different titles in operation and where print publications account for 43 per cent of corporate advertising.
Religious festivals are a big deal and make for big business. Companies gear product launches and promotions around festivals such as Diwali, Holi, the Khumbe Mela and Eid, fuelled by the spirit of gift-buying and celebration that comes to the fore during the festivities.
The monsoon begins in the south of India in June, sweeping up to Mumbai, and continues until June. It can have a major impact on infrastructure and the economy depending on the severity of the rain.
Trading in India: Case study
Trading in India since 2008
A shoe business with a focus on comfort, Pavers has 100 stores across the UK and Ireland but the past 10 years have seen the family business make a move into 20 Indian cities under current MD Stuart Paver. He credits the success of this strategy to a decision to link up with local partners that had a similar family business mentality and experience in the Indian market.
This story is taken from Courier June/July 2016.