How to grow your business in India
Why long-term and sustainable rewards await those who take the trouble to understand India's needs
The growth of its anglophile middle class makes India a prime target for entrepreneurs and investors, but that’s only half the story – long-term and sustainable rewards await those who take the trouble to understand the country’s needs.
When Lord Mandelson addressed the third annual UK-India Business summit at the end of October, he grumbled about the failure of Europe to “get” the pace of Indian change and the implications for the global economy. With bilateral trade between the UK and India still growing (reaching £12.6bn in 2008 despite the difficult global trading conditions), it’s hard to ignore, but many smaller companies still don’t understand the scale of the opportunity that faces them.
However, if you think our shared history will gain us preferred status in India, think again. Billion dollar-plus investments from Cisco, Intel, Microsoft and IBM, and the growing number of Indian students who prefer Caltech, MIT and Penn are among the signs that India is learning to leapfrog its old partners just as it is much of their technology.
Nevertheless, historic links still matter, admits Jaideep Prabhu, Professor of Indian Business and Enterprise at the University of Cambridge. “Indian politicians love coming over here to talk about the Indian economy, because they see us as closer than the USA, both geographically and culturally.”
Models of engagement
Perhaps the first difference the new entrant should consider is the time difference. Most of the people we spoke to were physically in India, which meant they were five and a half hours ahead. “If you need to talk to a UK office, you miss half the day,” points out Sonita Dass, founder of Urban Shore, an ‘über-classy’ beauty store, which opened its Delhi premises in 2007. “I work mainly with niche UK cosmetic brands, like Philip Kingsley, but also some in the USA, and their working hours never coincide.”
This means working in a very modern way, with little distinction between office hours and leisure time, and always having your Blackberry and laptop at your side. You have to stay a step ahead with the latest technology to compensate for deficiencies in local infrastructure, says Dass.
India’s Planning Commission says the country needs to invest $500bn on this creaking infrastructure that threatens to depress economic growth by 2%. This may not all happen by the original target of 2012, but roads, ports, power production and school building all represent fantastic opportunities for UK companies, such as marine consulting engineers Beckett Rankine. In 2008, the firm set up a subsidiary in India after joining a UK Trade and Industry (UKTI) sponsored Ports and Terminals Group trade mission. Projects include port expansion for coal handling, and developing jetties to accommodate roll-on/roll-off ferries, dry bulk carriers and the like.
Beckett Rankine found the process long-winded and time consuming, but well worth the effort. Who you know is the key to progress, according to director Gordon Rankine. “A lot of things happen a little differently to how they do in the UK, by people knowing someone and them knowing someone else,” he says. “A lot of phone calls are made, and we find out who the right kind of person is, not only with the skills that we need, but also the character. And obviously you need people who are trustworthy and you can get on with.”
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Involvement with UKTI and the UK-India Business Council (UKIBC), which promotes bilateral trade, business and investment opportunities between the two countries, lends gravitas and helps forge the first crucial contacts, Rankine adds. His plan is to develop the Mumbai office until it’s the equivalent of the London office. He then wants to establish absolute linkage and transfer of data and skills between both offices, so they can work together on projects worldwide.
India’s IT infrastructure is also being improved by technology developed by another British company, CambridgeMatrix, founded in 2002 by Graham McKoen and Rend Shakir. “Wireless hot spots have been widely implemented, but are disparate, unconnected, and largely indoors,” explains Shakir. “Now we have established a 17km2 wireless mesh network in Mumbai, where it’s possible to hop between hot spots without having to log-in repeatedly.” This is the second Indian implementation, following a successful trial in Gujarat in 2007. Shakir says it will revolutionise business communications.
Urban Shore, Beckett Rankine and CambridgeMatrix are all operating successfully in India, but it wasn’t simply a case of cloning their UK operations. “Because your business model works in the UK, it doesn’t follow that it will work in India,” Dass warns. “Do your research, but don’t go there with a rigid business plan – be flexible.”
Like Dass, Vandana Saxena Poria was born and educated in the UK. Her Get Through Guides provide budget access to professional and technical qualifications. She started up in the UK, but in 2007, when seven months pregnant with her second child, she moved to Pune because it’s an educational and IT hub.
You might want to come to India to secure a substantial niche market, as in Dass’ case, or to meet a much larger education and training need while taking advantage of low-cost sourcing, like Poria. Alternatively, the opportunity might come through a client. Manchester firm Photolink Creative was introduced to the country by one of its largest customers, Home Retail Group, developing a home shopping catalogue in India for Argos.
Since setting up an Indian subsidiary in 2007 and a studio in Mumbai, Photolink’s chief executive David Walter has taken on rebranding and communication work for the National Centre for Performing Arts (NCPA) and the internet strategy and build for the Tata-owned retailer Westside.
“You can’t take anything for granted in India,” says Walter. “What we have to offer is very special, and we couldn’t find any companies in the country to partner with, so we had to be ready to spend our own money. There are definitely no easy wins in India, which is why it’s crucial to secure the best advice. We found UKIBC exceptional when we were looking for property in Mumbai.”
For Jermyn Street shirtmakers Charles Tyrwhitt, a local partner was essential. Considering that, within living memory, British cognoscenti would order high-quality tailored shirts from India, it seemed rather a coup when the brand was launched recently at the Mumbai and Bangalore branches of The Collective Store. “Their position as an upmarket, high-quality outlet goes perfectly with our target audience and has helped us to position ourselves in the Indian market,” says the company’s founder Nick Wheeler.
Oiling the wheels
Exporting always means leaving your comfort zone, so it’s useful to have some partisan agencies on your side. As far as India is concerned, by far the most important of these is the UKIBC. It is something of a one-stop shop, claims its chief executive Sharon Bamford, because it can plug its members in to the services offered to all exporters by UKTI, via the trade interests of the Delhi High Commission.
These services include the Overseas Market Introduction Service (OMIS), and the Export Marketing Research Scheme (EMRS). OMIS can help analyse possible market entry strategies, identify potential business partners, set up key appointments and even organise a launch event for your product in India. EMRS is managed nationally on behalf of UKTI by the British Chambers of Commerce. It offers free, independent advice about how to research the Indian market.
“Use all the available resources,” advises Bamford. “I never fail to be excited about the bond between the UK and India. It won’t be easy, but the rewards are huge. The Indian economy took a drop to just below 6% growth, but confidence is back and the government has a priority to return the figure to 10%.”
UKIBC board members are happy to mentor small companies, she adds, and make personal introductions where possible. Once you have set foot in the market, there are opportunities to network with other British companies and learn from them. One of the first things Poria did in Pune was to set up the British Business Group (BBG), which she now chairs. There are 67 British companies in Pune, which are either wholly owned subsidiaries or joint ventures, as well as more than 200 businesses with a British connection. The BBG allows them to share knowledge and, where necessary, act as a community to address governance or infrastructure issues, for example. There are BBGs in Mumbai, Delhi and Goa too.
In India, personal relationships are the engine of business, and have to be nurtured. After the USA and Europe, India is LinkedIn’s fastest growing region, with 3.5 million registered users, currently growing at around 70,000 a week. Its groups and discussion forums are enthusiastically used and it is certainly one way to contact professionals, whether you need to fill a job or find an accountant.
All the entrepreneurs we spoke to use LinkedIn, although chiefly as a back-up. Once again, unless you have a trusted local partner, the UKIBC and UKTI (working through the High Commission in Delhi) are the best sources for an initial introduction. Ajit Mishra, who founded the London office of India’s oldest commercial law firm FoxMandal Little describes the traps that await the unprepared. Tax can be imposed at municipality, state or national level, for example. Furthermore, as in the USA, there are state laws to consider as well as statutes, further complicated by customary laws and precedents.
If you are thinking of taking on a partner or entering a joint venture agreement, Mishra advises going through the books closely. “Never neglect due diligence,” he says. “If you are getting into property, remember that in India, land records are not computerised and searches may need to be conducted manually at the local registry. And in some cases title deeds don’t guarantee ownership.”
So you’ll need a competent tax and property lawyer in India, as well as the accountants and auditors you would expect to engage. But it’s easy to find yourself in the wrong hands, warns Poria, so take care over identifying the right people. “It’s not something that can be done long distance. Come over in person, meet the people, then keep in constant touch via email,” she says. “Indian professionals hate to say ‘no’, and may agree to unrealistic schedules, so you need to be relentless, maintain personal contact, insist on strict deliverables and check progress on a weekly basis.”
A mine of opportunity
Upmarket retailers, such as Charles Tyrwhitt and Urban Shore, will only find customers in Indian cities. But Professor Jaideep Prabhu points out that while the downturn hit the urban and international business sectors, it hardly touched the rural and mass economy, which remained buoyant – 72% of India’s 1.2 billion people still live in rural areas. “The agrarian sector has been driving the Indian economy,” he says. “Over the next few years this is going to be the key growth sector.”
Perhaps this is where British entrepreneurs and innovators should be looking, Prabhu suggests. “The rural market is a great mine of opportunity with large and urgent needs for energy, information, education and financial services – 50% of the population still don’t have bank accounts,” he explains. “We are seeing social entrepreneurs entering this space, whether returnees who’ve made money abroad or people with a social objective that are also making money out of it.”
The World Bank estimates that 456 million people in India live under the global poverty line of $1.25 per day – that equates to a third of the global poor. “UK companies shouldn’t overlook the lower income sections of Indian society,” adds Mishra. “A very small rise in average income would mean a massive leap in the low-wage economy.”
Microfinance will be a vital tool here. In East Africa, M-Pesa proved that mobile financial transactions can be done quickly and securely. “There’s an explosion of these business models tackling unmet needs, and big unfilled voids, where people live on a daily budget. Entrepreneurs and smaller companies can take up these opportunities where bigger companies do not yet see the scale they’d be looking for,” says Prabhu. This is precisely what CambridgeMatrix is doing in Mumbai, by rolling out a wi-fi mesh across the city at speeds of up to 100Mbps.
But it takes a special kind of imagination and vision to identify these needs, which are very different from finding a traditional gap in the market. “Companies need to be prepared to partner with the right people locally, and to create their own ecosystem to inhabit,” says Prabhu. Poria agrees, adding: “I have never regretted coming here, only not doing it sooner. My advice is, if you think you can cut it in India, don’t make it a project for next year, do it now! Your product could become huge if you are first in the market.”
Look before you leap
Eight tips for entrepreneurs entering the Indian market
- Do your spadework – research markets, have a realistic business plan backed by thorough research
- Identify the best professionals, then do whatever you can to secure their services
- Always have an arbitration clause in your commercial agreements
- Take your time and immerse yourself in the market
- Learn through sharing best practice with other companies
- Be flexible – it’s the only way to do business in India
- Be persistent – in India, where there’s a will, there’s always a way
- Throw away your prejudices – about people, places and how things should be done
The UKIBC at a glance
A quick introduction to the organisation that could be your most important trade partner of all
The UK-India Business Council is the lead organisation supporting the British government in the promotion of bilateral trade, business and investment between the two countries. It aims:
- To play an influential role in creating and sustaining an environment in which free trade and investment flourishes. A key objective in this regard is the highlighting and dismantling of bureaucratic and regulatory barriers to entry
- To provide the resources, knowledge and infrastructure support for UK companies to make the most of emerging opportunities in India
UKIBC has offices in New Delhi and in Mumbai, and UK regional representatives in the North West, the Midlands and in the South East. It has organised a number of initiatives, including:
- A high-level delegation to India in January 2009 led by Lord Mandelson, attended by more than 200 businesses
- Over 33 seminars, workshops and events raising awareness about UK-India trade and investment opportunities
- The annual UK-India Business Summit, launched in 2009