9 steps to succeed in business in India
Now is the right time to enter the Indian market. The Indian economy is growing steadily, at the moment (state: 2018) with 7.5% per year. Thanks to a large and growing middle class, India is a rapidly developing consumer goods market.
Advice for doing business in India
Over 250 Dutch companies have successfully entered the Indian market with growing and profitable activities. Many of them have given a glimpse into the kitchen and told what challenges they faced when they entered the Indian market and how they overcame them. These lessons have been combined into the following 9 advice for doing business in India. They can help you set the first steps to the Indian market.
Step 1: Know your market
The Indian market is as diverse and extensive as the country itself. The overall market is made up of a complex collection of submarkets. Each of these smaller markets requires its own approach, geared to the sectors and intended customers. Identify your specific customer group clearly and think carefully about how you want to achieve them. Entrepreneurs must tailor their products to local needs and requirements. Consult the large amount of secondary data available on the Indian market and the various submarkets.
Step 2: Identify suitable local partners
Many companies that have successfully entered the Indian market underline that it is important to put a lot of effort into finding a suitable local partner. The Indian market is very complex and personal networks and connections are very important. Local partners can give input to local networks and connections that are difficult for foreign entrepreneurs to approach. Dutch companies that have invested time and effort in finding the "perfect match" have experienced that they could thus save the task of finding other partners. RVO.nl can also help you find suitable business partners.
Step 3: Become familiar with the business culture
The Indian way of doing business is based on relationships. Indians want first to build a good relationship and mutual trust before they hit nails. This requires a lot of time and attention, both on a business and personal level. Avoid the "Dutch" directness and do not immediately negotiate when you are still building the relationship.
Step 4: Become familair with the bureaucratic and legal system
The legal system and procedures are well-developed in India, but for newcomers they can be incoherent and difficult to fathom. It is important to know exactly what implications the legal system has to prevent legal or bureaucratic problems at a later stage. Unexpected tax levies on lump sum payments, royalties, and payments may affect your business model. Most companies outsource the regulation of government and tax issues or gain professional advice to prevent unnecessary complications.
Step 5: Become familair with the business system
The juridical structure and shareholder distribution of your company is very important. Think about this carefully. If this is not done with care, a company can spend a lot of money on unnecessary taxes. Certain legal structures require a local partner who represents your company in India. If a local partner is required, carry out a due diligence investigation and a careful inspection of the intended joint venture company. It is advisable to call in professional support for this process to proceed smoothly.
Step 6: Become familair with the networking and negotiating structures
Negotiations are an essential part for doing business. Indians assume that negotiations must take place during business meetings and it is customary for them to show their emotions.
Agreements and contracts are not laid out in stone and provisions are often renegotiated. The intention, based on a relationship, is ultimately much more important than the signature.
It is advisable to include detailed force majeure and arbitration conditions in the agreements, in addition to clear dissolution provisions in the occurrence of certain circumstances.
Make sure that property rights can be transferred to the company and not under a power of attorney.
Step 7: Management and employers
Investigate whether it is really necessary to place Dutch people in certain positions, especially as a director, since the use of local employees offers great advantages. Before you determine the HR policy, you should know how all local employment conditions, income levels and social costs are regulated. The biggest challenge is to create a good and effective link with the parent company in the Netherlands. In this context, it is advisable to ensure a balanced mix of Dutch and local employees.
Step 8: Business development techniques
Tapping into the Indian market requires a long-term strategy and patience. Companies must do their homework and master the specific characteristics of doing business in India with a flexible and open mind. Ensuring awareness and emphasizing how your product can contribute to specific market niches are important steps in the further development of your business in India.
Step 9: Gain advice from a professional
In these recommendations we give a concise overview of the points of attention, but entering the Indian market requires more in-depth research. Doing business in India is a complex matter and there is more to it than we can deal with in this advice. Dutch companies are active on a wide variety of Indian (sub) markets and sectors. You are strongly advised to seek expert advice in the following areas when entering the Indian market: market research, fundraising, cross-border acquisition, assistance with joint ventures, transactions and insurance, tax planning, transfer pricing, and government and infrastructure.