FAQs Market Entry and Business Consulting

Which are the critical points to be considered to be successful in the Indian market?

India is one of the largest consumer bases in the world (1.3 billion people), but has its own complexities due to huge country size, each state with different language, food habits, culture, education and level of development. It will not be wrong to call it “Countries Within the Country”. Based on our experience & expertise in the Indian market, here are 5 tips to be successful in the Indian market:

Tip#1: Customize your products or services to suit the requirements/tastes of the Indian market.

Be it a consumer product or a machinery on the shop floor, an international company should study the target market (consumer mindset, trends, food habits, competitor pricing strategy in case of consumer products or level of technology adaption, shop floor conditions, price levels in case of industrial products). Accordingly, it should customize its offerings for the Indian market in order to reach maximum market potential.

Tip#2: Remember that the consumers are value conscious and not price conscious.

Most often, India has been misunderstood as price sensitive or price conscious market. Rather India is more of a value conscious market. If the Indian customer is convinced about the value, he/she is getting in return for the price being paid, he/she will buy it. For instance, India has been the largest market for Mercedes in terms of number of cars sold in a year, for several years in a row. So, there is a market for Mercedes as well as the cheapest car in the world- Tata Nano. One needs to identify its target customer base, formulate the right marketing strategy and last but not the least, offer right products at competitive prices.

Tip#3: Investment in the Indian market must be for a long term and would not yield quick returns

India has its own challenges including huge competition (large domestic and multinational companies as well as SMEs) and complex regulatory landscape. For foreign companies, it takes time to understand the culture, business environment, competition and regulatory landscape, and devise the right strategy accordingly. The companies have to forgo or invest back the short terms gains, in order to capture a larger market share.

Tip#4: Be prepared to understand and comply to laws and tax structures in India

Companies in India need to complete periodic tax compliances (for both direct and indirect taxes), Registrar of Companies and Reserve Bank of India. Attention needs to be paid to the details and professional advice to be sought in order not to attract any penalties or any other action from the Government authorities.

Tip#5: Find a suitable partner for your venture in the Indian market

Finding a suitable partner in an unknown and complex market like India, helps to accelerate the entry in the market. The local partner can help you to navigate in the new business environment by providing insights about the target market and competition. Having local presence or a local partner also gives comfort and assurance to your customers and it facilitates business generation.

Which are the modes of entry in the Indian market and the factors to be considered while deciding the suitable mode of entry?

Decision about mode of entry in the Indian market will be based on certain factors such as the expected volumes in the Indian market, your financial and management bandwidth and so on. Some of the modes of entry are described below:

  • Appointment of Importer and Development of Distribution Network: International companies can identify an importer for the Indian market and appoint multiple distributors for different regions or products, depending on the market reach of the
  • Contract Manufacturing: In order to take advantage of low production/assembly costs, International companies can get its products manufactured/assembled from a contract manufacturer in
  • Technology Licensing: International companies can also give their technology or know-how to Indian companies on a license basis. With the licensed technology, Indian companies will manufacture and sell products under their brand name and pay royalties to the foreign
  • Joint Venture: International companies can opt for a joint venture in case these companies need a ready made setup, clientele, local partner’s expertise and involvement in the business.
  • Wholly owned Subsidiary (WOS): International companies can opt for WOS when their management is confident that they can build the business from ground zero and intend to have full control over the Indian

Comparison of different modes of entry based on key factors is depicted in the below chart:

 

 

Factors

Distribution Network

Contract Manufacturing

Technology Licensing

Joint Venture

 

WOS

Investment Required

Low

NA

NA

Medium

High

Management Bandwidth required

Low

Low

Low

Medium

High

Advantage of Low Cost of Production in India

 

NA

 

High

 

NA

 

High

 

High

Opportunity to Use Readymade Distribution Network/Sales Channels

 

High

 

NA

 

NA

 

High

 

Low

Development of Own Brand

 

Medium

 

NA

 

NA

 

Medium

 

High

 

Ability to Serve India and            Neighboring Markets with quality products at competitive prices

 

 

 

Low

 

 

 

High

 

 

 

NA

 

 

 

High

 

 

 

High

Control Over Operations

Low

Low

Low

Medium

High

* NA: Not Applicable

What are the advantages of manufacturing or assembling your products in India?

India offers an immense opportunity to International companies, both in terms of market for their products as well as possibility of manufacturing the products at lower costs.

  • Low cost of production as compared to western countries
  • Product customization
    • Customization of machines or industrial products as per Indian shop floor conditions (different climate, rough usage)
    • Customization of consumer products as per Indian tastes and preferences
  • Quick after sales service at low cost
  • Confidence of clients in the company due to a full-fledged set up in India
  • The base in India can be used for domestic sales as well as
Why is it important to take an independent and objective advice from a local consultancy firm in a new market?

Business consultants or market entry experts can help the international companies with the insights about the target market, competition, pricing, regulatory structures, sector specific challenges and can devise the suitable market entry strategy. Further, the experienced professional consultants in India will be in position to handhold the foreign companies during the set up and growth phase in the Indian market. In this way, the setup and expansion process of a company can be expediated and the market opportunities can be tapped more effectively.

During COVID times, in case of internationalization or execution of growth strategies, businessmen are facing varied challenges including the restrictions on travel, urgency to revive/tap new markets, and opportunity costs involved with delaying the new possibilities. In these times, role of a professional advisor with a local setup and expertise becomes more crucial.