Connecting Businesses with Opportunities in India
Connecting Businesses with Opportunities in India

Business Articles

Submitted by Export.gov on Fri, 03/22/2013 - 9:01pm.

Source: www.export.gov

Small businesses looking to increase sales and profit, reduce dependence on the domestic market and stabilize seasonal fluctuations should consider exporting.

Nearly 96 percent of consumers live outside the U.S.Two-thirds of the world’s purchasing power is in foreign countries.Go where the customers are.

There is significant opportunity for small businesses to profit through exporting.

Click here to register with www.export.gov and learn more about exporting.

Submitted by Biplab Saha on Mon, 08/01/2011 - 9:45am.

This article is of use to companies that plan to offshore work and also to offshore service providers (vendors) who can use the observations to improve their engagement with prospective clients.

Introduction

Offshore outsourcing has transformed the way U.S. companies do business, and McKinsey predicts global offshore outsourcing spend to hit $110bn by 2010. The attraction to offshore outsourcing is primarily the cost savings that happen due to it. However, many companies fail to recognize that there are additional soft costs that need to be incurred over and above the direct contract cost of the offshore outsourcing engagement and these costs can undermine the success of the engagement, if not factored in at the start of the process.

These soft costs include time involved in vendor selection, process transition, training and monitoring operations in offshore locations, and in overcoming the challenges of working in a foreign country including communication challenges, low-skilled workforce, unfamiliar laws and regulations, and infrastructure constraints. These factors directly affect the outcome of the offshoring process, and along with the direct contract cost constitute what can be termed as TCO – Total Cost of Offshoring. Investment in these needs to be made upfront, even before the actual work gets underway.

This article analyzes the soft costs mentioned above and recommends that companies budget for these in advance to make their offshore outsourcing endeavor truly successful. It also tries to bring up some reasons for failure or mid-way abandonment of offshoring engagements and suggests ways to overcome them.

Cost of Vendor Evaluation & Selection
The first step in an offshoring endeavor is to determine which functions are best suited for offshoring. While some tasks can be performed efficiently even when done remotely, other tasks may necessarily need a face-to-face interaction. In their article “The Rise of Offshoring – It’s not wine for cloth anymore” Gene Grossman & Esteban Rossi-Hansberg of the Department Economics, Princeton University, share the paradigms set forth by various scholars to classify tasks on these lines. For example Edward Learner & Michael Storper distinguish between tasks that require codifiable information and those that require tacit information. The former can be done remotely because they can be expressed as a set of symbols, be they mathematical, linguistic or visual. The latter non-codifiable tasks require that both parties have a broad common background to “know” each other well enough; the doer needs to interact face-to-face with the receiver of the service to perform such tasks.

After determining whether the function in question is amenable to be offshored, the next step is to identify vendors that can match your needs by defining the relevant skills and experience needed for the function being offshored. After this a first cut analysis of the shortlisted vendors will need to be made. All these steps can cost anywhere from 0.2% to 2% of the Direct Contract Cost (DCC) because of the additional time incurred on the following activities:
 

  • Evaluation of the in-house functions to determine if they can be offshored
  • Documenting the specifications, skill-sets required and the scope of work in the RFP
  • Identifying potential vendors, sending out the RFP, and managing the responses
  • Bids evaluation and negotiation
  • Due diligence of the vendor capability
  • Travel expenses to the overseas location

The vendor evaluation and selection process may need an in-house resource working full time on this, in addition to other resources chipping in with time & domain expertise. Travel is recommended to get the actual feel of the vendor’s staff capabilities, rather than evaluating just the paper bids or basing it on your interactions with a limited set of people on the vendor side (usually the sales team and the operations head), and is an essential part of the due diligence process.

Cost of Transition & Training
The process of transition & training can take between 3 months to a year before work can be completely handed over to the offshore team. Typically this is the most expensive stage in the offshoring process and can cost an additional 2% to 3% of the DCC.

The costs here will typically be those incurred due to travel & temporary relocation of the vendor’s project team to the client’s office(s) in the home country, so that they can learn the intricacy of the functions from the in-house staff that has been doing them for years.
Also there will be a cost of reduced productivity of the in-house staff because of their time spent in training the vendor’s team. To offset the costs at this stage it can be negotiated that the cost of travel and relocation be borne completely by the vendor.

Cost due to lower productivity of the offshore workers
Once the project or function is completely offshored, you will realize that the offshore team lags behind due to a variety of reasons that range from work culture, lack of good understanding of the business of the company, bad ergonomics at the place of work, lesser work experience (staff of most offshore companies are typically graduates or post-graduates with 5-7 years experience as opposed to an average of 10-15 years in the US), long commute times to the place of work, underdeveloped civic amenities, unstable political environment, and many more. Therefore though you may paying say $10 per hour for an offshore worker as against say $40 per hour for an in-house employee, you can end up incurring twice the cost due to his reduced productivity. Hank Zupnik, CIO of GE Real Estate, who has overseen numerous projects outsourced offshore for over a decade, observes that because of these differences you cannot assume that one offshore worker can simply replace all the work done by one American worker.

Another reason for low productivity is the high turn over at offshore vendors. With attrition rate as high as 30% in some industries, companies spend time re-training everytime critical resources leave the vendor to join another offshoring outfit.
Thus it needs to be understood that lower productivity of offshore workers can offset the assumed savings by a factor of 3% to 10% of the Direct Contract Cost.

Cost of lay-offs & reduced output of in-house staff
Companies should also be ready to factor in productivity dips of the in-house staff after the offshoring transition has been completed. This is because of the low morale of the employees due to their colleagues suddenly losing their job, and extra workload on the existing in-house staff. The severance package of the laid-off employees also needs to be factored in the cost of the offshoring endeavor. Also some ex-employees may also initiate legal action against the company, thereby adding a legal expense to the cost of lay-offs.

Communicating with your current staff on the impact of outsourcing and planning ahead for redundancies that are necessitated after the outsourcing transition can avoid some of these costs.

Cost of managing the ongoing project
An offshore project needs to be managed differently than a in-house processes, and you may need to invest the time to develop a project plan; something that may not have been required all this while when it was an in-house processes. Once fully offshored, one of the key people you will interface with are the first level leaders of the team offshore; they may be called by various titles – team lead, tech lead or project manager. These people tend to be more technical or operational and less “project management” oriented – you cannot assume that they know “project management” the way you may envision it just because of their titles. Someone from your in-house staff, say the functional head or the department head will need to take on the additional responsibility of resource planning & allocation and management of the offshore team.

Over and above the direct project management cost, there’s a significant amount of time taken up in handling invoicing & auditing of the offshore work – e.g. ensuring that cost centers are charged correctly and manhours are appropriately recorded without inflating the hours. It is also observed that a 100% offshore model (all resources working from offshore) is very challenging for both the service provider and the client. Interactions and exchange opportunities are missing which often leads to functional, technical, and cultural misunderstandings. Frequent exchanges or a policy of maintaining 10-20% of the service providers team on your site is recommended.

Finally it will be realized that though vendors use certain standard baselines and assumptions when costing the project, there is a “scope creep” in most projects and the actual work varies from estimates initially provided to them. If the cost of the project is escalates due to this, the vendor will expect the client to bear the incremental cost.
Summarizing the above, the additional cost are those on account of (a) time invested in developing the project plan; (b) putting additional in-house manegerial resource to manage the offshore project; (c) accounting & auditing of the ongoing project; (d) having 10 – 20% vendor personnel onshore; (e) cost due to change (or addition) in scope of work during the project.

Cost due to upfront investment in infrastructure
Besides the manpower cost, there is a cost of infrastructure that may need to be installed or upgraded at both ends to facilitate seamless integration of the two work sites – the customers & the offshore vendor location. For example additional networking equipment may be needed to provide data connectivity between both sites. Or additional software tools or licenses may be needed the because, now there is an additional location (the vendor’s facility) and more often than not the same tools/licenses cannot be shared across two different locations. In some cases additional data communication costs may need to be incurred where companies have had to dedicate separate “communication pipes” in order to keep the offshore and local data bases synchronized. In addition, there is the cost of voice communication, video conferencing, e-mail and chat sessions. You need to measure the increase in communication cost to attribute the incremental additions to the total cost of offshoring (TCO).

While the vendor usually agrees to take care of the cost at their end, the company may need to absorb the cost of infrastructure at their end, unless the vendor agrees to invests in that too, and amortize its cost over the period of the contract.

References
Dean Davison; Top 10 Risks Of Offshore Outsourcing
Fleming Parker; Key Success Factors for Offshore Outsourcing to India;
Gene M. Grossman & Esteban Rossi-Hansberg (Dept of Economics, Princeton University);
The Rise Of Offshoring: It’s Not Wine For Cloth Anymore;
Dr. Joe Greco; The Hidden Costs in Offshore Outsourcing – a Case Study;
M.M.Sathyanarayan; How to Determine True Business Value of Offshore Outsourcing;

Stephanie Overby; The Hidden Costs of Offshore Outsourcing; Sep. 1, 2003 Issue of CIO Magazine

Submitted by Biplab Saha on Sun, 04/17/2011 - 1:09pm.

Article Summary:
Many offshore projects get off to a flying start, but fail to succeed over the long term or worse still are abandoned mid-way, even though a considerable time & effort is spent by companies before and during the course of the offshore engagement. This article looks at the impediments to success of an offshore outsourcing endeavor with suggestions to avoid or overcome them.

Introduction:
Many well intentioned offshore projects get off to a flying start, but fail to succeed over the long term or worse still are abandoned mid-way, even though a considerable time & effort is spent by companies before and during the initial stages of an offshore engagement on activities like documenting the project RFP, evaluating and shortlisting service providers, defining quality parameters, training the offshore team, and the like. This article looks at some factors that may impede the success of the offshore outsourcing endeavor with suggestions to avoid or overcome them.

Unrealistic Assumptions on Cost Savings:
You have to ensure that there are clearly defined goals and final expected outcomes from the project. Many companies that outsource work offshore, wrongly assume that labor arbitrage will yield savings on a person-to-person basis (i.e., Since a full-time equivalent employee in India cost 40% less, the savings will be in the same range!) without regard for the hidden costs and differences in operating model of the offshore vendor. In reality, most organizations save 15-25% during the first year; by the third year, cost savings often reach 35-40% as both the sides move up the learning-curve and the client modifies their internal operations to align to an offshore model.

Lack of Well-Documented In-House Processes:
Documentation is a time intensive and often neglegted activity. It is observed that most internal processes are only about 30% documented. However, before offshoring a process the documentation level should be at around 90% and should include mapping of the current process, putting down the transition strategy, evaluation for all risks of failure and a documented contingency plan. High risk or exposure might deter the company from outsourcing offshore; or it might shift the outsourcing strategy (e.g., from a single vendor to multiple vendors); or it might actually give a greater thrust to offshoring if the vendor(s) seem better equipped to reduce risks while keeping the costs low. Though the results of risk analysis vary between companies, documenting the risks & preparing the contingency plan are important.

Poor Expectation Management:
Outsourcing engagements have a supplier (vendor) and a recipient (client), and both will have different expectations from the relationship. That the service is delivered from offshore complicates it further, and expectations mismatch become problematic.
An expectation gap may arise when you are in doubt about the vendor’s capability and hesitant to offshore anything beyond a specific task, while the service provider expects greater chunk of “higher value” work and might feel unchallenged by dealing only with standard, unchallenging tasks. If this expectation gap continues, the vendor may over time, accord low importance to your project or may even want to get out of the relationship as soon as a higher value-add work comes their way.

Similarly, you may expect the vendor employees to come up to a level of understanding that matches that of your in-house staff, but they may not be able to think or perform beyond the task that has been outsourced, and may ask questions that may seem ‘silly’, resulting in frustration at your end and possibly an early termination of the contract.

You should chart out a growth plan for the outsourcing relationship so that the service provider have their eyes set on the next target in terms of new processes coming their way. Knowing this growth path, the vendor and their employees will try to gain deeper insights into your business, thus resulting in superior results during the initial ‘unchallenging’ stages of offshoring too, and a stronger sense of loyalty to their relationship with you.

Also ensuring continuous knowledge transfer to the vendor’s employees working on your project, make feel as a part of your extended organization and perform better.

Failure in Bridging the Cultural Gap:
Most of the offshore workers will not have an exposure to the Western way of life and to the Western work culture. Therefore besides the training related directly to work, your in-house staff may need to spend time in acquainting the vendor’s employees with the cultural nuances of the organization and that of the your company’s home base, be it Europe or US. For example although English is an official language in India, pronunciation and accents can vary tremendously. Though many service providers put their employees through accent & language training and have cultural education programs, inherent differences due to culture, religion, social activities, way of dressing, and even the way a junior interacts with a senior colleague will not be easy to overcome. Something that’s common sense to the Western worker may be a completely foreign concept to an overseas worker.

Similarly your senior management & your in-house staff directly involved in the transition process need to acquaint themselves with the culture of the country where the vendor is located to communicate effectively with them and be able to understand the soft aspects of doing business with them. This avoids issues that can arise due to misunderstanding the ‘language’ at either side. Mutual visits to the other country are very helpful for effective working relationships as they help in drastic improvement of each others understanding and in the quality of work.
Some companies may try to save the travel cost by communicating over the phone or using video conferences, but in the long run this proves to be more expensive because of the delay related to transitioning the process overseas and the longer time taken to get the expected quality or performance from the offshore team.

Disaffection of in-house staff:
Extensive knowledge transfer and training are required prior to and during the transition of work to the vendor, and this needs to be consistently supported by the in-house staff. However layoffs can cause major morale problems among the in-house “survivors,” leading to disaffection and work slowdowns. Internal people may refuse to transition to the offshore model because they have a certain comfort level, or they don’t want their co-worker to lose his job. Some of your staff may also start proclaiming, that offshore outsourcing is not saving money to the company after all and that it was a bad idea, which futher lowers morale of other employees. Sometimes your in-house project management team may need to work into the night and arrive at work in the early morning to manage the offshore team, and their perception about who is benefiting and who is hurting becomes personal.

You have to set aside management and employee time before, during and after the offshore transition to talk to your employees about the whole proposition of offshoring and how it will help the company to become more competitive in the long term. A consensus needs to be built among all employees favoring the company’s offshoring efforts. Without this kind of a mandate, offshore endeavors are doomed.

Backlash from customers as a result of poor quality control:
The cost savings resulting from offshoring is the primary motivation for businesses to engage in the same. It is often realized late in the process that quality is an important factor for a successful offshore engagement. Poor quality of service delivery will have a negative impact on the performance and the reputation of the company may suffer in the eyes of their customers. A lack of adherence to the quality norms by the vendor and lack of monitoring of their output can result in considerable rework, and associated follow-up costs.

KPIs (Key Performance Indicators) of the offshore engagement should be defined in the beginning itself, so that the performance can be measured objectively during the tenure project and mid-course corrections are done wherever needed. It is also advisable to institutionalize regular satisfaction surveys that measure the “perception” of the engagement across several stakeholder levels.

Conclusion:
Offshore outsourcing is a phenomenon that’s here to stay. Companies that are adopting this are learning operate in a global business environment, and will benefit in the long run as they gain insights into other countries and their way of conducting business. However a failed or abandoned offshore outsourcing venture may set back the company by both the money spent and the willingness to take up such opportunities in the future. It is therefore important to study and analyze all factors that will affect the offshore endeavor and ensure that steps are taken to overcome the pitfalls well ahead of the offshore transition.

References:
Fleming Parker; Key Success Factors for Offshore Outsourcing to India;
Gene M. Grossman & Esteban Rossi-Hansberg (Dept of Economics, Princeton University);
The Rise Of Offshoring: It’s Not Wine For Cloth Anymore;
Dr. Joe Greco; The Hidden Costs in Offshore Outsourcing – a Case Study;
M.M.Sathyanarayan; How to Determine True Business Value of Offshore Outsourcing;
Stephanie Overby; The Hidden Costs of Offshore Outsourcing; Sep. 1, 2003 Issue of CIO Magazine;

Submitted by Navin Pathak on Sat, 03/26/2011 - 7:37pm.

(Updated on August 13, 2017)

India is going through exciting times. Developing into an open-market economy, India is certainly on high growth trajectory, which averaged nearly 7% per year from 1997 to 2016. The Projected GDP growth of 7.2% in 2017-2018 will make India the fastest growing economy in the world. Further, India's economy, which crossed the trillion dollar mark in 2007 and expected to become a $5 Trillion economy by 2025, is currently in 3rd position (PPP) after US and China.

The prospects of India’s long term economic growth, which is very positive, can easily be assessed from the following factors:

  1. The numbers are on your side:  564 million below the age of 20, 600 million growing middle-class, saving rates have tripled in last 12 years, etc.
  2. Growth Mindset of Indians:  Adaptability, competitive, entrepreneurial, believes in learning, earning and spending.

Now you require ‘opportunities’ and ‘political will’ for things to happen.

India is certainly a ‘Land of Opportunities’. Why? Because 1) there are tremendous challenges in India (mainly in areas such as transport and agricultural infrastructure, medical, power generation & distribution, education, healthcare) and solving these challenges means business & economic growth, 2) Availability of skilled manpower, 3) Geographical proximity to markets in South East Asia & Middle East, 4) English is well understood and spoken in India.

And, finally, the ‘political will’ that is necessary to create success is boldly shown by the current Indian Government (GoI). Under the leadership of Prime Minister Mr. Narendra Modi, GoI is implementing initiatives that not only will facilitate investments into India but will also make India a better and easier place to do business in. Some of the initiatives that the current government has started are Make in India, Start-up India, Digital India, Skill India and Smart Cities.

So far only Multi-National Companies (MNCs) with their vast resources, know-how and the right connections have been the major beneficiaries of this phenomenal growth in India. Small and Medium Enterprises (SMEs) and Entrepreneurs are just becoming aware of the growth story of India.

A simple analysis, taking into account the increasing population (See side box), growing consumption and the shrinking agricultural land, shows that there is a very lucrative market for US companies with products or technologies in the following areas:

  • Food & Beverages: food processing, food packaging, food warehouse and transport, health drinks, etc. 
  • Home based: home decor products, kitchenware essentials, bed and bath, etc. 
  • Healthcare: diagnostics and testing, medical equipment, health supplements, clean air and water products, etc.
  • Education: medical/nursing, 'train the teacher' programs, automotive mechanics, medical technicians, advanced courses in the upcoming fields of genetics and nanotechnologies.
  • Consultancy Services: engineering, business development, product development, security analysis, etc. 
  • Infrastructure: waste management, solar and wind technologies, temperature controlled warehouses, air and noise pollution control technologies, towing trucks, and automated parking lot equipment.

Similar business prospects abound in other sectors such as home land security, media & entertainment, hotel/motel, financial investment services, etc.

One of the business formats that is rapidly gaining acceptance is "Franchising". While legal infrastructure and ecosystem are in place in India, one must do a thorough research, and due diligence of the potential Franchisee and create binding agreements covering all important aspects of the Franchising before making any investments. One must also understand business norms of India and seek professional help in navigating the paper trail, IP protection, and Tax implications etc. before undertaking partnership agreements with the Franchisee. Top sectors with franchising opportunities are Education and Healthcare due to a huge mismatch between supply and demand now and in the coming years. Another popular model is Public Private Partnership (PPP) with the Government of India through a 'tender' process. 

For Urban Development, for example, Government of India has initiated a program called ‘Smart Cities Mission’ in 2015. As of Jun 2017, 90 cities have been selected for upgrade as part of this mission. US $15 billion has been approved by the Indian Government for the development of the selected cities. Details about this mission are available here https://en.wikipedia.org/wiki/Smart_Cities_Mission.  

All of the above present a historic opportunity for the SMEs and Entrepreneurs in the US to expand beyond borders to India. US companies with the right know-how are most preferred by Indian companies mainly for the reason that Indians have a very favorable view of the US according to a Global Attitudes Survey. Indian Government officials make regular visits to the US to meet with the industry experts and to promote business and trade opportunities.

I am so confident that with the efforts that not only Indian Government, Indian business conglomerates and entrepreneurs are putting towards India's growth but also the investments that foreign MNCs like Apple, Microsoft, Samsung, etc. are making in India will entice more international businesses mainly SMEs to do business with/in India. 

Submitted by Suresh Arya on Tue, 03/01/2011 - 1:23pm.

This is a standard issue that is faced by business owners at some point in the life of their company. Entrepreneurs could reach a saturation point beyond which they are not able to grow their business or they may not have the skill sets or networking capabilities that are required to take their company to the next level. So what can be done to mitigate this big problem?

There are a couple of ways that you can grow the business. One way is the organic route and the other is the inorganic route.

Let's discuss the organic route first. Using this strategy, you can increase sales by adding more sales people, explore channel marketing and create reseller channels. The good news about organic growth is that there are lots of talented sales people available due to the Great US Recession.

But there is a problem. Tier 2 companies especially are struggling to add new businesses as their customers are consolidating the number of vendors that they deal with. Recently I was talking to a manager of large American logistics company and he mentioned that they have reduced their suppliers from 9 to 3. This scenario is happening across all industries.

Now using the inorganic growth strategy, you can look for companies with whom you can merge or acquire. In most sectors, if you are not among the top 10 players in the space, you can't reach a critical mass in your industry and therefore it is harder to grow today.

If you have a strong balance sheet, banks are willing to work with you to finance an acquisition. The financial crisis has created big opportunities and valuations have become reasonable again, from the frothy levels of the past. We cannot drive looking at the rearview mirror, so our advice to clients is to seek strategic acquisitions.

One of our clients is in the medical transcription and billing business and is pursuing a roll up strategy. The medical transcription industry is fragmented with about a thousand companies having less than $1 million in revenue. By combining companies in similar business one can achieve operational efficiency. Also larger revenues command a better valuation in the market. Another example is making acquisitions for geographical diversification.

One of our other clients who is an Indian automobile components manufacturer is looking to make overseas acquisitions, and we are sourcing targets - both profitable and distressed companies - in automobile parts manufacturing. This enables our client company to access new markets and new suppliers for raw materials. Other reasons a company might be interested in mergers and acquisitions are cross-selling, cost savings, product diversification and customer-base expansion.

What are the trends? Acquisitions have been strong this year and we expect this trend to continue for several more years. Recent examples are Tata acquiring LandRover and Abbott acquiring Piramal Healthcare. This is not just a blip on the radar but a strong secular macro trend. Due to an increase in globalization, there is a strong interest from mid-sized US firms to look at India and China as new markets.

Fortune 500 companies have already made their entry into these markets. Now it's time for small to middle market firms to follow the leaders. There is increased activity in all sectors, especially in Information Technology, BPO/KPO, Power, Agriculture, Retail, Telecom, Healthcare, Pharmaceutical and Commodities. Since commodity prices are close to all-time highs we are witnessing a heightened interest in M&A activity in mining and food industries.

To sum up the trend, Harish HV, partner at Grant Thornton India says, "We have seen a significant level of activity in mergers and acquisitions and private equity investments in 2010 and we believe that 2011 will be an even more exciting year in these two business growth strategies."

Here are some tips for companies looking into inorganic expansion -

  • Don't ape your competitor's strategy but create your own and execute it flawlessly. This can be done by using in-house corporate planning and a development team or hiring a business advisory firm to assist you.
  • If you are considering cross border acquisitions, you need to focus on cultural factors, tax, legal and other regulatory issues.
  • Responsiveness is very important when an Indian company is trying to acquire a US based company. There should be a senior executive dedicated to the transaction, who will be responsible for internal coordination and prompt execution of tasks.
  • American companies trying to enter the Indian market should be willing to make long term commitments.
  • Product companies fare better than service companies entering India.

In the next issue, I will be writing about the best practices for buying a business.

Submitted by Navin Pathak on Wed, 12/08/2010 - 8:23pm.

Driven by a growth rate of over 8% in 2010 and a 350 million strong middle-class with growing purchasing power and appetite to spend, the Indian market is reshaping the world’s economy. Investment in almost every sector (Education, Food, Energy, Health care and Retail) of the Indian economy has a promise of high returns that has caught the attention of investors and businesses across the world.

Indian economy is, however in transition and so are its tax and investment laws. New guidelines, policies, programs, and incentives for investment are being introduced into the system regularly and frequently.

Indian government is offering various incentives for the foreign companies and investors who want to

  • Lower labor costs
  • Explore new market/s (in and around India)
  • Develop and Commercialize/Industrialize new products and services
  • Open up export oriented units in India

Government incentives include:

  • Duty free import of capital goods and raw materials
  • Reimbursements of Central Sales Tax
  • Tax holiday for specified period
  • 100 per cent repatriation of profits for subcontracting facilities
  • and more

However, there is a considerable risk for players who are not fully prepated to do business in India and may not fully understand how local markets operate in India. Hence the challenge of the investor is to assess what opportunity to tap and how to minimize the associated risk.

I outline below an eight step plan with action, resources and contacts to help you benefit from the booming Indian Economy while minimizing your risk.

 

 1. Know WHAT you want..

Have clear objectives for your company and ensure that your India strategy is aligned with your objectives.

Buyusa.gov provides excellent information on assessing your objectives and provides what you need to know for doing business in India.

 

2. Understand the Economy you are investing in

India is a diverse country with many languages, different business norms and a complex regulatory structure. In addition, foreigners must know how to deal with corruption, bureaucracy and labor market rigidities at the state and the central level.

World Bank's Doing Business site provides excellent information on these topics. Read through the following papers and presentations:

- Doing Business 2010 ‘India’ by the World Bank Group

- Doing Business in India by Ernst & Young

 

3. Identify and Assess Opportunities in India

You need to do a thorough market research to qualify the opportunity for selling your products/services or for making other investments in India. Get the research tailored to your needs from the following resources: 

- Market Research Reports are available on buyusa.gov

- The country commercial guide for India from US Department of Commerce

Indian Brand Equity Foundation group from India

- Wealthtree for custom market research

 

4. Are you ready?

Assess if your company is prepared to do business or invest in India. Is your company committed to succeeding in India? Is there a market for your product? Is your product/service unique enough? Are the regulatory requirements straightforward to implement?

 

5. Attend Trade Events

Trade events are probably the best way to identify opportunities, meet subject matter experts, showcase your products and services, connect with potential partners, suppliers and buyers and check out your competition.

Upcoming Events by Entry India is an excellent source for upcoming business events in US and India.

 

6. Find one or more local partners in India

It is essential to have a local partner who understands the language and culture of the country. This will make it easy to negotiate, develop sales and distribution channels, price the product and services appropriate for the target market segment, and to protect intellectual property of your company. Due diligence and sound contractual agreement with the partner are a must for success.

US Department of Commerce has excellent services for US companies to find the right Indian partner.

 

7. Market Entry Options

Options include creating a wholly owned subsidiary, a joint venture with a local company or opening a branch or liaison office in India.

Department of Industrial Policy and Promotion under government of India provides excellent information for foreign companies pursuing entry into India.

 

8. Know Industry and Professional Associations in India

Through membership with key Industry associations, businesses gain access to local business resources, make valuable contacts, keep track of changing laws governing their business etc.

- Depending on the industry/sector of interest Confederation of Indian Industry, FICCI, AMCHAM, ASSOCAM, and NASSCOM are a few industry associations that a foreign business must look into.  India One Stop provides a comprehensive list of professional organizations in India that foreign companies must know.

- Export Assistance from US: The U.S. Commercial Service helps U.S. companies to expand their business to worldwide markets and has the largest presence, outside US, with 7 offices in India. U.S. Commercial Service offices are located in 107 U.S. cities and 145 U.S. Embassies and Consulates worldwide to take advantage of.

 

Summary:

A thorough planning before expanding your business to India or making your investments in India will go a long way for a profitable and worry-free operation in India. 

Submitted by Navin Pathak on Sun, 12/05/2010 - 9:47am.

Selling your products or services internationally is the key to your business growth. To assess whether you are ready for exporting, first ask yourself the following three questions:

  1. Do you currently have a successful product or service in the domestic market?
  2. Is your product or service reasonably attractive for the foreign markets? (To answer this, you may consider unique features of the product, not too easy to copy, attractive for foreign customers & their ability to pay for it, export and import regulations, etc.)
  3. Are you ready to commit dedicated resources (financial, manufacturing capacity, staff, time...) to support marketing abroad?

If the answer to each of these questions is an unqualified yes, you are way ahead of the game. There is of course a lot more to know and do before you are really ready to jump in the International arena, but all of it is rather straightforward and an extensive Eco system exists to support you to do it successfully. Here are some of the important items you need to do:

1. Market Research

This is the most important first step. You can do it yourself or hire a consultant to do all or part of the research. The objective is to choose an initial target market in a well-defined geographic territory and a local sales channel appropriate for your product. With the help of your local partner and potential customers, you will need to understand the selected market's requirements for price, style, packaging, labeling, etc. for your product taking into account export/import regulations and cultural preferences.

A lot can be gleaned from the trade magazines and the research reports available on the Internet. It is priceless, however to attend a trade show that attracts foreign customers and distributors. You can exhibit at the show, take a speaking role in a business forum, and hold meetings with the perspective buyers and distributors. It is also a good place to gauge customer interest, their ability to pay, getting feed back in modifying your product, checking what your competition is offering, what channels they are using etc.

2. Sales Channel management

If you intend to use a distributor for selling your product, you first have to select a distributor and create a legally binding agreement with the distributor.

Prior to committing anything in writing, conduct a thorough due diligence on potential distributors such as, checking on their track record, verifying their commitment to your product, etc.

Keep the agreement concise, cover all aspects of business operations, responsibilities and money flow in advance. For instance, does it cover who is responsible for and will pay for local product registrations?

You need to pay special attention to training, promotional material, customer support, performance tracking, delivery schedules, quality inspections, frequency and means of communications, etc.

Make sure both sides have a skin in the game, gain more or less equally from the terms and conditions because either both succeed or neither does.

Get the distributor up and running. Make sure to frequently visit the market, distributors, and prospects.

3. Shipping your product overseas

You can do it yourself but it will not be easy. A thorough knowledge of export paper requirements for your product is a must. Alternately you can use an international freight forwarder or an integrator for this purpose.

A friendly and experienced freight forwarder can be a very valuable partner that can take care of numerous export issues, reduce your shipping costs and free you to attend to what you know best: producing and marketing your product.

If you have simple and infrequent shipments with no personalized service required, an integrator such as UPS may be a good choice.

4. Develop working knowledge of export payment mechanisms

Your choices include cash, letter of credit, open account etc.

Cash payments can be in the form of wire transfer, check or credit card, wire transfer is the safest option. You need to be aware of the issues with checks and credit cards (processing fee, delay in collection, fraud etc.)

A letter of credit is issued by a bank on behalf of the buyer in favor of the seller. In effect, the bank promises to make the payment to the buyer upon presentation of the documents listed in the letter of credit. There are further nuances to various forms of letter of credit that affect terms and timing of the payment.

Open account i.e. waiting for the payment after goods are shipped and received by the buyer is the most risky of the methods and should be avoided or used only in a known and proven relationship.

5. Learn how to arrange for export financing

The availability of working capital for an export transaction is important for worry free operations. You may make use of the credit of the foreign buyer for this purpose (through a transferable letter of credit, for instance).

If you need working capital for exporting, you may use the US SBA's Guaranteed Export Working Capital Loan Program. US-based exporters can benefit from the programs by obtaining a working capital guarantee from Ex-Im Bank.

6. Know who can help you

Your local, regional, national, or international chambers of commerce are a good source of information and support.

Export.gov set up by the US Commercial Service has detailed research reports specific to many industry sectors in numerous countries written by experts in International trade. You can also sign up and make use of extensive services offered by the US commercial service.

Export consulting companies can be very helpful in getting you up and running in no time.

 

Have fun doing this and your business will go from surviving to thriving in no time.

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