Thinking @ doing business in India? What Next?

Author: Ravi V. Patil, India Director of INDOLINK Consulting

“India is doing great. Nobody talks about it.” Republican presidential candidate Donald Trump said in an interview with CNN on Monday 27th Jan.16. His statement carries particular importance knowing his views accusing several countries taking advantage of US particularly China. Steadily, India has overtaken China as fastest growing economy currently with @7.5% growth rate.

 When I meet overseas business delegates during this trips to India, one of the questions I normally ask is “Is this your first trip to India?” and the answer could be: Yes or 2nd, 3rd, 4th…  More than 50% of these delegates, this is their 2nd to 3th  visit to India during last 2-3 years and the purpose is exploring the possibility of doing business in India. They read the news: India offers very good opportunities, its vast market size, its growth rate etc. but at the same time, they read about  bureaucracy, delays and difficulties faced by some of the businessmen who tried it before. It creates a dilemma in their mind- to be or not to be and hence 2nd trip and more trips…  After 2-3 trips they realize that some players had taken the decision to start and now they are settled and doing great.

7 reasons why Joint Ventures fail in India

Source: INDOLINK

The joint venture is often considered the first option when the idea of doing business in India arises. Nevertheless, the experience proves that these associations rarely reach the expected goals and results. In most cases it turns out on traumatic experiences and failure for at least one of the partners (usually the foreigner).

There are logical reasons why foreign companies consider advantageous to join local Indian partners: lack of local knowledge –bureaucracy, market dynamics, business culture, management styles, labour laws…- quick access to the local market –due to distribution networks and customer portfolio of the local partner, and immediate availability of starting infrastructure –land, manufacturing plant, licenses and operation already going on-. For all this, the local partner is expected to pave the way for an easier, quicker and safer or lower investment.

This approach may seem logical a priori, but instead, we eventually find out that in many cases these assumptions prove wrong. Us in INDOLINK, after years of helping foreign enterprises to enter the Indian market, find the following main reasons that lead the joint ventures to fail:

What our Customers say about us

 

“Looking back to my first visit to India more than 10 years ago, the feeling is almost melancholic. Although it seems just like yesterday, there have been many travels during this time and countless experiences lived.

Our start in India and our work during all this time, has always been attached to INDOLINK, and in this 10th Anniversary we would like to sincerely thank their effort, their professionalism and the commitment that they have proved to us all the way until this day. Without them our set up in India wouldn’t have been possible. For our company, this setup has meant a huge opportunity, and with everyone’s effort, they have made difficult look easy.

Congratulations and well done. – Aristides Maurel, CEO (MIJU S.A.)

” Our experience working with INDOLINK dates back to 2011, when Aernnova Group decided to open an engineering office in India. Although we had in our record some past experiences in countries like USA and Brazil, we understood that, given the singularity of the country and our intention to outsource the accounting, tax and labour departments, it was crucial for us to find a consultancy company that could provide us all the needed support in the mentioned areas, as well as a close collaborator that could take our working method and our needs, making it all compatible with the regulations and the formal requirements of the country; something like our authorized representative in specific matters in India.

At this point, we have not only achieved to have this type of service through our understanding with INDOLINK, but we have also felt a collaborative spirit beyond that of the contractual agreement ; they have worked closely in all the issues that we have put forward, showing great professionalism and promptness in their replies throughout all this time.

Our impression is that INDOLINK knows very well the needs and sensations of the foreign companies located in India. This gives way to a ready communication and, for this, making progress in a country like India becomes easy”. – Patxi Molás (AERNNOVA)

“I find Indolink a supportive company for the internationalization of companies in India. The knowledge that Indolink has about the legal barriers that usually the foreigner companies find in their arrival, help them to overcome succesfully the first and hard steps in our adoptive country. The continous communication and advice from Indolink team is the best guaranty to have an efective landing in India.” – Fernando Rueda (HINE India)

“INDOLINK is making it possible for us to set up the subsidiary of HIDROAMBIENTE in India, EVERBLUE. INDOLINK is nowadays our trusted counselor in India.” – Miguel Iturbe (EVERBLUE/HIDROAMBIENTE)

We would like to thank you & the Indolink team for all the wonderful support throughout this year, and we look forward for your extended support in the future. – Giridaran Srinivasan (Zigor India)

 

Interview of Santosh Deshmukh, Project Manager in INDOLINK

This year is INDOLINK’s 10th Anniversary. For that reason we have interviewed some of our team members to know them a bit better.

Santosh Deshmukh is the Vendor Development Manager in INDOLINK and operates from Pune office.  He has studied Industrial engineering. He is working with INDOLINK for more than 9 years. He has been closely involved in various set-up projects. We have interviewed him to know his experience about working with INDOLINK.

When did you start working for INDOLINK? And the reason why you decided to join?

I joined on 7th March 2005 as Jr. engineer in vendor development dept. Initially INDOLINK was named as Mai Sourcing and we were more focused on automotive rubber parts development, procurement and supply to Miju SA.

The activity I use to perform initially was a sort of repetitive work ‘’Inspection’’ which I decided to end up and look a sort of job where I could learn new things other than inspection. Hence I got a opportunity to work in vendor development department where I developed skills like vendor assessment, costing, and many more.

What he been the major set up projects you/INDOLINK have handled?

The major set up projects executed by Indolink are Miju india Pune plant, Bellota at Sinnar, Gamesa at Chennai, Windar in Gujarat.

Major set up projects that  I have handled is Bellota, where I was involved in each and every activity closely like from land identification & acquisition, Architect, civil contractor and other agency finalization, procurement (steel, cement, etc for building) raw material (boron steel billets) process equipments procurement install and commission, etc. . It was the first experience set up industrial project for me all new things and I really learned a lot from this project.

I was involved in Windar project as well where I was more focused on equipment procurement, installation and commissioning part but was also active in other activities like land identification, architect search and assessment, recruitment, licenses, etc. The most critical task was to convert the land from residential Non-agricultural to Industrial Non-agricultural, as the factory construction was started and to get 12 km 33 Kva HT electricity line for Bellota which we monitored closely and we got it by passing various hurdles.

What are the major challenges you face while working on projects, both from Indian companies(contractors, govt. agencies etc…) as well as the foreign companies/customers?

The major challenges faced while working with foreign companies are mostly the language communication & pronunciations. It also happens that some contractor representatives commits but do not fulfill the commitment for some or other reason which leads to frustrations as the foreigners are not so use to commit false dates. On most of the Indian site activities safety norms are not thoroughly followed which is strange for foreign companies.

Tell us something about the internal working culture of INDOLINK.

The working culture in Indolink is really very good. Its a free working environment and everyone tries to give 100% to fulfill customer demands/ requirements. There is no typical Indian working culture like proprietorship, one man company/single decision maker, boss, assistant, personal assistant, etc. Everyone works as a team and shares all the knowledge gathered/ gained. We have strong quality system, IT infrastructure etc… so there is no any hidden process whatever we do is transparent.

 

Interview of Ravi Patil, Director of INDOLINK India

Ravi Patil, Director of INDOLINK India

Ravi Patil is Partner and Director of  INDOLINK India. With his immense experience, he is handling many international customers interested in setting-up their businesses in India. We have interviewed him to learn about his experience.

How did you decide to start INDOLINK?

The idea of starting INDOLINK is the brainchild of Mario. Around that time I also started my own company called Mai Sourcing, focused on helping European companies source from India. Mario and me knew each other since few years from Rinder where we worked together. So later on we decided to join hands and we created the subsidiary of INDOLINK in India, mai INDOLINK Consulting Pvt. Ltd.

Which have been the major problems faced so far?

I would say the major problem so far was and still is (even today) how to make International companies believe that India is a very good potential market. Things appear difficult, time consuming, bureaucratic etc…, and they are. But with a medium-long term strategy it is possible to access that potential market. And with our experience we can make the process of doing business in India smooth and less complicated.

Which have been the most challenging projects?

Each project is challenging because each customer is from a different sector. So, each time there are new things to learn, we face new challenges and we have to make it happen. Personally, I would say the most challenging projects have been the setup of BELLOTA’s manufacturing plant in Nasik and GAMESA-MADE in Chennai.

Bellota because of its scope of activities, the difficulties faced while obtaining government approvals, electricity, etc. And Gamesa because of its tight time schedule. We had the task of making a plant ready for operations within a span of just 4 months from the moment we got possession of the factory. Almost complete factory was renovated, permissions obtained and plant started operating exactly the date planned (19th July 2008).

Which is the most valuable asset of the company now in your opinion?

The most valuable asset for INDOLINK is its people: our team and customers. It’s our team who has the knowledge and experience to handle the projects effectively. And they are satisfied customers who make more customers approach us.

How has been the experience in the last ten years?

Wonderful! A lot of learning, the opportunity to interact with customers with different views… Every project is a creation. Every set up project is a rare and unique chance to experience a concept/strategy being developed into reality. In every market research project we get a chance to learn new things. Our knowledge is constantly building up. I think this is a rare type of activity where we earn and learn simultaneously. It is an enriching experience.

How do you see INDOLINK in next ten years?

As a reference company in the activities related to helping companies establish and operate businesses in India. Building knowledge and eager to add value to our customers.

Which are the challenges that you have faced working with foreign companies?

The major challenge that we have face is understanding customers perceptions, their expectations about going to new country, the ideas they have about setting up the business, etc. And then analyzing the requirements, thinking about the best strategy and explaining it to customers.

Another challenge is to make the customer confident that they can leave the responsibility of setting up and administrative tasks on INDOLINK so that they can focus on what they really know, their core activities. We are very committed to our customer’s success but it’s not always easy to transmit that they can trust us totally. Building trust takes time. But once we start working closely, customers experience our reliability and things become smooth.

What are your expectations of growth of Indian economy?

Indian economy is bound to grow for a period of at least next 20- 25 years. I expect the growth rate to be >5% throughout these years. There is a significant gap between developed countries and India. India would like to reduce/bridge this gap. Indian people are becoming conscious about their responsibility towards the nation. This was evident in the increase in % of voting in the recent national elections. People of India has elected a government whose agenda is based in grown and development. Growing middle class, growth of educated population and the desire of people for a better way of life will act as accelerators to growth and will help it sustain for many years to come.

How is INDOLINK different from other consultants?

I would say INDOLINK is different from other consultants mainly because of two aspects: our comprehensive portfolio of services and the value we add to our customers.

Our ranges of services include everything from the initial strategic planning to all activities related to setting up the business, and the subsequent legal and administrative requirements (accounting, secretarial services, taxes, etc). As far as I know there are hardly any consultancy companies offering such wide range of services.

Offering a real added value to our customer is our philosophy. Our clients say “once we hand over the task to INDOLINK we don’t have to look into them. They will ensure everything is taken care of, we rely on them.” We treat our customer’s project as our OWN. Our commitment is total. In our opinion it’s the only way for success.

Interview to Mario Gil, Director of INDOLINK

Interview to Naiara Alonso, Consultant in INDOLINK

 

Interview to Mario Gil, Director of INDOLINK

“I think we are not vocationally consultants but hope to be trustworthy counsellors.”

Mario Gil, Director of INDOLINK

Mario Gil is Founder and Director of INDOLINK. Mario arrived in India in 1997 to lead the first international set up of the Spanish automotive manufacturer, RINDER. He was only 28 years old and spent the next 7 years living and working in India. In 2004, after succeeding in the set up of Rinder, he started his new project of assisting other foreign companies to set up in India and created INDOLINK. We have interviewed him to learn about his experience.

How did you decide to start INDOLINK?

Between 1997 and 2004 I worked as expatriate Director for RINDER, a Spanish automotive lights manufacturer, setting up their plant in India. This subsidiary was very successful, not only in terms of profits and return on investment, but in various other aspects which had a highly positive effect in the parent company’s performance. I could see that India offered a huge potential for many other Spanish companies, which could derive similar benefits from setting up their business in India.

At the same time, establishing RINDER India was not easy at all. In the process, we had to overcome many obstacles and faced some really difficult times. I learnt a lot from that experience and thought that this was a valuable asset I could offer to other companies willing to establish operations in India.

On top of that, I could see that Spanish companies were already struggling with the growing competition from Low Cost Countries and many were at a grave risk of going bankrupt if they didn’t drastically improve, which is extremely tough in a mature or declining market. I believed India offered them a low cost manufacturing base where they could improve their cost structure, while developing a decisive competitive edge in other areas.

Which have been the major problems faced so far?

Interview to Naiara Alonso, consultant at INDOLINK

“With the correct strategy and proper assistance, India can be a very profitable market in the medium and long term”

This year is INDOLINK’s 10th Anniversary. For that reason we have interviewed some of our team members to know them a bit better.

Naiara Alonso is consultant at INDOLINK and works mainly from our Bilbao office (Spain). She studied Business Administration in the University of Mondragón and will soon take up another important challenge: being a mother for the first time. We have interviewed her to know her experience about working in India and with INDOLINK.

When did you start working for INDOLINK? And why did you decide to join us?

I joined INDOLINK in May 2008. I already knew Mario (Founder and Director of INDOLINK) and Ravi (partner and Director INDOLINK India) since 2001 when I spent almost a year working as a trainee in Rinder India (Pune). That was the first time I went to India and I must say the experience was really positive and the country captured me with all its good and bad things. After that year I worked in the field of Cooperation for Development in South America and Africa for 6 years. In 2008, due to some funny coincidence I met Mario again and had the chance to join INDOLINK and I did it. I was happy to start working with India once again and with a team that I already knew partly.

How tough is the task of encouraging Spanish companies to invest in India?

Interview to Kiran Jagtap, Civil Engineer at INDOLINK Consulting

Kiran Jagtap

“India is a country with diverse cultures, with a lot of contradictions. Instead of comparing it with things at home, foreign companies planning to set up in India should try to accept and adapt to Indian conditions, ways..”

This month we are interviewing Kiran Jagtap who takes care of the industrial set up projects in INDOLINK Consulting. Kiran was born in Karwadi, a small town in Ahmadnagar district in Maharashtra, India. He is a Civil Enginnering Graduate from Pune University with a Post Graduate in Project Management and has been working in industrial and institutional construction projects for the last 10 years.

He’s 35 years old, is married and has a son and has been working with INDOLINK since 2008.

IL: What activities do you carry out in INDOLINK?

KJ: I work as Project Manager for industrial set up projects. I take care of most of the plant construction related activities like: Planning, layout design & finalization, estimation, budgeting, tendering, contracting, liaisoning for construction related permissions/ approvals,  scheduling, quality control, supervision and review, budget control, certification of bills, erection,  project closure and  project handover to client.

IL: What do you like the most of your job?

KJ: Well, what I like most of my job is when we complete the project successfully and then hand it over to the client. It’s very satisfying.

IL: And the least?

KJ: Sometimes you come across situations when you are responsible for the results but you don’t have the required authority to handle it appropriately. This is very stressful, sometime situation may become really tense.

IL: In which projects have you worked so far?

KJ: till date I have handled industrial, residential, institutional as well as infrastructure development projects.  Like medical and engineering universities, infrastructure for food industry like a wine park, a cold storage facility, etc. During my tenure in INDOLINK,  I have handled the construction management of the industrial sites of BELLOTA in Nasik, GAMESA-MADE and HINE in Chennai and WINDAR in Vadodara.

IL: You’ve already worked few years along with our foreign customers, especially Spanish, do you see a lot of difference on the way we are/we work (Indian vs Spanish/Western)? 

KJ: Yes, I see lot of differences, mostly cultural. India is a country with different local cultures, habits, languages, traditions, politics and also the government policies and laws. Many of the things are unpredictable here.  Western people expect everything to be scheduled, which sometimes is impossible to do. This is annoying for them. For example, the time required to obtain license/permissions from government authorities is difficult to predict, whereas customers want to know the date.

IL: What are the main difficulties from your point of view when a foreign company wants to set up a production plant in India?

KJ: The major difficulties I have observed from the foreigners at personal levels are problems with the interaction with the local people, different perception of what’s happening and adjustment to the local social life style.

For the companies the most difficult aspects are to find the right place for the plant, to find the right people (employees) at the place chosen, to understand the local government policies, laws, rules and taxation (there are different authorities for different permissions, approval and taxes) and get the things moving.

IL: What advice would you give to the foreign companies that are thinking of setting up a plant in India?

KJ: India has very good opportunities for the investment and business set ups. It is not an easy task but also not such a difficult or impossible one. The most important thing is to be careful while selecting the local partner, consultant and/or people on key positions. Those right choices  at the beginning will help them to set up the operations smoothly in spite of the challenges and difficulties.

IL: Any interesting experience during execution of the projects that  you would like to share with us?

KJ: Each project executed is unique and full of challenges.  However,  the most interesting for me was Gamesa set-up.  After identifying the factory we just had 4 months to start the production, which initially we said it was impossible. But, when it was clear that deadline couldn’t be postponed, we tried hard and did it on schedule.

IL: What would you suggest to your suggestion to Spanish companies planning to construct its factory in India?

KJ: India is acountry with diverse cultures, with a lot of contradictions. Instead of comparing it with things at home, foreign companies planning to set up in India should try to accept and adapt to Indian conditions, ways…This will make their life much more comfortable.

IL: Any interesting book or movie you advice us to read/watch? 

KJ: I liked the book “you can win” by Shiv Khera and the movie “Chak de! India”.

Key success factors to setup business in India

This article was published in the ICE (in english Spanish Commercial Information) Economic Bulletin in February 2011.

Author: Mario Gil, Director of INDOLINK Consulting

The present article aims at encouraging executives from small and middle scale European companies to set up business in India. With this objective we present the main variables which make India an attractive business destination, the major obstacles limiting the access to available opportunities and, finally, a few suggestions to avoid those constraints and increase their chances of success in setting operations in this country.

Any internationalization process, regardless of its magnitude or destination, constitutes a major decision in the life of a company, with far reaching implications. Given the difficulties which that decision implies, in the introduction of this paper we present an approach which may break the generic conflict many industrial SMEs face in venturing on their first foreign establishment.

In these links you can find the full article:

• Original (in Spanish)
• English version

CASE STUDY OF A SPANISH SME FROM ELECTRONIC SECTOR IN INDIA

ADD Semiconductor (Advanced Digital Design S.A.)  is a Spanish company set up in 2001 by two professionals from the Zaragoza University with more than 15 years of experience in microelectronic design. ADD develops systems of high efficiency and low cost in one chip (System on Chip) for telecom application and signaling processors. ADD is growing fast and nowadays has 40 employees between Spain, India, China and USA.

In 2009 ADD identified India as a priority market. Along with China and USA, India is one of the biggest markets in this sector. The country has more than 135 millions power meters where the ADD chips are inserted. Compared to the European average of one meter per inhabitant, and making a conservative estimation, in 10 or 12 years India can reach 700 millions of meters.

In addition, India is experiencing a robust development in infrastructures, which is pushing the electronic sector. ADD’s product has several applications such as controlling public lighting,  controlling solar energy panels, home automation, etc.

According to its International Sales Vice-president, Jesús Teijeiro, “we were aware that, for entering the Indian market, our physical presence was required. Speaking the same language and sharing the same culture is basic to do business”.

The basic structure needed by ADD to set up in a country is composed of two people: one Business Development Manager, who must have a good knowledge of the region and the potential customers, and one Application Engineer for giving technical support to their clients.

Instead of choosing the traditional strategy of creating a commercial subsidiary, ADD opted for recruiting these people on a contractual basis through a third party (INDOLINK). Ensuring their full dedication to ADD would guaranty their objective of establishing quickly in the market without the need to create their own legal structure, avoiding several duties and diverse legal, accounting and financial costs.

“At the time of deciding which company was going to support us in our entry strategy we assessed a couple of options. We chose INDOLINK due to its experience with other clients in the industrial sector. We wanted a sound consulting firm that knows how to move fast in the market. The promptness in hiring our technical staff and their Business Centre guaranteed a fast set up at a reasonable cost”.

In September 2009 the recruitment was finalized and the two newly hired professionals joined duty. The experience is being more positive than expected, in less than a year they have got important contacts and brought in the first big sale, “normally it takes between one year and a half to two years to recover the initial investment. In India we hope to recover the investment in our first year working there. We expect our turnover to be around one million Euros in the next financial year. We plan an exponential increase; by 2012 we hope our turnover to reach 5 to 6 million Euros.”

According to ADD, the main causes for their success are, firstly, having a sound and robust technological product very suitable for markets like the Indian. Secondly, recruiting the right people with a deep knowledge of the market, who have effectively conveyed their product value to the client. Finally, the support and orientation provided by INDOLINK to ADD and their local staff.

When compared to other countries, their experience in India shows particularly positive. ”We have been working in China one year prior to India, but it is only now when we are starting to receive the first orders, and they are still much smaller than the Indian orders. We have noticed that the Indian market is more open, more prepared to listen, and there are less idiomatic barriers than in China. ROI is higher in India than in China. We would recommend consolidating first in the Indian market and then trying the Chinese one. In EEUU we are also having good results because it’s a market that is not so price sensitive”.

Currently ADD is recruiting a new engineer and they are planning to continue expanding their staff. In the medium term they will establish a subsidiary company, once their sales confirm their real possibilities in the Indian market.

Recruitment on contractual basis through a third party is a convenient alternative for SME’s that are willing to enter in international markets, but prefers to avoid incorporating a subsidiary company ad hoc.

Advantages of this type of strategy:

SOURCE: INDOLINK