Business Opportunities in India
U.S. companies are cashing in on the booming Indian economy.
In Mumbai, New Delhi—all the big cities of India, the talk of late is about disappointingly slow economic growth. But feast on the hefty size of the subcontinent’s numbers: “Growth is expected to moderate to 7.5 percent in 2011–12,” Rajeev Malik, senior economist at leading investment firm CLSA, told the Economic Times newspaper. The U.S. economy, meantime, managed 1.8 percent growth in Q1 2011, and other established economies—such as the United Kingdom and Japan—are faring no better.
That is why suddenly there is immense interest on the part of U.S.-based companies in selling into India. Presently Asia’s third biggest economy (after China and Japan) and the 10th biggest globally per the International Monetary Fund, India is projected to keep growing. Excitement focuses on the burgeoning middle class, now a tick over 10 percent of the 1.2 billion population but projected to grow to 267 million people within five years, according to the National Council for Applied Economic Research’s (NCAER) Centre for Macro Consumer Research in New Delhi.
“There are plentiful reasons to be bullish about India,” says Manoj Singh, global managing partner for operations at professional services firm Deloitte Touche Tohmatsu. “We are,” he added, pointing out that Deloitte presently employs 14,000 people in India, and roughly 45 percent of the work done by Deloitte in India is serving Indian clients.
Opportunities abound across India, say the experts, because this is a huge nation that is seeking to rapidly transform itself into a world-class economy. And it knows it needs goods, services and know-how from abroad to effect the transformation.
American companies eyeing India should know they come at this with sizable advantages, says Kishore Dash, associate professor of global studies at Thunderbird School of Global Management, in Glendale, Arizona, who also is a lecturer at the University of Delhi. “American goods have a quality component—they are perceived as qualitatively superior,” says Dash, who adds that “the younger generation is especially brand conscious,” and in many cases the brands they crave are American.
But there also is opportunity for small and midsize U.S. companies that will benefit from the halo effect of an American origin.
Who is prospering in India—and why? Here are three examples of small companies that have found their groove in the subcontinent.
Fun and Games
“It was the most complicated, daunting transaction we have ever been involved in,” says Arnon Rosan, CEO of New York–based Signature Fencing and Flooring Systems, of his company’s recent sale to India. But then there is the plus side: It also was the biggest onetime sale in the company’s history, more than $2 million, and because the company was providing specialty turf protection flooring for use in the opening and closing ceremonies of the Fall 2010 Commonwealth Games in New Delhi, it also put Signature’s products on display in front of millions of viewers across the globe.
The sale almost did not happen. “You have to be prepared for an awful lot of red tape and bureaucracy,” says Rosan. “We do business in 40 countries but this was the most difficult transaction we have ever had. You have to be very patient. The decision-making process is very lengthy.”
Rosan explains that the organizers of the Commonwealth Games—a mini Olympics for the 50+ nations that once were part of the Commonwealth of Nations—put out an international tender requesting bids for specialty flooring that could accommodate elephants, motor vehicles and thousands of people. Some good news/bad news is that the process of bidding was exceptionally complicated—“and that probably deterred some bidders,” says Rosan.
His company decided to stick with it because he wanted to be part of the Commonwealth Games; he knew his product—heavy-duty flooring—was just what the organizers needed, and they had nothing comparable of Indian origin (“their manufacturing sector is lagging,” says Rosan).
One important lesson learned by Rosan: “We could not have navigated the bureaucracy without a local agent. There were over 11 sign-offs on the wire transfer to pay us. Our agent had to walk the documents from [the] office. At every step, the agent helped move the process along.”
Another lesson: Indians are painstaking negotiators. “What we believed would be two days of negotiations turned into nine,” says Rosan.
Rosan acknowledges that the Commonwealth Games netted some bad press for India—focusing on questionable construction practices and claims of bribery—but he also says his company encountered nothing of the kind. “The bureaucracy drove us crazy, yes, but we were not asked for payoffs. For us, this experience was very positive.”
One thing India is enamored with is power—particularly power from internal combustion engines. Motorcycles, cars, motorized rickshaws—you name it, it is found on the teeming streets of Indian metropolises.
Two problems: Pollution is thick and, worse, fuel quality is highly uncertain (lots of diluted gasoline, kerosene and diesel are on the market, say experts).
Glenn Williams, president of Longwood, Fla.–based Bell Performance, a developer of fuel additives, thought his company had to be in India, because of both the immense market size and the growing need for exactly the products Bell Performance makes.
So the company kept looking for ways in. It got active on b2b websites with high profiles in Asia (Williams pointed to Alibaba.com as a case in point) but it kept looking for ways to deepen its involvement.
“We have been looking at how to get big in India for two or three years,” says Williams.
It started to click when Bell Performance sent its international sales director over for a month of whirlwind meetings with Indian and U.S. government officials, business owners and just about anybody he could collar. Says Williams: “He came back with a lot of clues. And he made very good contacts. There is lag time in India. Relationships don’t take off that fast. It’s a slow, methodical process.”
And it turned out he hit bingo. Bell Performance now has forged a tight relationship with a large, family-owned chain of automotive and truck repair shops that has begun private labeling Bell Performance’s fuel additives. (Williams indicated the contract precludes divulging the name, but it is one well known in India.)
Most important, at the urging of his Indian partner, Williams also reformulated key products for the Indian market. The critical change has been condensing fluids to one-fourth their size in the U.S., a step that dramatically cuts shipping costs as well as import tariffs. “We knew we had to price our product for this market, and condensation helps us a lot,” he says.
“We believe India will soon be one of our biggest foreign markets,” adds Williams, who forecasts 2012 sales of $6 million to India.
A Surprise Success
Ignighter.com launched in 2008 with a specific niche: It wanted to bring group dating to a 20-something audience that, believed the Ignighter founders, had grown skittish about one-on-one dating. And not too many months after founding, Ignighter had 50,000 members.
It was going nowhere. Not in a world where 700 million of us belong to Facebook.
Then the founders noticed an oddity: The site was gaining members fast from one country in particular: India. Every day, in fact, Ignighter got hundreds of sign-ups from Mumbai, Bengaluru, Chennai, Hyderabad—the main cities in India’s high-tech revolution. Ignighter was doing no marketing in India; this was entirely self-fueled growth. But the Indian users kept coming.
Finally, after having ignored it for months, Ignighter’s founders embraced the obvious: “We realized we are an Indian dating site,” says cofounder Adam Sachs.
In one week, Ignighter gets more visitors in India than it did in a year in the U.S.
Membership now totals 2.5 million, says Sachs. Indians make up 80 percent of the total.
One consequence: Ignighter had been designed as a fee-based, premium site. For now that is not how it works in India—Ignighter is free. Revenues come from sales of virtual goods—flowers, for instance—that can be presented to other Ignighter members, and Sachs says Ignighter is exploring other revenue streams such as advertising.
Another consequence: The three Ignighter founders have become frequent travelers to India, as they seek to find ways to make the site yet more appropriate to their newly designated audience. Local knowledge just may let the Ignighter team create better hooks, believe the founders. Sachs spent March 2011 on the ground in India, and he planned to spend August there also.
Sachs says the founders realized they needed an experienced local hand, so they recently hired a country head, to be based in Mumbai (“We let him choose where he wanted to be,” says Sachs), who is charged with building up the Ignighter profile in India.
One oddity: Ignighter has no plans to shift its programming to India. “We have a great in-house team in New York who have been with us from the beginning,” says Sachs.
Key advice for any companies trying to penetrate the Indian market: Make a stop at the U.S. consulates a top priority. Explains Marsha McDaniel, commercial officer in the U.S. Consulate in Mumbai: “We have a team of Commercial Specialists who are industry experts with years of experience in India. These specialists are dedicated to helping U.S. companies export to India, and they are available to counsel U.S. companies in person, over the phone or via email.”
India incurs a $10 billion balance of trade deficit with the U.S.—we send that much more money there than comes back here—and the Obama White House has set as a top goal shrinking that deficit. That means there is plentiful federal government help available to companies that are intent on cracking the Indian code, says McDaniel. “In 2010 we helped 230 U.S. companies, many of them SMEs [small and medium-size enterprises], achieve export successes in India.”
But the goals are much more ambitious. Says McDaniel: “With a population of over one billion people, a democratic government and English as the business language, India offers abundant commercial opportunities.”
Four Paths To Indian Success
Succeeding in India is hard, very hard. But there are growing numbers of American companies that are succeeding. And they have traits in common.
Ask Marsha McDaniel, commercial officer in the U.S. Consulate in Mumbai, what U.S. companies need to do to prosper in India, and she quickly ticks off a fourfold path: “There are four key factors that contribute to business success in India.”
1. The first is partnering with the right people. India is a vast country with 22 official languages, and each geographical region is unique. A local partner will understand the region and will be positioned to help U.S. companies find success.”
2. The second factor is localization. It is imperative that U.S. companies localize their products for the Indian market. Indian consumers demand products that meet their tastes and preferences.”
3. Third, companies should carefully evaluate their pricing strategy before entering the Indian market. This is an incredibly price-sensitive market.”
4. Finally, U.S. companies must have patience. Many companies come here once, maybe twice, and if they do not get their desired results they give up. This is a mistake. It can take a long time to succeed in India, but the results can be worth the wait. The owner of the McDonald’s franchise for western India once told me that ‘doing business in India is a marathon, not a sprint.’ McDonald’s was present in India for five years before they opened their first restaurant.”
Keys To India’s Cities
Fast-track getting to know India by signing up for the U.S. Commercial Service’s Gold Key Service (GKS), specifically designed to help SMEs get traction faster in India. The fee is $700 and for that an SME gets custom-selected one-on-one meetings with four to six prescreened sales representatives, agents or distributors, and/or licensing partners.
Included in the package are:
• A profile on each Indian company/partner you will meet
• Relevant market information
• Escort by a U.S. Commercial Service staff member for meetings
• Post-meeting debriefing with U.S. Commercial Service staff to discuss results of meetings and assistance in developing appropriate follow-up strategie
The GKS is available in New Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Ahmedabad and Hyderabad.
Additional days of meetings may be scheduled for $300, if there is adequate availability of potential business partners.
For more information, email email@example.com.