With a billion-plus population and an economy that’s growing faster than China’s, India is much more than an emerging market: it’s a hot spot for global investment and trade.
To tap into India’s opportunities, Canadian companies must learn to navigate an often difficult business landscape, making on-the-ground connections vital.
Explore your possibilities through these connections:
Chief Representative, India,
Export Development Canada
How does India’s business environment compare with Canada’s?
More than anything, businesses in India want to see people return to India. There’s been a trend over the last 10 years in which many companies came here wanting to do business quickly, did their transactions and then disappeared. Indians know their country is a hot market and they really want to look for long-term partnerships. They might have a deal for you the day you arrive, but they will make you wait for six months to a year to see if you are a dedicated partner or investor.
What barriers can Canadian companies expect to face?
It’s such a big investment for Canadian companies that come to India. You need to spend time while you’re here and you need to come back multiple times. That’s a big expense, especially if you’re a small or mid-sized business.
How would you describe India’s regulatory environment?
Tough. Right now it’s very difficult to purchase land, for example. As well, in certain sectors foreigners can only own 49% of a business, so there’s not enough control. But a lot of sectors have opened up so that foreign companies can own a majority stake.
Chairman, TaraSpan Inc
and Partner, Wesley Clover
Photo by Mark Halleron.
What’s your top advice for Canadian companies that want to penetrate the Indian market?
While we work exclusively in the technology space, I can tell you that regardless of sector, having that local market presence is critical. You need somebody who understands the business culture and the negotiations culture and who has the ability to be with the customer at a moment’s notice. You should also have a proof of concept – a demo that prospective customers can try – and have the local resources in place to support your customers as they go through that trial.
What market entry strategies work best in India?
Depending on the industry you’re selling into there are different ways to enter the market. If you have a software product for telco operators and you know exactly who you need to be talking to, you want a model that’s more direct, so you would set up a company or a liaison office. If you’re selling a product into the enterprise market you want to look at a distribution model and partner with a reseller who has the breadth and network to handle and reach the entire market.
What is the best structure to set up in India, a corporation or a liaison office?
The main distinction is that a liaison office is constrained in terms of function. It cannot transact directly, so customers in India would not be able to purchase products through this office but would have to do so through the parent office. The types of services it can provide would be constrained as well. It’s complex; you need to look at how you want to operate in India and then decide which structure works best with what you want to do.
Founder and CEO,
The majority of Indians earn low incomes. How can Canadian companies build a profitable business in this market?
In the Indian market, the average product or service price per user is significantly lower than in Canada. For example, for telecommunications services the average revenue (ARPU) in Canada is $40 to $60 per person per month, whereas in India it’s somewhere in the $5-8 range. You need to understand your product’s applicability and adoptability to the market, your competitive advantage and your pricing model has to fit. With good marketing you can develop a strong user base for Mobile applications as the market has crossed 1 Billion users and most are using mobile devices as their only means to get on the Internet.
How can Canadian companies best position themselves for growth here?
You want to look at your market in a holistic way and see India as an opportunity to scale across the region too. For example, if you’re selling communication technology or services, you’ve got five operators in two different regions you can sell to address 90% of the target market. Also, recognize that India is the perfect hub from which to segue into other markets, including Malaysia, Singapore, Hong Kong, Vietnam, Indonesia, the Philippines and the United Arab Emirates. You can base your team in India and travel easily to the ASEA and EMEA markets in a cost-effective manner.
Any emerging trends in India that Canadian exporters should know about?
Among Indian companies, there’s a progressive move towards acquiring the best technology and growing it. Their interest may be more than doing a tie-up, they’re possibly considering acquiring your company, or entering into a partnership or joint venture. So keep an open mind and remember that the Indian market presents more than a selling opportunity; in some cases your products can be embedded into Indian products thus creating a new and lightweight version of a solution that meets the pricing target. It is also a good geography to build out a strong technical support team to address global customers in a feasible manner.
Accord Group India
What’s the labour market like today for foreign companies in India?
There was a time when the labour market was geared strongly towards foreign companies, when people would almost blindly work for foreign companies. Indian employees are now doing their due diligence. A number of Indian companies have grown substantially and are able to provide more interesting career opportunities. Indian multinationals may also have an edge over foreign companies because their decision making is in India. Another factor that has worked against foreign companies: given recent economic conditions, many of them have changed plans and left. So job candidates are a bit wary.
So what can Canadian companies do to make themselves more attractive to Indian workers?
Make sure their brand name and product offerings are well known, which I know is a challenge for small to mid-sized companies. If you’re not a Coca-Cola or Microsoft, then work with partners such as search firms or consultants that are well respected in India. Invest a little bit to build your brand as an employer of choice.
How can Canadian companies ensure they’re hiring the right people to run their Indian-based operations?
They need to make sure they have contacts who know the local labour market quite well. Reference checking is really hard to do in India because people here tend to not say negative things about others unless they really know the person who’s making inquiries.
Also there’s no central database of social security numbers so it’s hard to verify a candidate’s job experience. Some companies have success with hiring through word-of-mouth, but ideally you should be complementing that with a structured search.
Manager, Legal Research
How extensive is corruption in India, and what forms does it commonly take?
India has a long history of entrenched corruption, ranging from low-level administrative graft to high-level “crony capitalism.” Among the most visible forms are bureaucratic and administrative corruption. An abundance of regulatory hurdles provide many opportunities for public officials to solicit bribes from members of the business community, and it is common to encounter demands for “facilitation payments” to expedite paperwork. Bribery can also appear as a tempting shortcut around complicated regulations, or as a relatively cheap way to obtain government business. According to the World Bank Group’s most recent Enterprise Survey for India, nearly 40% of firms reported being expected to make a gift to secure a government contract, with the average amount of the gift being only 0.1% of the contract value—dramatically lower than the global rate of 1.7%.
How can Canadian companies reduce their risk of involvement in corrupt business practices?
Canadian companies operating in India should establish and maintain a robust compliance program, with annual auditing and calibration of their compliance procedures. They should make sure that their employees are trained and prepared to respond to bribery risks, knowing that the company will support them in their refusal to make illicit payments, even if doing so leads to an administrative delay. Anonymous whistleblower hotlines can also serve as a window into potential wrongdoing. Finally, companies should take care that their business partners in India are reputable and willing to conduct themselves according to the company’s compliance standards.
What are the prospects for improvement in India’s corruption-risk profile?
The Indian government has committed to implementing a system of “minimum government and maximum governance”—that is, reducing the opportunity for corrupt practices by scaling back the country’s massive administrative bureaucracy. It appears to be moving in the right direction: there has been noticeable recent improvement in statistical indicators related to the country’s level of regulatory burden, bribery expectation, and government contact—the three factors carrying the most weight in the TRACE Bribery Risk Matrix. Overall, it scores 45, indicating a moderate risk of business bribery.
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