How to enter the Indian market
Himanshu Godara, Manager – Business Advisory at SKP Business Consulting, shares top tips for businesses looking to sell and export in India
For foreign companies, it is important to consider right mode of entry to do business within the Indian market. This should be evaluated in terms of size of investment, short and long-term business plan, nature of business activity, tax and legal liabilities. There are two options to consider:
If you want to enter the Indian market with limited financial and legal risk, appointing independent local distributors would be an ideal choice. However, in this case your success completely depends upon identifying the right distributor, here’s how:
- Supply chain and distribution analysis – Companies must understand the prevalent supply chain and distribution model from a tax and commercial perspective. It will help you draft the roles and responsibilities of identified distributors and in designing an efficient distribution model.
- Detailed due diligence of identified distributors – To choose the most appropriate distributor you should select distributors after considering various parameters such as financial strength, access to potential customers, key management background, and ability to grow business in defined market.
- Set-up systems and process to gather required financial and performance data from distributors – When entering the Indian market through the indirect route, distributors become key sources of reliable data. It is necessary to have systems and processes that facilitate and guide distributors to provide market information on a regular basis.
- Consider distributors as long-term partners – It is important to develop trust with local distributors and treat them as long-term partners rather than just an entry vehicle
Companies with direct presence in India through a liaison office, branch office, limited liability partnership or wholly-owned subsidiary give better control over operations, financial and marketing activities compared to an indirect presence through distributor(s). However, the type of entity completely depends upon nature of business activity, tax and legal implications and business strategy.
Meanwhile, if you have limited resources it may be necessary to leverage third-party expertise on non-core functions such as logistics, accounting and book-keeping for initial years and focus your efforts on marketing and brand building.
There are many third party logistic companies that provide customised support right from freight forwarding, custom clearance and warehousing, setting-up distribution channel and inventory management. Similarly, you can take professional support from financial outsourcing companies for accounting, book keeping, compliance management and payroll.
There are many success stories of foreign companies doing business with India. At the same time there are plenty instances where organisations were not able to make their ventures profitable. The difference between success and failure lies in preparation as well as approach towards entering the Indian market. Many times complex regulations, cultural diversity and fast changing business landscape are all hurdles companies will have to overcome to be successful.
To see how the UK India Business Council could help you begin your Indian business development journey, please follow this link.
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