Differences in the way of doing business among Indian states

India is almost as large as the European Union and has more than twice as many inhabitants. No wonder, then, that there are major differences between the various Indian states in terms of language, demographics, politics and economic growth. For a successful start-up in India, it is therefore important to take these differences into account when drawing up a business plan. Because what works in Gujarat does not automatically work in West Bengal.

Image via Harvard Business Review

The regional differences among Indian states

For a European company to succeed in India, you must be aware of the country's vast regional differences. India is a fragmented market with large, and often underestimated, regional differences in language, culture, infrastructure and wealth, all of which affect the regional business culture.

Indian states are therefore better compared to individual countries than to, say, the Dutch provinces. Indeed, India's most populous state, Uttar Pradesh, has as many inhabitants as Brazil, and the southern state of Tamil Nadu has an economy as large as that of Hungary. 

There are also large demographic differences between Indian states. For example, southern India is older, has more to spend and is more educated than the rest of the country. Northern India, on the other hand, is younger and relatively poor.

North Indians primarily speak Hindi, while South Indians prefer to communicate in English or in their regional state language, such as Kannada or Malayalam. The German wholesaler METRO, better known in the Netherlands as Makro, found out after their start in India that there are big differences between the groceries that customers in a certain region put in their shopping cart and adjusted the assortment accordingly by adding more local products. Logical really, Finns also have different preferences than Spaniards.

"METRO found out that there are big differences between the groceries that customers in different regions in India put in their shopping cart."

- Mark Alexander Friedrich, Head of International Affairs for METRO

Do not make one business plan for all of India

For a successful start in India, thorough market research is a must. Regional differences are not only obstacles, but can also work in your favor depending on your sector and product.

The southwestern states, such as Maharashtra and Karnataka, are a suitable base for technical sectors such as automotive, engineering, as well as outsourcing IT and Research & Development teams.

Northern states such as Punjab and Haryana, among others, have thriving agricultural sectors, creating opportunities for food processing and renewable energy industries.

Starting in the right regions is also essential for selling your product in India. European products almost always fall in the highest market segment in India, so it is smart to start in the regions where people have sufficient income and there is real demand for a more exclusive, expensive product.

"Approaching India as one country by working with only one distributor or partner is one of the most common mistakes European companies make in India," says Klaus Maier, CEO of Maier + Vidorno, IndiaConnected's partner in India.

"In Europe, you wouldn't ask an Italian distributor to set up your network in Norway either. An Indian partner or distributor operating in a specific state has a good network only there and will not succeed in successfully expanding sales to other states. Therefore, those who take India seriously start with about four dedicated, local managers or distributors who understand your product and the regional market well. With them, the market can be mapped and the logistics network set up, one of the biggest challenges for international companies in India. In this way, the Indian market can be conquered step by step, successfully." 

Selling successfully in India with the right strategy

For anyone looking to conquer the Indian market, IndiaConnected has put together a special guide in which we offer you insight into the steps to take to successfully start and grow your sales in India.

From preparing your first export shipment to India to setting up a solid after sales service, we guide and advise throughout your India journey.

Why manufacturing in India is a smart move

When outsourcing production, European companies are quick to think of China, because it can be done cheaply there. But is that idea still correct? Labor costs in China have risen significantly in recent years. average minimum wage for contract workers in China is now 197.67 euros and India only 125 euros. There are many other advantages to producing in India, such as there is no language barrier because Indians speak English well and there is a large pool of highly skilled personnel available. Three top European companies chose India years ago for these reasons.

In 2011, Roosen Industries noticed that in the Netherlands and surrounding countries it was finding it increasingly difficult to get good skilled workers to make high-quality precision metal parts. Labor costs were also skyrocketing as a result. "A serious threat," observed director Gandert Roosen, who took the initiative to build a factory in the northern Indian city of Kanpur. That turned out to be a golden opportunity. "The lower labor costs and an abundance of highly trained personnel mean that we can produce more than 20% cheaper on average and we can complete our orders faster because of the extra capacity. This has greatly strengthened our competitive position. 40% of semi-finished products are now made in India. It is the fastest growing division of our company."

"Made in India does not have the best image," states entrepreneur Paulien Wesselink, "but with O My Bag we are proving otherwise." The sustainable bag brand produces top quality in Calcutta. "We obviously didn't find the right producer at once, but over time we stumbled upon a cooperation partner who could meet our standards." The trendy bag label is now sold in more than 120 stores in 20 countries. 

"Anything we can make in Europe can just as well be produced in India," argues Jens Groot of Basic Water Needs. Why more companies don't have an Indian factory surprises him. "Producing in India is attractive. The industrial landscape is good: there are enough suppliers who can deliver quality, wages are low and the infrastructure is in order." In terms of logistics, India is also convenient. "Chennai, India's 5th largest city is a few hours' drive away. There is an international airport and a port from where we export our water filters to Africa and the rest of Asia. Ideal."

5 tips for finding and keeping good staff in India

1. Go to Bangalore

"While the labour market in Bangalore is highly competitive, it is bursting with excellent people. The outstanding graduates of India's top universities come to this city in droves."

• Jos van Haaren, Philips

2. Keep a close eye on salaries

"Most Indians are not very nice to their employees, so as a European you are easily a very good boss here. I think it's important to create a good atmosphere. I try to create clear expectations about how people can develop with us, including their salary. This is very important, because Indians are constantly comparing their salary with colleagues. You have to treat everyone equally, otherwise you get trouble and people leave. With us, the turnover so far has been zero. I'm proud of that." 

• Jesse van de Zand, Janta Meals

3. Opt for experience

"Prefer not to hire people who have just come out of university. People with work experience have already learned the basics about working in the industry from their first employer." 

• Jos van Haaren, Philips

 4. Encourage critical thinking, ask for feedback

"Whether you instruct them to run 10, 20 or 30 rounds, Indian field hockey players do it. In Europe, players are quick to ask 'Why really?' The lack of independence kills you in top sports, because on the field you really have to decide who to play the ball to. In business, of course, the same applies. Therefore, constantly ask for feedback and encourage critical thinking." 

• Paul van Ass, former national coach of the Indian hockey team

5. Provide a challenge

"As an employer, it is sometimes difficult to work with the best students in India. On the one hand, you want to show respect and give recognition to what people have achieved. On the other hand, a job with a foreign multinational is not the finish line. For the employer, that's when it starts. Therefore, you have to ensure that your people continue to learn and be challenged." 

• Jos van Haaren, Philips.

6. Accept cultural differences, but draw a line too   

"You have to immerse yourself in the Indian context and accept that things in India happen differently than what you are used to. Otherwise you go crazy. For example, I constantly had a driver at my disposal, even though I hardly needed one. As a European you find it sad that such a driver is waiting all day, but over there they are used to that. Besides, the driver does have a job. So don't send him away, but accept it. On the other hand, you have to watch over your core business: you must not compromise on quality." 

• Paul van Ass, former national coach of the Indian hockey team

What you need to know if you are going to manufacture in India

More and more companies are choosing India as a production location. This is only logical, as Prime Minister Modi's Make in India campaign has greatly improved the business climate. Do you also have plans to have your products made in India? Then read these five tips from Paulien Wesselink of the sustainable bag brand O My Bag.

Photo: O my bag

1. "Travel to India to get a feel for the country and the people. In India, everything is about personal contact, so a good click with Indians is crucial."

2. "Do not rely on agents, but visit local producers yourself. Then you can see exactly how things work in the factories and build a direct relationship with the people who make your product."

3. "Hire independent quality controllers who check your product at various times during the production process. We should have done that much sooner in retrospect."

4. "Fair trade certified producers are often not professional and reliable enough when you want to scale up. So don't be blinded by a quality mark, but rather focus on transparency with your producer. Customers are rightly sceptical about labels, so it is more important that you can show them how your supplier operates."

5. "Trial & Error is the method of finding a good Indian producer. Therefore, work with different producers to find the best cooperation partner along the way."