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

"The Netherlands can also learn something from Indian healthcare system"

Philips Innovation Campus in Bangalore (Photo: Berkeley - Haas)

To be successful in India, foreign companies must adapt their products to the Indian market. McDonalds sells a vegetarian potato burger in India, the McAloo Tikki, and TomTom developed a navigation system based on landmarks instead of street names. "Philips also needs to adapt its medical equipment specifically for India," says Jos van Haaren, who has worked as research director at Philips' innovation campus in Bangalorefor the past three years

"I would have liked to stay longer, but everything comes to an end," says Jos van Haaren resignedly. The researcher from Brabant worked for more than three years on the Philips innovation campus in Bangalore. "It was a fantastic, inspiring experience," recalls van Haaren. "As a Dutchman, you often think you know what people worldwide consider normal, but in India you soon notice that people there look at the world very differently."

He does not only refer to the most remarkable themes such as religion, politics, class differences and poverty, but also to social issues such as healthcare. Van Haaren: "Competition in health care is perfectly normal in India. The costs of treatments are known. In fact, you often have to go to the cash register before you are treated. The fact that healthcare providers make a profit is completely accepted. Almost everyone is convinced that this improves quality and benefits patients. And let's face it, the Netherlands can also learn a lot from Indian healthcare.

The backbone of Indian healthcare is made up of more than 40,000 small private clinics across the country. Van Haaren: "These clinics are often run by a couple: the woman is responsible for gynaecology and obstetrics, the man for surgery and cardiology. If you want to sell them something, you have to adjust your offer to their wishes. The price of equipment is important, but reliability is also crucial, as they often only have one of each. In addition, you have to think carefully about service, because it is relatively expensive to send specialised maintenance engineers to all those clinics across the country." 

Jos van Haaren with colleague (Photo: Jos van Haaren)

Philips must therefore redevelop its products for the Indian market and for similar markets in Asia, Latin America and Africa. Van Haaren: "In doing so, we ask ourselves the question with which a product must comply as a minimum. What offers real value and which functionalities can we leave out without reducing the primary functionality? For example, we have developed a highly simplified Ultra Sound System for making ultrasounds during pregnancy and for performing heart scans. Ultrasound specialists want to have all the data, but other treating physicians need only such a simplified and much cheaper system to get a good picture of the situation."

Interestingly, this highly simplified, cheaper equipment is not only in demand in India. Van Haaren: "We have noticed that physiotherapists and midwives in Western Europe are also interested in such instruments. India is an enormously cost competitive country. That makes it a perfect test case for new products. If you succeed in India, you can succeed anywhere."

Also active in the healthcare sector and planning to conquer the Indian market? Feel free to contact us!