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.

The purchasing power of the Indian consumer

India is one of the fastest growing consumer markets in the world, but what do those figures mean for your business? What percentage of the Indian population actually belongs to your target group? And how big is the customer base for your products or services?

The size of your potential customer base in India and their purchasing power depends entirely on the industry you are in and the type of products you offer, but there are some general assumptions we can make:

• On the one hand, we see that the vast majority of India's nearly 1.4 billion people are young and poor and lack sufficient purchasing power to buy high-end, European products. Genexis, the European market leader in fiber optic modems, found that out too. Their modems were far too developed for the Indian consumer, so they built a special model for the Indian market. 

• On the other hand, India's middle class is expanding at lightning speed, increasing the demand for better products. The Indian middle class often sees foreign products as being of better quality, and this creates opportunities for international companies such as the Dutch clothing brand Scotch & Soda noticed. They opened 8 stores in India in 3 years and are now serving the fast-growing middle class online through their e-commerce platform.

This schematic representation of the Indian market provides a better understanding of what to expect and how best to rate your product or service:

The top end of the Indian market

In some sectors in India, there is no high-end market, but for others, such as fashion and electronics, for example, there is a large market. These consumers are often located in and around the largest cities, such as Delhi, Mumbai and Bangalore, but they cannot all be grouped under the same customer profile.

In India, having a specific, regional strategy is important to sell successfully. That means that within this segment, in principle, you must assume a small, exclusive group of consumers. Many companies think they can get around the regional approach by focusing entirely on e-commerce. A smart move when you consider India's rapid digital development.

However, as an entrepreneur, you must take into account the strict regulations in this area, it is currently still not possible for foreign companies to sell online directly to Indian consumers.

The Indian mid-segment

Many European companies have the idea that they can offer their high-tech, European products in the growing middle segment as well. But once they make their market entry, they find out that the Indian middle class still has much lower purchasing power than elsewhere.

In the first instance, therefore, it is smart to leave this segment out of the calculations for a while and in time, after you have started up in the higher segment, start thinking about how you can adapt your product to better suit the needs and price level of the Indian middle segment. After all, if you start focusing on the middle segment in addition to the high end, you might triple your sales market in a short time.  

Workshop: Market entry in India

Starting to export to India can be challenging for European companies who are not so familiar with the country. IndiaConnected helps over 100 companies every year with their activities in India. We work with local experts in all sectors and can therefore offer you a helping hand in shaping a successful market strategy for your business in our tailor-made workshops:

• We will give you more insight into what is involved in your market entry in India.

• You will receive valuable feedback on your current India strategy from independent experts.

• Expertise in every field: sales, manufacturing, legal, tax, finance, supply chain, recruitment, etc.

Our workshop usually lasts about 2 hours. Our experts will work with you to explore your issue and formulate possible answers and strategies. Afterwards, you will receive a report.

How Brabant's SIAP won India's most prestigious project

The JIO World Centre in the business heart of metropolis Mumbai is the most prestigious convention centre in India and the first Indian customer of the Brabant acoustics specialist SIAP Acoustics. CEO Reinout Gerlach personally took the stand behind the piano to bring in his Indian customer Reliance.

The SIAP and Reliance team together in the concert hall of the JIO World Centre

First contacts with India

SIAP, based in Uden in Brabant, has developed a system with which you can electronically change the acoustics in a room. With this patented system, you can make an unamplified symphony orchestra sound like it is playing in a concert hall or play the sound of a film in surround, drawing the audience completely into the film. SIAP's system is used in various concert halls and arts centres from Amsterdam to New York, Hong Kong and Seoul. "At the beginning of the millennium, we successfully did several, large projects in South Korea," says CEO Reinout Gerlach. "We regularly worked with Samsung subcontractors in these projects. In 2015, Samsung knocked directly on our door. At that time, they were the contractor for the JIO World Center in Mumbai, India and asked us to be their VAS (Virtual Acoustic System) supplier."

Unannounced visit from India

After the first talks with Samsung, it remained quiet for a long time. Samsung's Indian client, Reliance, spoke with several parties who could provide image and sound, but no choice was made. "Reliance is one of the largest companies in India and is run by one of the country's richest families, the Ambanis. They naturally want only the best of the best and a competitive price, so all the major audio-visual companies in the world offered their services to Reliance. We feared that one of our international competitors would get the job." It wasn't until three years later, in 2018, that things started to move when Reliance reported to SIAP at an exhibition in Amsterdam. "They had specially travelled to the Netherlands with 12 people to talk to us about the acoustics of the Jio World Centre in Mumbai and how our system would facilitate the intended multi-purpose use of the hall ."

Playing the piano for an Indian customer

The first conversation between the two parties went well. "We understood how best to behave," says Gerlach. "Not too pedantic, but interested and respectful. That was to their liking." The Indians wanted a demonstration of SIAP's system, and not at a later date so that the company could prepare it calmly, but immediately. "We were totally unprepared for that. The closest system is at the De La Mar Theatre in Amsterdam and luckily, by chance, we were able to get there quickly. "It was all super makeshift. We started by demonstrating the presets for classical music, but that didn't catch on at all - it's not a well-known genre in India. I then decided to take up the piano myself. That worked!"  

Also at the JIO World Centre, SIAP CEO Reinout Gerlach played the piano to test the system.

Respect and flexibility

While playing, Gerlach tries to reproduce the typical sounds of Bollywood. "That was really a turning point. The fact that we made an effort to really build a connection by thinking about what music we played was proof to them that we had the right willingness, knowledge, but also attitude to be able to fulfil the assignment. We showed respect and flexibility that other, much bigger international companies apparently had not shown. I think the decision to choose us was made on the spot. " 

Negotiating with Indian customers: tough against tough

However, even after the signature of Reliance's CEO, the contract was not yet in: negotiations with Reliance really started then and went hard. 

"We were not well prepared for that. In our European view, Indians will go to great lengths to get the best price, almost to the point of rudeness. And because they always come across as very friendly and almost helpful in the rest of the conversations, this really came as a surprise to us. Therefore, start at a price four times higher than you would normally do, so that at least you are not undercutting your cost price. I can only advise other companies to take their time when negotiating." 

Local help saves lots of time 

For a possible next assignment, Gerlach would definitely enlist local help to take care of all the time-consuming business. "This time we took on all elements of the assignment ourselves, by which I also mean the peripheral issues such as various taxes, visas, permits, bank guarantees and local laws and regulations (safety standards on the work floor there), but we really had a day's work to do. It is actually not worth reinventing the wheel all by yourself, next time we will definitely outsource this and charge much more project hours. Analysis of our time expenditure showed that we had spent at least 400 hours on research and superfluous bureaucracy.

Is your company about to go to India for the first time to explore the market, roll out a first project, or hopefully land your first Indian customer? Then feel free to contact us about how we can help you with all the red tape that comes with doing business in India.

First time in India is a special experience

Last May was finally the day. SIAP travelled to India to install their acoustic system at JIO World Centre. "It was our first time in India, so just landing at the airport in Mumbai felt overwhelming," says Gerlach. The Dutch team had to get used to the Indian service in the beginning. "Everyone wanted to do everything for us; if we had asked them to brush our teeth for us, they would definitely have said 'yes'. But working together was also incredibly nice because of that helpfulness, everyone is constantly on the starting blocks and things are picked up super fast." 

SIAP has added special presets in their system that make traditional Indian music sound according to local preferences.

Adapting to local preferences

Not only in the run-up to the project and during the tough price negotiations did Gerlach learn a lot about doing business in India, but also during the testing of the system he came to surprising insights about local preferences. "In the Western world, we have been used to concert halls with their characteristic acoustics for a few centuries. In India, this is completely unknown and music is often played in temples. We found out during testing that they like a lot of reverb for certain types of music, so we made special presets for them with extra reverb for Indian music. Those are special lessons that you pick up from a project like that and hopefully we can take them to the next one."

Wondering about the opportunities in India for your product or company? Check our sector overview to get a better idea of the growth opportunities in India.