How to avoid a business conflict in India

India offers enormous business opportunities for Dutch companies, but entrepreneurs need to be well prepared. Five tips to avoid business failures and conflicts.

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1. Know who you are doing business with
It is advisable to conduct thorough background research on the party you want to do business with in India. What is their reputation in the market? Who are their key customers? What does the management team look like? Does it include the shareholders? Are there any lawsuits open or is the company being sued? Have there been any legal conflicts in the past? This information is publicly available and can be made insightful by specialized Indian parties.

2. Check the experiences of international customers
The question you should always ask Indian customers as an exporter is whether they do business with international (Western) companies more often. This says something about the mentality and professionalism of the company. Don't take the Indian party's word for it, but also check with the Western party whether it is true and how the cooperation went.

3. Engage an Indian lawyer in a timely manner
Make sure you have cooperation documents drafted and reviewed by a specialized Indian lawyer. Do not wait for a contract proposal from the Indian party, but draw up your own contract together with an Indian lawyer. Then have your Indian business partner look at it and make any changes together in a second round of review. Such a thorough approach ensures involvement of both parties and produces an agreement that takes into account the Indian context.

4. Intellectual Property
India has very comprehensive intellectual property legislation. This includes all aspects that entrepreneurs may have to deal with: from copyright and trademarks to industrial design and trade and brand names. For Dutch entrepreneurs there are numerous possibilities to protect their intellectual property in India. Make sure you always have good contract templates with strong clauses that address and protect intellectual property (IP). Proper preparation and contractual protection of your intellectual property helps tremendously in case of escalation.

5. Relationship, relationship, relationship
Finally - in addition to the formal protective measures you should take - there is no more effective way for preventing business conflicts than to create a good, personal business relationship. When you have a good relationship with your Indian business partner, conflicts will rarely escalate through formal routes.

Have you run into a problem with an Indian customer or partner and the situation remains unresolved? Or would you prefer to have a background check performed? Our legal experts are ready to answer your questions.

More and more Dutch companies are achieving success in India. How do they do it in this large and diverse country?

India is not an easy market but it is a very big one. Too big to be ignored. Certainly for Dutch companies with ambition, guts and perseverance, there are many opportunities in this country. More and more Dutch companies are able to seize these opportunities. How do they do it and what can other companies learn from them? Lessons for success in India from seed potato grower HZPC Holland and machine builder Meyn Foodprocessing Technology.

IndiaConnected is regularly asked to share knowledge about India. For Globe, the magazine of the Dutch Export Association EvoFenedexpartner Maarten van der Schaaf wrote this article about the lessons from Dutch companies for success in India.

At the end of 2007 HZPC Holland, the largest Dutch exporter of seed potatoes, decided that the company from Joure in Friesland should seriously consider India. "Occasionally we came there", says ceo Gerard Backx, "but we had never given the country structural attention." That had to change, Backx thought. Coincidence or not, a few months later an employee of Indian conglomerate Mahindra calls him. He asked if he could drop by in Joure. Backx is curious. "What does such a huge concern, which is mainly strong in iron and engines, want with seed potatoes? I was curious where their interest came from."

That first appointment almost went wrong, Backx recalls. "Mahindra's representative arrived at Heerenveen station on Friday at 6.30pm instead of 11am. He had taken a wrong train and then got lost." But when the two got into a conversation that evening, it clicked. Mahindra appears to have decided to expand its agricultural branch and would like to introduce the potato varieties of world market leader HZPC in India. The meeting leads to a cooperation agreement in 2008, in which Mahindra will represent the Friesians in India.

Good balance

In 2014, the two companies set up a joint venture: Mahindra HZPC. This company started the cultivation and trade of common Indian potato varieties. HZPC has an interest of forty percent in the joint venture. Backx: "We have looked for a good balance. They do the finances and HR policy, we do the technology and the potato varieties. The joint venture pays our Dutch company a licence to use the varieties. As far as we are concerned, we are in balance. It does not matter that we have a minority interest. If the joint venture makes a profit, that is great, but for us it is mainly about the income from the licence stream. The more Indian farmers who grow our varieties, the better. We are not completely dependent on Mahindra and we are also talking to third parties to get more farmers in India to grow our varieties. By the way, we are having these discussions together with Mahindra. Our relationship is excellent."

Almost ten years

The potato varieties of HZPC are sold to the processing industry and supermarkets in India. "The processing industry, think of large french fries and crisps manufacturers such as Lays, is very pleased with our arrival. With our high-quality varieties they can make better products and achieve higher returns. The fresh market is by far the largest market for potatoes in India. Traditionally, growers take little account of the eating preferences of Indians: they focus mainly on technical cultivation issues such as disease resistance and the amount of water needed. Our varieties have different tastes, are smoother and look nicer than the classic potato varieties with deep pits. With this, we think we can primarily serve the middle class and elite through the supermarkets." It took almost a decade to get his high-quality potato varieties to market in India. Ceo Backx takes this long lead time for granted. "India is perhaps the most promising market of the future."

Tipping point

At Meyn Foodprocessing Technology, one of the world's largest machine builders for the production of chicken meat, they have a similar experience. It took the company from Oostzaan more than twenty years to get a firm foothold in India. "We had to sow a lot of seeds there before we could start harvesting, but it was worth it," says Karel de Waal, Meyn's senior sales manager for India. "Thanks to our patience, we now have over fifty percent of the market." That market is large and growing: India is the fifth largest producer of broilers in the world. As more chicken is sold through supermarkets, the demand for automation in the meat processing industry will further increase.

What is the key to Meyn's success? "A good partner," says De Waal. "Before we found our partner, we had a few less than smooth collaborations, which didn't yield much. But when we came into contact with Alok Raj, there was an immediate click. He opened up the market for us and worked for us in India for twenty years, more as an advisor than a salesman actually. In India, building a personal relationship is extremely important when doing business with each other. Alok understood this like no other and has seen about every meat processing company in India from the inside. He would work with the entrepreneur to see how the production process could be organised more efficiently and even help start-ups design entire factories," says De Waal with a smile. "Those factories actually materialised, because the entrepreneurs felt they could always count on us. That was the turning point when we were able to start charging for our service."

Much faster

Meanwhile, Alok Raj has retired and Meyn has a hundred per cent subsidiary in India. "Before we had the office, we arranged everything from the Netherlands. From sales to installation and after-sales. But as a company we want to be as close to our customers as possible. That is our global strategy. That is why we have a total of 16 after-sales offices, where we work in the local language and currency and sell spare parts. Especially in India, providing this kind of quick after-sales service is very important."

On the advice of Meyn's owner, the Berkshire Hathaway group, the Indian office was set up in partnership with a law firm that the Berkshire Hathaway group itself already had experience with. "In retrospect, this may not have been the best party. It was a very big firm that wouldn't do the metres for us. We were led to believe that setting up would be a matter of months, but it ended up taking two years." Smaller agencies can do it much faster, within three to six months, De Waal later learned. "As an international company, you shouldn't focus on size and international experience. It is more important that such a law firm has the right contacts in India and can focus its full attention on you."

All lessons from HZPC and Meyn in a row:

1. Give India structural attention;

2. A good partner is crucial in India;

3. Continuous professionalisation offers opportunities for high-quality products;

4. Selling in India takes time. Take that time, it is worth it;

5. Build relationships. Or work with Indians who have good relations in your sector;

6. Service and after-sales are very important to Indian customers;

7. Choose local knowledge, advice and support on the ground. You will need them.