With a population of 1.3 billion people and constantly rising income level, India has emerged as one of the biggest markets in the world. Also, India is the fastest-growing large economy in the world, having recently overtaken China, and is ranked fifth in the world in terms of GDP. When purchasing power parity is taken into account, India’s ranking climbs up to the third position. But, it’s per capita GDP is significantly lower when compared to other developed economies because of its extremely large population. Nevertheless, domestic consumption is quite good and many foreign companies have established their business set up in India to tap the ever-growing domestic market.
What makes India an attractive destination for global players is the fact that domestic consumption is very high. Unlike China whose GDP is largely dependent on exports, India does not rely too heavily on exports for its GDP. Though India is fast emerging as an export hub for both, domestic and foreign companies, its domestic market continues to grow at fast pace.
With multinational corporations setting up their facilities in the country and the continuously increasing FDI inflows fuelling India’s economic growth, the purchasing power of the Indian consumers has constantly increased over the years, making India one of the biggest markets in the world.
Why Companies Fail in India
Of the numerous foreign companies that opened shops in India, quite a few failed to taste success and had to wind up and withdraw from the country. It’s not that there was something wrong with their products or services; they all have had a proven track record in other countries. What probably went wrong for them was that they came here under preparation without doing a comprehensive market study, and most importantly, they did not understand the consumer behavior in this country, and their whole marketing strategy went wrong.
It is, therefore, paramount that companies planning to enter India did proper market research, not only to learn about the size of the market and the competition, but also to understand consumer behavior and preferences, and what the biggest influencers are. This article tries to offer some tips for successful entry into the Indian market.
Find a Local Partner
India is a big country with a population of more than 1.3 billion people with diverse cultural and religious beliefs. It’s a country where language and culture changes every 100 kilo meters, as also the consumer preferences. All these make India a very complex market, making it difficult for businesses to navigate. The market dynamics in India is far removed from that of other countries, and therefore, the strategies that work there may not be suitable for the Indian market. Companies with a preconceived notion and limited international exposure are overwhelmed by India’s complex business landscape. Therefore, it’s a good idea to find a local partner before you embark upon your India venture. The local partner would be able to help you understand the nuances of doing business in India and apprise you of the rules and regulations, besides giving valuable information about the competition and guiding you towards the right marketing approach.
Product localization and Diversification
As mentioned above, India is a country of diverse cultural and religious identities, and consumer preferences and taste vary from region to region. Products that might be high in demand in other countries, may not find favour with Indian consumers. Also, with different consumer behaviour and preferences across regions, a single product or service may not suit everybody. Hence, it is of utmost importance that the product offering should be customised to cater to the local demands and needs. There should also be a range of products or services to address the needs of people from different parts of the country and from different economic strata of the society.
Get the Pricing Right
Indian consumers are very price sensitive. With a large percentage of the population coming from the lower or lower middle class, and the poor section, price is an important factor in their buying decisions. They want value for money in their purchases. No frills products are what they prefer, so try to keep the costs under check, and offer your product or service at reasonable price. Getting the pricing right is critical.
Enter the Indian Market with Long Term Perspective
India is huge market with 1.3 billion people, including a 400 million strong middle class. Though the market is very attractive, the competition too is very tough, and gaining market share is not an easy job. Many companies, in order to stand up to the competition and gain market share, forego their profits in the initial years just to establish themselves. Profits only come later, after they have slogged for a few years just to get a foothold. So, anyone who wants to enter the Indian market must do so with a long term perspective. There is no quick money to be made in the Indian market.
Prepare for a Different Legal and Regulatory Landscape
The legal and regulatory framework in India is significantly different from many western countries, and is quite complex as well. With so many laws, both state and central, it is not easy to negotiate the Indian Judicial System. If you want to establish a business set up in India, you should first consult some reputed business lawyers to fully understand the legal environment and requirements in this country. Also, courts in India are over-burdened and cases get delayed endlessly, so any contract or agreement you enter into should have a provision for some Alternative Dispute Resolution mechanism.
To conclude, your Indian market entry strategy should take into consideration all the points mentioned above. You have to be fully prepared if you want to succeed in this highly complex and competitive market.