CONTEXTUAL INTELLIGENCE: INDIA€¦ · Executive Summary (II/II) The online survey reveals that...
Transcript of CONTEXTUAL INTELLIGENCE: INDIA€¦ · Executive Summary (II/II) The online survey reveals that...
University of St.Gallen
CONTEXTUAL INTELLIGENCE:
INDIA
Market Entry Challenges
Prof. Dr. Roger Moser
Assistant-Professor of International Management &
Director, ASIA CONNECT Center, University of St.Gallen
Switzerland/India, February, 2012
Mathias Imbach, Roger Moser, Philipp Rehbock, Winfried Ruigrok
India Competence Center
University of St. Gallenwww.fim.unisg.ch
The bumpy road to India
«Market entry challenges for Swiss companies:
Lessons learned»
Insights from recent research with Swiss-Indian Chamber of Commerce: Challenges and solutions along 13 market entry steps.
Executive Summary (I/II)
➢ This presentation is based on semi-structured personal interviews and an online survey with Swiss/ EU and Indian SME executives (N=45) aimed at identifying key market entry challenges for Swiss SMEs in India and practical recommendations to successfully address them
➢ 13 critical incidents along the market entry phases “evaluation, entry planning, entry implementation, local operations” are identified – the root causes of many challenges are related to “soft factors” (Swiss experience clashes with Indian reality)
➢ Overall, SME executives rate market evaluation phase as most critical for overall entry success, challenges in the implementation phase as most complex to address
➢ Specifically, executives perceive the following challenges as most important for overall market entry success:
➢ Correct evaluation of market potential
➢ Rigorous financial planning
➢ Developing a strong and trustworthy leadership team in India
➢ Quality management (ongoing)3
Executive Summary (II/II)
➢ The online survey reveals that addressing the following challenges successfully seems to be most complex:
➢ Right adaptation of own product portfolio for Indian market
➢ Taking the right entry mode decision (independently vs. with Indian JV partner)
➢ Finding a business process design which works (Swiss vs. Indian way of doing business)
➢ IP/ Technology protection (ongoing)
➢ Swiss/ EU SME executives rate complexity of market entry challenges solutions significantly higher than Indian peers – tendency particularly distinct for “people management related challenges”
➢ Analysis suggests that the most complex challenges along the market entry process to India can be efficiently addressed by following certain guidelines:
➢ Allocate sufficient time to “know your market”
➢ Invest in personal overlapping networks (Is your “red” button at least as big as your
partner’s?)
➢ Calibrate Swiss vs. Indian way of doing business
➢ Align IP/ Technology protection measures with overall business strategy/ value chain
➢ This presentation describes all entry challenges and related recommendations in detail 4
Objective: Identify most critical incidents along the marketentry process and develop practical recommendations
suitable for resolving related challenges
➢Market entries in emerging markets
heavily impact firm financial &
operational performance
➢Even well managed Swiss SMEs have
experienced significant challenges
when entering the Indian market
➢Underlying issues related to the key
market entry challenges have yet to be
thoroughly researched and understood
Current situation:
➢ Identify the most critical incidents
along the market entry process
➢Understand underlying challenges/
problems associated with these critical
incidents
➢Develop practical recommendations
to enable SMEs to respond to identified
market entry challenges
Project objective:
Project objective
5
Approach – Project followed a 4-step approach
Step 1: Identify major market
entry process steps
Step 2: Identify critical incidents
from a Swiss pers-
pective
Step 3: Evaluate critical
incidents through Swiss
and Indian experts
Step 4: Develop recommen-
dations
➢Phase A: Market Evaluation
➢Phase B: Entry Planning / Preparation
➢Phase C: Market Entry Implementation
➢Phase D: Local Operations
➢Identification of critical incidents by means of
qualitative interviews with Swiss and Indian executives
with relevant management experience at the interface
of Switzerland and India
➢Evaluation of critical incidents through
▪ Qualitative personal interviews
▪ Online questionnaire targeted at Swiss/ European
and Indian SME executives
➢Development of hands-on recommendations enabling
SMEs to address identified challenges in a structured
manner
6
Results are based on interviews & online question-naire – Sample consists of Swiss/EU & Indian exec.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Indian
European
Swiss
150 - X
50-150
10-50
0-10
Other
BusinessDevelopmentManager
Country Head
Chairman,CEO,MD
Note: N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Nationality Position CompaniesCompany Size
in USD M
Other
Chemical &Pharmaceutical
Software & Technology
Retail & ConsumerGoods
Automotive
Industrial Services
Machine Construction
7
13 critical incidents along four major market entry phases identified
Market Evaluation
Entry Planning/
Preparation
Market Entry Implementa-
tion
Local Operations
1. CEO
expectations
2. Evaluating
market potential
3. Adapting
product for
Indian market
1. Choosing the
right location
2. Financial
planning
3. Entry mode choice
1. Business
Process design
2. Managing Indian
partner(s)
3. Developing a
leadership team
in India
4. Land acquisition
1. Managing the workforce
2. Technology protection
3. Quality management
9
Securing
independence
through
forward
looking
contract
negotiations
Results Overview: Challenges & Recommendations
Swiss
experience
vs. Indian
reality
Key challenges along market entry
phases
Major recommendations to address
challenges successfully
IMP
OR
TA
NC
E O
F C
HA
LL
EN
GE
HIGH
LOW
Relation-
ships x
Trust =
Market
Insights
Price –
Margin –
Quality
Trade-off
Finding
YOUR
location
Planning
the
unexpected
Staying
indepen-
dent
Identifying
right level of
adaptation
to “the
Indian way”
Ethics–
Time–
Corruption
Trade-off
Attracting
and
preparing
the right
leadership
team
Retaining
your people
– efficiently
SO
LU
TIO
N C
OM
PL
EX
ITY
HIGH
LOW
Build long-
term
incentive
systems
Apply
Jugaad
where
necessary
Match IP
protection
measures to
overall
business
strategy
A3
A2
C2
Capture and
clarify all
eventuali-
ties in
contract
C4B3
B2
Know your
market
A3
Apply fact-
based,
individua-
lized
location
analysis
Swiss
quality – de-
livered the
Indian way
Keep
control of
your IP
D2
Source: India Competence Center interviews; India Competence Center online questionnaire
Passion and
personal
presence
A2
Deploy
financial
contingency
planning
from the
outset
Invest in
personal
overlapping
networks
B3 Include,
empower,
control
Do not
compro-
mise on
corporate
policy
C4
C1
B1
D3D2
10
D1
C1
Ex ante
analysis of
financial,
reputational
and organiza-
tional
consequen-
ces
D3
C2
Patience
and
persistence
A1
B2
C3
Market
Evaluation
Entry
Planning
Entry Imple-
mentation
Local
Operations
Market
Evaluation
Entry
Planning
Entry Imple-
mentation
Local
Operations
B1
C3
A1 D1
2
3
4
5
6
7
A1 A2 A3 B1 B2 B3 C1 C2 C3 C4 D1 D2 D3
Evaluation of market potential and financial planning perceived most important by SME executivesHow important do you perceive the proper handling of this situation for the final market entry success in India?
A:
Evaluation
B:
Entry Planning
C:
Entry Implementation
D:
Local OperationsNote: N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
CE
O e
xp
ec
tati
on
s
Eva
lua
tin
g m
ark
et
po
ten
tia
l
Ad
ap
tin
g p
rod
uc
t fo
r In
dia
n m
ark
et
Ch
oo
sin
g t
he
rig
ht
loc
ati
on
Fin
an
cia
l p
lan
nin
g
En
try m
od
e c
ho
ice
Bu
sin
es
s p
roc
es
s d
es
ign
Ma
na
gin
g In
dia
n p
art
ne
r(s
)
Develo
pin
g a
lead
ers
hip
team
in
In
dia
La
nd
ac
qu
isit
ion
Ma
na
gin
g t
he
wo
rkfo
rce
Te
ch
no
log
y p
rote
cti
on
Qu
ali
ty m
an
ag
em
en
t
11
2
3
4
5
6
7
A1 A2 A3 B1 B2 B3 C1 C2 C3 C4 D1 D2 D3
Overall, addressing key challenges in implementation phase perceived most complex
According to your experience, how complex is it to address this challenge successfully?
CE
O e
xp
ec
tati
on
s
Eva
lua
tin
g m
ark
et
po
ten
tia
l
Ad
ap
tin
g p
rod
uc
t
to In
dia
n m
ark
et
Ch
oo
sin
g t
he
rig
ht
loc
ati
on
Fin
an
cia
l p
lan
nin
g
En
try m
od
e c
ho
ice
Bu
sin
es
s
Pro
ce
ss
de
sig
n
Ma
na
gin
g In
dia
n p
art
ne
r(s
)
De
v. a
le
ad
ers
hip
tea
m in
In
dia
La
nd
ac
qu
isit
ion
Ma
na
gin
g t
he
wo
rkfo
rce
Te
ch
no
log
y p
rote
cti
on
Qu
ali
ty m
an
ag
em
en
t
12
Note: N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
A:
Evaluation
B:
Entry Planning
C:
Entry Implementation
D:
Local Operations
Executives rate evaluation phase most important forsuccess – implementation phase perceived mostcomplex
A:
Evaluation
B:
Entry Planning
C: Entry
Implementation
D:
Local Operations
Note: N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
13
• Importance for market entry
•Solution complexity
2
3
4
5
6
7
Overall, only few significant deviations between CH/ EU and Indian executives‘ importance judgement
14
6.0 6.3 6.1 6.3 6.0 6.3 5.8 6.5 6.3 6.2
? ? ? ? ? ? ? ? ? ?
Imp
ort
an
ce
of
Ch
all
en
ge
CH
/ E
U S
ME
ex
ec
uti
ve
s
Ind
ian
SM
E
ex
ec
uti
ve
s
Note: Numbers refer to arithmetic average of all respondents for respective critical incident (CI)
*Average answers: CH/ EU SME executives – Indian SME executives
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Δ*
Δ > 0.5
Overall, only few significant deviations between CH/ EU and Indian executives‘ importance judgement
6.0 6.3 6.1 6.3 6.0 6.3 5.8 6.5 6.3 6.2
6.0 6.8 5.6 5.7 5.9 6.3 6.1 5.5 5.2 6.0
0 -0.5 0.5 0.6 0.1 0 -0.3 1.0 1.1 0.2
Imp
ort
an
ce
of
Ch
all
en
ge
CH
/ E
U S
ME
ex
ec
uti
ve
s
Ind
ian
SM
E
ex
ec
uti
ve
s
Note: Numbers refer to arithmetic average of all respondents for respective critical incident (CI)
*Average answers: CH/ EU SME executives – Indian SME executives
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Δ*
Δ > 0.5
CH/ EU executives rate complexity of market entry solutions significantly higher than Indian peers
5.5 5.0 4.9 5.0 5.3 5.8 5.3 5.7 5.6 5.7
? ? ? ? ? ? ? ? ? ?
So
luti
on
Co
mp
lex
ity
CH
/ E
U S
ME
ex
ec
uti
ve
s
Ind
ian
SM
E
ex
ec
uti
ve
s
Note: Numbers refer to arithmetic average of all respondents for respective critical incident (CI)
*Average answers: CH/ EU SME executives – Indian SME executives
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Δ*
Δ > 2.0Δ ≥ 2.5
CH/ EU executives rate complexity of market entry solutions significantly higher than Indian peers
5.5 5.0 4.9 5.0 5.3 5.8 5.3 5.7 5.6 5.7
2.0 4.0 2.8 3.7 2.8 3.7 3.7 2.9 3.8 3.6
3.5 1.0 2.1 1.3 2.5 2.1 1.6 2.8 1.8 2.1
So
luti
on
Co
mp
lex
ity
CH
/ E
U S
ME
ex
ec
uti
ve
s
Ind
ian
SM
E
ex
ec
uti
ve
s
Note: Numbers refer to arithmetic average of all respondents for respective critical incident (CI)
*Average answers: CH/ EU SME executives – Indian SME executives
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Δ*
Δ > 2.0Δ ≥ 2.5
Summary of recommendations along market entry phases
Market EvaluationEntry Planning/
Preparation
Market Entry Implementation
Local Operations
➢ Allocate
sufficient time to
“know your
market”
➢ Cultivate local
network:
Ongoing
passion and
personal
presence
➢ Set expectations
right from the
outset: Patience
and persistence
key prerequi-
sites for
success
➢ Invest in
personal
overlapping
networks
➢ Apply fact-
based,
individualized
location
analysis
➢ Deploy financial
contingency
planning from
the outset
➢ Calibrate Swiss
vs. Indian way of
doing business
➢ Local leadership:
Include,
empower, control
➢ Regulator: Do
not compromise
on corporate
policy
➢ Capture and
clarify all/ most
eventualities in
contracts
➢ Match IP protection
measures to overall
business strategy
➢ Quality mgmt.: Apply
Jugaad where
necessary to deliver
Swiss quality the
“Indian way”
➢ HR: Build long-term
incentive systems
A DCB
Indian reality does not reflect typical Swiss experience – Setting expectations right from the outset is key
Market Evaluation: CEO expectations
The CEO is completely excited about the market opportunities in India and is already dreaming of capturing a part of this multi-million
$ market next year.
„Sometimes I meet SME managers on the plane who
already feel sick when thinking about soon landing
in India – probably not a good prerequisite for doing
business successfully there.“
Managing Partner, Services Company 1
Challenge: Swiss attitude may clash
with Indian reality
A1
Recommendation: Think long-term
& show persistence
Source: India Competence Center interviews; India Competence Center online questionnaire
„Drawing up a business plan for at least 5–10 years is
key for success – don’t expect to make money in
year 1.“
CEO, Machine Construction Company 14
„If I have learned one thing while setting up our
business in India it is this: Without relentless
persistence one will never succeed. Growing very
fast is not possible without doing immoral things …“
CFO, Machine Construction Company 5
17
➢ Many „Swiss givens“ do not apply to India
(e.g. process efficiency, reliability of business
partners, …)
➢ Swiss SME decision-makers report that this
can lead to early discouragement and
frustration
➢ Setting expectations right from the outset
is thus key for a successful market entry
➢ Winning in India means thinking long-term,
being willing to invest and showing
relentless persistence
„Europeans tend to be more subtle/ careful in their
expression than Indians – the latter may take
advantage of this ...”
CEO, Software & Technology Company 4
Recommendation: Think long-term &
show persistence
Overall average (Com.)
Overall average (Imp.)
Importance Complexity
HIGH
LOW
Market Evaluation: CEO expectations
The CEO is completely excited about the market opportunities in India and is already dreaming of capturing a part of this multi-million $
market next year.
In relative terms, SME decision-makers believe “setting expectations right” is not particularly complex
A1
Rationale & Comments
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
„It is a fact that many entry failures have allegedly
been caused by 'faults' on the parts of the Indian
partner or issues with the regulator. However, I
believe the actual cause often also lies in wrong
expectations and related mismanagement on the
side of the Swiss company.“
Country Head, Machine Construction Company 6
18
➢ Survey results show significant spread
between rated „importance“ vs. perceived
„complexity“
➢ This can be interpreted as indication that
SME executives may not focus enough on
„setting expectations right“ in relevant
parts of their company
2
3
4
5
6
7
Respondents emphasize importance of personal interest for India of key for SME decision-makers
Market Evaluation: Evaluating market potential
The CEO reads various articles which mention that India is the future growth market. To explore whether there is an opportunity for his
company too, he attends several fairs and gets connected to interested partners from India. They all confirm that the market
opportunity for his product portfolio would be huge. He decides to team up with the Indian company he thinks is most trustworthy.
„Some Indians would not mind signing a MOU when
meeting you accidentally at an airport – be careful.“
CEO, Service Company 3
A2
"Successful approaches start with neutral and
independent market studies."
CEO, Industrial Services Company 6
„Show commitment and visit the country regularly to
get a flavor and to build your local network.“
CEO, Machine Construction Company 13.
“For a small SME true personal interest for India is a
key success factor – you need to get your own ass
over there regularly and enjoy it.“
Managing Partner, Services Company 1
19
Challenge: Build local network you can
trust
Recommendation: Passion & personal
presence by top mgmt.
➢ Building a network of trusted sources in
India is the only way to build the market
knowledge you need to make the right
decisions
➢ Lack of access to the right knowledge
leads to information asymmetry (e.g. with
partners) and fosters wrong decision-
making in the early stages of the market
entry process
➢ Therefore, strong personal interest
(passion) and commitment from the very
top and willingness to spend time „on the
ground“ in India are vital
Source: India Competence Center interviews; India Competence Center online questionnaire
Importance Complexity
Correct evaluation of market potential rated as mostimportant challenge in early entry stage
Rationale & Comments
„At early stages Swiss companies often make one (or
both) of the following mistakes:
1) No clear statement of purpose (why do I want to go
to India?)
2) Do not invest sufficient resources in finding the
right local partners."
Country Head, Machine Construction Company 6
20
Market Evaluation: Evaluating market potential
The CEO reads various articles which mention that India is the future growth market. To explore whether there is an opportunity for his
company too, he attends several fairs and gets connected to interested partners from India. They all confirm that the market
opportunity for his product portfolio would be huge. He decides to team up with the Indian company he thinks is most trustworthy.
A2
➢ Correct ex ante evaluation of market
potential perceived as most important in
the early stage of a market entry in India
➢ These results reflect how crucial it is to find
the right sources of information and
partners to work with in India
2
3
4
5
6
7
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Overall average (Com.)
Overall average (Imp.)
HIGH
LOW
Trusted local relationships required to generate true market insights
„When collaborating with an Indian
partner always ask yourself : What
will these guys bring to the table
on a sustainable basis over the
next 5-10 years? Think long-
term.“
Country Head, Machine
Construction Company 6
„Start with informal visits to India
to feel the pulse.“
CEO, Service Company 3
Relationships × =Trust Market Insights
„India = Country of
relationships. However, be
careful to enter a JV out of 'deep
friendship' – you might regret it
fast.“
CEO, Machine Construction
Company 7
„Only a few partners will
represent your interests properly
– don’t trust too easily.“
CEO, Automotive Company 1
„Establish contact to key potential
users early on and build trust.“
CEO, Machine Construction
Company 13
„Your analysis should include a
wide variety of aspects e.g.
government regulations, market
size, the local image of your key
players, …“
CEO, Industrial Services
Company 6
„India is a huge country with
many sub-cultures and
requirements. With the right help
you can figure it out.”
CEO, Industrial Services
Company 3
„Having the right partner you can
trust is key for success in India.“
CEO, Industrial Services
Company 421
Market Evaluation: Evaluating market potential
The CEO reads various articles which mention that India is the future growth market. To explore whether there is an opportunity for his
company too, he attends several fairs and gets connected to interested partners from India. They all confirm that the market
opportunity for his product portfolio would be huge. He decides to team up with the Indian company he thinks is most trustworthy.
A2
Source: India Competence Center interviews; India Competence Center online questionnaire
Indian price consciousness triggers difficult to handle „price – margin – quality“ trade-off
Market Evaluation: Adapting product for Indian market
Although the CEO is aware that India is a price conscious country he is very optimistic. His rationale is to reduce the quality level for ABC’s products for the local Indian market and apply “proven” but not latest technologies to maintain their usual profit margin.
Challenge: Navigating the price –
margin – quality trade-off
Recommendation: Don‘t give in to
short-term thinking
A3
“In our case an old technology was good enough to
make profit and gain first market shares in India. We
also benefited from low local sourcing and labor
cost."
BDM, Machine Construction Company 2
“It might be wise to enter India with state-of-the-art
technology. Once customers value the higher
quality, the initially low acceptance due to price-
consciousness will disappear."
Creative Director, Apparel Manufacturing Company 1.“We followed the strategy 'Swiss quality knows no
compromise‘. However, we had a tough time
defending our margin following this credo.”
CEO, Machine Construction Company 3
“Our customers demand the best quality. Once price
negotiation is on we often hear: ‘A Chinese supplier
is cheaper‘. It’s tough to remove this inconsistency
…”
CFO, Machine Construction Company 5 22
➢ Indian customers are extremely price cons-
cious, often demanding„best available
quality for impossibly low prices“
➢ It is a challenge for SME executives to
navigate the resulting price – margin –
quality trade-off in a sustainable manner
➢ Study responses reveal that there is not one
right answer. Overall, respondents agree
that taking a long-term view is crucial
Source: India Competence Center interviews; India Competence Center online questionnaire
Overall average (Imp.)
Importance Complexity
Adapting product portfolio for Indian market perceived most complex challenge in early phase
Rationale & Comments
"Identifying the right customers and adapting the
product accordingly is very difficult."
CEO, Industrial Services Company 13
2
3
4
5
6
7
23
Market Evaluation: Adapting product for Indian market
Although the CEO is aware that India is a price conscious country he is very optimistic. His rationale is to reduce the quality level for ABC’s products for the local Indian market and apply “proven” but not latest technologies to maintain their usual profit margin.
A3
➢ SME executives rate challenge of adapting
their product portfolio to the Indian market
as very important (in relative terms)
➢ On average, respondents perceive it as the
most complex challenge to deal with in
the early market entry stage
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Overall average (Com.)
HIGH
LOW
Adequate handling of P-M-Q trade-off varies depend-ing on overall strategy (distribution vs. local operations)
Price – Margin – Quality Trade-offAdapt product portfolio to be in line
with chosen market strategy
Margin
Price
Quality Margin
Price
Quality
24
Short-
Term
Long-
Term
Market Evaluation: Adapting product for Indian market
Although the CEO is aware that India is a price conscious country he is very optimistic. His rationale is to reduce the quality level for ABC’s products for the local Indian market and apply “proven” but not latest technologies to maintain their usual profit margin.
A3
➢ SMEs distributing products in India:
➢ SMEs manufacturing products in India:
“I am no friend of entering India with lower quality
products. Better invest in educating local customers
that quality pays-off in the long-run. We found this to
be very tough with OEMs, but easier with mid-sized
customers."
CFO, Machine Construction Company 5
“Even if you try hard, you won’t manage to
manufacture ‘Swiss quality like products‘. Adapt to
local sourcing and labor conditions and come up
with solid quality, lower cost products the local
market demands.”
CEO, Machine Construction Company 8
Source: India Competence Center interviews; India Competence Center online questionnaire
Following others to „popular locations“ is tempting but might not be the right choice for own endeavor
"You have to consider many aspects, e.g. type of
operations, employees, customer base, infrastructure,
education…”
COO, Machine Construction Company 1
“Following others to a popular location without
detailed investigation is not advisable. It might not
be the best location for your needs."
CEO, Industrial Services Company 5
“It helped us a lot to answer the following questions in
a structured way:
1) Which location fits best to our operations
requirements?
2) Where do we have access to good people?
3) Are there identifiable customer clusters?
4) General business environment (universities,
infrastructure, …)?"
BDM, Machine Construction Company 4
Entry Preparation: Choosing the right location
The CEO ponders about where in India he should start his operations. After discussing this with a few Swiss SME colleagues the decision seems easy. Almost everybody seems to have launched their operations in India in Maharashtra (mostly in or around Mumbai). The CEO decides to follow suit.
B1
"Build two or three small plants at different locations
compared to one big one. It will pay-off in the long-
term."
Purchasing Manager, Automotive Company 2
25
Challenge: Prioritize requirements &
bet on most suitable location
Recommendation: Fact-based,
individualized location analysis
➢ Independent, individualized and fact-
based location analysis perceived as best
strategy to find YOUR location
➢ Most respondents agree that following
others to popular locations is tempting but
may be counter-productive for own
endeavors
“Used to Swiss standards, no location in India is
perfect. The challenge is to prioritize and find the
location which covers most of your requirements.”
COO, Machine Construction Company 1
Source: India Competence Center interviews; India Competence Center online questionnaire
Overall average (Imp.)
Overall average (Com.)
HIGH
LOW
Importance Complexity
Executives acknowledge importance of location choi-ce but do not rate challenge as particularly complex
Rationale & Comments
“I do not think that in recent years many Swiss SMEs
took wrong location decisions. While it’s a critical
step in the market entry process there are other
challenges which are much more complex."
CEO, Services Company 2
2
3
4
5
6
7
26
Entry Preparation: Choosing the right location
The CEO ponders about where in India he should start his operations. After discussing this with a few Swiss SME colleagues the decision seems easy. Almost everybody seems to have launched their operations in India in Maharashtra (mostly in or around Mumbai). The CEO decides to follow suit.
B1
➢ While choosing the right location is a
critical incident when planning a market
entry in India, compared to other key steps
respondents rate it – in relative terms – as a
moderately less important and much less
complex challenge
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Business environment, industry clusters and import-ance of customer proximity key decision criteria
Customer
Proximity
Industry
Cluster
➢ Is customer proximity a
prerequisite for your business
model to work?
➢How geographically dispersed
are your target customers?
➢ Is your industry geographically
concentrated?
➢Do you need highly specialized resources?
➢Human resources (e.g. engineers)
➢Natural resources (e.g. clay)
➢Rare, specialized suppliers?
➢Do you have trusted personal relationships in a
specific geographic area?
➢Can you benefit from special development
programs in particular states?
General
Business
Environ-
ment
27
Prioritize
Entry Preparation: Choosing the right location
The CEO ponders about where in India he should start his operations. After discussing this with a few Swiss SME colleagues the decision seems easy. Almost everybody seems to have launched their operations in India in Maharashtra (mostly in or around Mumbai). The CEO decides to follow suit.
B1
Source: India Competence Center interviews; India Competence Center online questionnaire
Financial contingency planning will help to deal with high uncertainty in India and provides confidence
Entry Preparation: Financial planning
The CEO`s discussions with the CFO have shown that they can easily finance the basic operations for two years before
getting close to break-even. Even so the CEO is aware that there is only limited certainty on the overall investments, he is
convinced that his estimations are pretty accurate.
B2
"Very likely there will be some important points
missing. Expect the unexpected. Add a contingency
of 50-100% to the original budget."
CEO, Service Company 3
"You need clear targets. Put them down on paper. Also
include different contingencies because you never
know what comes tomorrow in India.“
CEO, Industrial Services Company 3
“Financial planning in India? Don’t get frustrated –
just include different scenarios in your thinking.”
CEO, Machine Construction Company 10
29
Challenge: Making the right
assumptions for financial planning
Recommendation: Financial contin-
gency planning from the outset
Source: India Competence Center interviews; India Competence Center online questionnaire
➢ Uncertainty should not lead to attitude
proclaiming that exact planning is
unnecessary
➢ Force yourself to adapt and include
detailed contingencies in your financial
models
➢ Detailed financial planning is an extremely
difficult task in India – „uncertainty is
everywhere“
➢ In such an environment, making realistic
assumptions for a business plan is a
major challenge and risk
"Feelings should not be the driving force behind a
strategically important decision such as the one to
enter a key market like India.“
CEO, Machine Construction Company 13
Overall average (Imp.)
Overall average (Com.)
HIGH
LOW
Importance Complexity
Financial planning perceived most important but not particularly complex challenge in planning phase
Rationale & Comments
2
3
4
5
6
7
“We push hard to meet financial plans, even in an
uncertain environment such as India. I think the
Swiss are good at that.”
CEO, Machine Construction Company 7
30
Entry Preparation: Financial planning
The CEO`s discussions with the CFO have shown that they can easily finance the basic operations for two years before
getting close to break-even. Even so the CEO is aware that there is only limited certainty on the overall investments, he is
convinced that his estimations are pretty accurate.
B2
➢ SME executives agree that financial
planning should be a top priority
➢ The complexity of this task, however, is
rated below average. This may reflect
Swiss executives‘ trust in their well-
structured, process oriented and
analytical management style
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Keeping enough independence crucial when partner-ing up – investing in overlapping networks helps
Entry Preparation: Entry mode choice
Over the last five years, ABC Ltd. has successfully exported products to India through a local agent. The CEO is now considering to relocate parts of his operations to India without partnering up with his agent. His agent said: “If you want to start operations without my involvement I am convinced you will lose your most valuable customers."
B3
"You need to involve the agent in one way or another
that he can "save" at least his face and that you can
benefit from his long-term relationships with the
customers.“
COO, Machine Construction Company 1
"Involve your agent financially or at least as a
member of the Board. He shall depend on you and
you on him – to the same extent.“
CEO, Machine Construction Company 3
"Create long-term benefits for both parties."
CEO, Machine Construction Company 3
“Whenever possible enter India completely
independent. I know from my own experience that
there’s so much that can go wrong with (the wrong)
Indian partner. They’ll make sure you depend on
them very fast.“
CEO, Machine Construction Company 7 31
Source: India Competence Center interviews; India Competence Center online questionnaire
Challenge: Staying independent/ in
control when parnering up
Recommendation: Invest in personal
overlapping networks
➢ If possible (big enough?) evaluate whether
entry without local partner might work
➢ Invest time and resources in finding the
right partner – and make sure he/ she
depends on you as much as you depend
on him/ her mid- to long-term
➢ For small(er) SMEs it is often impossible to
build local presence without an Indian
partner
➢ The result can be a power game – securing
own positions („staying independent“) is a
major challenge
Overall average (Imp.)
Overall average (Com.)
HIGH
LOW
Importance Complexity
Executives rate entry mode choice as challenge of average importance and complexity
Rationale & Comments
2
3
4
5
6
7
"Try to have two or three persons representing the
company in India. It will avoid overdependence on
one.“
Purchasing Manager, Automotive Company 2
"Identify a trusted strategic Indian partner who can
co-invest in as well as manage the business. This will
enable you to take advantage of readily available
skilled manpower and systems.“
Purchasing Manager, Automotive Company 2
32
Entry Preparation: Entry mode choice
Over the last five years, ABC Ltd. has successfully exported products to India through a local agent. The CEO is now considering to relocate parts of his operations to India without partnering up with his agent. His agent said: “If you want to start operations without my involvement I am convinced you will lose your most valuable customers."
B3
➢ Study respondents rate decision whether to
enter India with/ without a local partner as
of slightly below average importantance –
complexity of challenge perceived average.
Significant deviation between Swiss and
Indian executive views (Δ = 1.3)
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Swiss/ EU
executives rate
challenge as
more complex
than Indian
peers
Overlapping Networks: Underlying logic
Source: Moser, Doing Business in Emerging Markets, 2011; India Competence Center
34
Entry Preparation: Entry mode choice
Over the last five years, ABC Ltd. has successfully exported products to India through a local agent. The CEO is now considering to relocate parts of his operations to India without partnering up with his agent. His agent said: “If you want to start operations without my involvement I am convinced you will lose your most valuable customers."
B3
Successful ventures to India manage to adapt to local conditions without loosing “Swissness”
Market Entry Implementation: Business Process Design
The CEO is looking for a JV partner to establish their own production in India. During almost any meeting with potential partners he gets the feeling that his discussion partners are almost over self-confident, strongly emphasizing that European companies have to adapt to the Indian business terms if they want to survive in the long-term.
„Indian customs and the way of doing business are
different, but it is key that the local partner
understands and identifies with your business
philosophy.“
CEO, Industrial Services Company 3
„Interact with Swiss companies which are already in
the market to understand where you have to adapt
and where you have to stay put.“
CEO, Industrial Services Company 4
35
Source: India Competence Center interviews; India Competence Center online questionnaire
Challenge: Adapt to Indian way without
loosing „Swissness“
Recommendation: Benefit from others‘
experiences
➢ Respondents report that interacting with
other Swiss SMEs established in India
helps to find the balance between adapting
to the Indian way and not compromising
Swiss business virtues
➢ Comprise and evaluate the financial,
reputational and organizational
consequences of going forward the Swiss
vs. the Indian way
➢ „In Rome, do as the Romans do“ – It is not
as simple as that when venturing to India
➢ Executives report that balancing adaptation
to the Indian way without loosing
Swissness can be a challenge
„Swiss SMEs must show a lot of resolution and not
just give in. Else one will loose touch with what’s
going on on the ground in India very fast.”
CEO, Machine Construction Company 10
C1
Overall average (Imp.)
Overall average (Com.)
HIGH
LOW2
3
4
5
6
7
Importance Complexity
Defining optimal business process on the ground per-ceived most complex challenge during implementation
„Finding the right partner and figuring out how exactly to
work with him will be most difficult and yet most
important.“
CEO, Machine Construction Company 1336
Market Entry Implementation: Business Process Design
The CEO is looking for a JV partner to establish their own production in India. During almost any meeting with potential partners he gets the feeling that his discussion partners are almost over self-confident, strongly emphasizing that European companies have to adapt to the Indian business terms if they want to survive in the long-term.
Rationale & Comments
➢ Study results illustrate that identifying the
right business process design for India is
often characterized by major insecurities
and risks – challenge perceived most
complex in the entry implementation
phase
„As a Swiss company we brought the technical and
commercial know-how to the table. Indians display a
high customer focus and are extremely good at
handling the unexpected – this combination works
quite nicely.“
CFO, Machine Construction Company 5
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
C1
37
Source: India Competence Center interviews; India Competence Center online questionnaire
Market Entry Implementation: Business Process Design
The CEO is looking for a JV partner to establish their own production in India. During almost any meeting with potential partners he gets the feeling that his discussion partners are almost over self-confident, strongly emphasizing that European companies have to adapt to the Indian business terms if they want to survive in the long-term.
Swiss vs. Indian way of doing Business
Character-
istic 1
Extreme A Extreme B
➢ Handling corruption
➢ Government relations
➢ Social engagement
➢ Administrative processes
➢ People management
➢ Financial planning
➢ Quality management
➢ …
…
Character-
istic 8
Clear decisions in what dimensions to follow the Swiss/ Indian way provides helpful point of reference
Business
CharacteristicsILLUSTRATIVE
C1
Capturing as many eventualities as possible in contracts ex ante reduces risk, particularly in disputes
Market Entry Implementation: Managing Indian partner(s)
Due to the success of the company ABC Ltd and the extensive network that the CEO could personally establish he is consideringlaunching his own fully controlled operations in India. However, when looking at the Joint Venture contract he realizes that there is no sentence in the agreement on how to exit the JV.
„Exiting a JV can be very messy, time consuming
and expensive. It is difficult but key to build a
relationship built on trust from the beginning – this
will help when issues arise. At the same time, always
remain cautious …“
CEO, Industrial Services Company 5
„Do not sign the contract before all aspects are
clarified between your partner and you.“
CEO, Machine Construction Company 14
„Your agreement should always address the exit
situation and dispute resolution. Again, stay as
independent as possible … and in control.”
CEO, Industrial Services Company 1"This should be less of an issue now. "Press Note 1”
in relation to JV agreements has been withdrawn by
the Govt of India with effect from 1 April 2011."
BDM, Machine Construction Company 4 „Pay enough attention to the exit clause while drawing
up your JV agreement.“
Controller, Chemical & Pharmaceutical Company 138
Challenge: Managing relationships with
Indian partner(s) effectively
Recommendation: Capture & clarify all
eventualities in contracts
Source: India Competence Center interviews; India Competence Center online questionnaire
➢ SME executives‘ responses are strongly
aligned: The only effective way of avoiding
unwanted surprises is „control“ – try to
capture as many eventualities as possible
in contracts
➢ Managing Indian partners effectively remains
challenging, particularly when disputes arise
– this still holds true after „Press Note 1“
C2
Overall average (Imp.)
Overall average (Com.)
HIGH
LOW2
3
4
5
6
7
Importance Complexity
Swiss/ EU vs. Indian executives: Significant discrepancy regarding perceived challenge complexity
Rationale & Comments
„Since India has relaxed the rules (such as earlier Press
Note 1) managing Indian partners has become much
easier.“
CFO, Machine Construction Company 5
39
Market Entry Implementation: Managing Indian partner(s)
Due to the success of the company ABC Ltd and the extensive network that the CEO could personally establish he is consideringlaunching his own fully controlled operations in India. However, when looking at the Joint Venture contract he realizes that there is no sentence in the agreement on how to exit the JV.
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
➢ Other than expected, study results show that
managing Indian partners, in relative terms,
does not seem to be perceived particularly
important or complex – recent
abolishments of ancient regulatory obstacles
(e.g. Press Note 1) may have impacted
results.
➢ However, Swiss/ EU executives alone rank
complexity significantly higher (Δ = 2.5).
Swiss/ EU
executives rate
challenge as
much more
complex
C2
Include and empower a local mgmt. team early on – but remain present to keep up close monitoring
„You have to very soon find a trustful local person
who has an existing network and can take over a
leading role. Without such a contact you will
undergo a lot of delays.“
BDM, Industrial Services Company 2„You need a local MD who has experiences with
foreign companies. Additionally, you require a Swiss
employee as technical adviser and as trusted
source for the Swiss HQ.“
CEO, Industrial Services Company 1„A good idea is to send over a Swiss mgr. to set up the
key processes and then hand over to local mgmt.
after 1.5-2 years.“
CEO, Machine Construction Company 10
Market Entry Implementation: Developing a leadership team in India
The CEO wants to send his best employee Thomas Muster to India, however, after 10 months of waiting to move to India due to different delays in getting local registrations, concessions and permissions done, Thomas becomes more and more disillusioned. Moreover, the CEO is convinced that he needs to send a Swiss manager as MD for his Indian operations.
40
Challenge: Attract and prepare the right
leadership team
Recommendation: Include, empower,
control local mgmt. team
Source: India Competence Center interviews; India Competence Center online questionnaire
➢ Respondents agree that building a local
management team is a key success factor
➢ Include and empower local mgrs. early on,
but at the same time keep up close
monitoring
➢ Study results reveal two main questions
related to attracting and preparing the right
local leadership team as major challenge:
➢ Which expats are prepared and willing
to take on the challenge in India?
➢ At what stage (if at all) should a local
mgmt. team take over and where do
we find suitable candidates?„It’s good to build a strong local management team
from the start. But also guarantee you do not depend
too much on him – maintain Swissness.”Country Head, Machine Construction Company 6
C3
Overall average (Imp.)
Overall average (Com.)
HIGH
LOW2
3
4
5
6
7
Importance Complexity
Developing a local leadership team rated most importantand very complex challenge in implementation phase
„You need a strong expat on the ground from the very
beginning. Many Swiss SMEs do simply not manage
to find the right people to send to India.”
Country Head, Machine Construction Company 6
41
Rationale & Comments
Market Entry Implementation: Developing a leadership team in India
The CEO wants to send his best employee Thomas Muster to India, however, after 10 months of waiting to move to India due to different delays in getting local registrations, concessions and permissions done, Thomas becomes more and more disillusioned. Moreover, the CEO is convinced that he needs to send a Swiss manager as MD for his Indian operations.
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
➢ Development of leadership team for
operations in India clearly rated as most
important and very complex challenge in
entry implementation phase
➢ On average, Swiss/ EU managers perceive
challenge as much more complex than
Indian peers (5.8 vs. 3.7)
C3
Investing in key management personnel often necessary to build local leadership team which thinks long-term
„Teach them [the employees] to see the big picture (i.e. the steps before and after their job in the value chain), to think more about the
consequences and requirements of their work . In short, lift them out of the black boxes they are working in …“
42
Market Entry Implementation: Developing a leadership team in India
The CEO wants to send his best employee Thomas Muster to India, however, after 10 months of waiting to move to India due to different delays in getting local registrations, concessions and permissions done, Thomas becomes more and more disillusioned. Moreover, the CEO is convinced that he needs to send a Swiss manager as MD for his Indian operations.
Source: India Competence Center interviews; India Competence Center online questionnaire
„We find that our local Indian management often
struggles to see the big picture and to act
accordingly. The predominant hierarchical
structure leads to a culture where people just
follow orders without challenging supervisors.
Investing in our key people by flying them to
Switzerland and trying to really bring across our
long-term strategy and including them in our
discussions helped.“
CEO & Chairman, Machine
Construction Company 11
C3
Decide on your position in „Ethics – Time – Corruption“ conflict – follow it and be aware of consequences
Market Entry Implementation: Land acquisition
With the help of OSEC’s Swiss Business Hub the CEO has identified a piece of land where he can build his factory. Very soon he realizes that it does not seem to be feasible to buy this land without bribing people here and there. The CEO is alienated.
C4
„Bribing is black mailing and will never stop after the
first payment.“
CFO, Retail & Consumer Goods Company 3
„Without bribing it will take you a long time to get
things done in India. One has to play the system!“
BDM, Software & Technology Company 1
43
Challenge: Find position in Ethics –
Time – Corruption conflict
Recommendation: Do not compromise
on corporate policy
Source: India Competence Center interviews; India Competence Center online questionnaire
➢ SME executives present different
approaches for dealing with corruption in
India – the gist is: Find your own corporate
policy and then do not compromise on it
➢ Respondents agree that corruption is a big
concern when entering India (land
acquisition case in point)
➢ Main challenge is to decide on own
position in „Ethics – Time – Corruption“
Trade-off and follow it consistently "Think about your goals and decide how you want to
achieve them. The outcome may mean to change the
goals or not be present in India."
CEO, Industrial Services Company 4
Approach 1:
“Bribes are not necessary! The clean way is
cumbersome and requires long breath. However, it is
feasible and we feel good to follow it."
CFO, Machine Construction Company 5
Approach 2:
"Let your Indian partner do the dirty job. Some little
kick backs here and there …You won’t succeed
without."
CEO, Industrial Services Company 6
Approach 3:
Overall average (Imp.)
Overall average (Com.)
HIGH
LOW2
3
4
5
6
7
Importance Complexity
Existence of corruption is common knowledge – issueimportance for entry success rated bellow average
Rationale & Comments
“Doing business in India is a daily frenzy – corruption
in the region is like a cancer tumor. Everybody
knows what’s happening.“
Chairman, Machine Construction Company 12
44N=45
*India ranks 87 behind e.g. Colombia or China in Transparency International’s Corruption Perception Index 2010
Source: Transparency International; India Competence Center interviews; India Competence Center online questionnaire
Market Entry Implementation: Land acquisition
With the help of OSEC’s Swiss Business Hub the CEO has identified a piece of land where he can build his factory. Very soon he realizes that it does not seem to be feasible to buy this land without bribing people here and there. The CEO is alienated.
C4
➢ Existence of corruption issue in India is
common knowledge* – respondents rate
both importance and challenge complexity
as around average in relative terms
Where in the “Ethics – Time – Corruption” triangle is your company/ your management positioned?
Bribe
money
Business
Ethics
Practicability
(Speed money)
According to Transparency International we differentiate types of corruption bymotive:"Speed Money" is according to rulecorruption."Bribe Money" is against the rulecorruption.
"We haven't paid a single bribe since
we set up operations in 1989."
Duncan Watkinson, MD,
Turbocam International
"Leave these issues to your strategic
local partners who understand local
language and culture …"
CEO, Automotive Company 3
„Bribing in India became even worse in the
past few years.“
CFO, Retail & Consumer Goods Company 3
45
Source: Transparency International; India Competence Center interviews; India Competence Center online questionnaire
Market Entry Implementation: Land acquisition
With the help of OSEC’s Swiss Business Hub the CEO has identified a piece of land where he can build his factory. Very soon he realizes that it does not seem to be feasible to buy this land without bribing people here and there. The CEO is alienated.
C4
?„Bribes are mainly used to take
shortcuts and in order to avoid
compliance with rules and laws …“
CFO, Machine Construction Company 5
Executives’ experience shows that retaining people in India is difficult – but effective tools exist
Local operations: Managing the Workforce
The Swiss management team in India faces the challenge that the local union representatives want hourly salaries for the
blue-collar workers that are more than 25% above the local average with the argument that a Swiss company can afford it.
D1
"Unions can give you a real headache. Do not argue
with them as a foreigner. Have your local mgmt.
dealing with them."
CEO, Industrial Services Company 5
“Due to low employee loyalty, often driven by many
outside opportunities (high growth), employee
fluctuation rate can be as high as 60%. If you do
extremely well you can get it down to 10-15% in the long-
term. "
Chairman, Machine Construction Company 12
"You should offer long-term intangible advantages such
as family benefits or further training – Loyalty will rise.CEO, Machine Construction Company 14
46
Challenge: Retaining your people in
India – efficiently
Recommendation: Invest in people,
build long-term incentive systems
Source: India Competence Center interviews; India Competence Center online questionnaire
➢ Respondents‘ recommendations can be
summarized as follows:
1. Let locals deal with unions/ politicians
2. Adapt recruiting strategy to India
3. Invest in people, but secure your interests
through long-term incentive systems
➢ Dealing with Unions/ local politicians and
keeping employee fluctuation as low as
possible is a major challenge in operations
phase
“We have learned that when we need 10 people we
have to start the process with ~30, many will drop-out.CEO, Machine Construction Company 7
“When we train Indian workers in Switzerland we hold
back part of the money, we have employees sign
binding contracts and increase wages regularly.”Chairman, Machine Construction Company 12
Overall average (Imp.)
Overall average (Com.)
HIGH
LOW2
3
4
5
6
7
Importance Complexity
Importance for success & challenge complexity ratedslightly below average – Swiss mgrs. use higher rating
„My Indian workers rarely indicate when they do not
understand a task – they just don’t ask back and then do
the wrong thing. I am glad we have put in place a local
mgmt. structure.”
CEO & Chairman, Machine Construction Company 11
47
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Local operations: Managing the Workforce
The Swiss management team in India faces the challenge that the local union representatives want hourly salaries for the
blue-collar workers that are more than 25% above the local average with the argument that a Swiss company can afford it.
D1
Rationale & Comments
➢ Overall, executives perceive importance for
success and challenge complexity of
managing the local workforce comparatively
low (slightly below overall average)
➢ However, Swiss/ EU executives rate
importance (Δ 1.0) and complexity (Δ 2.8)
much higer than Indian peers
IP protection is an ongoing challenge for Swiss SMEs in India – measures should be aligned with strategy
"As long as I can earn money with my latest
technology in Europe, I do not want to use it India. It
will be copied."
BDM, Machine Construction Company 2
"Go to a high level court if your partner violates the
contractual obligations (reg. IP). You will win.”
CEO, Service Company 3
48
Local operations: Technology protection
After three years the investment of ABC Ltd. has still not reached break-even. Overall, it has become increasingly challenging for the Swiss team to monitor what is actually happening on the ground in India. Recently, the CEO has heard from a supplier that his Indian partner has started another, separate company on his own buying the same inputs.
D2
Challenge: Keeping control of your IPRecommendation: Match IP protection
measures to strategy
Source: India Competence Center interviews; India Competence Center online questionnaire
➢ SME executives report to be cautious when
it comes to exporting the latest technology
to India – when the market requires it the
following is suggested:
➢ Make sure that R&D activities/ IP related
activities are led by trusted expat
executives
➢ Build strict IP protection clauses in
contracts
➢ Align protection measures with overall
strategy (see following slides)
➢ Study respondents agree that keeping
control of/ protecting IP is an ongoing
challenge when operating in India
“Also in this regard JVs are a headache and should be
avoided if possible […] I would see that all the steps
etc. are well documented and supervised by a law
firm to have sufficient evidence in case of a dispute."
CFO, Machine Construction Company 5
Overall average (Imp.)
Overall average (Com.)
HIGH
LOW2
3
4
5
6
7
Importance Complexity
Technology protection perceived most complex ongoing challenge when operating in India
„Key will be speed, smartness and precise contracts
to prevent partners from going on their own taking
advantage of leaked IP.“
CEO, Machine Construction Company 13
49
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
Local operations: Technology protection
After three years the investment of ABC Ltd. has still not reached break-even. Overall, it has become increasingly challenging for the Swiss team to monitor what is actually happening on the ground in India. Recently, the CEO has heard from a supplier that his Indian partner has started another, separate company on his own buying the same inputs.
D2
Rationale & Comments
➢ Overall, IP protection does not seem to
belong to the „hot topics“ when entering
India (as e.g. compared to China)
➢ However, respondents perceive technology
protection as most complex ongoing
challenge when operating in India (in
relative terms)
IP protection requires diverging measures depending on overall business strategy
Technology Generation
De
gre
e o
f lo
ca
l
Op
era
tio
ns
Low
Earlier Latest
High ➢ Local R&D (if at all)
only led by trusted
Swiss executives
➢ Enforce processes to
keep technolgy
transfer as low/ slow
as possible
➢ Build explicit clauses in
all contracts
➢ Protect technology
(IP) by working with
several Indian sales/
distribution partners
➢ Build credible threat
with your overlapping
networks
➢ If products not
technologically
advanced: Reputation/
sound customer
relationships & access
most important
➢ Often perceived as
valid market entry
strategy
➢ Use of earlier
technology to cater to
local market
characteristics (e.g.
price sensitivity)
50
Source: India Competence Center interviews; India Competence Center online questionnaire
Local operations: Technology protection
After three years the investment of ABC Ltd. has still not reached break-even. Overall, it has become increasingly challenging for the Swiss team to monitor what is actually happening on the ground in India. Recently, the CEO has heard from a supplier that his Indian partner has started another, separate company on his own buying the same inputs.
D2
„Which IP protection measures
should be put in place varies and
largely depends on the overall
business strategy.”CEO, Machine Construction
Company 10
Quality management in India: Finding the best way to deliver „Swiss Quality – the Indian way“
Local operations: Quality management
After a successful marketing campaign the production volume in India needs to be fast increased leading to more frequent qualitymanagement challenges. The “Swiss High Quality” branding advantage, profit margins and the business model in general are at stake.
D3
“Indians sometimes demand the best quality for no
money, which is not possible. Therefore, Swiss SMEs
often have to adapt their products – also in terms of
quality – to make money in India."
CEO, Machine Construction Company 8"It must be clear from the beginning how close to
Swiss standards the products for the Indian market
have to be."
CFO, Retail & Consumer Goods Company 3 51
Challenge: Delivering Swiss quality –
the Indian way
Recommendation: Don‘t shy away from
Jugaad for local production
Source: India Competence Center interviews; India Competence Center online questionnaire
➢ Adapt to local conditions and apply
„Jugaad“ where necessary to produce
solid products the Indian market demands
➢ Put in place structures and processes to
guarantee chosen quality standards
➢ Swiss SME products stand for high quality
and reliability. However, market conditions
in India demand product adaptations which
can also impact quality
➢ Finding the best way to deliver „Swiss
quality – the Indian way“ can be
challenging, particularly for smaller SMEs “Appoint a strong Quality Manager who reports to the
MD. Get ISO certificated from the beginning. Introduce
quality audits at vendor site. Critical material can not
leave the vendor place before quality approval is given
by the own employee or agent.”
CFO, Machine Construction Company 5
Overall average (Imp.)
Overall average (Com.)
HIGH
LOW2
3
4
5
6
7
Importance Complexity
Executives rate quality management as most important challenge in operations phase
52
Local operations: Quality management
After a successful marketing campaign the production volume in India needs to be fast increased leading to more frequent qualitymanagement challenges. The “Swiss High Quality” branding advantage, profit margins and the business model in general are at stake.
D3
Rationale & Comments
N=45
Source: India Competence Center interviews; India Competence Center online questionnaire
➢ Study respondents perceive quality
management as most important challenge
to be successful in operations phase
➢ Complexity is rated above average,
particularly by Swiss/ EU executives (Δ 2.1)
“Even if you try hard, you won’t manage to manufact-
ure ‘Swiss quality like products‘ in India. Adapt to
local sourcing and labor conditions and come up
with solid quality, lower cost products the local
market demands.”
CEO, Machine Construction Company 8
What quality level is perceived as „Swiss quality“ in India and how can this quality be produced locally?
„It will be hard to achieve high quality results when
manufacturing in India.“
BDM, Software & Technology Company 2
53
Source: India Competence Center interviews; India Competence Center online questionnaire
Local operations: Quality management
After a successful marketing campaign the production volume in India needs to be fast increased leading to more frequent qualitymanagement challenges. The “Swiss High Quality” branding advantage, profit margins and the business model in general are at stake.
D3
Average
Swiss
Quality
Average
Indian
Quality
Expect-
ed
„Swiss
Quality“
in India
Swiss
Quality
– deliv-
ered the
Indian
way
Rationale & Comments
HIG
HL
OW
A B➢ Manufacturing in India will often not allow
for „100% Swiss quality“ products – local
market is highly price sensitive and expects
„Swiss quality“, but delivered the Indian
way
➢ Swiss SMEs can answer the following two
questions to define quality standard for India:
➢ Which quality level works for my product
portfolio to be sold in India/ other markets?
➢ How can I produce this quality under local
conditions (sourcing, labor skills, …)?
A
B