How to enter India market : The Right Strategy

For a multinational to enter the India market, it is first and foremost important to think through the ownership structure. As a surprise to many, it is reported that multinationals who know how to enter India market that enters the Indian market as stand-alone entities fare better than the ones who enter into joint ventures with Indian partners. Most of such businesses have either exited or purchased the stakes of the Indian partners or have established majority shareholdings. For instance, one global consumer goods company bought the Indian partner over differences in brand positioning and product marketing. The multinational is now a name to reckon with in all the segments that it competes in.

Advantages of knowing how to enter India market

Several multinationals think that having a local partner in the Indian market is an advantage as it helps the global partnership to understand how to enter India market including market regulations. Though it is true to an extent, such joint ventures are mostly for short-term performance over long-term goals, long-term association, and the aligned interests of the foreign and local partners. Without clear-cut ownership and management control, global companies may soon find itself exiting the Indian market. Though joint ventures are beneficial in some cases, if a multinational views India as a priority market and regulations allow the company to have its complete stake, then joint ventures are not essential. When opting for joint ventures, it is mandatory to have a clear-cut ownership path as well as management control in order to avoid confusion at a later stage.

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What did it take to enter the India market?

A strategic alliance is also a way of associating with the Indian local players which are different from joint ventures. For instance, an Indian company and an international technology manufacturer set up a manufacturing plant with fewer costs and double the production volumes every 18 months. With such high-profit margins, it became the largest of the multinational’s plant in India and soon, from “nice to have” category, India moved to become a significant part of its international operations.

A global pharmaceutical company, though a stand-alone entity, entered into strategic alliances with a local manufacturer in licensing and supplies for off-patent and generic medicines segments. This step of alliances helped the multinational to break into the fast-growing market of low-cost, branded and easily accessible generic and off-patent medicines in India.

To develop a sound understand of how to enter India market requires a lot of commitment and a willingness to continue over long periods of time in order to make a breakthrough. The need for global players is to adapt to low-cost delivery systems that are innovative with a high margin of profit alongside a well-established ownership model. The management of local stakeholders including activists and regulators need to be taken into account by the senior executives of such global firms. The efforts over a period of time may be in vain if such local groups are not taken into confidence and are overlooked.

Contact us for more information on this subject or to know how we can assist you in your plans to enter the Indian market being your Financial Advisor for setting up company in India.