Navigating India's Business Landscape: Key Considerations for Foreign Companies

Sheshadri Savalgi is a seasoned Business and Finance leader with two decades of experience at P&G, J&J, Coty, and General Mills. In a recent interaction with Industry Outlook magazine, Mr. Sheshadri discussed the appeal of India's diverse market for foreign companies, the need for unique strategies, digital transformation advantages, government policies, and the critical role of local collaboration in achieving success in India.

What are the few key factors foreign companies must keep in mind while foraying into India?

India is undeniably an attractive market for global companies, and this appeal arises from a range of factors. To begin with, India boasts an incredibly diverse consumer base, making it a prime hub for growth across various industries. Whether you look at beauty products, baby-related goods, or fast-moving consumer goods (FMCG), India consistently ranks as one of the top markets. With a population exceeding one billion, even a segment of a hundred million households represents a substantial customer base. Consequently, virtually all organizations aim to establish their presence in India.

However, succeeding in the Indian market necessitates a unique approach. Firstly, it requires long-term commitment. Quick victories are rare, and building a strong foothold with Indian consumers takes time. Many global organizations that thrive in India have been operating here for decades. Secondly, the concept of "global" is crucial. It involves blending global strengths, such as standardized processes and brand-building capabilities, with local sensitivities and insights. Products and services tailored to the Indian market tend to perform better than those relying solely on a global toolkit.

Lastly, partnership plays a pivotal role. Collaborating with Indian vendors and distributors and leveraging the vast local talent pool is essential. The local ecosystem holds the keys to success, as it encompasses distributors, talents, and other stakeholders. To achieve success, organizations must form strong partnerships within this ecosystem.

How can foreign MNCs leverage technology to localize their offerings to the varying demographics of India?

In the realm of digital transformation, foreign multinational corporations (MNCs) have shown a significant lead over their Indian counterparts. This digital journey encompasses various areas, with foreign MNCs excelling in several aspects. India, however, has been rapidly accelerating in this domain over the past five to six years. One notable strength of foreign MNCs lies in their prioritization and focus on digitization, which is deeply ingrained in their business operations. They consistently invest in cutting-edge tools, such as AI and machine learning, which have been part of their daily operations for decades. These tools are used extensively for activities ranging from transaction processing to data analysis and forecasting.

MNCs operate in highly evolved markets, employing touchless business processes. This positions them competitively against Indian startups, given their robust technological infrastructure and expertise. Nevertheless, they must leverage this advantage effectively, adapting their knowledge to the Indian market to gain local insights. India's digital payment system, notably UPI, is one area where India leads globally, with accelerated progress even during the COVID-19 pandemic.

To remain competitive, foreign MNCs should play to their strengths in digital transformation while also embracing India's unique features, like its digital payment ecosystem. Learning from India's innovations and integrating them into their operations will be essential for sustained growth in the Indian market.

Explain the government's role in encouraging foreign MNCs to foray into India.

The government has made significant strides in shaping India's economic landscape in recent decades. One key area of focus has been the liberalization of Foreign Direct Investments (FDI). This policy allows foreign companies to enter the Indian market and offer high-quality products to the Indian consumer. It's imperative that government restrictions don't hinder this process, as this can stifle economic growth.

Furthermore, the emphasis on improving the ease of doing business in India is commendable. Since the launch of "Make in India," the government has taken several steps towards simplification and digitalization. Online applications, information portals and reduced paperwork have helped organizations.

The "Make in India" initiative aims to turn India into a manufacturing hub, creating efficiency through localized production and enhancing the country's consumer base.

Tax reforms, including the implementation of the Goods and Services Tax (GST), should continue with a focus on consistency and simplicity. In the long term, a consistent tax structure will benefit the economy. Infrastructure development is another crucial aspect. Addressing issues like expensive frozen logistics will provide opportunities for the logistics sector to thrive.

India's rapid development since gaining independence 77 years ago is remarkable, and its potential for further growth and improvement is enormous. By nurturing these initiatives and ensuring consistency in various policies, India can continue to progress and become an even more significant player on the global stage in the years to come.

How important is it for a foreign company entering India to have India-specific people policies?

It's clear to me that the significance of well-crafted people management policies can't be overstated. Whether it's in multinational corporations or other organizations, these policies are essentially the foundation of a collective effort toward common goals. These policies have evolved significantly over time, often reflecting global best practices, which is especially evident in companies with a long history. India itself has seen substantial changes in work-life balance, maternity leave, paternity leave, and performance measurement. Global organizations are particularly well-equipped to create exemplary policies due to their presence in multiple countries and the opportunity to learn from diverse markets.

However, it's not just about copying and pasting these policies; it's also about integrating them with India's unique cultural and talent diversity. Indian professionals are highly regarded globally, and India serves as a prominent talent exporter. For multinational corporations looking at a long-term presence in India, most of their workforce will be Indian. Therefore, it's essential to not only adopt the best global policies but also tailor them to the Indian context, acknowledging and respecting the diverse culture and talent pool. In essence, these organizations should embrace India as a talent hub while adapting policies for the local environment, thus ensuring their continued success.

How will collaborating with local businesses help foreign MNCs?

Collaboration with local businesses is a crucial aspect of the growth strategy for multinational corporations (MNCs). While MNCs bring their technology and product expertise, most of the value chain relies on local partners in India. This collaboration begins with local governments and authorities, who play a vital role in permitting and facilitating manufacturing facilities. Additionally, sourcing materials and services locally is not only cost-effective but also reduces complexities related to duties and expenses.

Local vendors are essential partners, as they provide efficiency and accessibility. MNCs often prefer local sourcing and only opt for global vendors if a specific product is unavailable locally. Beyond vendors, the network extends to various local stakeholders, including distribution, logistics, retailers, and e-commerce channels. In essence, the success of MNCs in India hinges on their ability to effectively engage with these local stakeholders across the entire value chain.

Moreover, the local community, represented by farmers, distributors, retailers, and modern trade channels, also plays a significant role. Engaging with them, understanding their needs, and integrating them into the business model is critical. Overall, in India, success for MNCs is deeply intertwined with collaboration and partnership with local businesses, talent, and government entities. Failure to do so can hamper the organization's progress and growth prospects.