Everyone wants a part of India – businesses call it a top strategic market and Canada’s government calls it a priority market. Or you can just call it what it is – one of the biggest, fastest growing markets in the world. It’s the 10th largest economy by GDP, or 3rd by PPP (purchasing power parity, comparing the amount of money needed to purchase the same goods and services in different countries). While the top industrialized economies grew less than 3 per cent on average over the past two years, India’s growth averaged 7.8 per cent and is forecast to rise another 7.3 per cent this year.
Given India’s prominence, every year for the past five, University of Ottawa’s Telfer School of Management has put on the Telfer India Forum to help expand commercial and educational ties with this emerging superpower. “We provide practical insights into the rewards and challenges of establishing a presence in India, including investment climate, modes of market entry, cultural factors, and inherent risks and how to mitigate them,” says Marvin Hough, executive in residence at Telfer and a Canada-India Business Council director. EDC is one of the sponsors of this popular event.
The best part is that it draws expert speakers who are immersed in the Indian market from the business or policy side, most having lived and worked in that market for many years. They have witnessed recent trade between Canada and India grow at up to 20 per cent a year – the numbers shake out differently depending on whether you compare merchandise exports, investments, services, or trade that goes through Singapore or Mauritius because of tax advantages. However, they all point out our bilateral trade isn’t enough; many countries are doing business with India at double Canada’s pace, so there is a real risk our companies can be left behind.
More animation and apps
That’s definitely not the case for firms like Montreal-based Toon Boom Animation and Ottawa’s DragonWave. Toon Boom, a world leader in digital content and animation creation software, recognized more than a decade ago that the continuing growth in India’s middle class meant people will want much more entertainment, and one of those avenues is animation. Indeed, there was no such industry in India when the company entered the market in 2000.
“We started by outsourcing products from Los Angeles and bringing them to India, using a local distributor, and moved into setting up local training facilities with Indian partners, so their people could create their own productions,” said Joan Vogelesang, president and CEO of Toon Boom, which has used EDC’s credit insurance and export guarantee program to grow in India and acquire assets in other countries too.
“Now the industry has well over 100,000 people, 100 animation studios and is creating Academy Award-quality productions.”
In 2004, the Federation of Indian Chambers of Commerce and Industry honoured Ms. Vogelesang with a Lifetime Achievement Award for building up the Indian animation industry. The company continues to grow and rack up awards worldwide.
DragonWave is another mid-sized company with an impressive record in India, this time in the ICT sector. A leading provider of packet microwave solutions that drive Internet protocol (IP) networks, its products work behind the scenes (backhaul) to transmit broadband voice, video and data faster and better. The company recognized a few years ago that the plugged-in market in India was also hungry for more band space and speed.
“For us the right route was to find a local partner, and in 2010 we formed a joint venture to help us capture the new technology wave in India,” said Alan Solheim, the firm’s vice-president of Corporate Development. DragonWave looked for a reliable partner with similar goals, motivations and size range, who could help navigate the culture and vastly different laws, regulations and tax structures of India. They found Himachal Futuristic Communications Ltd. (HFCL), one of India’s leading telecommunication equipment manufacturers.
Size matters, patience rules
The importance of a reliable agent or partner – of matching skills and size – was echoed by nearly all the forum speakers. Experts inserted two strong precautions. Don’t sign with agents right away; preferably do it in two steps – first spelling out a memorandum of understanding, then moving onto a contract. Second, don’t sign exclusive agreements, especially for a large territory – you’ll often find you need three different agents in three regions, because of their vast differences.
Doing business in India requires a triple dose of patience. Be prepared to spend about $20,000 on travel, and attend at least two face-to-face meetings, before crafting a preliminary agreement.
The speakers also had a fount of cautionary tales. Did you hear the one about the corporate executive who exchanged phone calls and emails with an Indian agent, then met him for the first time in a posh office in India? Returning to that place at the day’s end to recover a forgotten diary, there was no office to be found.
More often, deals fall apart because of misunderstandings. One entrepreneur was excited to finally be going to India to complete an agreement that had been hammered out through many phone conversations with a promising partner. When they started talking business in person, the two parties were not on the same wavelength. The Canadian was under the impression that the Indian partner would put up all the money, and his firm would provide all the technology, but now the Indian was asking for a 50-50 investment split. Adds one market expert: Sometimes an Indian executive may say at the start, “money is no object,” and the Canadian takes it literally. Once you have built up real trust, he says, an Indian will bend backwards for you, even inviting you to family gatherings.
To learn about the new Telfer Focus India online program for business executives, visit: http://www.telfer.uottawa.ca/executiveprograms/en/
Five Key Cultural Considerations
- Indian companies tend to deal at the senior-executive level and expect the same from potential partners.
- Business in India is still largely conservative and hierarchical – a manager won’t overtly contradict a senior executive, and the same respect should be shown by Canadian partners.
- In a trusted relationship, Indians may allow for some leeway in the conditions of an agreement under special circumstances – in turn, they may expect the same kind of flexibility.
- Most Indians have a spiritual side – respect the pauses they may take for prayer and spiritual renewal.
And you know you are making headway when…
- The CEO not only gives you his business card, but scribbles in his personal cell number.
Did You Say $1 Trillion?
When talking about infrastructure in India, the figure $1 trillion in government spending often comes up. That’s based on an estimated 3-4 per cent annual growth in much-needed infrastructure development in India, over the next five years. Other key sectors, which also fit Canadian expertise, include: automotive, cleantech, biotech, educational services, telecom-ICT, plastics and agri-food.
Peeking ahead: Don Stephenson, Canada’s chief trade negotiator for the Canada-India Comprehensive Economic Partnership Agreement, touched on the potential for that agreement, when concluded, to expand trade and investment between our two countries – by some 50 per cent annually, according to a joint study. Gazing even further, EDC’s Peter Hall sees Canada’s growth in knowledge-based industries potentially leading to more outsourcing of manufacturing to India, given its skilled young workforce and common language.