A couple of years ago, Alexander Bachmann of Admitad, an affiliate marketing company based in Moscow, opened up a branch in India. We asked Bachmann about the perils and pitfalls that one can come to expect as a foreigner based on their experience of entering the Indian market.
‘First of all,’ Bachmann said, ‘Indian market has its own specifics that are important to learn about at the planning stage. The market structure and demand is different from other countries and each marketer needs to know what kind of businesses are worth starting in India. One of the most prosperous local sectors to enter and start your business development in India is IT. On the one hand, India is a great country to start your global business expansion in this field. But on the other hand, there are already various projects and startups that are quite similar to certain Western businesses.’
Bachmann also spoke of how in the digital sphere, it’s easy to find an Indian digital analogue of a model that has already worked well in Europe. ‘So, this market is rapidly developing and acceptance of new digital ideas and formats is very high.’
‘Moreover, while entering a new market or launching a business in India the business needs to take into account the legal aspects and logistics in the broad sense, and managing a company that has started.’ On example under this umbrella would be deciding whether the company would be 100% foreign capital or a mixed-capital IT venture.
Bachmann believes that the most crucial piece of the puzzle comes about by hiring a consultant; a requirement even if your company in India is established. ‘The process of preparing the documents for starting a company in India is rather painstaking, and it is absolutely impossible to manage on your own.’
‘To avoid problematic situations and dishonesty it is preferable to hire several lawyers. You need to choose legal consultants carefully and constantly communicate with your lawyers on various aspects. You also need to take into account that there might be a choice of agencies and the prices from one to another one may differ dramatically, but the price doesn’t guarantee you quality of service. So, you need to be involved in all processes and control them actively.’
You also need to stay ahead of the game in terms of taxation as the laws are sometimes overly bureaucratic and difficult to get your head around them. ‘For example, if the company is incorporated as a private company, then the company tax rate is 30%. However, if it is a branch office of a foreign company, the tax rate increases to 40%. Furthermore, if we have a profit of less than INR 50 Crore, then the tax rate reduces to 25% rate.’
If business runs by the same principle as real estate–in that it’s all about location, location, location—then Bachmann is sold on Gurugram or, as he likes to call it, the town that changes its name every 3 years.’ With it’s close proximity to Delhi, Bachmann observed that Gurugram has been a mecca for all Western companies. If you start your expansion to India, you must go to Gurugram because most people who work there are in the IT field. You can also find personnel for your company among people who are already located there. Most of them are locals. There are expats as well, but as a rule they stay in their companies and don’t plan to go anywhere else.’
‘It’s both cheap and efficient, in general it will be the right decision from various points of view including rent, staff salaries, tech staff availability, friendliness to foreign investments and infrastructure. It’s a different matter if we are talking about such a component as sales, for these purposes Mumbai will be very suitable.’Bachmann said, but added that ‘You can have an office with 30 persons in Gurugram, or you can support a team of 5 persons in Mumbai and the expenses will be the same. But on the other side, if it is Mumbai, it is advantageous if you have a sales department there…If the company wants to engage in developing its business, it would be quite a good idea to have a sales department in Mumbai. But it is much more expensive.’
Once you’ve got your location sorted you’re going to need staff. For Bachmann, your two options are either hiring a recruiting agency or find them through recommendations.
‘If you don’t have any business connections in India yet, the first way is preferable. Recruiting agency will help you save both money and time, because your staff won’t spend 24/7 on processing the incoming CVs, and, a professional recruiter knows the employment market situation and average criteria of selection and salaries for each category of employees. So, they can help to avoid some hidden pitfalls.’
‘Additionally, you need to know the overall culture of work interviews in India. You need to be ready to bargain with a candidate during a job interview when a person can tell you an estimated salary which is 2 or 3 times higher than it is on the market.’
Bachmann also wanted to prepare the potential company that wants to set up shop in India to be aware of the difference in proficiencies and education. ‘For instance, MBA in India is different from any European or American MBA and English proficiency of such candidates may be at school level; and, one candidate may have several MBAs while the level of these qualifications may be much lower than you may estimate.’
‘When it comes to recommendations however, it’s best to tap into local knowledge to get the best for your organisation. In Indian culture local connections play a significant role, because outsiders are not able to understand all cultural and social intricacies, castes, ties, social roles, gender roles and social connections aspects. It is much easier to hire a person and find new employees via this person’s social ties and business connections.’ Bachmann told us.
And finally, when at the negotiating table, Bachmann swears by one lifehack that does wonders when speaking with other companies or institutions. ‘If you are an international company developing in a B2B format and you need to negotiate with local businessmen more productively, make sure that there is a person on your side during the talks, who is not from India. The foreign participant draws more attention to your visit and to the subject of negotiations.’
