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September 18, 2010

Philip Logan:How to make India work for you

India is a vast market that represents a huge economic opportunity, yet it remains relatively untapped by foreign business, with many companies having tried but ultimately failed to set up shop. With six years’ experience in India’s meetings and events market Philip Logan shares his insights into what makes the country tick.

Many big names in the meetings and events sector have tried and failed to set up shop in India – Reed Travel being one of the most high-profile. Sadly, this has resulted in the country wrongly being seen as untrustworthy and untrusting. But with India predicted to be one of the main centres for economic growth over the next decade, particularly within the meetings and events sector, there are big opportunities for anyone willing to spend the time trying to understand one of the world’s biggest countries.

India’s top 10 capitals are all large Asian cities with populations in excess of five million. Mumbai’s population is close to 16 million and Delhi’s in excess of 13 million. There are more than 80 cities across 30 states and territories with more than of one million people.

These enormous population numbers can only be matched by China; and no other country has such scale. Census statistics show the average population age to be 24 years, so for the next 40 years India will remain one of largest consumer populations on the planet. This will be both a regional and global driving force as consumer businesses strive for innovation to attract this audience. Technology and IT savvy youth are already driving local product innovation, and one of the key things that differentiates India from China is that its market growth is market-led and not state-led.

Reconsider your investment model
Economies of Scale are always at play in India, with a national population in excess of 1.25 billion people, any serious business entry needs to consider its impact, when it comes to investment and rate of returns. Standard western models of cost and market penetration do not always hold up in this environment.

A look at the size of India’s domestic association market is a clear case in point; the industry has approximately 800 bodies both national and regional – as active associations who hold their meetings on an annual basis. The top 10 associations are:

Indian Dental Association – 50,000 members
Computer Society of India – 40,000 members
Federation of Obstetric and Gynecological Societies of India – 21000 members
Association of Physicians of India – 15000 members
Association of Surgeons In India – 13,000 members
Indian Pharmaceutical Association – 10,000 members
Indian Pharmaceutical Association – 10,000 members
Pediatrics Society of India – 8000 members
Dermatology Society of India – 6000 members
Cardiology Society of India – 6000 members
Research Society for the Study of Diabetes in India – 5000 members

There is also huge cultural diversity within India. The north and south of the country are viewed locally as completely different by language, food, culture and people. Geographically the north has deserts, mountains and hot and cold extremes, which lead to many social and physical issues. The south, on the other hand, has abundant water and, hence, food. This means that many of the basic poverty issues are overcome. It also has better weather, which reduces problems associated with shelter and housing, and higher levels of education. For this reason, development in the south tends to be more advanced.

Expect cultural variations
English is widely spoken, while Hindi the other national language is mainly spoken in the north and west. Other regional languages such as Telegu, Tamil, Urdu, Punjabi, Bengali, Malayum, Maharati, are all very popular and widely spoken as mother tongues. Indeed, India can boast 21 official languages and in excess of 400 regional dialects.

Each region has different sub-cultures as well as completely different foods, dress, cultures, symbols, idols etc. This means that making generalised assumptions in relation to language or culture is extremely dangerous from a business perspective. India is more diverse than Europe and more geographically diverse than the US. So one needs to be very cautious about rolling out product based on standard western models. A targeted city-by-city, state-by-state approach would likely yield far better results.

The “Power of Family” is also an essential element of the social fabric here and is central to the understanding of the way business runs in India. The family unit remains very close knit and most live close to each other. Many of the largest Indian firms are family or caste businesses, such as TATA or Mahindra. Although still largely a male-dominated society – except in two states – women are slowly emerging as a powerful consumer force, as are the youth .

Keep it in the family
Privacy notions are also very different from those of the west. Personal relationships through family, caste and religion remain very important in normal business operations and can often lead to public family conflict. Census data suggest that half the population marries within caste and often by arrangement. Although this practice is slowly reducing as the young population emerge, an intrinsic respect for these channels as well as for the elderly make this a powerful voice within social economics.

Foreigners clearly sit outside of these family/cultural boundaries and it can therefore be a slow process getting established in India. Despite this, foreign direct investment continues to grow as India continues to open up, but it still accounts for less than 20% of the economy. Expatriates or standalone foreign firms, although strongly represented, do not dominate the Indian business landscape, unlike the Middle East or China.

On top of this India’s value of education has given the nation a strong and educated working population. This has also meant that overseas education and travel has been widely respected and has led to an innovative, creative and modern workforce. This, in turn, means the numbers of non-resident Indians (NRI), overseas Indian citizens (OCI) living abroad and people of Indian origin (POI) are in excess of 50 million. With an expansion of the economy; these people are becoming a valuable source of national employment.

Essentially, there are seven key lessons to doing business in this country:

Lesson 1: Have a city by city strategy – the sheer size of the population eliminates need to spread yourself to thin
Lesson 2: India’s population is youthful, so be modern and allow longer product lead time
Lesson 3: Test your product P&L assumptions
Lesson 4: Although English is the key language of business + 1 state language, there are 20 other languages
Lesson 5: The wide range of national diversity will affect your strategy implementation. Expect variation
Lesson 6: Respect local customs traditions and abide by local rules. The longer you are in the market the more you’re respected
Lesson 7: India is an educated society. Treat it as such

Finally, India does have unwritten barriers to entry, such as the Indian Business Model, based on Ghandi’s right of self-determination this means “nationals first”. For this reason, foreign firms need to carefully consider their entry vehicle: venture capital, private equity, joint venture, foreign direct invest, private placement, business partnership, franchise, manchise or management contract. Many companies trying to enter India fail because they assume they know better.

Philip Logan is a general manager living in India and working meetings industry. He is a member of The Indian Convention Promotions Bureau (ICPB), ICCA, The International Association of Congress Centres (AIPC) and Professional Convention Management Association (PCMA).

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