Ammann becomes a market leader with its Indian joint venture partner

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    Joint venture in India-Rolf Jenny, Ammann

    Swiss family-owned Ammann is a global leader in the construction and road-building machinery industry. “In almost all of the 100 countries where we operate, we started out on our own and became successful,” explains Rolf Jenny, managing director of Ammann in India. “Except in India. There, we quickly came to the conclusion that we would never make it without local knowledge and support.”

    “Ammann’s first steps in Asia were in China. In the late 1990s, the Chinese government was very interested in our technology because they wanted to improve their entire road network in a short time. Ammann was therefore warmly welcomed with attractive tax rates and special subsidy programs,” says Jenny. “We had to make very few changes to our product to be successful in China. Only a small price reduction was needed. That was easily solved with a local production facility, and we had captured the market in no time.”

    China and India are not comparable

    With this smooth experience in China, Ammann then set out to enter the other major market in Asia: India. “There we were suddenly at a loss. Indians were not interested in our advanced products. Especially not at the price we were offering them,” says the CEO. “What worked great in China didn’t work at all in India. In India, we couldn’t settle for minor adjustments to our products, so we said to ourselves, ‘We can’t do this alone, we need a partner who understands the Indian mindset.'”

    Know what you have to offer an Indian partner

    Ammann begins with a major market search in hopes of finding an Indian company they can buy. During the research, Ammann comes across Apollo, an Indian company. At this point, Apollo is the leading manufacturer of road construction equipment in India. “And that’s exactly why it interests Apollo in our technologies, but immediately rejected the idea of a possible partnership,” Jenny says. “They said they had been operating at the top end of the Indian market for 50 years. Therefore, there would be no advantage in entering into a joint venture with an inexperienced European company. With this harsh rejection, Apollo killed our possibility of a successful start in India in one fell swoop.”

    But the Swiss company was lucky: two years later, Apollo sought contact again, and this time the Indian manufacturer was open to a joint venture. “That was the beginning of tough negotiations because we didn’t immediately agree on the terms of our partnership,” says the top Swiss manager. “Ammann normally always has a 100 percent stake in the companies we set up abroad. Therefore, it was unthinkable for us to own less than 70 percent of the joint venture. Apollo, on the other hand, wanted a 50:50 split of the shares. Our goal was for the joint venture to focus only on India, while Apollo planned to export to neighboring countries. Once again, we faced a big challenge in India.”

    Joint ventures in India, how do I do it right?

    Bridging differences

    To bridge the differences during negotiations, Jenny first focused on the similarities between the two parties. “Amman and Apollo are both family businesses, which immediately created a connection. We decided to invite Apollo to Switzerland so we could get to know our company even better. We wanted to learn more about how we can complement each other,” explains the CEO. “Amann is a world leader in high-tech products, Apollo in low-tech and low-cost versions. So together we could deliver a quality product at a mid-range price. By building trust and proving that we truly saw them as an equal partner, we were able to convince Apollo of the benefits of a joint venture. However, without having to compromise on our own terms.”

    Adhering to the basic principles of a successful joint venture

    According to Jenny, a successful joint venture depends on a number of basic principles. “You have to be able to trust each other completely and treat each other as equal partners. Even in our case, where we owned 70 percent of the company. All decisions within the joint venture were always made by mutual agreement. We determined from the beginning what would happen if one of the two companies wanted to leave the joint venture. A joint venture should always be equally beneficial for both parties. It is therefore extremely important to think not only about what a happy marriage will look like. But also to think about an amicable divorce if one of the two plans to go it alone.”

    Ending the joint venture

    After eight years of successful collaboration, Ammann and Apollo decided last year to end their joint business. “We have learned a lot from each other over the years and have always worked well together without any disagreements. But Apollo was ready to stand on its own two feet again,” Jenny says. “The 70:30 ratio meant Apollo was more of an investor than the entrepreneur behind the company, and something started to itch again – they wanted to get back to work.” Apollo sold the remaining 30 percent to Ammann for nearly 27 million. “Apollo not only got a very good deal on that sale. It was also able to benefit from the boom that the company has experienced in recent years. Together, we not only increased the value of the company enormously but also tripled sales. Despite the separation, the joint venture has always been a success for both parties. So we part as friends and will continue to have a good relationship.”

    Jenny, therefore, recommends an Indian partner to any European company looking to set up a shop in India.

    “You can only be successful in India if you understand the customer’s needs and adapt your product and price to those needs. To do that, you have to manufacture in India, the product has to breathe India. If you are confident that you can do it on your own, then take the plunge. In our case, we knew that our products did not fit the market. But we needed the local knowledge to understand what needs to improve. Should they want to remain independent, or a process of trial and error?” Ammann wanted to enter the market quickly without too many setbacks. We couldn’t have done that without our great partner. So research well and set your strategy based on that, but be aware that local help in India makes a lot of things easier.”

    Opportunities in infrastructure and construction

    Ammann is excited about the future in India. “Construction and infrastructure are two sectors that will grow strongly in India in the coming years. Indeed, the country needs more infrastructure if it is to maintain high economic growth over the long term,” Jenny says. “But even though these sectors are starting to offer interesting opportunities, it’s important that foreign companies realize that India doesn’t offer a quick fix. I’ve seen many international companies come and go. All had hopes of getting a piece of the investment in the road network. But if your product doesn’t fit India’s needs and Indians don’t trust you, you have a choice: Either invest for the long term or pull out of the market.”