Expert Insights: Eli Hamacher | Freelance business journalist
Published in October 2018
Understand the need and customize
With growth rates of roughly 7%, India is the fastest-growing emerging economy. Industries such as logistics and healthcare offer good opportunities for Foreign SMEs. A cleverly planned market entry pays off as there are numerous pitfalls lurking when it comes to imports or developing sales in India.
Of the many reforms the India’s Prime Minister Narendra Modi initiated since 2014, “Clean India” is the most important for Rüdiger Schröder. “A lot has happened in the last year. The state is investing in cleaner and more attractive railway stations, which inturn increases the demand for our cleaning equipment,” says the Managing Director of Kaercher Cleaning Systems Pvt. Ltd. based in New Delhi. Rethinking is also underway in street cleaning. “If the state switches from manual cleaning with brooms to mechanical cleaning in the future, this trend will also further improve our order situation.”
The Indian subsidiary of the traditional company from Baden-Württemberg sources its cleaning equipment and systems for private and business customers from the company’s factories around the world. “For the Indian market, these are predominantly entry-level models that the group produces specifically for developing markets of Asia, South America or Africa”, emphasizes Schröder. This proved to be a good strategy as now they know what models & specifications work for the Indian market. This year, however, the Indian subsidiary acquired a stake in an Indian company in order to be able to produce locally in the future.
First import, then produce
Before setting up their own production facilities, experts such as Shashank Verma from Maier+Vidorno recommend first testing the market with imported products. “It is therefore important to know exactly where potential customers are located in order to define an efficient import and distribution strategy for developing sales in India”, emphasises the Head of Supply Chain and Order Management at Maier+Vidorno.
Since the business-friendly Prime Minister Modi took office in 2014, it has become easier to obtain the required registrations, for example, for the import of goods. However, the expert points out that it is important to keep an eye on the regulatory requirements, as they can change again and again. M+V supports with business and product registrations for its customers who import and sell goods in India.
Well trained and managed sales teams
Kärcher, specialist for cleaning equipment, has a two-track approach to developing sales in India. Since they do not have a retail license, the devices for end customers are sold through hardware dealers, says Rüdiger Schröder. Unlike in Germany, there are no traditional DIY stores in India. At present, however, a trend can be observed in which the first dealers are investing in their own showrooms. Business customers, on the other hand, are addressed directly by Kärcher’s own sales team. In total, the India subsidiary founded in 2011 has established a network of twelve branches in the subcontinent with around 300 employees and is thus represented in all of the country’s important economic centres.
The 62-year-old responds calmly to a study according to which 70% of German companies in India miss their sales targets. “Our annual sales show continuous growth of 20% over the recent years”. The German, who joined Kärcher five years ago and brought along experience in the Indian market, explains the success with the deployment of his own well-trained and closely managed sales staff, specialising in customer groups in B2B business and qualified service.
Target group-oriented approach and qualified service
With your own teams, you have your success in your own hands. According to Rüdiger Schröder, it is crucial to lead and control the employees so that the available time is used efficiently. Kärcher’s specialisation on individual customer groups, such as building cleaners, hotels or even industry, enables a customer-oriented approach. Last but not least, a qualified service is indispensable. “Many Indian companies employ unskilled workers. This can quickly damage a machine, which we then have to service quickly.”
Get an expert on ground
Deep Sharma, Managing Director of Schulke India Pvt. Ltd, a specialist in hygiene and conservation for the healthcare, manufacturing and processing industry, headquartered in Norderstedt near Hamburg, underlines the importance of intensive preparation before market entry in India. “After founding our subsidiary in 2011, we took three years to understand the market and the competition before defining our strategy, determining which customers in India we want to address with which products.” Schulke India imports some of the products from Germany, the majority is manufactured in India by local contract manufacturers.
Hospital Acquired Infections are one of the major risks for healthcare professionals to improve safety and quality of patient treatment worldwide, and India is no exception. Schulke provides comprehensive hygiene solutions for patient safety through its quality products and services. “One of the biggest challenges for us”, Sharma emphasises, “is to organise the import licenses that we need. In addition, we had to find the right partner to develop the business and build the nationwide distribution network for us”. Having local expertise is very important for developing sales in India successfully.
Sharma sees potential in simplifying the registration and import of medical devices, in quality standards for the manufacture of pharmaceuticals and in introducing European standards and regulatory requirements for infection prevention and control practices for hospitals. From day one, Schulke has worked closely with Maier+Vidorno to manage import regulations and to establish their distribution network for successfully developing sales in India. “For us, this service provider is an extended arm of Schulke,” emphasises Sharma. M+V supported Schulke, which today employs 40 people, in the areas of finance, human resources, ERP and compliance. The consultants’ expertise was also very valuable during the acquisition of Microshield’s range of products in 2015 from Johnson&Johnson. For future growth opportunities, they will continue to rely on their support.
Good reforms, strenuous bureaucracy
The Managing Director of Schulke India is satisfied with the Modi-government. The Prime Minister has initiated some ground-breaking reforms. These included the tax reform to introduce a uniform turnover tax (GST) and the new regulation of insolvency law. “Corruption at the government level has also declined significantly,” Sharma says. However, nothing has changed in the day-to-day business with the authorities.
Nonetheless, the Germans still draw a positive balance. Within seven years Schulke has developed itself from a market-entrant to a market leader in its segment. Demand from the healthcare industry is growing, quality standards are rising, insurance companies are covering more services, and the government is focused on providing medical care for the poor. “Efforts to improve infection prevention for the benefit of patients and medical staff in hospitals have increased significantly”. These mega-trends will continue to drive growth at Schulke.
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