India is almost as big as the European Union and more than twice as many people live there. No wonder, then, that there are big differences between the various Indian states. The differences are in terms of language, demography, politics and economic growth. For a successful start in India, it is therefore important to take these differences into account when making a business plan. Because what works in Gujarat does not automatically work in West Bengal.
The Regional Differences Between Indian states
To succeed as a multinational in India, you must be aware of the large regional differences in India. India is a fragmented market with large, and often underestimated, regional differences in language, culture, infrastructure and wealth. All of which affect regional business culture. Indian states are therefore better compared with individual countries than the Dutch provinces, British districts or Swiss cantons. Indeed, India’s most populous state, Uttar Pradesh, has as many inhabitants as Brazil, and the southern state of Tamil Nadu has an economy as large as that of Hungary.
There are also large demographic differences between the Indian states. For example, the south of India is older. It has more to spend and has a higher literacy rate than the rest of the country. North India, on the other hand, is younger and relatively poor. The North Indians mainly speak Hindi. The South Indians prefer to communicate in English or their regional state languages, such as Kannada or Malayalam. The German wholesaler METRO (better known in some countries as Makro) made interesting discoveries about Indian customers. In India, there are big differences between the messages that customers in a certain region put in their shopping cart and adjust the assortment by adding more local products. Logical actually, Finns also have different preferences than Spaniards.
“METRO found out that there are big differences between the messages that customers in different regions of India put in their shopping cart”. – Mark Alexander Friedrich, Head of International Affairs for METRO
Don’t Make One Business Plan For The Whole Of India
For a successful start in India thorough market research is a must. The regional differences are not only obstacles but can also work to your advantage, depending on your sector and product. The southwestern states, such as Maharashtra and Karnataka, are a suitable base for technical sectors such as automotive, engineering, etc. They are also known for outsourcing IT and Research & Development teams. Northern states such as Punjab and Haryana, among others, have a thriving agricultural sector. They provide opportunities for the food processing industry and the renewable energy sector. Also for selling your product in India, starting in the right regions is essential. European products are almost always in the highest market segment in India. So it’s smart to start in the regions where there are sufficient income and a real demand for a more exclusive, more expensive product.
“Approaching India as one country by working with just one distributor or partner is one of the most common mistakes European companies make in India,” says Klaus Maier, CEO of Maier+Vidorno.
In Europe, you wouldn’t ask an Italian distributor to set up your network in Norway either. An Indian partner or distributor operating in a specific state has a good network only there. It will not succeed in successfully expanding sales to other states. If you take India seriously you will start with about four local managers or distributors who have a good understanding of your product and the regional market. With them scan the market and the logistics network set up, one of the biggest challenges for international companies in India. In this way, you can step by step successfully conquer the Indian market “.
Maier+Vidorno has compiled a guide explaining the specific characteristics of business culture in the various states.