India, with 29 states, is almost as large as the European Union and has more than twice as many inhabitants. No wonder, then, that there are big differences in language, demographics, politics, and economic growth between the different Indian states. For a successful start in India, it is therefore important to take these differences into account when creating a business plan. Because what works in Gujarat does not work automatically in West Bengal.
Harvard Business Review
The regional differences between the Indian states
For a multinational company to succeed in India, you need to be aware of the great regional differences in India. India is a fragmented market with large and often underestimated regional differences in language, culture, infrastructure, and prosperity. Of course, this diversity influences the regional business culture. Indian states are therefore better compared with individual countries. 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 Hungary’s.
There are also large demographic differences between The Indian states. For example, the average age and purchasing power of the population in southern India is higher than in the rest of the country. In northern India, the average population is younger and incomes are lower. The Northern Indians mainly speak Hindi, while the Southern Indians prefer to communicate in English or in their regional national languages, such as Kannada or Malayalam. After entering the Indian market like the German wholesaler METRO. They found that there are large differences in customers’ baskets in a particular region. METRO adapted the range by adding more local products. Actually logical, because even Finns have different preferences than Spaniards.
A business plan for the whole of India is not working
A thorough market analysis is a must for a successful start in India. Regional differences are not just obstacles but can also be to your advantage depending on the industry and product. The southwestern states, such as Maharashtra and Karnataka, are a suitable location for technical sectors such as automotive, mechanical engineering as well as for the outsourcing of IT and R&D teams. Northern states such as Punjab and Haryana have a thriving agricultural sector. This offers opportunities for the food processing industry and the renewable energy sector.
For the sale of your product in India, it is also important to start in the right regions. In India, European products are almost always located in the top market segment. It is therefore wise to start in regions where there is sufficient purchasing power. Also a real demand for a more exclusive, more expensive product.
“To regard India as a country and only work with a distributor or partner is one of the most common mistakes made by European companies in India,” says Klaus Maier, Managing Director of Maier+Vidorno. In Europe, you wouldn’t ask an Italian distributor to build your network in Norway. An Indian partner or distributor operating only in a particular state has a good network there and will not be able to successfully expand sales to other states. If you take India seriously, you start with about four dedicated, local managers or distributors who understand your product and the regional market well. They set up the market and build up a network. One of the biggest challenges for international companies in India. In this way, the Indian market can be successfully conquered step by step.”