TM considers the dynamics of market entry for UK manufacturers in India.
The engineering and manufacturing sector in India contributes around 12% to the nation’s immense $1.24 trillion GDP and the sector is set to grow rapidly in the coming decade to account for a far higher proportion of economic activity – the Indian government’s manufacturing policy has targeted the creation of 100 million jobs in manufacturing over this period.
UK manufacturers can be a part of this boom and many who have already made forays into India are extremely positive about the experience. Speaking at the UK India Business Council’s annual Newtorking Summit on March 14, Ludo Chapman, MD of SME scientific equipment manufacturer, Grant Instruments, commented “India is certainly the biggest opportunity to a small company like mine, and I recommend it highly.” (Go to www.themenaufacturer.com for a full transcript of Ludo Chapman’s presentation at UKIBC’s 2012 Summit.)
Sustainable premium plastics manufacturer Luxus, undertook its first trade mission to India in February. Describing the characteristics to be looked for in the leader of such a project from a UK perspective Mr Aterby, Luxus’ MD says: “We selected Alex Clarke, one of our senior graduate apprentices.
He is an automotive engineer and automotive is the primary market we are investigating a the moment.“Alex is also a very open and worldly character who travelled a good deal when he was a student,” continues Aterby. “He also has an ability to communicate with people on a very personal level in a professional environment and this is very important in India.”
Expanding on this point Aterby explains: “Alex was able to build a rapport with local contacts before we took part in our trade mission. Through leveraging these relationships he ensured that we were able to talk to the right senior people in the organisations we were interested in – not just those people fronting up stands at exhibitions.”
Speaking for himself about the experience of leading Luxus into India Alex Clarke says: “We went out with the idea of establishing a joint venture with a company we felt we could help on a technical level. Having been to the market we will probably look at direct shipping as an alternative short term solution. This is because, while potential partners were in fact more technically capable than I had expected, we couldn’t find anyone who is doing what we would require with regards to sustainability and using recycled materials.”
Package trip or solo expedition?
Anthony Shepherd, director of Shepherd International, considers the value of trade missions and asks if other options are available to UK manufacturers looking to crack (or sustain) market entry in India and similar territories.
No one was ever sacked for joining one of Britain’s 500 or so trade missions each year. Missions can help sell your goods or services into an export market.
But other routes exist for market entry which may prove less expensive, more effective in customer-facing time and are more flexible. It’s important that Britain’s 18,000 or so active manufacturerexporters, as well as new kids on the block, are aware of the arguments for selecting Trade Missions or taking a DIY approach.
The busy manufacturer benefits from his or her time-consuming travel package being administered by others, but at additional cost. Your organising trade body should carry out pre-visit market research, set appointments for meetings and presentations, coordinate your visit with industry and embassy events and obtain visas, flights and hotels.
As the ‘missioner’, you benefit from a higher local media profile, since a joint visit has more clout than one company, and there’s a supportive camaraderie in travelling with like minded peers. For the shy or nervous this brings a sense of security and is morale-boosting.
To reduce the cost of a mission, UK manufacturers should be aware they can access UK government mission grants of £300 to £1000 to offset some of the admin costs involved. Missioners should also try and take advantage of networking with non-competing exporters, potentially sharing valuable market intelligence. If high-profile politicians or blue chip companies travel with you, piggy-back on their clout and connections. Missions tend to most benefit newcomers.
The DIY sales trip:
Missions help justify the work of diplomats, civil servants and trade bodies. So missions can cost £500 to £1500 more than a solo sales trip. The airline ticket and hotel quality levels are often higher for official mission groups, perhaps more than you need, and you pay for the organisers’ fees too, as well as the market research by the Embassy or High Commission Trade team at £600- £2000.
The flight schedule on an official trade mission may not suit you. You decide your own itinerary when it’s DIY and can either focus on 100% overt client-facing time, or take a more stealthy approach if you are concerned about alerting competition.
In addition, organising your own sales trip, including selecting your own in-market specialists (see some below), will ensure you have independent agents who have to compete hard to provide you with the most effective market research using local know-how. If you know the market already, you’ll prefer the DIY route.
This is an important selling point for Luxus in the UK and Mr Clarke is confident that, given strong activity from European automotive OEMs in India, there will soon be a requirement for plastics of their grade there. For the moment however, Clarke says, “Buying in India is still very cost driven and conversations about the sustainable value of products is relatively immature. To maintain the integrity of our product we would have to look at direct shipping, but this will be very expensive – around £70-80 per tonne shipping costs.”
“India is certainly the biggest opportunity to a small company like mine, and I recommend it highly” – Ludo Chapman, MD, Grant Instruments
So, the market for Luxus is currently nascent and uncertain, and the choice will have to be made as to whether it lays its bet on success now in order to capitalise on immense potential in years to come, or wait and see, and risk losing competitive advantage. This is not an unusual position to be in. Mr Chapman comments, “India works on a five year plan. We are going to follow that and look at a five year scope for each of the steps in our strategy.”