Despite increasing sales - four out of five companies in India are on a growth path - according to the India Business Climate Index 2018 Only a few (16 percent) of the medium-sized companies surveyed actually achieve or exceed their own sales targets in India. Only four out of ten companies largely achieve their self-set sales sales targets. Every third company in the “boom country” of India misses their own sales targets by more than half!
Supposed market barriers and real brakes on growth
When asked about the perceived brakes on growth, 26 percent of all companies responded “Market, competition, product & price” as the primary problem in India (right after Compliance & bureaucracy).
It is obviously becoming increasingly difficult to enforce one's own margins - especially against low-cost Asian competition. In the last ten years, companies from the Far East have gained significant market share in India at the expense of European providers - not only through generous price advantages, but above all because they have adapted excellently to actual local customer needs. Due to high flexibility and very pragmatic products, Chinese companies in particular are increasingly gaining traction and are asserting themselves against high-end products from Europe.
European capital goods, machines and systems almost exclusively serve the absolute (but very small) top segment in India. Because only a few medium-sized companies from India can still afford “Made in Germany”.
Are European products too expensive for India?
When sales are weak, the European headquarters and the Indian management typically end up agreeing on the two seemingly most obvious reasons:
- “The Indian market is simply not ready for our products yet.”
- “We are too expensive and therefore cannot assert ourselves against our competitors.”
As a rule, however, there are completely different reasons behind the “killing” arguments of market and price. And these reasons, interestingly enough, are almost always the same, and almost always homemade.
In most cases, your own sales in India is the biggest lever for increasing sales and profits. Therefore, set up the “right” sales structures for India and regularly check your existing sales organization through its paces! We therefore always recommend one active management and control of their Indian sales.
Make in India? Local manufacturing in India
In connection with India's own competitiveness, the topic of "production" is being discussed more and more often - not least because of the large-scale “Make in India” Campaign. Specifically, local production and the development of our own products specifically for the Indian market (keywords localization and “frugal innovation”) are intended to appeal to a broader group of customers and thus achieve real market relevance.
However, a production location in India does not always make economic sense! If the potential target market does not multiply through real “indovation”, it may happen that you have to pass on the price advantage achieved in full to your Indian customers. In this way, you are essentially subsidizing Indian customers through your local investment.
In the last few months we have had several (strategy) projects in which it ultimately turned out that setting up our own production in India did not make economic sense. more on the subject Production setup in India.
