More than a quarter of medium-sized companies are dissatisfied with their own competitiveness in the Indian market (see WB Business Climate Index India 2018):

  • From the head office perspective, the sales team in India is not offering the right products.
  • Local pricing contradicts global product positioning.
  • New product series are only offered on the market with a long delay.

At the same time, the Indian sales team often complains about seemingly contradictory pricing targets and non-transparent sales targets.

Analysis and monitoring of exchange rate vs. transfer prices

A detailed analysis of the sales data – down to the product level – proves to be helpful here. For example, the strong fluctuation in the rupee exchange rate can lead to undesirable price differences of up to 30 percent - even within largely homogeneous product families.
In extreme cases, products are even sold below production costs. This happens when the transfer price has not been adjusted to the current exchange rates for a long time or the Indian branch is controlled via the local margin. However, in this case, the actual loss (at company level) is not visible to Indian sales.

Inconsistencies in the control variables often lead to a further deterioration of the situation. For example, if the managing director in India is measured by his local EBIT in rupees, but the product manager is measured by the contribution margin in euros, sooner or later different assessments will arise.
Another point is the volume discounts granted by the subsidiary, which often have no connection to the sales volumes achieved.

Concrete measures for sales control and optimization

These analyzes go well beyond the normal key figures and are usually neglected in everyday operations.
An external, neutral view allows these problem areas to be revealed and corrective measures to be taken. This could include clearing out the portfolio active in India to remove loss-makers or “problem children”, but also a revision of the relevant transfer or list prices (see above). In addition, the sales team should also focus on the “right” products suitable training measures be anchored.

The targeted elimination of a few problem areas can increase the gross margin by several percentage points. At the same time, sales are able to concentrate better and more specifically on the needs of local customers. In this process, close coordination between the company headquarters and the Indian branch is of great importance.