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HELPING YOU PROCURE GOODS AND SERVICES FROM INDIA, DEVELOP BUSINESS AND SELL INTO INDIA AND ADMINISTER THE PROCESS ALL ALONG THE WAY

India, Doing Business In – courtesy of: Reference for Business » Encyclopedia of Business, 2nd ed. » Inc-Int

India is the world's largest democracy and is rapidly becoming one of the most attractive developing nations for doing business. This attractive business environment came about largely because of political and economic reforms that provide foreign investors with incentives for doing business in India. India brought about major economic reforms in the early 1990s, making it possible for business firms located outside India to make direct investments in the Indian marketplace. Due to these reforms, U.S. firms and businesses from other countries have taken advantage of the opportunities there; today the United States is currently the largest foreign investor in India. And while opportunities for doing business in India have led to many success stories, particularly from many large U.S. multinational business organizations, there remain numerous challenges in doing business effectively with India. To understand these challenges and to learn how to effectively do business in India, it is important first to learn how Indian firms and their managers conduct business. Business, as practiced in India, provides a useful model for Western business organizations planning to enter the Indian marketplace.

In contrast to many Western transnational corporations with high technology capabilities and proprietary product systems, many Asian Indian managers rely extensively upon long-term relationship building in their international business encounters. Indian business styles are based upon long-term, vis-a-vis shortterm, priorities in the context of several cultural and functional dimensions. This knowledge should be useful to Western businesses in the development of strategies for India, or for researchers interested in learning more about the way business is conducted in India. To describe the Indian business approach, several organizational dimensions are included to provide an understanding of these issues.

ORGANIZATIONAL DIMENSIONS

POWER DISTANCE.

According to Geert Hofstede, organizations can be defined as "high power distance" instances when less powerful members accept a standard of unequally distributed power and believe that their superiors make sound leadership decisions due, in large part, to the superior's position of power. In contrast, subordinates in low power distance organizations attribute high quality decisions to leadership skills, rather than positions of power. India is a high power distance society. Due to the vertical structure in most Indian business organizations, someone from the United States working in an Indian business environment will need to be willing to accept authority in a more complete sense than he or she is perhaps accustomed to.

INDIVIDUALISM-COLLECTIVISM.

Collectivist organizations nurture group interdependence; in turn the organization has a greater responsibility for its individual members. Collectivist persons give primary attention to the needs of their group and are willing to sacrifice opportunities for personal gain, since their sense of self is an extension of the group. Conversely, individualistic employees see themselves primarily as engineers, managers, professors, etc., and secondarily as group members of specific organizations or institutions. Persons from individualistic cultures pay more attention to their own needs, taking advantage of opportunities for personal gain or enrichment.

An interesting business phenomenon takes place in India. As one doing business in India quickly learns, independence is welcome in carrying out one's assignments, but at the same time supervisors are looked up to and respected for their managerial wisdom (high power distance). An interesting collectivist value in India, as well as most of Asia, is that of" filial piety." This value relates to the obedience to, respect for, and financial support of parents, and the honoring of ancestors as a collectivist value system. In India, according to Sunil H. Rathi, director for Rathi Dye Chem Ltd., "elderly people are very respected. We look to them for advice because they are people who have experienced life and they have more wisdom. An 80-year-old person will have greater wisdom because he has lived a long, practical life. So for them I touch their feet when I greet them," (from an interview with Rathi).

Filial piety within many of India's industries is shown, in large part, in an entrepreneurial spirit, including a group of companies founded by the former J.R.D. Tata—synonymous with India's very best. While outside investors are often welcome, Indian families retain financial and administrative control. In India, society revolves around the entire family rather than an individual's personal priorities. This carries over into the business setting. Top management positions are reserved for family members, although this is changing somewhat, particularly within the ranks of middle management. Still, the family remains very strong in the entrepreneurial functions and investment areas.

LANGUAGE AND SOCIOLINGUISTICS.

Due to the long-term colonization of India, the British Raj cultural traits remain strong to this day. While many languages and multiple dialects are spoken in India, the language of international business is English. While English is the language of industry and large business, it is mixed with Hindi and state dialects, creating somewhat different connotations from British or American English. Thus, miscommunication can occur even between those sharing the same language. The sharing of the same native language is not necessarily sufficient for effective interpretation of business documents.

Beyond simple language differences, paralinguistic meaning can also vary significantly from culture to culture. Speakers of Indian English, for example, routinely increase their voice volume for recognition purposes in business negotiations and other encounters; this paralinguistic behavior can be misinterpreted by standard British or American English negotiators as an expression of anger. In addition to paralinguistics, other nonverbal behavior can also be understood differently.

Nonverbal management symbols relate, for example, to power relationships such as seating patterns at management meetings, body posture, dress, and personal greetings. In India, namaste is a greeting of choice (with hands together as if in prayer and just under the chin). This greeting is appreciated, particularly when a visiting Western businessperson greets a woman in India. Also, respect to elders is shown through the custom of touching of feet and at the same time looking into their eyes. Indian nonverbal responses often vary significantly from other country's norms. For example, moving the head sideways in the United States denotes a negative response; in India, a sideways movement of the head carries a positive connotation of understanding. And while nonverbal cues should be supportive of parallel verbal messages, this is not always the case, as conflicting verbal and nonverbal signals are commonplace.

MARKETING AND POLITICAL CHALLENGES.

While worldwide tastes are becoming more standardized, demand is coming from a more diverse marketplace. For example, in India there are approximately 250 million middle-class people with various Western tastes in the selection of products and services. The Indian middle-class culture, however, is still very much Eastern and also differs from other classes within India. This poses complex marketing challenges for business organizations planning initiatives within India's expanding marketplace.

Political events in India have an impact on all business. As mentioned earlier, a more relaxed investment climate has developed in India, changing the rules for foreign direct investment in the country. With support from the prime minister and legislative bodies, investment by foreigners in India is now encouraged. There is a sense of excitement in the Indian financial and industrial communities as transnational organizations enter into Indian joint ventures. Political challenges, however, remain real and strong. According to Mohan R. Limaye, writing in Business Horizons, American companies need to be aware of the complexities of the Indian political environment including India's multiparty democracy, the growing power of India's states vis-a-vis the federal government, and a growing Indian political nationalism.

TIME CONSIDERATIONS.

In India, most management persons are time-conscious, meaning that they regulate their business life according to the clock. Many Indian managers tend to follow a linear time frame as is the practice in much of Western Europe or the United States. That is, businesspeople are expected to be punctual for appointments and it is mandatory for workers to arrive on time for work. It can also be noted, however, that trains run on a more flexible schedule and are routinely late. This is important to keep in mind when scheduling appointments; extra time needs to be scheduled to reach business destinations on time. Social contacts can differ from business protocol in relation to time; flexible behavior is much more the norm in social settings.

NEGOTIATIONS.

Successful negotiations are customer oriented in India and follow a long-term communication strategy. When negotiating in Japan, for instance, Indian executives and managers approach business negotiations according to the Japanese communication style; the Indian negotiator presents the proposal in such a way that the Japanese counterparts will be attracted to doing business. Dr. Ramchandra Rathi, managing director of Sudarshan Chemical Industries, Ltd., stated that to accomplish their business objectives, there must first be an understanding of the Japanese culture and then a plan to adjust the negotiating strategy accordingly (in a conversation with the author). In labor contracts, which are generally for three-year periods in India, one rarely refers to the contract prior to the negotiations, as trust between the parties is developed first.

ACADEMIC AND GOVERNMENT COLLABORATIONS.

Currently in India there are relatively few developed collaborations between academic institutions and business practitioners. Consultants are utilized in professional management areas such as legal matters, technology, and marketing. The Indian government offers grants to do so, thus it is profitable to use consultants under grant arrangements. When grants are not available, few Indian companies take advantage of consultants, since they are not viewed as being cost effective.

India is a very bureaucratic country and everything is monitored by government. Banking is nationalized in India as well. Better financing is available through the banking system in India than is normally found in the United States, as Indian banks provide credit of up to 75 percent on inventory loans against export orders.

QUALITY ASSURANCE.

Sudarshan L. Rathi, managing director of Sun Engichem Ltd., believes his charge at all times is to "look after the plant," reflecting a long-term orientation to quality. "The key ingredient for any production success rests with the person in charge—every detail of the plant must be known. This is done by moving around and having dialog with the people. The supervisor must communicate that the people are critical to the organization's success. Teamwork is very important. This must be communicated; then anything is possible" (paraphrase of selected remarks obtained in an interview with Rathi).

LONG-TERM ORIENTATIONS

CONFUCIAN VALUES.

In an article in the Journal of Business Communication, Moyan R. Limaye and David A. Victor discussed the limitations of Western linear paradigms for international business encounters that ignore the uniqueness of other worldviews. The Eastern worldview is worthwhile to examine due to the remarkable economic growth that many of these economies have experienced over the last couple of decades. And while India does not share a heritage of Chinese Confucian philosophy, many connections can be made between Hinduism, as practiced by the majority in India, and the cultures of East Asia.

Confucianism is a set of rules focusing on a longterm versus a short term lifestyle. Confucian teaching includes obligations of relationships, family collectivities, virtuous behavior toward others, and moderate living, i.e., preserving resources—as individuals and as economies. The shared heritage of East Asia provides strong evidence that culture may indeed be a contributing factor for economic growth. The link between Confucian values and economic growth was intuitively thought to be the case for some time: economic growth of Japan, South Korea, Taiwan, Hong Kong, and Singapore (the "Five Dragons") was due in large part to certain key traits that derive their social ideals from Confucian tradition. Proponents of such an argument attribute the economic success of East Asia to common cultural roots; roots providing conditions that contribute to the region's post-World War II competitive business accomplishments.

LONG-TERM ORIENTATION INDEX.

The correlation between long-term Confucian values and economic growth over the past few decades was examined empirically in what Geert Hofstede and Michael Bond call the long-term orientation (LTO) index. The LTO index is a survey designed to quantify certain Confucian values within selected countries. The original survey was titled the "Chinese Value Survey" (CVS). A number of ethnic Chinese social scientists from Hong Kong and Taiwan designed 40 questions listing ten basic Chinese cultural values.

An interesting finding, aside from business practice, is that the LTO index appears to correlate positively with certain economic growth data published by the International Bank for Reconstruction and Development (the World Bank) for the period 1965 to 1987. While Hofstede in his 1991 book showed a correlation coefficient between a country's LTO level and percent average gross domestic product (GDP) growth, his statistical method was based upon an assumed linear relationship between these two parameters during the period from 1965 to 1987. While a compelling case can be presented in support of LTO cultural values as being an integral component for economic growth, other factors are also determinants to economic growth; market, economic, and political factors clearly come to bear on GDP results.

Among the first nine countries on the LTO index, however, are China (1), Hong Kong (2), Taiwan (3), Japan (4), South Korea (5), and Singapore (9). All these economies are experiencing rapid economic growth. India is very high and is seventh on the LTO index. While India's economic growth was not as great over the last decade in comparison to some of the East Asian countries, this is now changing, as discussed earlier, due to relaxed financial constraints upon foreign direct investments. There is a widespread sense of excitement within Indian industrial circles, as it is anticipated their country will become a member of the community of rapidly growing nations. The cultural environment that fosters a long term outlook, in addition to the necessary factors of a rapidly expanding middle-class market, and a favorable political environment that encourages investment in India, points toward India as a key growth area over the next several years. Major global corporations are expanding rapidly into India, taking advantage of this window of opportunity.

While the LTO attributes are not all directly related to international business issues, of direct significance is the contrast of quick results versus perseverance towards slow results. The Chinese have a term relating to interpersonal perseverance: guanxi, defined as the linking of people with highly developed relationships through mutual dependencies. This value system includes the concepts of personal connections and mutual dependencies and is a strong trait in Chinese interrelational systems. In effect, guanxi is a value for long-term relationships that combine practical needs with a closeness going much deeper than surface relationships; characteristics necessary to doing business in India. There is no direct translation into English describing the word's meaning, yet the rich semantic intrigue surrounding the concept can be somewhat captured within the creative term "peopleizing": A communication process that develops mutual relationships. But the definition of the term involves much more. Peopleizing is a strategy that prioritizes long-term relationship building over that of the completion of short-term functional business tasks and is a useful strategy for doing business in India.

INDIAN LONG-TERM RELATIONSHIPS.

The success of leading Indian businesses is attributable, in large part, to this strategy of long-term relationship building: Madhu Rathi, a leading industrialist in India, shared the following high context thoughts in a conversation: "Our networking is built on trust. There is some initial risk, of course, but trust builds through very close relationships. What is needed is to find out what the needs are in a country and fulfill those needs. This means knowing the culture and studying the market. We look to the long-term not the short-term. If you look to the short term and fail, there is no long-term."

Providing additional flavor to the long-term cultural values prevalent in Indian business, are remarks by Sunil H. Rathi (a truly international person), director for Rathi Dye Chem Ltd. (from an interview conducted with Rathi):

We have seven industries [in the Rathi Group]. My uncle [Dr. R. J., Rathi] deals with sales at the international level for Sudarshan Chemical Industries. He travels to America, Russia, Europe, France, and elsewhere to develop these markets. He has many friends in all of these places. When people come to India, we show them all of India. These are our potential agents, and through them we get more and more business. And, if you have open-mindedness, lasting business connections can be formed.

CONCLUDING THOUGHTS

The organizational dimensions described above and supported by remarks from leading Indian executives are pertinent to doing business successfully in India; they illustrate Indian relationships that are significant for international business in India as well as to help foster greater human understanding in the global village. Future Western international business accomplishments in India will go to organizations motivated to developing long-term communication strategiesWhile there may be disagreement with this conviction, arguing that culture and communication are not determinants to business success, many in top U.S. management ranks are becoming more convinced that this is indeed the case. Western international business practice is undergoing radical change, reflecting the belief that a focus for the future ought to be, in part, on culture and communication. The connections between long-term strategies and business success, afford rich possibilities for discovering and providing knowledge to international business practitioners entering, or planning to enter, the burgeoning Indian marketplace.

[ William B. Chapel ]