Entering the Indian market: have you thought of everything?
Five questions you need to ask yourself before taking the first step.
The paradox of entering India
You talk to European SMEs about India and often hear two contrasting stories. Some tell of years of stagnation despite major investments, others of hasty decisions that they later had to correct at great expense. Both groups have something in common: they asked the wrong questions – or asked the right questions too late.
In our experience, the real problem with entering India is neither hesitation nor overzealousness. It is acting without clarity. Looking for a distributor quickly now is just as risky as waiting for years without a concrete target. The difference between successful and failed India engagements lies not in the speed, but in the quality of your preparation.
Accept that India is different – i.e. more support-intensive, more time-consuming, initially busier, etc. If you make the right decisions here with clear preparation and vision, then India really does offer enormous potential.
Five questions you need to answer before you start
1. which form of presence suits your business model?
Liaison office, branch office or private limited company? The decision may seem technical, but it has far-reaching consequences. A common misconception is that forms of presence can simply be “upgraded”. The reality is different. If you start with a liaison office, you cannot convert it into a Pvt. Ltd. A change effectively means new registration, new bank accounts, new tax numbers, new contracts with partners and customers. The supposedly cautious start becomes an expensive detour that costs you months and slows down your business just when you want to pick up speed.
The right question is therefore not: “What is easiest?” Rather: “What do we need in three to five years’ time – and what structure will support this from the outset?”
2. do you understand who really decides in India?
Many companies underestimate how differently decision-making processes work in India. While the purchasing manager or managing director makes official decisions in Europe, family networks, political connections or informal advisors often play a greater role in India.
An example from our practice shows this clearly: a manufacturer of electronic door systems relied on hundreds of sales employees to acquire projects on construction sites, but the actual decision-makers were a few property developers who determined which systems were to be installed at the tender stage. Instead of key account management, the company operated mass sales – and lost systematically. Our external analysis revealed that a lean key account structure would have been more successful and profitable.
In the case of GCCs, there is an additional dimension: the integration of local management staff and the promotion of a culture of innovation are decisive success factors. Indian teams are efficient, but established employee management tools must be adapted for India – otherwise there is a risk of high fluctuation and frictional losses between locations.
The question is not: “Who is our contact person?” But rather: “Who influences the decision before it is officially made?”
3 Is India one market for you – or several?
The most common mistake is to think of India as a homogeneous market. What works in Tamil Nadu can fail in Gujarat. There are serious differences between states, customer groups and trade channels – linguistic, cultural, regulatory.
Your experience from China or other markets is only of limited help. India consists of a patchwork of regional peculiarities: different business mentalities, divergent distribution logics, local interdependencies that remain invisible from the outside. The choice of location also plays a central role for GCCs: the talent pool, infrastructure, costs and tax incentives vary considerably between Bangalore, Hyderabad, Pune or Chennai.
The question is not: “How big is the Indian market?” But rather: “Which part of the Indian market can we reach – and with which specific strategy?”
4. do you have a target image – or just an intention?
Many production, sales or GCC (Global Capability Center) projects start with vague ideas such as “We want to be present in India”. Without a clear answer as to whether it is about market supply, exports, cost optimization, a shared service center or strategic positioning, misallocations of personnel, location and investments occur.
“Production started because that’s what you do” – this sentence describes more failed projects than you would expect. Equally problematic are unrealistic expectations of scalability, which lead to oversized or too small systems and later either break your budget or block your growth.
The question is not: “Do we want to go to India?” But rather: “What exactly do we want to achieve there – and by when?”
5. do you know what you don’t know?
The regulatory environment in India is complex and changes frequently. Tax laws, import restrictions, industry-specific permits – official documentation often lags behind reality. In addition, there are issues such as the permanent establishment risk: even with recurring sales activities by local representatives, Indian tax authorities can insist that you pay tax on profits in India.
Many companies rely on sample contracts from local law firms or company secretaries – well-intentioned, but often inconsistent or not aligned with your corporate strategy. The result is a patchwork of regulations that you can only correct later at great expense.
Companies that rely on consultants with an operational presence in India – with teams that conduct conversations at store floor level and have access to information that is not put on the table in official meetings – have an advantage. The question is not: “Do we have a lawyer?” It’s: “Do we understand the implications of our structure – tax, legal, operational?”
The difference between success and failure
European companies that are successful in India have one thing above all: clarity. A defined target image, an understanding of local realities and the willingness to ask the right questions – even if the answers are uncomfortable!
Make a clear decision: Not a “maybe”, but a conscious “yes” or “no”. This does not mean making a quick decision. It means making an informed decision, with all available information and a realistic picture of what to expect.
India is difficult to forgive strategic false starts. Structures that you set up incorrectly at the beginning can only be corrected later with considerable effort – if at all. This is precisely why it pays to get things right from the start: with a clear vision, a realistic understanding of local conditions and the willingness to ask the right questions before taking the first step.
If you don’t want to answer these questions on your own, talk to someone who knows the Indian market not from studies, but from over 20 years of operational work on the ground. We support companies from the initial strategic decision to ongoing operations – with dual teams of European project managers and Indian specialists who know how India really works. Contact us for a confidential strategy discussion.
