Tendency of Japanese companies
A lot of Japanese companies are heavily tied to, and dependent on their Japanese customers or business networks (Nikkei Kigyo). They have worked together in Japan and outside Japan for a long time. It works well, but sometimes this co-dependency can work against effective decision making when dealing with “non-Japanese” entities, as the systems of doing business outside Japan Inc or outside Nikkei Kigyo is very different.
Going as a supplier to a Japanese company is a safe way to enter the market. The relationships are a true testament to the success of Japan Inc. Yet, it is still important to understand how to adapt to local pricing and demand. Simply relying on the Japanese OEM to buy from you is a one-sided approach and creates a lot of dependency. This approach needs to be one of many possible approaches to the market, depending on your long-term vision.
Even Japanese OEMs put tremendous price pressure to meet local market pricing and once they find a suitable local partner to supply products to them, they may source local products or import from elsewhere. To keep costs in control, or to reduce cost over time, Companies utilize Kaizen, and “Jugaad”, which is an Indian management methodology and an innovative way that Indian Companies make improvements or problem-solve by utilizing finite or limited resources to get work done in a price-sensitive market. Sooner or later, companies want to find a local partner and local customers.
Characteristics of the Indian market
India is very price sensitive. If your price point is high, then you have to devise your plan and strategy on that basis, to know why it is OK to charge those prices, and know the market’s needs and application relative to your prices, and the prices of your competition. A brand in Japan or in Asia may not have the same brand recognition in India, so it may require educating the local market on your products.
The market is also very competitive. There are many International brands present and there are also many local indigenous brands. The use of the right distribution channels and business networks is needed to compete aggressively. It is a long-term play. A short-term approach generally fails.
WHAT IS GENERAL FEEDBACK FROM JAPANESE ON BUSINESS IN INDIA
Listed below are some main points that we have heard from Japanese doing business in India.
- Wages continue to rise, even with inflation.
- The Infrastructure is still considered to be relatively poor (although improving and developing)
- Sourcing raw materials and parts locally may not be easy for some products
- India still faces blackouts and power shortage although the situation has improved a lot, especially in the major cities.
- India is a highly competitive and price-sensitive market
- Ease of doing business still needs to improve, although India is fast coming up in the global rankings. There is better transparency and the government is making efforts to crackdown on corruption.
- The level of vocational skills or technical trade skills is still relatively low.
- A lot of skills training programs need to be implemented to raise the levels. Vocational skills are important in many industries in sectors like manufacturing and operations.