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					Purchasing in India – Tips for the Negotiation
Process & Using Indian Suppliers to Improve
Competitiveness
Israeli Purchasing and Logistics Managers Association
Telecom Forum
Meeting 4




                             1
Agenda

 BDO-I2I at a Glance

 India - Culture

 India - Business Culture

 India - Intercultural Communication Aspects

 India - Telecom Industry




                        2
BDO-I2I Background
 BDO-I2I is Israel’s leading India focused business consulting firm

 Joint venture between BDO Consulting Group and I2I Ventures
    Combining forces of Israel's leading consulting group and the
      leading Indo-Israeli business group
    Leveraging on BDO international expansion and leadership

 Provides Israeli and Indian companies with Business Development
  and professional “One Stop Shop” solutions

 Providing our customers end to end coverage of the services
  required for operating cross border
    Business and Market Research
    Strategic and Business Planning
    M&A and JV Leadership
    Access Strategic Customers and Partners
    Setting Sales and Distribution Channels
    Complementary Services
                                 3
BDO-I2I Executive Management Team
   David Keynan – Founder and CEO
   David is heading BDO-I2I. David was a member of the Intel Capital
   India team since 2003, managing Intel’s investments there. David has
   relocated to India after spending three years in Intel Capital Israel,
   leading Intel investments in the telecom space.
   David was Vice-Chairman of the Israel-India chamber of commerce.
   He previously joined TiE as a chartered member in the Bangalore
   chapter. David earned his B.Sc. in Mathematics and Philosophy from
   the Hebrew University in Jerusalem.


   P. Sriganesh – Mumbai Partner
   A Fellow member of the Institute of Chartered Accountants of India
   and Institute of Company Secretaries of India. Sriganesh has over 30
   years of experience in the IT and ITES industry and NBFC sector
   having set up several Companies in India. Between 1986 and 2000 he
   worked in senior financial positions in Citigroup India. He was a
   Promoter-Director of Citicorp Information Technology (now known as
   I-Flex) and co-founder and Honorary Treasurer of NASSCOM. As
   Treasurer of NASSCOM in the initial years was involved with the
   Government to set up regulations for the then nascent industry.


                                4
BDO Ziv Haft Consulting Group - Business Activities




                                           M&A and
                                           Investment
                                           Banking - US




                                           Corporate
                                           Finance &
                                           M&A in
                                           Georgia




                       5
Agenda

 BDO-I2I at a Glance

 India - Culture

 India - Business Culture

 India - Intercultural Communication Aspects

 India - Telecom Industry




                        6
Flag & Emblem
 The saffron stands for courage, sacrifice and the spirit of
  renunciation
 The white is for purity and truth
 The green is for faith and fertility
 The navy blue wheel denotes the continuity of the nation's
  progress which is deemed to be as boundless as the blue sky
  and as fathomless as the deep blue sea.




                           “Truth Alone Triumphs”


                           7
 Geography
 Area: 3,287,590 sq km
   • World 7th largest
 Natural hazards:
   • Droughts
   • Flash Floods
   • Widespread and Destructive
     Flooding from Monsoonal
     Rains
   • Severe Thunderstorms
   • Earthquakes




                              8
           Fact Sheet
Demographics

Population (billion)                        1.13
                                                                           Economy
Population growth (%)                       1.6
                                                                           GDP (nominal, US$ billion)                                1171
Labor force (million)                       516
                                                                           Inflation (%) (Aug. 08)                                   12
Less than 30 years (%)                      52
                                                                           Fiscal Deficit (% of GDP)                                 5.6
Urbanization (%)                            28
                                                                           FDI (US$ billion)                                         32

                                                                           Forex reserve (US$ billion, Jul 08)                       307
Social/Developmental

Literacy (%)                               61

Unemployment (%)                           7.2
                                                                           Trade
Infant mortality (per 1000)                34.6
                                                                           Exports (US$ billion)                     159
Life expectancy (years)                    68.5
                                                                           Imports (US$ billion)                     240

                                                                           Top 3 export markets                      US (13%)
Transport/Telecom                                                                                                    UAE (10%)
                                                                                                                     China (7%)
Passenger cars (million)                        13

Two wheelers (million)                          53                         Top 3 import partners                     China (11%)
                                                                                                                     Saudi Arabia (8%)
Mobile users (million)                          295                                                                  UAE (6%)
Internet users (million)                        52



                                                                       9                                                                   9
                              Sources: IBEF, EIU, RBI, CIA fact book                           FY08 unless indicated otherwise
Geographic Division




               Delhi

                                           North East


                                 Kolkata
                   Center
      Mumbai




               South




                            10
Population

   Ethnic Groups:
     • Indo-Aryan 72%
     • Dravidian 25%
     • Mongoloid and other 3% (2000)

   Religions:
     • Hindu 81.3%
     • Muslim 12%
     • Christian 2.3%
     • Sikh 1.9%
     • Buddhist, Jain, Parsi 2.5% (2000)

   Languages:
     • English
     • Hindi (the national language )
     • 14 other official languages: Bengali, Telugu, Marathi, Tamil, Urdu,
       Gujarati, Malayalam, Kannada, Oriya, Punjabi, Assamese, Kashmiri,
       Sindhi and Sanskrit
     • Hindustani
                                      11
History & Religion

 Indus Valley Civilization- one of the world’s first great urban
 civilizations.
 World’s first university in Takshila –700 B.C
 Ayurveda- earliest school of medicine known to humans
 OM - The first sound of the Almighty, oneness with the
 supreme.
 The Trinity:
  • Generates-Brahma
  • Observes-Vishnu
  • Destroys-Shiva
 Yoga – Made in India – 5000 BC
 Kalarippayat - Origin of Martial Arts – 200 BC




                            12
Culture Fundamentals
 Non-Violent Religion
   Never invaded any country in her history

 The   British influence inspired western education and thoughts:
      Created a new educated class.
      Created a common language – English
      Inspired freedom and exchange of ideas

 Religious tolerance and freedom of worship:
   Hindus and Muslims live side by side but inter-religious marriages are
     rare

 Gandhi’s Non-Violence Movement for freedom appealed to the
 civilized world

 Caste System
   Brahmins: Highest caste, most privileged - lawyers, doctors,
     businessmen
   Ksatriyas: Warriors and rulers had to give their lives to protect the
     Brahmins and sacred animals (cows).
   Vaisyas: Farmers and traders. Encouraged to give money to Brahmins
     & build temples
   Sudras: Serve the other three classes. Weavers and carpenters
                                   13
   The Untouchables/Dalit Caste
Meals, Drink & Snack

•   Varies from region to region
•   Hindus do not eat beef
•   Muslims do not eat pork or drink alcohol
•   Vegetarian Cuisine
•   Meat for the non-vegetarians
•         (mainly lamb, chicken, and fish)
•   Ingredients: mainly use herbs and spices
•   Curry – “Pan -Asian” Dish
•   In favor of tea (most famous: Chai)




                                 14
Local Culture Essentials
   Respect elderly and touch their feet for blessing
   Right Hand
   Eat with fingers and always use right hand to eat
   Wash their hands immediately after and before eating a meal
   Believed that food tastes better when eating with one’s hands
   Can't Say No
   Take your footwear off when you enter a private house or temple
   Indian names vary based upon religion, social class, and region of the
    country
   Frangipani and white flowers cannot be the gifts
   Yellow, green and red are lucky colors
   Strong bonds with family members as well as relatives (Respect the elders)
   Sons are always more preferred than daughters
   Most marriages are still arranged by parents
   Extremely low divorce - rate with only 1.1%
   Woman Status




                                     15
Agenda

 BDO-I2I at a Glance

 India - Culture

 India - Business Culture

 India - Intercultural Communication Aspects

 India - Telecom Industry




                        16
Business Dress Code
 Normal Business Dress Code for Man – Suit and Tie
 Due to a warm climate, often full-sleeved shirt and tie are
  also acceptable
 Business Dress Code for Woman – Pantsuits and skirts
  which cover the knees; neckline of the blouse and top
  should be high and sleeves should cover the shoulders
 Select neutral colors that are subdued and not very bright




                             17
Greeting…
 Greeting

 • When doing business in India, business etiquette requires a
   handshake
 • Indians among themselves use Namaste – the palms are brought
   together ant chest level with slight bow of the head
 • Using Namaste is a sign of Indian Etiquette understanding



 Business Cards

 • Business cards should be exchanged at the first meeting
 • Be sure to receive and give with the right hand
 • Make sure the card is put away respectfully and not simply
   pushed into your shirt/trousers pocket



                           18
Meeting
 Meetings
  • Meetings should be arranged well in advance in writing and confirmed
    later on by phone
  • Avoid meetings near national holidays – Independence Day, Diwali, etc.
  • Punctuality is expected however being late usually will not have disastrous
    consequences
  • Flexibility is paramount
  • Last minute cancellations are possible and not a sign for anything

 Meetings Flow
  • When entering a room always greet the most senior figure first
  • Start from commencing a a conversation – latest business news,
    stock exchange and sports (mostly, cricket)

 Avoid talking about:
  • Personal matters
  • Poverty/beggars
  • Politics, caste system & religion issues
  • Woman rights

                                   19
Agenda

 BDO-I2I at a Glance

 India - Culture

 India - Business Culture

 India - Intercultural Communication Aspects

 India - Telecom Industry




                        20
Most Important



             In India,
    Relationship Comes Before
             Business




                 21
India – Top 10 Business Principals

 Time is measured by years, not weeks
   • Long term approach will create significant impact
 Partnering and win-win is were it all starts
 India and its people are very diverse
   • Need to adjust to the right people/team
 Listening is much more appreciated than talking
 “The land of good enough”
 “No” is never said
 Government/official relations are important
 Business India is corruption free
   • If you are asked, you are in the wrong place
 Regulations are simple, but very strictly enforced




                            22
      India Geographic Business Corridors




80% of India
   GDP




                        23
“The Land of Good Enough”

 India has very interesting view on brand and technology
 Brand represents “hard” values:
   • Reliability, complexity, cost, suitability for multi-user
 With very few exceptions, “luxury” and “”Name” are less
  important
 Example – Nokia cell phones:
   • Reliable and hard working
   • Though much more expensive than Chinese brands
   • >60% market share in India
 Another example - fashion brands:
   • Very low penetration of global brands
   • Very strong local brands
   • Opposite to China
   • Reason – no value in “Global” tags

                            24
Negotiations - How to Start?
   Send a detailed product overview in advance
   Prepare your initial offer to allow bargaining later on
   Respect Indian Business Hierarchy
   Hospitality is part of the business culture – accept any
    hospitality offers (tea/coffee/snacks)
   Presentations are generally accepted to start a discussions
   Declare long term, and mean it
   Learn first, talk later
   Tough issues:
     • Learn first…
     • Raise when discussed, resolve last
     • The time between raising and resolving is reserved to
       relationship,        internal      contemplations      and
       product/technology international presence
     • Indians tend to take larger risks with person they trust -
       > Credibility and Trustworthiness are Critical

                              25
Decision Criteria
 It is all personal
 The business reason is key
 Technology is being looked at from business perspective
   • Innovation per se is a mixed bag
   • Risk aversion - major issue
 In Indian organizations, size matters
   • As many employees, as good
   • Automation is Necessary to deal with scale
 Product/Technology WW Spread
 Trust relationship
 Relationship/Emotions




                           26
CEO Role
In India:
    • CEO, Managing Director, Promoter
    • All alternate names to same function
    • CEO - Potential Decision Maker
    • The most superior company executive -> Respect
    • Must be addressed with appropriate title -> Mr.
    • Exhibit positive traits -> Honor, Trustworthiness
    • Being most senior -> Must be greeted first
    • Concentrate efforts on building relationship with the CEO
    • You should leave space for escalations
        – Chairman, Large share holder etc.




                             27
On the Discussion Table
   Silence is blessed
   Let the VP talk, CEO to close
   Listen to the music
   Don’t push…
   Don’t insist on any commitment at the first meetings
   Do not use strict expressions
     • “No” is not being said, “Yes” is hardly used
   Indians value flexibility during negotiations
   Express disagreement openly considered rude -> “We will
    discuss this issue later on”
   Disturbances during the meetings doesn’t show lack of
    interest or respect
   Be prepared for questions/enquiries that seem not related



                            28
Business Hierarchy
 One of the most significant influences on Indian Business
  Culture
 Mostly – One decision maker in the company
 Managers and executives – still will wait for approval by
  CEO/owner
 Sometimes decisions are maid by people who are not present
  during negotiations




                           29
Agenda

 BDO-I2I at a Glance

 India - Culture

 India - Business Culture

 India - Intercultural Communication Aspects

 India - Telecom Industry




                        30
                  India Technology Boost – Present



                             CAGR: 27 per cent
         US$ bn




   Revenues–
     Indian
   IT industry



Israeli Technology
       Export




                                           31
       India Technological M&A Trend - Telecom

               20
                                                 18
               18
               16
               14
                                          12
No. of Deals




               12
               10
                8
                6           5
                4    3
                2
                0
                    2007   2008           2009   2010
                                   Year

                                  32
India Electronics Manufacturing Services
 Electronic Manufacturing Services are among the most
  rapidly growing industries in India, with the capacity for
  fulfillment of large series of orders
 Indian manufacturers started to operate in quantities and
  qualities which can easily compete with the Chinese
  manufacturers.
 Two major players:
   • Vinyas Innovative Technologies Pvt. Ltd
   • Centum Electronics
 India is one of the biggest target market for telecom
  equipment. Close to 15% of all productions are sold to India.
 Using an Indian EMS company lower your costs and bring
  you closer to your final customer




                             33
Thank You !


David Keynan
CEO
BDO-I2I India Business Consulting

Menachem Begin Road 46-48
Tel – Aviv, Israel
Israel (O)+972-3-6382508
Israel (F)+972-3-6374801
India (O)+91-80-4330-1999

einat@bdo-i2i.com




                       34

				
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