Purchasing in India – Tips for the Negotiation
Process & Using Indian Suppliers to Improve
Competitiveness
Israeli Purchasing and Logistics Managers Association
Telecom Forum
Meeting 4
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Agenda
 BDO-I2I at a Glance
 India - Culture
 India - Business Culture
 India - Intercultural Communication Aspects
 India - Telecom Industry
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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
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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.
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BDO Ziv Haft Consulting Group - Business Activities
M&A and
Investment
Banking - US
Corporate
Finance &
M&A in
Georgia
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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”
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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
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Fact Sheet
Demographics
Population (billion)
1.13
Population growth (%)
1.6
Labor force (million)
516
Less than 30 years (%)
52
Urbanization (%)
28
Economy
Social/Developmental
Literacy (%)
61
Unemployment (%)
7.2
Infant mortality (per 1000)
34.6
Life expectancy (years)
68.5
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Two wheelers (million)
53
Mobile users (million)
295
Internet users (million)
52
1171
Inflation (%) (Aug. 08)
12
Fiscal Deficit (% of GDP)
5.6
FDI (US$ billion)
32
Forex reserve (US$ billion, Jul 08)
307
Trade
Transport/Telecom
Passenger cars (million)
GDP (nominal, US$ billion)
Exports (US$ billion)
159
Imports (US$ billion)
240
Top 3 export markets
US (13%)
UAE (10%)
China (7%)
Top 3 import partners
China (11%)
Saudi Arabia (8%)
UAE (6%)
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Sources: IBEF, EIU, RBI, CIA fact book
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FY08 unless indicated otherwise
Geographic Division
Delhi
North East
Kolkata
Center
Mumbai
South
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Population
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Ethnic Groups:
• Indo-Aryan 72%
• Dravidian 25%
• Mongoloid and other 3% (2000)
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Religions:
• Hindu 81.3%
• Muslim 12%
• Christian 2.3%
• Sikh 1.9%
• Buddhist, Jain, Parsi 2.5% (2000)
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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
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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
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Culture Fundamentals
Non-Violent Religion
 Never invaded any country in her history
The
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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
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 The Untouchables/Dalit Caste
Meals, Drink & Snack
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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)
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Local Culture Essentials
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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
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Agenda
 BDO-I2I at a Glance
 India - Culture
 India - Business Culture
 India - Intercultural Communication Aspects
 India - Telecom Industry
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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
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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
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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
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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
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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
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India Geographic Business Corridors
80% of India
GDP
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“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
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Negotiations - How to Start?
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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
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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
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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.
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On the Discussion Table
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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
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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
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Agenda
 BDO-I2I at a Glance
 India - Culture
 India - Business Culture
 India - Intercultural Communication Aspects
 India - Telecom Industry
30
India Technology Boost – Present
US$ bn
CAGR: 27 per cent
Revenues–
Indian
IT industry
Israeli Technology
Export
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India Technological M&A Trend - Telecom
20
18
18
16
No. of Deals
14
12
12
10
8
5
6
4
3
2
0
2007
2008
2009
Year
32
2010
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
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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
[email protected]
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