Useful tips for business in India

Be sure that your product will be strongly represented among the agent's product mix.


Finding a partner / agent

If you have products of promising sales potential in India, you can either set up a base in India or appoint a distributor or an agent. Setting up base is preferable because Indians like to see foreign companies investing in their country rather than just selling. Whether you set up a joint-venture or appoint distributor, you will need to select your partner. What precautions should you take?

Foreign firms that are serious about pursuing opportunities in the Indian market need to be alert to the following considerations while choosing an agent or distributor in India:

At first glance, many agents appear to have excellent industry and customer contacts. They would typically have developed and nurtured these contacts over time, and their primary interest in a distributorship is to sell to these contacts. These agents may have little motivation to develop new markets or new customers. It is important to gauge your prospective agent's ability and keenness to develop new networks and contacts.

Some potential agents will provide impressive lists of foreign principals, covering dozens of products. Check out if those lists are dated, and some of the relationships exist. An agent with many principals and product mandates could find it difficult to devote management and resources to every additional relationship that he takes on. Do your follow-up homework to make sure that what you are told you will get is what you get. Be sure that your product will be strongly represented among the agent's product mix.

Many agents will also play up their widespread distribution network and country-wide presence. They will project a professional image, backed by well-qualified staff. Very often such agents will leave the distribution of a new product or service to this network, without making any extra effort, because this approach has worked in the past. Make sure your prospective distributor is committed to actively promoting your product.

Foreign firms should avoid the temptation to establish a relationship with an agent or distributor merely because he is the most persistent or the keenest out of many. These attributes will not necessarily make the best agent or distributor, because the following additional factors need to be considered before making a final choice of agent or distributor:

  • Determine who the customers are and where in India these customers will make their buying decisions. A potential distributor who handles products similar or related to those of a hi-tech foreign firm, need not necessarily be the best choice. This is because several Indian firms have very effective distribution channels, and can offer foreign principals more by way of marketing savvy than mere product knowledge. Agents with fewer principals and smaller set-ups can prove to be more adaptable and committed and those with a large infrastructure and a bigger market reputation. A small agent could be ideal where a flexible strategy is called for.

  • There may be a conflict of interest where the potential agent handles similar product lines, and many agents do. Foreign firms should decide up-front whether or not this will be acceptable, to avoid complications later on. By the same token, foreign companies should decide if they will need more than one agent. It is not uncommon in India to appoint three to four representatives for different products, locations and even markets.

  • Foreign firms should examine all distributor prospects, and thoroughly research the more promising ones. Credit and reputation checks are becoming easier, with a number of private organizations now providing these services in India. Even established distributors are known to have exaggerated their capabilities.

  • One way of identifying suitable agents is to look for distributors of related and even competing products. Foreign firms can screen a few unsolicited applications, seek more information on specific areas, and see who responds best to these.

  • To gauge what an agent can do, you should evaluate him in the Indian context. This means rather than focusing on the plushness of the agent's office, look at his address, and references from lawyers and accountants. For technical products, a visit to the agent is critical. The agent's general facilities, staff and experience should be reviewed at this time. It is vitally important that you check the potential agent's reputation. This can be done by checking with local industry sources and associations, potential clients, bankers, other foreign companies and the agent's competitors. These steps will ensure that selection of an agent or distributor is not left to chance alone.

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