Foreign Investment

Market Entry Strategy in India for a Foreigner

Market Entry Strategy in India for a Foreigner

India is a big economy offering various opportunities in every field. It is a developing nation whose policies are framed in a way as to bring foreign investment into the country. The investment of foreign players begins at the time of the introduction of LPG schemes by the Indian government in the 1990s. The government, in order to increase foreign investment in the country, has opened the Indian market to foreign companies by reducing the entry barriers. Keeping in view the same approach, the nation has significantly modified its laws and regulations to meet the requirements of foreign players. India is becoming a strong country that has the potential to overtake other Asian countries. Foreign players entering India will find a broad market and entrepreneurial base with wide interests and diverse consumption patterns. Henceforth, strategic planning[1] shall be needed, which will include region-specific strategies. Due to differentiation in the market regionally, the efforts must be made by the foreign entity before entering the market. The present article will discuss the opportunities in the market and the market entry strategy in India.

What Are The Market Entry Strategy In India For A Foreigner?

The market entry strategy in India for a foreign player includes:

1. Market Research

The first Market entry strategy in India for a foreigner will include market research. It includes the identification of the relevant market in accordance with the product offered by the entity. Since the Indian market varies regionally in terms of their value, attitude, and consumption. Henceforth the foreign entity shall need to conduct local market research before launching its product in the market. It is pertinent to mention that due to the availability of foreign substituted goods offered at low cost as compared to the other goods, the demands of the Indian consumer are gradually shifting towards foreign-produced goods. Therefore, these factors have to be taken into consideration at the time of entering the Indian market.

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2. Optimisation of Products and Services

After conducting market research, the foreign entity shall need to optimise its products according to the needs of the consumers in the Indian market. Due to different lifestyles and trends prevalent across various regions, the demand for such products or services also changes. Henceforth, the foreign entity must optimise its products according to the region it wants to operate its business. Moreover, it is often seen that the foreign entity willing to enter the foreign market does not offer diversification in their products or services, which acts as a barrier for them to enter the market.

3. Price Sensitivity Issue

The foreign entity willing to enter India shall include in its market entry strategy the price sensitivity issue in India. Since the average salary of an Indian is comparatively low as compared to the other nations, hence it is required that the foreign entity shall offer its products at a reasonable price to the consumers. Therefore, the market entry strategy must address the price sensitivity issue, which will help them to streamline the production line for affordability.

4. FDI Prospectus in India

India has become an attractive destination for foreign direct investment in recent years due to the influence of various factors that have boosted the FDI. The country ranks 68th in the Global Competitive Index. Even during the time of the pandemic, the country has shown significant foreign direct investment. The country is also named 48th in the most innovative country among the 50 countries. Further, the government has also made significant development in its laws and policies by introducing favourable schemes. These schemes have promoted India’s development initiative and increased the FDI investment, especially in the field of the new sector such as defence manufacturing, real estate, Research & Development, and pharmaceutical industries. Moreover, the Indian government has allowed the automatic route under FDI, wherein the foreign company is not required to take prior approval from the Reserve Bank of India. Henceforth, the foreign entity does not face any issues while forming a market entry strategy for India.

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5. Digitalisation in India

India is one of the countries which have digitalised every sphere of services, be it from banking to compliance. India is a technologically driven country wherein the company is enjoying the freedom to introduce digitalisation in every product or service it offers. With the increase in the initiative by the Indian government, the existing company are also changing their prospectus to offer their services online. Moreover, to invite foreign participation in India for inducing the latest technology, the government is offering various subsidies and reducing the barriers. For this purpose, the Indian government has opened various special zones for the IT sector wherein many MNCs are working and offering their services. Henceforth, the market entry strategy of a foreign entity for India shall include the prospectus of introducing the new and latest technology while simultaneously ascertaining the consumers’ needs.

6. Simplified Regulatory and Compliance Requirements

India’s regulatory and compliance requirements are guided by the rules and regulations. The country with the aim to increase foreign participation in India requires the foreign company to open a liaison office in India, which will act as the intermediary between the foreign entity and the Indian regulatory bodies. The regulation requires the foreign company to open a subsidiary company or a liaison office or a project or branch office that will handle all the business operations in India. Therefore, it is required that the market entry strategy of the foreign company shall include opening a registered office at the principal place of business.

7. Partnership or Joint Venture

The partnership firm and joint ventures are the preferred way of entering the Indian market. Foreign companies can set up their operations in India by coming into alliances with Indian partners. It offers various advantages to foreign companies through acquiring the established distribution or marketing setup of the Indian partner, availing financial resources of the Indian partners,  help establish contacts with the Indian partner to smoothen the process of setting up operations. Henceforth, the foreign company shall make a market entry strategy to help them acquire a large consumer base and more geographical area by partnering or forming a joint venture with the Indian companies.

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The Indian market is flourishing gradually with the introduction of the latest technology and a reduction in trade barriers. Having access to most of the Asian market and holding a large number of ports, the Indian market offers an uninterrupted flow of goods in the market. The foreign entity intending to enter the Indian market can benefit from a large consumer base, low operating cost, less transportation cost, high availability of natural resources etc. Furthermore, the Indian government is also offering subsidies and introducing schemes which is a turning point for the Indian market. The Indian government is also offering the loan at a concessional interest rate for carrying on the business in numerous fields. Henceforth, the premeditated market entry strategy will not significantly hinder a foreign company when investing in India.

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