They offer "a European standard at an Asian price" in engineering, IT services and sourcing services to European technology, industrial and construction companies
India
EurosiaTM has been based at the Technopark of Trivandrum for three years. The operations manager, Munni Sankar, and the service delivery manager, Fabrice Foucaud, share their knowledge and experience on how to develop business in and with India.
In a country where the population is the second largest in the world, the workforce and vast talent pool are the main competitive advantages. "Not only the costs of experienced consultants are lower, but the young population (50% of the population is below the age of 25) generally possesses more experience. Moreover, the talent pool is on top of the latest technological trends," says Munni. Another major advantage of having a team in India is the time difference with Western countries. "It means that your team in India starts working before you and may already have a solution when you enter your office in the morning," declares Fabrice. Not to mention, English is the main language of communication which contributed to a better interaction with your Indian teams and partners. Finally, the effective corporate tax rate for MNCs of 17% is lower than other major Asian country such as China (22%) and Japan (38%).
In India, companies should consider pursuing activities such as IT and software development (especially in Bangalore, Trivandrum, Hyderabad, Pune, and Chennai), engineering, BPO, KPO, and other non-core operations. Indeed, services make up 69% of GDP and are dominated by IT and communication, transportation, banking and financial services. Manufacturing (automotive for instance) remains the main field within the industrial sector.
Working in or with a different country, one can face many cultural shocks. As a foreigner working in India, "the heavy traffic and the constant honking can be a challenge on a daily basis. Regarding administrative procedures, one should also be very patient because it takes time," explains Fabrice. On the business side, Munni says that "there is no cultural shock with Western organisations at senior management level, as they understand the importance of outsourcing and the cost-savings that can be achieved through outsourcing. However, a reluctance towards sharing information with outsourcing vendors can be observed from the employee level, which indicates a fear of losing their jobs."
Nevertheless, one should keep in mind the main challenge in India, which is the high level of competition. When sourcing talent, it leads to a low percentage of people showing up for interviews or a high number of people turning down contracts because they have found a better job elsewhere. Efficient ways of attracting and retaining talent should be considered. This includes offering good benefits and packages, opportunities to grow and learn technical skills, and international perspectives. In fact, Fabrice explains that "Indian people are eager to learn technical skills and work on international projects. If they have the opportunity to work abroad, in the US or Europe, it's even better for them."
China
With more than 1.3 billion people, China has the largest labour force in the world and the second largest economy in the world after the United States. It is not surprising that China has been one of the most common outsourcing countries for decades, especially in the manufacturing sectors. Still, the Chinese outsourcing market is expanding by 30% each year.
The key advantages of China are numerous. Firstly, being the world's manufacturer for 15 years has made the skill level better meet the quality expectations of Western businesses. Second, there are vast natural resources such as coal, iron ore, petroleum, aluminium, lead, zinc, uranium, and the world's largest hydropower potential. Third, a new market is opening up as China is experiencing a growing middle-class that will reach 1 billion people by 2030. Fourth, bringing product manufacturing to China allows firms to create a higher volume of product at reasonable cost. However, labour costs are rising but remain low in the central and eastern parts of China.
In spite of these many competitive advantages, any firm trying to enter the Chinese domestic market should keep in mind the different characteristics shaping it.
- China is not a single large market, but many smaller, dissimilar markets
- Many MNCs have shown that entering China is not difficult, but making money is tough (only 41% of MNCs operations in China are profitable while 34% of them are reported to lose money)
- Long term commitment is key as payouts are rare in the short term
- Joint ventures are not the golden solution and often entail more problems than the benefits they provide
- Transition to local execution is vital to sustainable success
- Government regulation issues are a key consideration
- Chinese management decisions are complex (the behaviour of Chinese companies does not depend solely on financial rationale)
- Local competitors are fierce and rise quickly
In order to face these challenges, a firm should follow these do's and don'ts for a successful enter in the Chinese market.
DOs
1. Getting the right China strategy: disciplined and well developed business basics
• Seek a deep understanding of the real market and its dynamics
• Adopt targeted and segmented entry strategies
• Have clear and well-thought through business plans
• Manage and stage investment risks judiciously
• Understand regulatory issues and government position in-depth
2. Organising to effectively execute in China: Unique challenges need distinct organisational approaches
• Institutionalise top management backing at HQ, with right measures
• Leverage China capabilities across all ventures and business units
• Become an ‘insider'
• Recruit, retain and develop both locals and expats
• Recognise stages in organisational development
DON'Ts
1. Expect any sort of immediate and/or large returns
• China has traditionally demanded long-term and significant investment
2. Try to reach for the unattainable
• Be realistic about what the company can offer and the opportunity China presents
3. Change logical, business decision-making practices for China
• Over-do ‘homework' for investments; need rigorous and detailed business cases
4. Implement a completely Chinese business model
• Leverage worldwide tools and practices in a programmed way
5. Ignore need for strong organisation, capabilities infrastructure and processes to execute
• Expansion often places heavy strain on these resources
Singapore
"When talking about Singapore, many people do not exactly know where it is or think it is part of China," admits Seow Thong Yeo (EurosiaTM associate). Only a few people know that Singapore is actually one of the top five largest financial centres and busiest ports in the world and amongst the top three with per capita income. Ranking first for the "doing business index" by the World Bank, Singapore is a first world country with English spoken as the day-to-day language and all less than 50 years old as a nation. Its welcoming business environment, quality infrastructure, and proximity to Asian clients have made Singapore one of the favourite sourcing spots.
Singapore has become a global financial centre but still has competitive advantage in electronics and pharmaceuticals. One of the major key areas is services, which make up 71% of GDP and are dominated by wholesale and retail, followed by business and financial services sectors. BPO, recruitment, and RPO are also common activities that firms should consider pursuing in Singapore.
The key advantages of setting up a business in Singapore include low corruption, low corporate tax, successful free market economy, globally high ranking infrastructure, and stable political climate. From EurosiaTM experience, this nation has also shown low transportation and operating costs, round the clock delivery times, and faster response time with a service provider than in-house.
Working in and with Singapore can also be challenging. Indeed, many cultures and ethnicities are represented in this small nation: Chinese, Malays, Indians, and also an increasing number of expatriates coming from all around the world. It is crucial to understand the culture differences because it means higher efficiency and increased competetive advantage.
There are numbers of culture etiquettes that one should be aware of
when working with foreign partners; it includes greeting your partner in the
local custom, bringing a symbolic gift, showing respect to elders and those
higher up in the hierarchy, keeping your emotions in check, avoiding giving criticism
in public, etc. In Singapore, the Chinese culture has strongly influenced the
way business partners interact with each other. One very important point is
“the concept of losing face”, which refers to the cause of lowering someone in
the eyes of their peers.
Seow Thong explains that "when your Chinese employees or partners lose face, you lose them". Additionally, one should not be mistaken by the common "no problem" phrase as it really means "there is a big problem".
For
more information: EurosiaTM
278 Route d'Esch, L-1471 Luxembourg
Prudential Tower, 30 Cecil Street
#19-08, 049712 Singapore
SBC 2201, Tower 2, SEZ campus,
Technopark Phase III, Trivandrum, India
