by Real Business - Thursday, 30th August 2007

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In a vast, diverse nation like India, export opportunities are large – and growing. Historic trade barriers have been pulled down, technology industries are springing up and the subcontinent’s 200m-strong middle class has plenty of disposable income.

The country’s size and expansion rate present big opportunities, as manufacturing software designer Preactor International, 135-year-old Acme Whistles and biotech company Lipoxen Technologies have discovered.

Chippenham-based Preactor, which writes and installs production-planning software, opened a subsidiary in Bangalore in January 2005. The deci-sion, after several years of selling through a distributor, allows Preactor itself – rather than its reseller – to boost profits by leveraging India’s cheap and skilled labour force. Indian sales currently account for two per cent of the firm’s £3m turnover.

“Labour costs are a fifth of what they are in Britain and clients see the launch as a commitment to them,” explains chief executive Mike Novels. What’s more, he believes that his expe-rienced Indian team can bring real expertise to the wider business.

Opening an office 5 1 /2 time zones away was relatively straightforward, Novels says. Preactor asked its reseller to find premises and a local consul-tancy to work on the legal issues, although as Novels points out, the UK and Indian legal systems are very similar. An employee spent a month in Bangalore working on the launch, which cost less than £100,000. Should Preactor’s subsidiary develop a signifi-cant export business it will qualify for a corporation tax holiday and other benefits offered by the Indian govern-ment’s Software Technology Parks of India organisation.

Acme Whistles, a Birmingham-based manufacturer with a £4m turnover, has taken the opposite approach to conquering India’s vast-ness. “I’ve never been there,” chief executive Simon Topman admits cheerfully. The company, which has racked up sales of £78,000 since it started exporting to the subcontinent, has used word of mouth to seek and build a customer base. After receiving an order from a referee with the Jahlandar Basketball Association, Topman persuaded his customer to promote his products to colleagues.

“He found our website by accident but we contacted him and asked him to pass the message on,” Topman explains. “It started with one or two whistles and now it’s 83,000.”

In January 2005 London-based Lipoxen, which crafts drug delivery technologies and has a turnover of less than £5m, signed a joint venture with Serum Institute of India, which will make and distribute eight of the company’s products in the subconti-nent. Lipoxen approached UK Trade & Investment to compile a list of prospective clients and visited poten-tial partners on a trip organised by the trade office in Hyderabad.

“The advice and support provided by UK Trade & Investment has really contributed to our success in India,” says chief executive Scott Maguire. The deal not only outsources produc-tion but also gives the company access to a significant new market.

Networking skills are also essential, Novels says. “It’s more formal than the UK and a lot of business is done through an old-boy network. It’s almost impossible to work there unless you have contacts.”

Indian customers barter and have a strong expectation that sellers will offer discounts of up to 30 per cent. The firms admit adjusting their prices accordingly. Topman has found that customers are happy to give construc-tive feedback: “They are a nation of chatterers. They love to talk business.”

But while India may be emerging as a high-tech leader, the infrastructure hasn’t quite kept pace, and power cuts are common. Novels recommends bringing reserve battery supplies for electrical equipment.

Where next?
UK Trade and Investment:
www.uktradeinvest.gov.uk
Indian commerce ministry:
www.commin.nic.in
Indian foreign trade directorate:
http://dgft.delhi.nic.in

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