As managers initiate business dealings overseas, they are tasked with the necessity of understanding the cultural landscape. Those who are able to understand and master the intricacies of the local culture will prosper while others may get disappointed and exit the market. Cultural understanding is vital in ensuring that your business venture prospers and grows in the local environment. Some businesses have done this well while others have learnt from their failures and still others have gotten bitter and decided not to return.
In this blog, I will highlight some of the cultural challenges that foreign businesses can expect when operating in India. Originally from India, I have lived and worked in North America, Asia Pacific, and Europe as a business academic. My observations are based on my own research and conversation with business executives both in India and abroad who have done business in the country.
Culture shapes our worldviews, our reactions to events, and how we interact with others. The impact can be both subtle as well as direct. Some barriers are easily observable but others are less so. It might be easy to note, for example, that your counterpart is not giving a direct answer to your question, but it might be more difficult to ascertain why, the origins of that behavior.
Contemporary Indian culture has been shaped by the basic tenets of Indian philosophy, legacy of British rule, and exposure to Western influences in an era of globalization and especially so when India opened up in 1991. Indian culture is hierarchical and family centric. India embraces both the tradition of individualism as well as that of collectivism. The coexistence of opposites creates an inbuilt tension meaning that individuals can behave both in an individualistic or a collectivistic manner depending upon the situational context.
What are some of the key cultural issues foreign managers will need to deal with when operating in India?
Although predictability is gaining ground in India it is still a little elusive. The individual/s may make a commitment but they may not follow up on it for a variety of reasons. In some instances, they may have given you an unrealistic date whereas in other cases some external events may have compelled noncompliance. There is also the general implicit assumption that delays are inevitable and the assumption of that inevitability makes them bearable. Indians recognize this, they plan for it and are not unnecessarily perturbed when this violation occurs. You cannot assume, for example, that by giving an order that it will be automatically implemented. Follow-up is essential and while it might increase costs you may benefit from it in the long run.
Attitude towards Time
Time is viewed as an elastic commodity and not one that necessarily needs to be rigidly honored. This holds true for a business meeting or a deadline for a project. A European manager once told me that at a meeting to discuss a potential joint venture the Indian business partner was delayed for a considerable length of time. He informed his Indian counterpart that if they could not agree to begin meetings on time there was no way they could set up a joint venture. In future the meetings did begin on time.
This is important in setting up and running any business venture. A collectivistic mind-set is oriented towards harmony and not inclined to offend the other party. The Indian manager may not directly express his/her true feelings about any business issue directly. If the foreigner is not sensitive to it, he/she may draw inferences that are not correct. A European company was setting up a distributorship agreement with an Indian partner. They wanted the Indian company to promote product X but they were more interested in promoting product Y. This discrepancy never got resolved and the European company was baffled because the product they wished to promote was not doing well. The relationship was terminated eventually with the Indian company resorting to litigation.
Lack of teamwork
As I mentioned earlier there is a strong individualistic streak among the Indians. Teamwork necessitates cooperation and compromise. It requires the team to develop a collective consensus and work with a common will. The individualistic tendency with each individual thinking that their own approach or potential solution is the best one makes compromise difficult. It is hard to build a consensus and/or to execute a strategy effectively and efficiently when teamwork is absent. A foreign enterprise with operations in India will need to create a culture that while respecting individuality encourages the development of a common bond.
Understanding psychology of the Indian business partner
Many firms in India are family owned. Decision making is concentrated within the family and if you are doing business with them it is important to understand their psychology. They often tend to be focused on costs which is legitimate from a business perspective but this needs to be balanced against the need for brand building. This is particularly important if the firm has global ambitions. There is also the implicit assumption that if the foreign partner is more powerful/wealthy he/she has the obligation to help the weaker party. This is an issue which the foreign investor needs to tackle delicately.
Negotiating practices are deeply embedded in the cultural and social fabric of a country. The understanding of negotiation, the process by which people negotiate, and/or the attitudes towards contracts are all culture dependent. India has traditionally been a country where resources have been scarce. Although the economic wellbeing of the middle-class Indians is much better than it was the psychological mindset has not kept pace with the changing circumstances. When resources are perceived to be scarce the negotiators bargain aggressively fearing that they might lose out. The Indian negotiators are also looking at exploring the best possible solution to a given issue and while this is eminently desirable it may create delays for negotiators who have a more pragmatic orientation.
The Indian business environment has changed substantially over the last several decades. The country offers investors tremendous opportunities but these need to be accessed keeping the cultural environment in mind. I have outlined some of the cultural aspects that foreign investors need to be cognizant of.