This post is part two of a two-part series on local partnership models in India. To read part one, please click here. These posts have been developed carefully based on FSG’s numerous interactions with clients and experts, and will have significant value for senior executives of western multinational companies operating in India.

Executives consider local partnerships a central element in their India strategy. Commercial partners can be crucial to multinationals’ success in the Indian market for numerous reasons such as varying business cultures, complex regulatory environment, high logistics costs and a fragmented market, as highlighted in the previous post.

Multinationals should therefore consider or re-evaluate their partnership strategy for India. To support this, we have developed a three-step process to help multinational companies evaluate the various commercial partnership models in India.

Step 1: Prioritize objectives for the partnership

The first step is to identify and prioritize the most important objectives for the partnership. These objectives could include maintaining price competitiveness through the partnership, entering new market segments and/or entering new product markets using the partnership, or maintaining management control.

For example, the most important objectives for a partnership in technology firm Alpha’s case are increasing customer reach, gaining insight on local market and regulatory conditions, protecting its technology, and maintaining price competitiveness.

Identifying and prioritizing objectives at the start will allow both companies to be aware and align priorities, thereby ensuring both parties get the most out of the partnership.

Step 2: Identify the right partnership model

The second step is to map the objectives on FSG’s partnership matrix. Highlighting the most important objectives in the matrix allows companies to choose the partnership model that best serves these objectives. For example, technology firm Alpha has highlighted its most important objectives in the matrix below. Based on these objectives the company has identified that a distributor arrangement best serves its interests.

Step 3: Enhance the partnership

After identifying the right partnership model for India, multinationals should focus on enhancing their chosen partnership. Use the 3M’s framework to enhance and sustain the partnership.

• Measure: It is important to ensure that both parties’ objectives are clear and that the key performance indicators (KPIs) for the partnership are established and understood.
• Manage: Trust and relationship building are vital to a successful partnership in India, as India is a relationship-focused society (similar to Japan, Korea, and China). As a culturally diverse country, with an indirect communication system which is heavily focused on gestures and facial expressions, India demands a focus on relationship management. Local partners will go the extra mile if they feel supported by their foreign counterparts.

• Motivate: Apart from measuring KPIs, multinationals should focus on providing incentives for their local partners to perform better and avoid complacency. Global training opportunities, commissions, and other monetary or non-monetary incentives provide good motivation for local companies.

For an in-depth analysis of this topic, FSG clients can access the full report on the client portal. Not a client? Contact us to learn more.