The Specialist Ushers

Question: If you are a giant transnational corporation (TNC) with a global brand, or an NRI with an investable surplus, or for that matter any one with a desire to enter the Indian market and have no clue about the country, what do you do?
Answer: You hire an Entry Strategist.

WHAT started as a mere exception is today a profession, and a booming one. Nine out of 10 foreign investors today come into India with hand-holding and advice from entry strategists. Beginning with the commercial and economic wings of the embassies and high commissions, just about everyone is offering entry strategy: foreign banks, domestic and international accounting firms, venture management companies, project consultancies and even law firms, which had deviated to offering accounting services and which have now further deviated to offer entry strategy. But the true new breed in this line of work is the entrepreneurial individual. He travels light; his office is his bedroom or his basement, where, with a telephone, PC and fax machine installed, he's fully equipped and does roaring business.

The definition, though it's obvious: entry strategists are people who draw up strategies for investors looking to set up shop in India and either have no idea about Indian markets, procedures and bureaucratic hurdles, or do not have resources, infrastructure or time to go through all these on their own.

While entry strategists have been present since time immemorial to help global brands make customised entries into India—Band Aid and Johnson & Johnson, the concept of tea bags, Horlicks and shaving cream, etc—the breed struck gold when the reforms process began in 1991.

In the beginning, there were few, like management consultancy A.F. Ferguson, who dared to take up this new vocation, but this new stream got prominence after trans-national accounting firms got into the act. The Big Six as they're known—Arthur Anderson, Ernst and Young, Coopers & Lybrand, Deloite & Toosh, KPMG Peat Marwick and Price Waterhouse—shed inhibitions and exposed the profits to be reaped from entry strategy consultancy. In the last three years, hundreds of entry strategy firms have come up offering varied professional services for anyone with the money and the inclination.

The big management firms and industrial chambers like FICCI, Assocham and CII, with their database about Indian conditions, markets and companies and their members, were the first ones to capitalise on the success of the Big Six. Of late, it has been the lone operator—or a small firm set up by two or three friends—at the forefront of the business. Many of them are ex-employees of the Big Six or other management consultancy firms, usually IIT or IIM graduates or chartered accountants. Or retired senior bureaucrats or top public sector officials who, by virtue of their contacts among the powers that be, can make things move faster.

The world is looking upon India as a potential market as a result of saturation in the western and European markets, says Dr J.S. Juneja, who retired as the chairman of the National Small Industries Corporation (NSIC) and now runs entry strategy firm Global Projects and Development. The interest in India is not only because of the size of the Indian market but also due to the fact that the buying capacity of the average Indian equals that of the average Canadian. And since everyone is in a hurry and there is cut-throat competition, entry strategists provide capsulated information and planning for these companies to enter India, he says.

While hiring an entry strategist, the potential investor is primarily looking to save himself the time and headache of getting information about the country and going into the nitty-gritty of the complex procedures in India, says a retired top government official who is now in this business. Even more than in other countries, the entry strategist is often necessary in India, says Dr Raja Shastri, entry strategist and former associate of marketing guru Professor Philip Kotler of Northwestern University, due to a number of reasons. Primarily, unpredictability of policies and government functioning, uncertainties in infrastructure, relatively volatile Centre-state relationships and disproportionate consumer behaviour in different states. This, he says, the average TNC or foreign company is not used to and thus seeks a way out through the strategist.

The other factor, he says, is that most TNCs want to make maximum profit on minimum investment, with a high level of safety and in the fastest possible time. As such, the main questions asked by the average TNC include: Can I make money? When? Can I take my money back? How secure is my investment? The presence of an Indian partner often irks the foreign partner. As such, the average question is: When can I get rid of the Indian partner and how? These questions are usually answered by the entry strategist.

BUT what do entry strategists actually do? Practitioners claim that, being familiar with details on the country, they are perhaps best placed to provide correct information on demand. Moreover, being accustomed with the psyche of Indian markets, consumers and companies, they also provide a better perspective of a particular company or product in India. "It's a one-stop shop for these companies. We give such an expansive macro-eco-political and socio-cultural perspective of the Indian market that the only thing left for them to do after that is business," says Abhijit Bhaumik, director of entry strategy firm Corporate Catalyst.

"The most important job of an entry strategist is to give a long-term viability and operational plan for a company, without which it cannot function," says Subhash Agarwal, president of entry strategy firm Business Foundations, which boasts of clients like Mitsui of Japan, Lucky Goldstar of South Korea and Pfizer of the US. Just like it is important for an entry strategist to gauge the environment for a company to function, it is also important for him to take a long-term view of the project and give a life-span, he says.

The task of an entry strategist, Agarwal says, "is to assist the newborn and help him walk". An entry strategist sees that a client follows the right track in his quest to get into the Indian market and that he does not have legal, procedural and regulatory problems. "In India, an entry strategist also has to see that a company does not have any human interest problems like KFC, Enron or Cogentrix."

How does an entry strategist function? Although no standard module exists of the working of entry strategists and different strategists enter and exit at different phases of a company's project, the generally accepted classical funnel of entry strategists working in India starts from a macro-economic overview of the country. This includes the state of the economy and factors like inflation, foreign exchange requirements, currency value, and then the market strength and the country as an investment destination and whether it is right for the company to enter India.

This is followed by a survey on product marketing, which includes market evaluation, customising a product and the timing of the product. The extent of investment desirable and worth risking and the likely nature of returns on the same are then calculated. The next stage is of conceptuals about the project where the exact nature of the project is decided along with the structure of entry, including the equity pattern, debt-equity ratio and the sources of debt.

A feasibility study follows to obtain a detailed techno-economic appraisal of the project, which is followed by a locational study to earmark conducive sites. This is followed by a project report and then the final memorandum of association, technical cooperation agreement or a joint venture agreement is signed. This is when most entry strategists part ways with their clients.

But in many cases, a foreign client expects much more out of an entry strategist than might be under the purview of his work. According to Shastri, both Indian and TNC clients expect entry strategists to eliminate the bureaucratic hurdles, which is not strictly an entry strategist's function. Agarwal concurs: "An entry strategist looks at larger issues and aspects than mere FIPB clearance and advertising."

WITH a further opening up of the Indian markets, entry strategy too has become specialised. While there are already country-specific entry strategist firms like Protech and Technova and product and sector-specific firms like Blue-Cross Consultants and Economic and Management Consultants, the current trend is for customised and specialised services for clients with varied demands.

According to Vinayak Chatterjee, chairman of Feedback Ventures—one of the pioneering Indian professional entry strategy firms—there are four broad segments of specialisation: the TNC segment, where the profit motive is supreme and where the entry strategist is an essential tool for the company to devise its future course of action; the NRI segment, where the party has investable surplus and a sentimental attachment and the entry strategist is needed to restore confidence about the country; the Indian corporate segment, where the entry strategist is a powerful lobby with the authorities; and the largely untapped state government segment, where the entry strategist is basically a lobby for getting more investment in core sectors.

While entry strategy services have become professional and customised to suit the specific needs of the parties, the services come for a price. And in most cases, the price comes with a premium depending upon the status of the entry strategy firm. While no outfit is willing to divulge a specific price tag on a project, a medium-sized project for a TNC firm could fetch a one-time payment upwards of $50,000 for a short-time service or a minimum of $7,500 to $10,000 a month on a medium-term retainer.

But like anything else, the vocation is not devoid of problems. The sheer privilege and power in the hands of the entry strategists have made them prey to pressures from Indian companies. According to Shastri, Indian corporates sometimes feed wrong information to the entry strategists just to let a deal go through. "Indian companies want entry strategists to paint a rosy picture of themselves to lure foreign investment or partners so that a deal is struck. And therein comes scope for corruption on either side," he says. It is not surprising, thus, that a sizeable chunk of people claiming to be entry strategists have the sole capability of bribing their way through and obtaining FIPB and other clearances, or for that matter offer "guaranteed foreign partnership and investment" to Indian companies.

While entry strategists have mushroomed in the country, there's still enough business and more for everyone. "Earlier only TNCs came in and were catered to by TNC accounting firms or the big firms. But now, the trend is of small and medium companies who cannot conduct this kind of exercise on their own or hire a TNC firm," says Juneja. And with the government keen on further opening up and foreign companies more keen on coming to India, the demand for professional entry strategists can only go up.