Purchasing in India Tips for the Negotiation Process & Using Indian Suppliers to Improve Competitiveness

Israeli Purchasing and Logistics Managers Association Telecom Forum Meeting 4

Agenda
BDO-I2I at a Glance India - Culture India - Business Culture India - Intercultural Communication Aspects India - Telecom Industry

BDO-I2I Background
BDO-I2I is Israels leading India focused business consulting firm
Joint venture between BDO Consulting Group and I2I Ventures Combining forces of Israel's leading consulting group and the leading Indo-Israeli business group Leveraging on BDO international expansion and leadership Provides Israeli and Indian companies with Business Development and professional One Stop Shop solutions Providing our customers end to end coverage of the services required for operating cross border Business and Market Research Strategic and Business Planning M&A and JV Leadership Access Strategic Customers and Partners Setting Sales and Distribution Channels Complementary Services
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BDO-I2I Executive Management Team

David Keynan Founder and CEO David is heading BDO-I2I. David was a member of the Intel Capital India team since 2003, managing Intels investments there. David has relocated to India after spending three years in Intel Capital Israel, leading Intel investments in the telecom space. David was Vice-Chairman of the Israel-India chamber of commerce. He previously joined TiE as a chartered member in the Bangalore chapter. David earned his B.Sc. in Mathematics and Philosophy from the Hebrew University in Jerusalem. P. Sriganesh Mumbai Partner A Fellow member of the Institute of Chartered Accountants of India and Institute of Company Secretaries of India. Sriganesh has over 30 years of experience in the IT and ITES industry and NBFC sector having set up several Companies in India. Between 1986 and 2000 he worked in senior financial positions in Citigroup India. He was a Promoter-Director of Citicorp Information Technology (now known as I-Flex) and co-founder and Honorary Treasurer of NASSCOM. As Treasurer of NASSCOM in the initial years was involved with the Government to set up regulations for the then nascent industry. 4

BDO Ziv Haft Consulting Group - Business Activities

M&A and Investment Banking - US

Corporate Finance & M&A in Georgia

Agenda
BDO-I2I at a Glance India - Culture India - Business Culture India - Intercultural Communication Aspects India - Telecom Industry

Flag & Emblem

The saffron stands for courage, sacrifice and the spirit of renunciation The white is for purity and truth The green is for faith and fertility The navy blue wheel denotes the continuity of the nation's progress which is deemed to be as boundless as the blue sky and as fathomless as the deep blue sea.

Truth Alone Triumphs

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Geography
Area: 3,287,590 sq km World 7th largest Natural hazards: Droughts Flash Floods Widespread and Destructive Flooding from Monsoonal Rains Severe Thunderstorms Earthquakes

Fact Sheet
Demographics Population (billion) Population growth (%) Labor force (million) Less than 30 years (%) Urbanization (%) 1.13 1.6 516 52 28 Economy GDP (nominal, US$ billion) Inflation (%) (Aug. 08) Fiscal Deficit (% of GDP) FDI (US$ billion) Forex reserve (US$ billion, Jul 08) 61 7.2 34.6 68.5 Trade Exports (US$ billion) Imports (US$ billion) Top 3 export markets 13 53 295 52 Top 3 import partners 159 240 US (13%) UAE (10%) China (7%) China (11%) Saudi Arabia (8%) UAE (6%) 1171 12 5.6 32 307

Social/Developmental Literacy (%) Unemployment (%) Infant mortality (per 1000) Life expectancy (years) Transport/Telecom Passenger cars (million) Two wheelers (million) Mobile users (million) Internet users (million)

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Sources: IBEF, EIU, RBI, CIA fact book

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FY08 unless indicated otherwise

Geographic Division

Delhi North East Kolkata

Center Mumbai

South

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Population
Ethnic Groups: Indo-Aryan 72% Dravidian 25% Mongoloid and other 3% (2000) Religions: Hindu 81.3% Muslim 12% Christian 2.3% Sikh 1.9% Buddhist, Jain, Parsi 2.5% (2000) Languages: English Hindi (the national language ) 14 other official languages: Bengali, Telugu, Marathi, Tamil, Urdu, Gujarati, Malayalam, Kannada, Oriya, Punjabi, Assamese, Kashmiri, Sindhi and Sanskrit Hindustani 11

History & Religion

Indus Valley Civilization- one of the worlds first great urban civilizations. Worlds first university in Takshila 700 B.C Ayurveda- earliest school of medicine known to humans OM - The first sound of the Almighty, oneness with the supreme. The Trinity: Generates-Brahma Observes-Vishnu Destroys-Shiva Yoga Made in India 5000 BC Kalarippayat - Origin of Martial Arts 200 BC

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Culture Fundamentals
Non-Violent Religion Never invaded any country in her history The British influence inspired western education and thoughts: Created a new educated class. Created a common language English Inspired freedom and exchange of ideas

Religious tolerance and freedom of worship: Hindus and Muslims live side by side but inter-religious marriages are rare Gandhis Non-Violence Movement for freedom appealed to the civilized world Caste System Brahmins: Highest caste, most privileged - lawyers, doctors, businessmen Ksatriyas: Warriors and rulers had to give their lives to protect the Brahmins and sacred animals (cows). Vaisyas: Farmers and traders. Encouraged to give money to Brahmins & build temples Sudras: Serve the other three classes. Weavers and carpenters 13 The Untouchables/Dalit Caste

Meals, Drink & Snack

Varies from region to region Hindus do not eat beef Muslims do not eat pork or drink alcohol Vegetarian Cuisine Meat for the non-vegetarians (mainly lamb, chicken, and fish) Ingredients: mainly use herbs and spices Curry Pan -Asian Dish In favor of tea (most famous: Chai)

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Local Culture Essentials

Respect elderly and touch their feet for blessing Right Hand Eat with fingers and always use right hand to eat Wash their hands immediately after and before eating a meal Believed that food tastes better when eating with ones hands Can't Say No Take your footwear off when you enter a private house or temple Indian names vary based upon religion, social class, and region of the country Frangipani and white flowers cannot be the gifts Yellow, green and red are lucky colors Strong bonds with family members as well as relatives (Respect the elders) Sons are always more preferred than daughters Most marriages are still arranged by parents Extremely low divorce - rate with only 1.1% Woman Status

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Agenda
BDO-I2I at a Glance India - Culture India - Business Culture India - Intercultural Communication Aspects India - Telecom Industry

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Business Dress Code

Normal Business Dress Code for Man Suit and Tie Due to a warm climate, often full-sleeved shirt and tie are also acceptable Business Dress Code for Woman Pantsuits and skirts which cover the knees; neckline of the blouse and top should be high and sleeves should cover the shoulders Select neutral colors that are subdued and not very bright

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Greeting
Greeting

When doing business in India, business etiquette requires a handshake Indians among themselves use Namaste the palms are brought together ant chest level with slight bow of the head Using Namaste is a sign of Indian Etiquette understanding

Business Cards Business cards should be exchanged at the first meeting Be sure to receive and give with the right hand Make sure the card is put away respectfully and not simply pushed into your shirt/trousers pocket

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Meeting
Meetings Meetings should be arranged well in advance in writing and confirmed later on by phone Avoid meetings near national holidays Independence Day, Diwali, etc. Punctuality is expected however being late usually will not have disastrous consequences Flexibility is paramount Last minute cancellations are possible and not a sign for anything Meetings Flow When entering a room always greet the most senior figure first Start from commencing a a conversation latest business news, stock exchange and sports (mostly, cricket) Avoid talking about: Personal matters Poverty/beggars Politics, caste system & religion issues Woman rights 19

Agenda
BDO-I2I at a Glance India - Culture India - Business Culture India - Intercultural Communication Aspects India - Telecom Industry

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Most Important

In India, Relationship Comes Before Business

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India Top 10 Business Principals

Time is measured by years, not weeks Long term approach will create significant impact Partnering and win-win is were it all starts India and its people are very diverse Need to adjust to the right people/team Listening is much more appreciated than talking The land of good enough No is never said Government/official relations are important Business India is corruption free If you are asked, you are in the wrong place Regulations are simple, but very strictly enforced

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India Geographic Business Corridors

80% of India GDP

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The Land of Good Enough

India has very interesting view on brand and technology Brand represents hard values: Reliability, complexity, cost, suitability for multi-user With very few exceptions, luxury and Name are less important Example Nokia cell phones: Reliable and hard working Though much more expensive than Chinese brands >60% market share in India Another example - fashion brands: Very low penetration of global brands Very strong local brands Opposite to China Reason no value in Global tags
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Negotiations - How to Start?

Send a detailed product overview in advance Prepare your initial offer to allow bargaining later on Respect Indian Business Hierarchy Hospitality is part of the business culture accept any hospitality offers (tea/coffee/snacks) Presentations are generally accepted to start a discussions Declare long term, and mean it Learn first, talk later Tough issues: Learn first Raise when discussed, resolve last The time between raising and resolving is reserved to relationship, internal contemplations and product/technology international presence Indians tend to take larger risks with person they trust > Credibility and Trustworthiness are Critical
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Decision Criteria
It is all personal The business reason is key Technology is being looked at from business perspective Innovation per se is a mixed bag Risk aversion - major issue In Indian organizations, size matters As many employees, as good Automation is Necessary to deal with scale Product/Technology WW Spread Trust relationship Relationship/Emotions

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CEO Role
In India: CEO, Managing Director, Promoter All alternate names to same function CEO - Potential Decision Maker The most superior company executive -> Respect Must be addressed with appropriate title -> Mr. Exhibit positive traits -> Honor, Trustworthiness Being most senior -> Must be greeted first Concentrate efforts on building relationship with the CEO You should leave space for escalations Chairman, Large share holder etc.

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On the Discussion Table

Silence is blessed Let the VP talk, CEO to close Listen to the music Dont push Dont insist on any commitment at the first meetings Do not use strict expressions No is not being said, Yes is hardly used Indians value flexibility during negotiations Express disagreement openly considered rude -> We will discuss this issue later on Disturbances during the meetings doesnt show lack of interest or respect Be prepared for questions/enquiries that seem not related

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Business Hierarchy
One of the most significant influences on Indian Business Culture Mostly One decision maker in the company Managers and executives still will wait for approval by CEO/owner Sometimes decisions are maid by people who are not present during negotiations

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Agenda
BDO-I2I at a Glance India - Culture India - Business Culture India - Intercultural Communication Aspects India - Telecom Industry

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India Technology Boost Present

CAGR: 27 per cent US$ bn

Revenues Indian IT industry Israeli Technology Export

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India Technological M&A Trend - Telecom

20 18

18 16 14
No. of Deals

12 10 8 6 4
2

12

5 3

0 2007 2008 Year

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2009

2010

India Electronics Manufacturing Services

Electronic Manufacturing Services are among the most rapidly growing industries in India, with the capacity for fulfillment of large series of orders Indian manufacturers started to operate in quantities and qualities which can easily compete with the Chinese manufacturers. Two major players: Vinyas Innovative Technologies Pvt. Ltd Centum Electronics India is one of the biggest target market for telecom equipment. Close to 15% of all productions are sold to India. Using an Indian EMS company lower your costs and bring you closer to your final customer

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Thank You !
David Keynan CEO BDO-I2I India Business Consulting Menachem Begin Road 46-48 Tel Aviv, Israel Israel (O)+972-3-6382508 Israel (F)+972-3-6374801 India (O)+91-80-4330-1999 einat@bdo-i2i.com

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