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Business in India a trend, but not new

Lehman Bros., Goldman Sachs, EDS and Microsoft recently said they are investing in India, joining the rush to take advantage of cheaper costs and educated work force. But others got their first.
/ Source: CNBC

The headlines tell the story: Lehman Brothers, Goldman Sachs, EDS and Microsoft have all announced recently that they were investing in India, joining the rush to take advantage of cheaper costs and educated work force. But they will find that others got their first.

There are some sights here on India’s commercial landscape that will make Americans feel right at home.

“1902 was when we put up the first branch, and that was in Calcutta,” Citigroup India’s CEO Sanjay Nayar said.

Financial powerhouse Citigroup was among the first U.S. companies to see the business potential in India.

“I think from an international perspective for Citigroup, India is important from a bottom line point of view, and become bigger as you go ahead,” Nayar said.

With more than one billion people and a middle class larger than the population of the United States, India is a market no global company can ignore.

“It has grown by a Brazil in the last ten years, and will grow by another Brazil in this decade,” said Richard Celeste, a former U.S. ambassador to India.

For American CEOs trying to grow their companies, the issue is whether they embrace globalization. If they do, they must have a presence in India.

Early business pioneers often found the going was rough in India. Sanitation, water and roads — bad enough today — were deplorable.

Indian markets were strangled with red tape and protectionism. And to a great extent, they still are.

But a wave of recent reforms has opened up more opportunities to make money.

When India finally let foreign banks open their doors to Indian consumers in the late 1980s, Citigroup was ready.

“We were really the first serious player in the credit card market,” said Citibank Consumer Services’ Sarvesh Sarup. “When we entered the industry, there were 300,000 cards. Now there are in excess of seven million.”

General Electric has the largest foreign presence in India.

“Right now, every one of our manufacturing businesses has a significant engineering operations here,” said Scott Bayman, CEO of GE-India. (MSNBC is a joint venture of Microsoft and NBC, which is a GE company. Additionally, GE is CNBC’s parent company.)

Like Citigroup, GE makes its money in India in several ways, such as selling products and services, and by transferring white collar and back office work here.

GE has 22,000 employees in India doing research, manufacturing, running call centers and developing software, generating roughly $1 billion of revenue annually.

“There isn’t a better destination, frankly, than India just because of scale of population and availability of employees,” said Pramod Bhasin of GE India.

Still, presence and history alone don’t guarantee success in India.

Problems like its third-world transportation system, a multitude of languages, four-wheeled and four-legged traffic, and even the climate often intervene. Just ask Nestle.

The Swiss food giant has been in India for 90 years, with six manufacturing plants, 3,500 employees and almost $500 million in sales in 2002.

But Nestle had a problem with its trademark candy. In a country where temperatures can reach 120 degrees, chocolate melts.

Nestle gave retailers small coolers to keep the chocolate from melting, but that didn’t do the trick.

“Electricity costs money and is not provided in a uniform way, so on and off the electricity goes and the product may suffer sometimes,” said Carlo Donati, CEO of Nestle India.

So Nestle devised a liquid chocolate in a tube, and produced a winner.

It’s the kind of adaptation the successful players in India understand, and the newcomers must learn.

“Our journey has been full of challenges as well,” said Sandeep Kohli of Yum! Brands India.

Kohli has helped open 70 Pizza Hut and Kentucky Fried Chicken restaurants for Yum! Brands in India in less than a decade.

He says Yum! India has put together a promising recipe for success.

“The pizza base, the cheese and so on will be the same, but local flavors can come from a local cause, local toppings, adding things to it that make it more familiar and acceptable to the Indian consumer,” Kohli said.

“There is no quick buck to be made in India,” said McKinsey’s Shirish Sankhe. “The markets that are deregulated are extremely competitive. The local companies are very good so when you come to India, come for the long haul.”

Foreign corporations doing business in India run the gamut. But one thing all these companies have in common is that they were quick to realize India’s potential. And businesses that are not here yet are late.