by Stefano Namari, Studio Namari and Cornaglia Group

 

I have been consulting businesses and corporations on internationalizing their activities for 20 years.
Most of the times I found the foreigner partners to my clients and I have also drafted and negotiated the Joint Venture Agreements.
Usually, I’ve been also involved in the management of the JVs companies being appointed as member of the Board of Directors.


Therefore, these short notes will report more to a field experience than be focused on the technical-legal issues.
I have worked, among others, in Russia and Eastern Europe countries (such as Poland, Hungary, and Romania), as well as in Brazil, India, Canada, USA and Japan.
Cornaglia was one of the first clients I assisted in establishing operations in India.
It is important to note that lessons learned from Cornaglia experience are best applied to mid-sized companies.
Specifically, those companies that do have limited internal resources and an in-house organization not sufficiently structured to develop internationalization strategies in full autonomy.

This premise is crucial because, as will be discussed, this categorization determines whether or not there is a necessity of approaching new markets with the support of local partners.

Cornaglia India was established as a holding company on October 25th, 1999, 100% owned by Cornaglia S.p.A.

At the time, we determined to set up a company under the law of India would allow Cornaglia to operate in India under the same legislation and in the same jurisdiction as potential local partners.
This why, if controversies were to arise, the company would be avoided the complicated and costly processes associated with international law and arbitration.

Furthermore, we were told by local correspondents that a foreign entity would likely face a disadvantage before an Indian court (Indian judiciary).

I believe this approach would still be preferable today.

Getting acquainted and engaging with India’s complex legislative and bureaucratic system, was not easy then and is still not easy now.

Conversely, I have not had the same experience when it comes to business relationships.
In my dealings in India, I have never had communication or comprehension issues with entrepreneurs, despite what may be considered a vast cultural difference.

Is a fact that many Indian entrepreneurs have spent a significant amount of time abroad, often completing their studies in the UK or United States, but they maintain strong ties with their culture and traditions.

This does not present an insurmountable obstacle.

Rather, on more than one occasion, I have found greater willingness from our Indian interlocutors to comprehend the European culture than vice versa.

To be successful in India, however, any foreign businessperson must actively work to comprehend its culture. In my opinion, this is the major challenge of any entrepreneur approaching this market.
The complex network of relationships, and the equally intricate unwritten rules that govern it, is unique and inextricably tied to the structure and traditions of Indian society.

Hence, the central importance of a local partner.

Cornaglia had to face this reality, and in the course of our experience, showed flexibility and a commendable capacity to learn as we went along, adapting its decisions and actions with the sole purpose of seamlessly inserting itself into the industrial fabric of India.

The process was long, and not without setbacks, but ultimately, we found an ideal balance that guaranteed stability and set a strong foundation for future development.

Practically speaking, the strategic decisions that guided the company in this process can be summarized in the following key points:

1. General approach to India

For a mid-size company like Cornaglia, a local partner is integral to the success of any operation in India. Therefore, our first decision was to plan our entry into the Indian market through a joint venture.


2. Identifying a partner

India is extremely vast, and its industrial landscape is varied.
Finding a partner is never easy, but Cornaglia focused on identifying a company that not only had a similar industrial background, but also a comparable size so as to facilitate an equitable relationship.
At a later time, we chose to form a second partnership with a much larger player, who nonetheless agreed to a 50:50 Joint Venture.

3. Distributing responsibilities between partners

Once a partner was identified, Cornaglia turned its attention to clearly defining reciprocal technical and operational responsibilities within the JV.
In order to maintain oversight of production quality, Cornaglia established itself as the technical partner, responsible for product research and development.
The Indian partner was responsible for commercial operations and the day-to-day management of the JV, including personnel selection and management.
Cornaglia, like the other Indian JVs it is a part of, operates in the automotive industry and counts among its clients the major Indian car manufacturers (Tata, Maruti, etc...) as well as global players such as Volkswagen, CNH, FCA, GM and more.
Thus, consistent quality of production is essential.
For this reason, Cornaglia and the Indian partner agreed that employees on the production line would be trained in Italy, not only on the use of machinery, but also on quality control processes.
These training costs were covered by Cornaglia, and not the JVs.

4. Dispatching Italian personnel to India

To further meet OEMs stringent quality requirements, and to ensure additional oversight on production processes, Cornaglia transferred employees to the Indian JVs in supervisory or managerial roles.
In particular, in one of the JVs, the Director of Production (COO) is a Cornaglia employee that operates at the same level as the Indian General Manager.

5. Board of Directors meetings

To concretely contribute to the management of the JVs, Cornaglia travels to India to participate in Board Meetings at least bi-annually.

In conclusion, I think successfully and stably entering the Indian market depends on the following:
i. Respect for the Indian culture
ii. Humility and openness to understanding India
iii. Partnering with an appropriate and reliable local player
iv. Clear distribution of responsibilities among partners
v. Active partecipation in manufacturing management (Indian employees training, partner’ staff posted to India)
vi. Active participation in JV Co. management through the Board.

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