Indians have a long tradition as buyers and sellers with foreign countries, having traded for centuries with their neighbours in the Middle East and Southeast Asia. Since the fifteenth century, this trade also included Europe, though trade with the Romans has been documented as early as the first century. This has led Indians engaged in business to have a “trader” mentality, which has both positive and negative connotations. Positively, this makes them highly entrepreneurial, always looking for opportunities to do business. Perhaps negatively, especially from the supplier’s perspective, this makes them inordinately price sensitive in their purchasing. In other words, Indians are tough negotiators and love bargaining. Any foreigner desiring to sell to an Indian firm should be prepared for this.
Nirmalya Kumar. Photograph: Tessa Oksanen
Indian procurement officers like to be knowledgeable buyers and drive a hard bargain. For example, R.C. Bhargava, former purchase director of Suzuki India, used his knowledge of costs almost cold-bloodedly in purchase negotiations. Car tires have always been sold as proprietary products. Nowhere in the world was their price negotiated on a cost-plus basis. Yet, Bhargava stunned the tire industry in India by declaring: “You show me your cost structure and I will give you a remunerative margin.” Indians use their knowledge of zero-based costing remarkably well in buying situations.
Indians are not shy of using their relationships in business. For example, Shiv Shivram, a veteran buyer of forty years with Imperial Tobacco and Dunlop, is friendly with salespersons at all levels. When the general sales manager of a vendor comes to negotiate a contract, one of the vendor’s salesmen he is friendly with will whisper the bottom price in Shivram’s ear. Thus when Shivram negotiates, he knows the price below which he cannot go as it would hurt the seller. The strategy is to use long-standing relationships to get the best deal while giving a fair return, but not to squeeze the last dollar out of the seller.
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When major purchases, big-ticket items, or capital equipment are at stake, the negotiations can be frustrating to non-Indians. Westerners are often heard complaining that the discussions take forever and the specifications keep changing. Consider, for example, the current rush by foreign vendors to sell arms to India. Reflecting on the experience, Rear Admiral Rees Ward, head of the United Kingdom’s defense manufacturers’ trade association, said: “It is a rapidly growing market of a potential superpower...however, the procurement processes often cause delays and cancellations and therefore overseas companies need to understand that they have (to) commit to the long haul if they are going to win contracts.”
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