Are developing countries an opportunity for Spanish companies to emerge from the crisis?
The casual answer to this question seems obvious, we would say “Yes”. Markets in these countries offer very favourable growth, usually double-digit, and their populations are several times larger than that of countries within the EU. Consider, for example, a country like India with a population of 1,200 million people that possesses domestic demand for new product consumption and services with great opportunities in sectors such as energy, infrastructure and biotechnology.
Therefore, it seems reasonable to say Yes that Spain should be present in a country like this, and that Spanish companies should put focus on establishing business ties with India. However, experience shows me that this is not happening. Why?
The most probable answer is that India is a complicated country in Spanish eyes, and that Spain is too far not only in distance but also culture, so that for many companies this still retains significant risk. This results in the India being pushed to the bottom of the preference list for establishing new business relationships.
In principle, risk aversion is something that is within each of us and if country is presented as risky, it seems reasonable to think twice before entering the market and making mistakes. Now if we consider countries such as Germany, USA, UK, and Nordic countries; their companies have already been present in countries such as India for years and have vast experience in mitigating the risks. Their ability to achieve success is reflected by their impressive results thanks to sales in the country. Therefore you have to wonder, if companies in the aforementioned countries have managed to develop a business strategy in India, why are Spanish companies not able to do so?
In my opinion the answer to this question, or the reasons why Spain does not have a higher degree of penetration in the Indian market, can be found on different levels.
The primary level of reason is undoubtedly political. I think that neither the Spanish government nor the regional governments have done much in favour strengthening international relationships that facilitate technical or scientific trade between the two countries.
In China, where, paradoxically, there is higher commercial risk compared to India, such as language barriers, a large number of Spanish companies undertook commercial ventures due to the promotion of the domestic market by Chinese authorities. This demonstrates that the success of a good promotion and marketing campaign by collaborative governments is key to attracting foreign interest.
In my opinion, this level of institutional relationship that has existed and continues to the case of China, is virtually nonexistent in the case of India, justifying, at least in part, the trade deficit between the two countries.
Spanish companies, moreover, have little information of real opportunities. Information reaching the country is very low (in my opinion) and therefore the level of distrust is high, justifying that Spain show little interest in this country that, in turn, continues to postpone the strategic decision to address this market.
The second level of reason, that negatively affects establishing strong business relationships with India, refers to Spanish companies themselves, as they do not possess the resources and capabilities to address India as a business venture in a country of extraordinary dimensions and extremely complex market behaviour.
Obviously, with exception of large companies, such as the IBEX 35, one of the fundamental problems of Spanish companies (and in this case I adhere to the one I know best, which are the Bio-pharmaceutical), is that they are small enterprises that in many cases do not exceed 5 to 10 employees. Thus, with a solid scientific background and deep knowledge of scientific and intellectual challenges, they have poor training that is essential for commercial success, such as marketing management skills and sales management (reported BioCat 2010). Combined this results in unfavourable options as the Indian market is fragmented, has high barriers to entry, and it is extremely necessary for collaboration with local experts. The valuable knowledge that they have regarding the market dynamics and invaluable in identifying key success factors (KSF), identifying the key opinion leaders (KOL), and help to develop a suitable marketing strategy, based on a good differentiation from our competitors, that help ensure the success of collaborative ventures.
Clearly this investment, while necessary for the internationalization of SMEs, it is not possible in a scenario like this, where Spanish SMEs must devote its resources and efforts mainly to survive. But even some firms considered MEDIUM / BIG companies (Grupo Ferrer case, in the pharmaceutical sector), consider it more appropriate, at this time, devote their efforts to closer, more culturally similar, markets which provide lower risks and better ROI and payback. This defensive measure would seem to be prudent, but eventually we will be placed in a position of weakness, relative to other competing countries, unless the authorities cooperate. The ability to improve the environment for business with a country of the size and strategic importance of India would be welcomed by the entire Spanish Industry and it would be important for the Spanish authorities to remind themselves of this.
– Ramon Fernandez