Cultural Guide to Doing Business in India

Thesis (M.A.) 2010 36 Pages

Business economics - Business Management, Corporate Governance


Table of Contents:

Introduction 3

Part I: A Brief Overview of India - Facts and Figures
General Facts and Figures
The Economy in India and GDP Trends
Key Contacts

Part II: Cultural Dimensions
Power Distance and Achieved Status/Ascribed Status
Individualism/Collectivism and Space Orientation
Masculinity/Femininity and Gender Egalitarianism
Uncertainty Avoidance
Long-Term Orientation
Time Orientation and Clock Time/Event Time
Relation to Nature
Universalism/Particularism and Humane Orientation
High-Context/Low-Context Culture
Career Success/Quality of Life
Further Profiling

Part III: Other Cultural Nuances
Cultural Diversity within India

Part IV : Impact of Indian Culture
Impact of Indian Culture on Internal Issues of Business
Gender Issues
Concept of Time
Impact of Indian Culture on External Issues of Business
Marketing and Customers
Business Ethics
Legal Issues

Part V: Common Pitfalls of Multinationals doing Business in India and

Part VI: Key Managerial Strategies for Success in India
Cross-Cultural Training
Communication Enhancement
Organization Structure
Meetings, Appointments and the Concept of Time
Further Recommendations


Discussion Partners



This “Cultural Guide to Doing Business in India” is a comprehensive cultural profile of India, which also outlines implications for business people. This guide is meant to be for firms who aim for entering this market or for managers who do not have much experience in dealing with people from India or conducting business in India successfully.

The first section of the paper gives a brief overview of the country, its population and displays relevant facts and figures and briefly describes the economy and GDP trends. The second part examines different cultural aspects in India. It is shown where India ranks on various cultural dimensions, which are mainly drawn from Schein’s model of organizational culture and Hofstede’s cultural analysis, and it is explained what these rankings mean in real terms. In the next section other cultural nuances such as religion, the vastly different subcultures in India and language differences within the country are outlined. Following this, the impact of Indian culture on internal and external issues of business is taken into consideration. The next section throws light on common pitfalls of multinational firms doing business in India and gives recommendations of how to avoid such difficulties. The last part of this cultural guide clarifies key managerial strategies to be successful in India. The paper finishes with a short conclusion and summary.

Information for this cultural guide was obtained through primary and secondary research. The findings and recommendations of this paper are based on observations and statements made by the discussion partners and on academic papers. All interviewees are of Indian nationality and worked in India for a minimum of three years, with the exception of one consultant and company director, who is of Australian nationality. He has worked on several projects across India throughout his career. A listing of the persons interviewed is provided below this paper. Unless referenced otherwise, the findings and recommendations given in this cultural guide are a summary of the relevant statements made by the discussion partners for this research paper.

Part I: Facts and Figures on India

General Facts and Figures

illustration not visible in this excerpt

Figure: India (Ssolbergj 2008)

India, officially the Republic of India, is the seventh- largest country by geographical area, with more than one billion people the second most-populous country after China and the largest democratic country in the world (World Factbook n.d.).

India extends over a large part of South Asia and is bordered by Bangladesh, Bhutan, China, Myanmar, Nepal and Pakistan. Sri Lanka and the Maldives in the Indian Ocean are in the vicinity. The country’s capital is New Delhi. The climate is temperate in the north and the south is exposed to a lot of tropical monsoon rains. In reality, however, the country has a variety of climates across its regions, “which range from snow-peaked Himalayas in the north, desert in the west, thick rain forests in the north-east, flat green pastures in the Gangetic planes, and plateaus in south and central India” (Shukla n.d.).

India is a country rich in diversity. It is unique through its blend of cultures, races, religions and languages. Hindi is the official and main language of India; however there are 21 other official languages. English is accepted as a working language and is used in government and business. Part III of this cultural guide outlines these cultural nuances in more detail.

As mentioned, India is the largest democracy in the world. The central government has greater power in relation to the states. India is divided into 28 states and seven union territories. The president is the nominal head of state and government while the prime minister leads the government. India achieved its independence from the United Kingdom in 1947 and became a republic in 1950. India’s national day is celebrated on 26 January (Embassy of Iceland 2007, Shukla n.d.).

The Economy in India and GDP Trends Economy

Good economic fundamentals and liberalisation policies followed by the government make India a favourite of many multinational companies and an attractive place for investments. India’s economy is open since the early 1990s and since then allows foreign investments in most industries with the exception of a few strategic ones.

There is a large and increasing middle class estimated at 325 million people.

However, two-thirds of the population depends on agriculture and “lives on less than $2 per day. About 34% of the population lives on less than $1 per day (Makar 2008, pp. 27-28).

The United States is India’s largest trading partner. Australia is amongst India’s top ten import sources, with imports valued at $US 7.6 billion (High Commission of India in Australia 2010).

GDP Trends

The 2009 gross domestic product (GDP) of India, estimated at $3.53 trillion in terms of purchasing power parity valuation of country GDP, is one of the largest in the world (IMF). With an average annual GDP growth rate of about 5.8% for the past two decades, India’s economy is also amongst the fastest growing in the world (Vanaik 2006). It is a remarkable economic performance. IMF statistics indicate real GDP growth of 5.6% in 2009, with an estimate of 7.7% for 2010 and 7.8% for 2011 (IMF). The increased growth rate is due to the recovery from the global financial crisis. GDP per capita was estimated at around $2,932 in 2009, compared with $37,302 in Australia for the same period (IMF).

Key Contacts

High Commission of Australia in India

1-50/G, Shantipath, Chanakyapuri, New Delhi 110021; Phone: +91 688 8223/5637/5556/687 2035; Fax: +91 688 5199; www.india.embassy.gov.au

High Commission of India in Australia

3/5, Moonah Place, Yarralumla, ACT 2600, Phone: +61 2 6273 3999; Fax: +61 2 6273 1308; www.hcindia-au.org

Further Contacts

A substantial list of key contacts in regards to conducting business in India can be found in Desai’s “Indian Business Culture” (1999, pp. 113-148). It includes contacts of ministries and departments of the Government of India, contacts of financial institutions, major players in the media industry, business associations, trade bodies, management institutions and various other useful contacts.

Part II: Cultural Dimensions

In the following section the most important cultural dimensions are transferred to the context of Indian culture. Some dimensions are discussed in conjunction with others due to their similar nature or as they are relevant in context to each other.

Power Distance (Hofstede, Schein) and Achieved Status/Ascribed Status (Trompenaars)

Hofstede explained power distance as the extent to which less powerful people expect and accept that power is distributed unequally.

India has a power distance ranking of 77 compared to a world average of 56.5 (itim International n.d.). This score indicates a high level of inequality of power and wealth within the society. This is not necessarily forced upon the population, but rather accepted as a cultural norm.

Within Indian society everyone is ranked, holds a certain social status and people are very sensitive in this regards. Amit Pardeshi, one of the discussion partners, notes, “A person with a higher rank within an organization should always be obeyed and respected, although that person might be wrong and act unwisely”. Respect is based on seniority and not necessarily on expertise or knowledge. This hierarchy system has its origin in the Indian caste system. Although the traditional caste system has been prohibited, attitudes and practices still continue to exist. Power and status lead people to favour in-group members over out-group members, which is associated to the notion of ascribed status. It is common to see that government as well as private organizations make reservations for people from backward (lower) castes and their state origins. Job positions are also ascribed depending on family status.

One’s heritage points out where one stands in society and what one is likely to achieve professionally. However, much foreign civilization and new aspirations have affected this belief and mental structure, which is fading nowadays. Hofstede characterized the functioning of Indian work organizations “as ‘personnel bureaucracy’, where relationships among people are strictly determined by the hierarchical framework” (Panda & Gupta 2004, p. 31).

Foreigners have to respect that mentality when dealing with Indians. Managers and supervisors are supposed to micromanage individuals and their work and carry responsibility for their subordinates. Addressing a boss by his first name is inappropriate. It is advisable to prefix the name with ‘Mr.’, ‘Mrs.’ Or ‘Miss’ or a professional title such as ‘Doctor’ (Shukla n.d.). In addition, one is encouraged to give employees clear instructions, call senior staff members to make announcements and put titles and accreditations on one’s business card (Crown Relocations n.d.).

Individualism/Collectivism (Hofstede, Schein), Relationship among People (Kluckhohn & Strodtbeck), Individualism/Communitarianism (Trompenaars) and Space Orientation (Kluckhohn & Strodtbeck) In an individualistic country ties are loose between individuals whereas people within a collectivism-orientated country are integrated into strong, cohesive groups from birth onwards.

With a score of 48, India ranks slightly lower than the world average of 50 (Ilangovan et al. 2007, p. 543). A low individualism ranking indicates a society with a more collectivist nature with close ties between individuals and close family members. Taking responsibility for one’s extended family and fellow members of associated in­groups is encouraged.

This becomes evident when looking at Indian society. People work well in teams and individuals usually do things together, for instance eating lunch together at work. Indians place importance on interpersonal contacts and avoid conflicts. There is an apparent lack of privacy and personal space is not considered as important as in other cultures. This is due to the tradition of several generations living together in one place and also the high population density. The interest of one’s group is more important than individual interests. Indian collectivism originates from traditional family values. It is still common today that family members cook together and share their income, for instance.

Interviewee Ankit Jain describes that individuals who are driven by their career progress are usually not rewarded. It must also be expected that employees contact someone of higher authority prior to making a decision. Thus they might not be able to give immediate answers. Western managers might not be accustomed to that. One is encouraged to build lasting relationships, reward groups rather than individuals and one should be prepared to be asked personal questions and be invited to join a colleague’s family dinner, for instance. Due to the collectivist nature of the society, firms can benefit from low job turnovers.

Masculinity/Femininity (Hofstede, Schein) and Gender Egalitarianism (Globe study)

The dimension of masculinity/femininity refers to the distribution of roles between men and women in a society. In a masculine society gender roles are clearly distinct whereas they overlap in a feminine society. The concept of gender egalitarianism is very similar and refers to the extent to which an organization or society minimizes gender role differences and gender discrimination.

In terms of masculinity India ranks at 56 compared to a world average of 51 (itim International n.d.). This score points to a greater gap between the roles and values of men and women.

Traditionally, boys are valued more than girls in Indian society. As an Indian blessing, “ashta putra saubhagyavati bhav” (may you be blessed with eight sons), indicates, daughters are not as welcome. The wide gap between men and women emerged from religious practices. Women and men take on different roles in society while women should be family oriented. Statistics disclose that males remarkably outnumber females (Census of India n.d.). In addition, the interviewees confirm research findings that “the relative dominance of men over women in India has manifested itself in unusually high rates of sexual harassment compared to Western countries” (Luthar & Luthar 2007). This can explained through the relatively high power distance and low individualism scores.

Nevertheless women in business are very common in India and are generally treated with respect. Male managers must be aware that men are expected to wait until the female counterpart shakes hands and must take into consideration how to cope with greater sexual harassment.

Assertiveness (GLOBE)

Assertiveness in the GLOBE study is defined as the degree to which “individuals in organizations or societies are assertive, tough, dominant, and aggressive in social relationships” (House et al. 2004, p. 395). Assertiveness is also often associated with being confident and persistent.

India scores 3.73 out of a range of 1 to 7 on assertiveness practices, compared with a mean of 4.14, whereas the score for assertiveness values is 4.76, compared with a mean of 3.82 (House et al. 2004, pp. 409-411).

Although Indian society ranks fairly low on practicing assertiveness, the discussion partners pointed out that Indian business people can very well be assertive. As assertiveness is generally valued across Indian society, business people entering the Indian market should act accordingly and use these findings for their advantage, for instance in the formulation of marketing strategies. A slogan valuing an assertive attitude, such as Nike’s famous “Just do it”, could prove to be successful.

Uncertainty Avoidance (Hofstede, Schein)

Uncertainty Avoidance refers to the extent to which members of a culture feel threatened by uncertain or unknown situations. A high ranking indicates the country has a low tolerance for uncertainty and vagueness w]hile a low ranking country has less concern with this and is more open to a variety of opinions.

India’s score on this dimension is 40, with a global average of 65 (itim International n.d.). It signifies that India has a greater level of tolerance for ideas, thoughts, beliefs and vagueness. People do not attempt to control all outcomes and results and are able to cope with uncertainty.



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Title: Cultural Guide to Doing Business in India