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According to Pesmel Oy’s CEO Timo Äijö, business in India is an interesting prospect, but it pays to advance slowly in such a sizeable market.
Pesmel Oy manufactures automated material handling, loading and packing systems. It established a presence in India in 2008 by starting a business in Mumbai. The decision to enter the potential growth market was preceded by careful consideration.
“India is a market area which is growing steadily. Other things in favour of entering the market included India’s large population, democratic and stable conditions and English as a business language. And the fact that there is a lot of technical know-how available there,” says Timo Äijö, the CEO of Pesmel Oy.
According to him it was clear from the start that the company would not initiate operations through a representative or an agent. Establishing a company right from the start would create a solid ground for the further development of the company’s sales and maintenance operations as well as its subcontractor network.
Pesmel learned about Finnpartnership’s Business Partnership Support during the preparatory phase of the initiative and received advice and financial support for the preparatory steps and market research.
“Finnpartnership’s support was like a turbo charge. It helped us get a good start because it enabled us to focus much more carefully on what we were doing. Our input in India during the initial stage was far greater than in any other country before.”
Pesmel’s customer base consists of international fibre, paper, metal and logistics companies.
Over 90 per cent of turnover is generated from exports. The Group has over 200 employees, most of whom work at the company headquarters in Kauhajoki.
There are manufacturing and planning operations also in Estonia and the US, and the Group employs over 60 people outside Finland.
In addition to European exports, Pesmel has turned to developing economies, such as China and Russia, to seek further growth.
According to Timo Äijö, entering the Indian markets was part of a systematic growth plan with which Pesmel aims to grow in the global market. The first deal in India consisted of selling a fully automated packaging line for steel coils to a local metal manufacturer.
“This deal was an important reference for us and generated more good contacts. It helped open up new communication channels with local enterprises.”
Timo Äijö admits that the very size of the Indian markets was daunting at first. From the start it was clear that the best plan forward was to focus on a restricted geographic area and selected industries. The company considered both Delhi and Mumbai, but decided to focus on the latter.
“We do not aim to conquer the entire country. The motto of our Indian operations is: let’s be rational and do one thing at the time. After researching the markets, we decided to focus on metal industry and further select one narrow sector of companies.”
According to Timo Äijö, it is very difficult to separate market research from sales. In practice, product sales started during the very first meetings which Pesmel secured with potential customers.
This attitude has provided good results. By the end of 2009, Pesmel had signed agreements with five Indian customers on equipment deliveries. According to Äijö, Pesmel’s order book has filled up nicely.
The Indian subsidiary, Pesmel Ltd., currently has 3 employees in India. Timo Äijö says that personnel training has been an important focus area. In the induction stage, they have been trained for many types of tasks.
“Before starting the actual sales efforts, we wanted to ensure that our maintenance operations were up and running. It is an important competitive advantage for us to be able to provide the customers with good after-sales service.”
According to Äijö, the effects of the global recession are visible in India, too, although the markets for investment goods have not stalled completely like in many other countries.
“Projects have been postponed by 6 or 12 months, but none of the investment plans have been scrapped completely.”
When launching operations in India, Pesmel decided that the objective was to break even on the second year of operations. Äijö believes this is possible.
“We are very happy with the start we’ve had in India. I don’t think we would do anything differently even if we were to start again from scratch.”