The on going recession and need to cut cost has forced Small and Medium Businesses (SMBs) to start looking to set up their base in India.
After the first wave of the large-cap multinationals, it is the turn of the small and medium enterprises (SMEs) ranging in size of US$100- $500 million from these two continents to step into India. Some of these companies are family-owned.
Some of these companies are in the area of technology, clinical research, auto design and ancillary and pharmaceutical sectors
Other sectors that could be part of this trend are aerospace, pneumatics, banking and financial services, machine tools, industrial designing, retail, logistics, web services and content generation.
According to recent survey done by a major recruitment company in India about one-third of the SMEs in Europe and the US are now turning to India and China
These companies are looking at value-added off shoring from these locations as well as to be closer to the customer and because of the stringent labor laws in Europe.
This development will heat up the talent search market in India and will provide job seekers with new avenues of growth
According to Mr. Aroon Raman, Chairman-CII Karnataka State Council, European SMEs, faced with a stagnant market in their home countries, are turning towards India and China, where there is promise of 8-10 per cent growth. Besides this, companies reap the benefit of high-quality labor and cost advantage at these places.
Key Challenges: One of the key challenges for SMBs trying to set up base in countries like India and China is lack of brand power pull as talented people in these countries still prefer to work for bigger Multinational Brand names. Besides this the rising cost of renting out real estate cost combined with rupee getting stronger against front line currencies will lower the cost savings for these companies.
Another issue is a sharp wage inflation coupled with poor basic infrastructure in India which can trip off a lot of these companies trying to set up base in India.
In China the language and cultural barriers coupled with unpredictable govt. policies lead to business uncertainty which can be fatal for the SMEs.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to