International Business - Take it to the World
When the opportunity arose to do business in India, HMG Paints wanted to make sure that the partner company produced paint to their high standards. John Fenton and John Falder show how support from UK Trade and Investment oiled the wheels and helped them set up the joint venture.
"HMG have been established since 1930 - yet despite having a small subsidiary company in the USA, we have only had a relatively small export turnover until recently.
We joined the UK Trade & Investment Passport to Export programme to develop an export strategy, in particular maximising business in the USA and Europe. Then we received a query from Titan Paints in India.
Titan Paints wanted us to advise them on improving their formulas, and supply a range of paints for heat reflection. However, after a number of initial conversations, we realised that to properly help Titan we would need to have a lot of direct involvement - and the idea of a joint venture was born.
After a visit to their premises in India it became apparent that to produce paint to the standard we are happy with we really needed to update the plant and supply them with specialist machinery. We were also keen - from an ethical point of view - to meet high environmental standards and make sure labour practices were fair. So we decided to create a new company - Titan HMG Paints India Limited.
We had limited international experience, so we enlisted the help of Julian Birchett, UKTI and their 's Strategic Alliance Service adviser. The Adviser helped us to explore the commercial logic of the proposed partnership, helped with the legal structure and joint venture process, and advise on protecting intellectual property and the cultural aspects involved in dealing with Indian partners.
With the help of UKTI, we eventually decided on a 49/51 joint venture, with Titan holding the majority shareholding and providing indigenous manufacturing capability, sales expertise for their home market and existing Indian customers.
In return we offered our intellectual property to enable the Indian partners to upgrade raw materials, paint formulations and production methods, and - after several visits to India - signed a joint venture agreement. The opening celebration involved a full Pooja ceremony with an altar and the burning of fruits and offerings to Ganesh, the elephant God and then later offerings to Lakshmi the God of prosperity and knowledge and also the official Hindu God of the Lakshmi group.
We had not thought of ourselves as an international company before and this has been a great adventure. However, we would not have concluded the deal so smoothly without our International Trade Adviser's help. It has been incredibly reassuring to have UKTI there to share their experience with us - and in fact we would not have been able to get to India for the meetings in the first place had they not enlisted the help of the Embassy in procuring visas for us.
As well as a great deal of personal involvement and advice, he provided us with a PowerPoint presentation on key points to be aware of when setting up a joint venture, and we are still using it today - it has been like a bible for us!
We are delighted with the way things have turned out, and the joint venture company already looks set to become profitable from the first year. We hope to get great dividends from the new company - as well as creating a facility to manufacture paint for the Indian domestic market we also hope to create links with the Far East and Middle East from our new base and so increase our customer base even further.
We already had good synergies between ourselves and Titan, both being family owned businesses making similar products and with an established trading relationship. But the cultural differences involved in doing business in India should not be underestimated and it was great to have support and advice on the end of the telephone whenever we needed it.
Our Adviser has been a great asset - helping us to run when we should have run but providing reality checks so that we also took our time and walked when we should have walked! He also made us realise the value of our IP in an international context, which we hadn't considered before, and we have since had queries from the Middle East which we are considering following up."
John Fenton, Operations Board Manager, and John Falder, Managing Director
HMG Paints Ltd, Collyhurst, specialist paint product for general, industrial and transport use.
www.hmgpaint.com
Your Adviser for International Trade can be contacted via Derek Swan on 0845 603 7053