"A fortunate marriage of opportunity and need"

CHINA FOCUS TALKS TO PREMCHAND CHANDRASEKHARAN, VP OF AVALON CONSULTING, AND STEFAN KRACHT, MANAGER CHINA CONSULTING OF FIDUCIA, ABOUT A SPECIAL PARTNERSHIP.

China Focus (CF): How did the partnership between Fiducia and Avalon begin?
Stefan Kracht (SK): It started like every good "love story" does - by pure chance. One of our consultants in Shanghai was in contact with the Confederation of Indian Industry (CII). Through this co-operation with CII a meeting with Avalon came about. And that single meeting very quickly panned out into a working relationship on joint projects.
Premchand Chandrasekharan (PC): For us, the relationship with Fiducia came as a fortunate marriage of opportunity and need. At that point of time, an Indian client of ours wanted to evaluate a business opportunity in China. So we were looking out for partners. This was when Fiducia was in talks with CII with whom we enjoy a close working relationship. So really, it was a great coincidence that lead to this successful partnership. Since then we have worked together on over 15 projects over a period of more than three years.

CF: Do you still remember what this first project was about?
PC: Yes, I was fortunate to be associated with this project. The client was a well-known auto component group in India. Now, this company wanted to evaluate China as a possible investment destination. Basically they wanted to set up a manufacturing facility with the aim of targeting Western customers. They were looking at India and China as two alternative options for a plant location. We were very much capable of doing the India part, but the China part was harder. Fortunately, this is where Fiducia and their China expertise came into the picture. We settled into a comfortable synergetic working arrangement and our client was extremely satisfied with our work. This is the pedestal on which we started to build our China practice.

CF: Would you consider this a typical Fiducia-Avalon project?
SK: Yes, I would say so for three reasons. The project was an evaluation, it had to do with Indian investment into China with an export focus and it was in the automotive industry. You see, the basis on which our two companies cooperate is a very similar work approach in our methodology and the output we generate. And both of us also mostly deal with industrial and manufacturing companies, especially from the automotive sector, so from a client-sharing perspective there is also a very large common ground.
PC: Many of our joint projects have been related to the automotive and engineering sectors, even though we have also done some work in chemicals and other areas. There is no particular reason why we shouldn't do work in other areas. It's just that China has a strong manufacturing focus per se and also there is a number of Indian companies trying to become global players in the automotive industry which is almost impossible without engaging in China.

 

"There are a lot of similarities in the way that Chinese and Indians do business."
Premchand Chandrasekharan, VP, Avalon Consulting

 

CF: Have you done some joint work in the Chinese steel industry?
PC: We haven't directly worked for an Indian steel manufacturer yet, but in almost all the assignments that we have done with Fiducia so far, steel has been the basic raw material. We have extensively studied the Indian steel industry and the same goes for Fiducia and the steel industry in China. The Chinese costs of commodities such as steel have been a major driver of competitiveness and profitability which is why Indian companies look into China from a sourcing standpoint. Recently, China has also become interesting in terms of downstream value addition, and of course the Chinese domestic market itself is very attractive.
SK: Yes, we have done some joint work on the downstream markets for steel. One of our clients was an Indian manufacturer who buys the raw material in China and processes it into seamless steel tubes.

CF: What is the added value that the Fiducia-Avalon partnership provides?
SK: One aspect is certainly that, while retaining our individual identities as companies, the basis of Fiducia's and Avalon's work is very similar. I think clients quickly develop a high confidence level when working with both of us, either jointly or independently. Another aspect is that the whole pitch for Avalon-Fiducia is very strong: India and China. Our real competitive edge is that we are able to give comparisons between the world's two biggest emerging markets with a similar evaluation basis and approach. At the same time we have the know-how about cultural differences and business and regulatory environments in each country.
PC: Many of Avalon's clients are from the "old economy" - manufacturing or chemical companies - and most of them are talking of engaging in China. The main value of our partnership is that we can really offer a one-stop solution for China strategy. It does not matter whether you want to invest in, set up a manufacturing base or source from China. China is compelling and daunting at the same time. It gives a lot of comfort to our clients that we have it well covered.
SK: And our client base is similar as well. Many of Avalon's clients are large family-owned industrial manufacturers. Fiducia also has, especially on a European level, a strong client background with large industrial companies that are family-owned. This is a clear benefit: we understand owner-operated firms.
PC: Yes, with these clients it goes beyond the professional contact, more like a trust-based relationship.

CF: How do you see the picture of trade between India and China today?
PC: The oldest joke about the relationship between China and India is that the flights from Delhi to Beijing are always fuller than the other way round. The Indians still have a much bigger interest in China than the Chinese in India. On the other hand, if you look at China's trade surplus, there are a lot of Chinese products coming to India. Of course, a lot of this is also due to the initiative of Indian companies who are actively going to China for sourcing. But I think there will be a shift since more and more Indian service companies, for example big IT firms, set up shop in China with the view of expanding their businesses. That's where I can see the trade relationship between the two countries becoming more even.
SK: I agree. On our side, we have not yet come across many Chinese companies looking to invest or sell in India, but I can still see this is a future trend.

CF: How do Avalon's consultants deal with the cultural differences when working on Chinese projects?
SK: Here I have heard a joke: China doesn't have enough Indian restaurants to accommodate all Indian businessmen that come into the country.
PC: Yes, it can be difficult (laughs). There are quite a few consultants at Avalon who are vegetarians and they have a really tough time when they travel in China. But the main cities such as Shanghai or Beijing are pretty Indian-friendly now. However, I think the main barrier that Indians face when coming to China is the language.

CF: Many would think that the Indian culture is more similar to China than others...
SK: Quite the opposite actually. Both the Indian and the Chinese culture are very old and distinct cultures with a rich cultural heritage. One difference I have experienced is that Indians share more information than Chinese do. I am always positively surprised how Indian investors already know so much about China through personal contacts in other companies or even competitors.
PC: At the same time I think there are a lot of similarities in the way that Chinese and Indians do business, a certain confidence and trust between business partners which is so different from the Western world. There is a lot of respect for tradition.

 

"The whole pitch for Avalon-Fiducia is very strong: India and China."
Stefan Kracht, Manager China Consulting, Fiducia

 

CF: What do you see as the main challenge Avalon has to face in 2008?
PC: The greatest challenge that we are facing is attracting and retaining talent. Since the economy is booming we have more and more business opportunities between which we are now forced to "pick and choose'. It is challenging to find the right mix of qualified staff at all levels. Another strong challenge is that every Indian business entity of a reasonable size wants to do business with China. This is where we extremely benefit from our strong partnership with Fiducia. We have to pick up the right engagements where we can add maximum value.

CF: Where do you see the partnership Fiducia-Avalon head in 2008?
SK: For current projects that we jointly work on, we will add more value to the client relationships in terms of depth. We will have much smarter, more sophisticated Indian investors given the learning curve of Indian investment in China. I expect that we will see acquisitions by our clients in 2008 and more strategic interactions between Avalon and Fiducia. Through Avalon's great idea to host events in India we will be able to get a large number of new clients who are already much better informed at an early stage. And there are no limitations for the type of industry we can service even though we will most likely stick to what we know best: industrial projects.
PC: Ditto. We will be doing a lot of value-added work together and hope to have deeper engagements with Indian and Western clients.

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