The extent and nature of interaction with the business partner will be determined by a number of factors, including uncertainty in markets, technology and resource supply, and the complexity of the production or marketing tasks involved. The more these variables are involved in the venture, the more the organization will depend on effective interaction with its partner.

In such circumstances, an organization wants to find a partner whose organization and corporate style complement its own. Evaluating a potential partner’s characteristics, attitudes and operations will give you a good sense of whether they are the right fit for your company.

1. Characteristics

Of paramount consideration are questions of size, organizational structure, management style, operating policies and philosophy. There are many examples of organizational or cultural clashes that resulted in business partnerships ending even though organizations seemed compatible at first.

At this point in an organization’s analysis of prospective partners, several characteristics will already have been evaluated. These findings should now be compared with the identified gaps in the organization’s capabilities. A good fit exists when a business partner is able to fill those gaps and is compatible in other respects as well.

Ideally, the partnering organizations should be of a similar size. If they are not, special provisions may be necessary to prevent the larger partner from dominating the relationship.

The marketing capabilities, experience and strategies of the potential business partner should be appropriate to the product. They should be similar to the organization’s marketing capabilities, except that they should relate to the target market.

Ideally, corporate cultures should be closely matched. This is not to suggest they have to be identical. The partners, after all, operate in different environments. But the fundamental values that underlie each organization’s business approach must be reasonably similar if the partnership is to succeed.

2. Attitudes

The next step is to make sure each organization can cooperate easily and effectively with the other. If not, there are likely to be substantial coordination and communications costs, along with a high level of frustration.

It is also important to understand what a potential business partner wants from the relationship. Are the goals of both organizations compatible? The more divergence there is between strategic objectives, the greater the risk of dissatisfaction and associated problems.

This is why it is essential for organizations to have a clear idea of their strategic objectives when planning market entry strategies. If an organization does not focus on what it wants to achieve from international trade, it risks an eventual loss of control, with the partner’s needs dictating the direction of the partnership.

Each partner’s set of objectives should harmonize with the other’s, and both sets should fit into an overall strategy. Otherwise, the partnership might not meet the needs of either organization.

The goal is to create a win-win situation. If the partners have unclear or divergent objectives, this will be difficult to achieve.

It is also important to determine how critical the proposed venture is to the prospective partner’s long-term business strategy. Does the partner need the venture to meet its own tactical and strategic objectives?

In the final analysis, the overriding consideration must be the potential partner’s commitment and trustworthiness. Trust is crucial, especially where areas of core competence are involved. Today’s partner might become tomorrow’s competitor, especially with market entry strategies such as licensing. Exposing a proprietary strategy or technology to an unreliable business partner could seriously damage an organization’s competitive advantage.

Interested in a broader look at the topic that also includes market entry implementation, law and ethics, and intercultural skills? Then check out the FITTskills International Market Entry Strategies online course!

3. Operations

Operating an international business involves tackling many logistical problems. Marketing, order fulfillment and after-sales services and collection must be coordinated, and the need for central control must be balanced against the need for a degree of local autonomy. When the challenges of distance, language and cultural differences are added, the difficulties can be significant.

It is essential for organizations to find a business partner that can help deal with these obstacles and that has established communications, logistical and management operational systems.

How do current potential partners line up with your idea of an ideal business partner?

The following list is designed to help organizations compare their characteristics with those of a potential partner. You should assess these criteria twice: first when the characteristics sought in an ideal partner should be noted, and again when a possible partner is identified. That partner’s actual characteristics should be entered and then compared with those of the ideal partner.

• Number of employees
• Annual revenues
• Nature of business
• Product lines
• Competitive advantages
• Experience in the industry
• Strategic objectives
• Nature and value of existing
• Relationships
• Weaknesses
• Strengths
• Capabilities
• Technical skills and resources
• Marketing orientation
• Characteristics of corporate
• Culture
• Financial resources
• Proposed role

Developing a deeper level of partnership? Ask these additional questions to make your decision

Some market entry strategies, such as joint ventures and mergers, require closer collaboration between partners than others, such as direct exporting. For these intensive business relationships, organizations should also assess the following:

• How much cooperation will be required between the partners?
• Do the partners’ differences in size, structure and objectives require special arrangements?
• Can differences in corporate values and culture be accommodated?
• Are operations centralized or decentralized?
• Are their organizational structures compatible?
• Do the partners have similar attitudes to marketing, distribution strategies and customer service?
• Are their financial objectives compatible?
• Do the partners have a similar understanding of the risk involved?
• Do they agree on the distribution of dividends, reinvestment and indicators of financial performance?
• Do the partners have similar employee policies, compensation programs, hiring strategies and attitudes toward labour relations?

The post 3 things you should look at before committing to a business partner in a new market appeared first on Trade Ready.

Any market entry strategy can involve working with a business partner. Direct exporters may partner with distributors and indirect exporters may partner with trading houses. All forms of strategic alliance involving partner organizations, mergers, and acquisitions are more likely to succeed if an organization has developed a working partnership with the target organization first.

Even with Greenfield investment, an organization might need to work with a foreign partner to, for example, find financing or obtain supplies for a newly built factory.

Local partners can provide on-the-ground knowledge and contacts. Foreign partners also help reduce the risk to the organization.

In a broad sense, partners can also include governments and other organizations, such as financial institutions. Governments play a significant role in the promotion of international trade and offer a number of support services to organizations to facilitate expansion into markets. The same can be said for non-governmental organizations (NGOs) and industry associations. Consultants also provide international trade services that organizations can access. Financial institutions can play a supportive role for organizations embarking on international trade.

The success or failure of market entry depends on the partners with which an organization works. The search for the best partner possible can be both time consuming and costly. Partnerships can succeed only if the participants are willing to devote sufficient time, energy, resources, and skilled people to make them work. This includes the effort needed to find the right partnership. The updated FITTskills seventh edition International Market Entry Strategies course dives into where you should be looking when searching for a foreign business partner.

Finding the Right Business Partners 

Organizations may have to evaluate many candidates before a suitable partner is found. Fortunately, there are many sources of information and assistance that can provide the names of potential candidates, supply background information about them and help verify information provided by the candidates. Such information is vital to building your team of foreign partnerships.

1. Business Associates

Effective partnering depends on effective networking. This is especially true for small businesses. Formal and informal business links are important ways of developing contacts, securing business information, initiating cooperative activities, gaining access to new sources of capital and obtaining technology.

Business associates with experience in the target country are especially valuable, as an organization can often hear about a potential partner when discussing other matters with a business contact.

Initial exploratory meetings with potential partners often produce much better insight into market dynamics, segments, and competitors. This means early meetings with other market insiders are often an incredibly valuable source of information.

Networking through people you have a relationship with is one the best ways to find potential partners. Personal introductions carry a certain level of trust, so start searching for introductions to likely partners. Let people close to you know you are looking for a partner. Ask for introductions. People are often willing to share their networks when it seems like a ‘win-win’ for everyone involved.

If you identify someone specific you would like as your partner, ask your network for introductions. You would be surprised how often you’re only a couple of introductions away from almost anyone.

2. Business Associations

Business associations include chambers of commerce, boards of trade, industry associations, and bilateral business councils set up to develop trade with specific target countries. These associations can provide contacts and business information. Chambers of commerce and industry associations in target countries are also good sources of information. In many countries, industry associations maintain industry statistics as well as membership lists.

3. Business Advisors

Organizations should consider using consultants and specialists, such as lawyers and accountants, to search for potential partners. Although this can add to the expense of market entry, business advisors can use their experience to set up new networks rapidly and speed up the introduction of contacts.

For smaller organizations new to international trade, such services can greatly decrease the time involved in establishing an effective partnership.

Some organizations with investments in a group of local firms might seek partnerships with organizations that have invested in a complementary group of firms, as a means of helping their clients expand and develop.

4. Financial Institutions

Banks, individual traders (brokers), export credit agencies (ECAs), and trading organizations are all useful sources of information about potential partners in target market. An organization’s bank has a vested interest in the organization expanding its business successfully, and if bank has a branch in the target country, the local branch will usually provide a broad range of local business information.

An organization’s relationship with relevant financial institutions can be critical for international trade, not only in terms of partnerships, but for all types of market entry strategies. Financial institutions can often provide referrals to other institutions and individuals that can assist the organization in achieving its goals. Financial institutions can also provide information and support towards financing a venture. They are also excellent sources for information about current governmental and non-governmental programs, such as foreign investment programs.

5. Social Networking Sites for Entrepreneurs

Similar to business associations, online communities of entrepreneurs can be a good source of information related to potential partners.

There is a growing number of social networking sites devoted to making connections between potential partners. They provide a platform for sharing information and often encourage discussion.

This can be a unique way to access current information and opinions related to the target market and potential partners.

How did you your business partners help your business grow? Let us know in the comments down below. 

The post The 5 types of foreign business partners you should seek when expanding globally appeared first on Trade Ready.

My takeaway from this discussion was the need for Canadian importers to focus on maintaining profit margins, as opposed to maintaining market share at the expense of profit margins.

The lower value for the Canadian dollar, in relation to the U.S. dollar, should therefore act as motivation for Canadian businesses to engage and work with consultants to help improve their own productivity.

Working with a consultant or consulting group to improve your company’s communications and increase efficiencies within the business and across the supply chain can reduce operating costs. This is a critical ingredient for sustained business growth.

Investing in knowledge to improve decision-making, for example, can result in greater competitiveness.

This requires a productivity mindset that accepts that currency and commodities price fluctuations are beyond the control of individual businesses.

Another crucial way to increase revenue is to learn how to improve your communication with business partners, both to build successful new agreements and work out any issues, maintaining strong relationships with existing partners.

When negotiating import-export agreements in particular, it’s vital to establish transparent communication channels to convey expectations and resolve disputes.

This will enable the business to remain focused on productivity and competitiveness.

Sharpen and clarify communication channels

Too often, businesses negotiate import-export agreements with other parties without first identifying each other’s business culture and expectations.

The business needs to identify both the formal and informal “human communication channels” that will operate along the supply chain.

To establish a sustainable working business relationship, make sure the agreement establishes clear communication channels that are supported by organizational structure at the operational level of the business.

Without the proper communication channels and understanding of each other’s expectations, misunderstandings can ensue during negotiations, which may delay or ultimately break down talks between companies before an agreement can be reached.

When disputes and inefficiencies happen, in hindsight, business leaders often find that, “if only they knew then what they know now, they could have been more productive”.

The degree of alignment of communication activity across the supply chain with the expectations of the business can impact both qualitative and quantitative outcomes.

For example, a multinational corporation that manufactures worldwide with exports globally ensures that communication documents, from brochures to contracts, purchase order forms, invoices, letters of communication with customers and sales presentations, are all vetted for consistency by a team that has input from the corporate, operations, finance, and marketing departments.

This is done to ensure that at each stage, from initial contact with a prospect to placing of an order, delivery and request for payment, there is minimal possibility for dispute arising due to a miscommunication.

The result is a smooth flow of delivery from factory to the ultimate consumer.

An efficient supply chain delivers to the satisfaction of consumers thereby encouraging more business and prompt payment.

You will need to identify:

1. The degree of alignment of process implementation with the agreed terms of the import-export agreement

2. The steps that need to be taken to encourage alignment of collaborative processes with the agreed terms of the import-export agreement.

To improve productivity and prevent disputes arising the business should:

1. Assess the patterns of formal and informal communication channels among individuals, teams, and functions; internally within the business, and across the supply chain with partners, customers and competitors.

2. Take targeted steps to align communications and business processes with the aims and objectives of the import-export agreement.

3. Reduce inefficiencies by eliminating communication channels that do not produce significant value.

Negotiating international business agreements require an understanding by both parties of what it will take to implement the agreement in order to achieve desired business outcomes.

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