Export success often depends on building and maintaining strong partnerships with overseas companies.
Matthew Grandage from export specialists Chamber International shares insights on how to do this, and avoid common pitfalls.
102 of the 243 UK/Ireland large-format PSPs responding to the 2017 Image Reports Widthwise Survey said building overseas trade would be a top priority over the next year. If you are one of those, here’s what you need to know…
1. Whittle down your priorities
Building partnerships is costly so - unless you’re a big business - you may have to focus on just one or two new markets. If one country or region is of special strategic value to you and it requires local partnerships for success, then give that priority - issues in other places may sometimes be more urgent, but rarely will anything be more important!
Remember that there can be different reasons for needing strong partnerships in a country, for example:
- restrictions on foreign company activity
- language and culture different to your own
- highly relational society
2. Plan for partnership
If your strategy requires building good local partnerships, consider how you are going to resource that effort well in advance of actually doing it. Think about:
- Your people - can someone from your team drive this well? Do you need to recruit or reorganise?
- Your capacity - will you be able meet the needs of the new market, once it opens up?
- Your presentation - can you present yourself well to a potential partner? Will you need to adapt for cultural or religious reasons? What will need to be translated?
- Your knowledge - do you know enough to be able to have a meaningful dialogue? Do you know where your limits are? What do you need to know in order to demonstrate that you are committed to this market?
- Your finances - do you have the cash needed to sustain your efforts until this partnership becomes profitable? Make a realistic budget for the project.
3. Don’t be too trusting
Try to avoid partnership models that require a high level of trust at the outset - either from you or your partner company.
I’ve noticed that when UK companies first visit a new country, they can be tempted to entrust themselves too much, too quickly. Say you’re at trade show and looking for a suitable distributor, then one person approaches, speaking better English than most others, and suggests you make him your exclusive agent. Saying an immediate “Yes” is probably going to be a mistake, of course. Do thorough research and only then, if you’re satisfied, begin with a non-exclusive arrangement, possibly with time limits.
4. Be clear about where responsibilities lie
Whether you’re using a distributor, registering a joint-venture or setting up some other kind of partnership, it’s essential to clarify who is responsible for what. When working overseas this is especially important because expectations and regulations can vary hugely. Whatever your role in the partnership, always seek independent advice, be crystal clear regarding matters of ownership, delivery and payments. Always remember to protect your intellectual property (both registrable and non-registrable). No matter how good you think the partnership is, never allow your partner company full access to your essential IP.
5. Know your options
Is the partnership model you’re being offered the only (or the best) way?
Here’s an example regarding joint-ventures in China. A decade or so ago, one of the most common models for partnership in China was the JV. However, in recent years the regulations for setting up Wholly Foreign Owned Enterprises (WFOE) have relaxed, making them a much easier option than before, and there are other models available which involve even less investment. However, Chinese companies will often propose establishing a joint venture - a much more risky route for the incoming company, but one which is sometime agreed by companies who don’t understand the alternatives. Thinking clearly about all the partnership models and choosing the best upfront will reduce trouble in the future.
6. Know thy neighbour
In highly relational societies (including many Asian ones) strong business partnerships are marked by a desire to help the other’s business do well. That can sometimes mean assisting with matters which seem outside of your normal work. Building strong partner relationships will involve “putting yourself in their shoes” and trying to understand what they need from you - it may not always be what you expect.
One good partnership I had with an overseas government department required “our side” to attend a number of events unrelated to our business, and occasionally make speeches.
Why? Because part of what that partner needed from us was to stand with them publicly and made them look “international”. Maybe some of our requirements seemed as odd to them!
7. Manage expectations, plan to exceed some
Working with an overseas partner may feel more like a social relationship than we’re used to in normal UK business relationships. That’s partly because face-to-face meetings will involve travel, hosting, meals, and other outside-work activities. With regards to this social dimension, your overseas partner may have expectations of you which simply cannot be met - frequent visits by your MD, for example. These need to be addressed and managed early. Then, in general, for a good relationship it’s important to meet agreed expectations and also to exceed some.
8. Mind your language
It’s hard to over-stress how important language is to building strong export (or other) partnerships. Take extra care to use clear, simple English. Some people are better at this than others - and that’s one reason not to entrust an overseas partnership to just one person in your company (more reasons coming!). Get key documents translated into the receptor language. Always give your partners easy ways to check that they have understood your meaning correctly. Give time to make sure you understand them correctly too.
All of this requires patience, discipline and time. And of course, contract language is an area that requires for extreme caution and clarity! Keep it simple.
9. Keep short accounts
In some cultures it is common for one party to build up ‘favours’ and then claim something big back later. Therefore, if an overseas partner (agent, distributor, supplier) seems to giving an undue amount of help outside of normal work, try to return a favour quickly and not let things build up. Otherwise they may be badly disappointed later when they expect for some help from you which you are not able (or willing) to give - and that may end a business partnerships you have both invested a lot in.
10. Get paid and get insured
Make sure you minimise the potential for friction by using internationally trusted mechanisms for payment, delivery and risk management. Use the correct Incoterms (internationally agreed rules setting out delivery terms for goods traded across borders) and make sure that contracts are ultra-clear regarding payment and delivery terms. What’s the best method for payment in this situation - might it be a documentary letter of credit? Or even Alipay or Paypal? Is there any insurance available that can address risks and take the stress out of your relationship?
Every month Chamber International helps hundreds of UK companies save time and money by getting practical issues like these right - but sadly there are others who don’t seek help and get badly caught out.
11. Keep talking
Keep in regular contact, and don’t just leave this to one person. Regarding trade with China I often advise “there’s no such thing a relationship between companies, only between people in companies”. So if your person leaves, the relationship is finished. Set patterns for communication frequency, and take account of normal communication methods for that country. Is this a partner that expects and would appreciate phone calls? Or messaging?
WeChat? What will be the best time for communications - bearing in mind time differences?
How often should you visit them, and they you?
Foreign partnerships are hard work - without regular communication they stand little chance of success, but when communication is working well they have a chance for success.