Many companies that are interested in exporting into an overseas market, are not ready to set up a subsidiary. They then have to choose between an indirect export method, using an export company, or a direct export method, using an International Partner such as a distributor or an agent.
Let us presume that your company has already decided which market they want to enter. They also know they want to approach the market through an International partner. How can they go about finding such a 3rd party, while minimizing risk.
A business partner relationship is often compared with a marriage: you have to start by choosing a partner you have “chemistry” with. Once married you have to work on the relationship. It is a task without end. And if the relationship goes bad, it can cause significant damage to both parties.
This series of articles will walk us through the process of finding the best International Partner to develop a foreign market. This article describes how to develop the Ideal International Partner profile.
Distributor or Agent
You must choose what type of International partner you want to recruit: a Distributor or an Agent. Much will depend on the goods or services you sell. If you sell consumer goods, enlisting a distributor is probably the most appropriate. But, if you sell large systems to only a few potential customers, who purchase only from time to time, an agent may be a better choice.
A distributor will purchase goods from you, and will invest in storing goods in country. They will then resell these goods in your target market at a price they find appropriate. The distributor can set price and market your productsas they see fit. practically you can use the contract to restrict what the Distributor can and can not do. In principle, they own the goods and can do as they please. As a result you will be further removed from the customer.
An agent does not purchase goods from you. the agent represents your company towards the customer, but the customer places their order with your company. the agent gets paid a commission by your company whenever a sale is concluded. In this case, the agent is bound to you by contract. they are not allow to represent you improperly, take orders or quote prices you have not approved. You will be more in touch with your customer as your will need to closely work with you to close the sale.
The Ideal International Partner Profile
Before setting out to find a partner, it is best to make a weighed list of factors which describe the ideal partner you are looking for. This is easier if you have already worked with partners. in that case you look at the partners you worked best with and you ask yourself the question why the relationship with those particular partners worked well. Reversely, ask yourself why the others did not work out. From those experiences you can probably distill a set of characteristics that describe an ideal partner.
If you have never worked with partners, you will need to take a stab at it. You can ask help from people who have worked with partners and ask them for their input. I general, characteristics describe factors such as financial stability, organizational structure and business culture, market knowledge and penetration, and capabilities such as marketing, sales, and support.
Once you have listed the characteristics of your ideal partner, I suggest you weigh them. For instance, financial stability may be more important than having very specific penetration in a particular submarket. As a result, consider to weigh that characteristic much heavier.
At the end of the exercise you will find yourself with a list of characteristics, in order of importance, which describe your ideal partner. Each characteristic weighed and the total weight of the characteristics adding up to 100%.
We’ll use this list in our 3rd Step. To Select the Best International Business Partner, Compare the List of Potential Candidates with your Ideal Partner Profile. But first we discuss how you find potential partners in the 2nd Step. Develop a list of Potential International Business Partners, Distributors or Agents.