3 things you should look at before committing to a business partner in a new market


finding the right business partner

finding the right business partnerThe right business partner for a market entry venture is one that complements an organization’s capabilities and has a compatible business style and approach. However, complementary skills are not enough—the two organizations must also be able to interact effectively.

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.

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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.

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?
Interested in a broader look at the topic that also includes market entry implementation, law and ethics, and intercultural skills? Then the FITTskills International Market Entry Strategies online course is for you! Sign up for the course today to learn how to ensure your success in new markets around the world!

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About the author

Ewan Roy

Author: Ewan Roy

I'm a Digital Marketing Specialist for the Forum for International Trade Training (FITT). My background is in writing and research, and I am passionate about communicating new ideas and telling stories that matter to you.

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