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Looking for partners on foreign markets

MA_5

Title: Looking for partners on foreign markets

Keywords: partners in foreign markets, intermediary partners, sales, representatives, end –users, Enterprise Europe Network (EEN), crafts

Author: Comenius

Languages: English

Contents

Looking for partners is an integrated phase of the whole process of market analysis and market entry strategy. It significantly contributes to your business competitiveness. There are numerous resources available to help you to identify partners in target markets. However, to know the basics about process of identification and finding partners helps you to avoid pifalls and mistakes which could hurt your business.
When you have defined your strategy of penetration into target market you can follow the following steps of the process for looking for partners in abroad:
1. Choose one from the following four approaches, or their combination, that can be used in process of identification of partners for your penetration into foreing markets:
a/ to find domestic buyers who then export your product. In this case partners are domestic one and your selling approach to them is like you would sell somebody in local market. You will filling orders from domestic buyer and he/she then will export it even you don´t know whether it will be successfully exported. This your partner has decided that your product meets foreign demand. He/she takes all the risk and handels all exporting activities. Advantage of this approach is that it doesn´t ask any your knowledge about doing business in abroad and due to that is simple for you. However, disadvantage is that you, as original seller and producer, are not aware what is going on with your product. Usually, if original seller (yourself) learns about his/her product success in selling abroad starts to think about the other approach to find partners for selling in abroad that would alow him to be better recognized and participate more on sharing export margin.
b/ to find domestic buyers who represent foreign end users or customers. There are trading companies, local or foreing corporations, general contractors, foreign distributors and retailers etc. that purchase for export. In this case you may know your product is being exported even it is still the buyer who takes risk and handles all details of exporting.
c/ to use intermediaries who provide special services to identify foreign partners for your products (indirect approach). You as exporter can gain access to well-established expertise and trade contacts. And above all you can still retain considerable control over the process and realizte som of the other benefits of exporting such as learning more about foreign competitors, new trends in your business and other market opportunities. Typical intermediares are: export management companies; foreign agents; piggy back exporting partners.Export management companies (EMCs) functions as an "off-site" export sales department, representing your product along with various other non-competitive manufacturers. The EMC searches for business for your company and in area of looking for partners usually provides locating new, and utilizing existing foreign distributors or sales representatives to put your product into the foreign market. Functions as an overseas distribution channel or wholesaler. Takes ownership of the goods and operates on a commission basis. Foreign agents (FAs) are hired by companies for representation in overseas markets as the agent has knowledge of business practices, language, laws, and culture. There are different types of agents who perform a number of functions. The one you choose to hire is based upon how much you want the agent to do for you and how much you are willing to pay.
• Exporters use commissioned agents most often. It is the simplest way of doing things: The agent is paid a percentage of a sale only when the sale is made. This provides an incentive for the agent to work on your behalf.
• Retainer agents are paid a fixed amount to do certain work for a company over a specified period of time. The disadvantage is that it is difficult to monitor how hard they are working and they get paid whether they do anything or not.
• Retainer/Commissioned agents are placed on a retainer but also receive a percentage from each sale. The retainer provides them with funds to help run their business while the commission gives them additional incentive to work harder on your behalf. Piggyback exporting partners: when a company, which already has an export distribution system in place, is allowed to sell another company's product in addition to its own. A good advantage is that the requisite logistics associated with selling abroad are borne by the exporting company.
d/ to do directly own research in your target market to identify partners or end users as part of your direct exporting strategy. This approach is most ambitious and difficult. You have to be aware of significant committment of your time and effort if you want to find a good partners. On one side it is more risky and costly approach (as far as your own time and effort is) but may also be the best way to achieve high profit and long-term growth if it is properly executed with appropriate guidance from different state (national) and international institutions, international banks etc. that focus on exporting services. Partners for direct channels of your product may be: sales representatives, distributors/agents, end users.
• Sales Representatives/Paid by seller: foreign-based representatives who work on a salary/retainer plus incentive basis to locate buyers for a company’s products.
• Distributors/Agents: purchase merchandise directly from the home-country firm to re-sell at a profit.
• Direct Sales to End-User: Your product line will determine whether direct sales to the end-user are a viable options. Major end-user include foreign goverments, schools, businesses and individual consumers.
Approaches a/ and b/ are quite extensively used by small and medium size companies. However, they don´t require any special knowledge as far as foreign partners finding is. You can apply the same methods as for finding of local partners. If your export strategy, developed on your own goals and resources, is in favor of indirect approach (c/) it means you are new to exporting or you don´t have staff and resources that you could devote to more complex export activities then this approach is the most appropriate to you. There is a key to find suitable intermediares. However, applying this approach (c) still allow you to go directly to some well known markets for you (neighbouring country) and to apply indirect approach for finding partners in less known markets. Later, when you are more experienced in foreign market activities, then you can choose to gradually increase direct approach to find partners as part of direct exporting strategy.
2. Select ways (techniques, strategies) how to find partners and make contacts with them. There are different ways how to find partners and make contacts for arts and crafts. You can consider some of them listed below either as single one or in combination:
• Enterprise Europe Network (EEN) – the world´s largest support network for small and medium sized business (SME) with international ambitions. Network was established by European Commision with aim to provide support through local experts. It has 3000 experts across 600 member organsations in more than 60 countries. Member organisations include chambers of commerce and industry, technology centres and research institutes. EEN provides international business expertise with local knowledge across a range of targeted services:
• Partnership
• Advisory
The Network also offers specialised industry expertise across 17 sectors.
Partnership services
The Network manages Europe’s largest database of business opportunities. With the profiles in the database, Network experts can help businesses forge international partnerships with excellent growth potential. The database is updated every day, offers thousands of company profiles.
After preparing and submitting your own profile, you can join the database and receive regular updates about companies interested in working with you. The network can then connect you with selected parties and help you to broker a partnership.
The Network organizes 70,000 international business meetings every year and hosts matchmaking events throughout Europe, where you can meet potential business partners, on a confidential one-to-one basis if required. Many of these events take place at international fairs which means you can keep travel and accommodation costs down. These events can be divided into two separate formats with different purposes:
• Matchmaking and brokerage events where SMEs can meet potential business partners
o Fast and effective matchmaking event at international conferences and trade fairs
• Company missions for targeted international meetings with strong business prospects
o Tailor-made trade missions lead to successful partnerships thanks to thorough preparation. Local knowledge and expert guidance
? Advisory services
Network experts provide advice on market opportunities to help small businesses (craftsmen included) expand internationally. The network thanks to its local insight and various associated partners can cut through the complexities of international expansion by providing practical advice, targeted market intelligence and personalised support. These information are provided either through educational events and workshops or on an individual basis based on an assessment of the clients needs via individual consultations.
Advisory services include:
• Practical advice on doing business in another country
• Targeted market intelligence
• Information on EU laws and standards
• Advice on intellectual property
How to use these services: in order you are interested to make use of the partnership or advisory services provided by Enterprise Europe Network you can do so in your native language by contacting your local Network office. List of all Enterprise Europe Network members can be found under: http://een.ec.europa.eu/.
Important notice: all Enterprise Europe Network services are provided free of charge
• State and local government assistance. States provide an array of services to help to find partners both through agencies supporting small business (e.g. Slovak business agency in Slovakia), and commercial sections of ambassies of the ministries of foreign affairs. These sections can be contacted through ministries of foreign affairs.
• Assistance from national chambers of commerce, International Chamber of Commerce (ICC), World Chambers Federation (WCF) and arts and crafts national and international organizations. National chambers of commerce used to have their units or projects that are involved into active support to find international partners for SME. As local business support agencies, chambers of commerce connect ICC to small- and medium-sized companies and promote the important role they play in the global economy. WCF recognizes the valuable contribution of SMEs and helps them to face the challenges and opportunities of globalization. Arts and crafts national and international organizations used to present itself at webpages and inform about projects that support international business.
• Advertisement in periodicals , webpages; participation in catalog and video/catalog exhibitions, at trade fairs focused on arts and crafts etc. These means of product presentations can belonged to the cheapest ways of spreading message on your product if they are supported by government or governmental that have mission to support internationalisation of arts and crafts.
• Pursue Trade Leads. Trade leads are very important in identifying potential customers in abroad. They are most often accessed via Internet and offer an inexpensive way to establish vital links with buyers in target markets. There are a few portals that are a good source of information on leads around the world.
3. Qualify potential partners by reputation and financial position with aim to check them before entering into any agreements.
Once you locate a potential foreign partner the next step is to qualify them by reputation and financial position.
• First, obtain as much information as possible from partner itself. If you are O.K. with background information both from reputational and business points of view than you should try to get some credit information to check financial position of the company.
• There are different sources of information that could support you in decision making process. As far as financial position of your partner is you should go either through public credit information, social security or health insurance public data on past due clients in countries you are familiar from language point of view. You can also go to your bank and ask for banking information on your partners through correspondent banking contacts. For countries you are less familiar with you can obtain reports on due dilligence of foreign companies.
• To be sure that you don´t miss any important piece of information you should use some publicly available check list/questionnaire that you can adjust to sector specifics of your product and further needs.