Five Ways to Build a Good Overseas Relationship: Help from U.S.
Leaders
- Be Careful in Choosing Overseas Partners and Distributors
- Treat Your Overseas Distributors as Equals of their
Domestic Counterparts
- Learn the Dos and Don�ts
- Be Flexible in Forming Partnerships
- Concentrate on the Relationship
This is crucial. Whether you choose to go with a subsidiary, agent export
trading company, export management company, dealer, distributor, or your own
setup, you must spend time and effort to investigate the potential and
pitfalls of each. Pay personal visits to potential partners to assure
yourself of their long-term commitment to you and your product and of their
experience, ability, reputation, and financial stability. Rather than
relying on bank or credit sources for information on a prospective
distributor�s financial stability and resources, hire an independent expert
to advise you.
The keys to Black and Veatch�s corporate success, says company spokesman
Jim Patton, is a meticulous search for partners that focuses on "shared
philosophies," past business conduct, and dedication. After all, we�re
asking the business to give up two years to be absorbed into the Black and
Veatch�s way of business. We want to be sure we�re right for each other. On
the environmental side, picking partners with distinct and separate services
or geographical markets is key. (See the Black and Veatch/Binnie acquisition
Case Study.)
Your overseas distributors aren�t some poor family relations entitled to
only to crumbs and handouts. Everyone needs and deserves respect including
your distributor. They are part of your company�s future success, a division
equal to any domestic division. Offer them advertising campaigns, discount
programs, sales incentives, special credit terms, warranty deals, and
service programs that are equivalent to those you offer domestic
distributors and tailored to meet the needs of each country.
Also take into account the fact that distributors of export goods need to
act more independently of manufacturers and marketers than do domestic
distributors, because of the differences in trade laws and practices and the
vagaries of international communications and transportation.
McDonald�s partners in Korea adhere to the company�s overall standards of
consistency and quality, Trask says, but, in all other ways, McDonald�s
restaurants in Korea are thoroughly Korean -- Korean owned, staffed, and
operated. "We are not operational police," Trask says. The company knows to
leave well enough alone and trust its partners. "Those partners have
purchased the rights to a formula for proven success. We�ve never found
anyone foolish enough to fly in the face of success. Instead, they�ve
adapted the formula to suit their needs." Although burgers are a long way
from electrostatic precipitators, the message is clear even for
environmental companies: you have to trust your partner or your partnership
will not work and not last. Therefore, learning to trust your partner is a
key element for international business success.
Each country has a unique way of doing business, a process developed for
years to match the history, culture, and precepts of the people. Ignore
these practices and you lose. "McDonald�s system has enough leeway in it to
allow the local businessman to do what they have to do to succeed," Trask
says. Thus, every new McDonald�s in Thailand holds a staff night just before
the grand opening. The families of the youthful employees descend en masse
to be served McDonald�s meals in an atmosphere that they can see for
themselves is clean and wholesome." This was a practice developed for the
Thais by the Thais. Ask yourself, how you can get in touch with the business
culture in which you�re planning to operate. Ask your partner, and they will
tell you.
American companies in particular are notoriously obsessed with gaining
majority share of a joint venture, the type of partnership most favored by
East Asian governments. One reason is accounting: Revenue can show up on the
books at home only when the stake is more than 50 percent. Another reason is
the U.S. Foreign Corrupt Practices Act, which makes U.S. citizens and
companies liable for the conduct of their overseas partners. The idea is
that majority control translates into control of the minority partner. Here
again, Japanese practices are illuminating. Ownership is yet another area in
which the Japanese have succeeded; they see a two-sided relationship in
which Americans see themselves as the superior partner in knowledge,
finances, technology, and culture -- in other words, know-it-alls.
Westerners, and Americans in particular, have a lot to learn about
flexibility in business relationships. McDonald�s has chosen the 50-50 joint
venture route, with great profitability -- more than half its income now
comes from outside the United States. Kentucky Fried Chicken is another
American company that has found enormous success by being flexible. "We have
a philosophy of relying heavily on our joint venture or franchise partners
to guide us. We�d never dream of trying to impose our attitudes on them,"
says Trask.
Keep in mind that there is more than one way to do business overseas and
that changing laws or market conditions will often force you to consider
other options. Although distributorship may be best at first, a joint
venture or licensing agreement may be the way to go later.
This point cannot be emphasized to greatly. The Confucian culture of East
Asia emphasizes personal relationships above all else. Building a good
relationship takes time, patience, courtesy, reliability, dignity, honorable
conduct, and farsightedness; a poorly developed relationship dooms even your
best marketing efforts to failure. One U.S. computer maker made a great
mistake when it fired its Asian distributor after a falling out. The
dismissal, handled in a typically abrupt American way, caused the man to
lose face and ruined all the relationships the company had built through
this man. For three years afterward, company executives couldn�t find
another distributor, because no one would talk to them. Not only did the
company lose untold millions of dollars in sales, but it took US$40 million
in advertising to create enough consumer-driven demand for local
distributors to even consider meeting with the firm.
So, do your very best to build a sound, trusting and profitable
relationship with your overseas partners. They are putting themselves on the
line for you, spending time, money, and energy in the hope of future rewards
and a solid long-term relationship.
And, by all means, don�t expect your foreign distributors to jump through
hoops on a moment�s notice. For example, they need price protection, so they
don�t lose money on your price changes. If they buy your product for US$100
and a month later you cut your price to US$90, you have to give them credit
so they don�t get stuck with inventory at the higher price. If you raise
your price, you have to honor your prior commitment while giving ample
notice of the increase.
With their focus on long-term personal relationships, mutual respect, and
trust, East Asian firms, in particular, make honorable partners once you
have gained their confidence by showing them they have yours. |
