By Jim Foley, Director – Turner Center Operations
Illinois SBDC International Trade Center
Selecting the right foreign partner in a new country is a critical marketing decision. The right partner can lead to new sales and profits. The wrong partner may mean significant lost sales, poor branding and ultimately withdrawal from the market. For most companies, their first foreign partner is their agent or distributor. As that partner will be doing most of the marketing activities in the country, getting the right partner is crucial.
A firm must begin by detailing what it wants from the foreign partner. How much of the sales and marketing burden will be pushed on to the partner? If the exporter is planning to open a distribution facility, then much of the logistics issues will be handled by the exporter rather than the partner. Similarly, if the exporter is planning to open an overseas sales/marketing office, there are considerably less expectations from the partner.
Following are some of the issues to consider when choosing a partner. These will help identify the potential strengths or weaknesses of each partner as well as the opportunities and threats they face in the country and industry in which they operate. These same strengths and weaknesses need to fit with the strengths and weaknesses of the exporter, and the opportunities and threats need to match with the international goals of the exporter. This may be difficult to achieve, which is why the selection of a foreign partner is most commonly selecting the ‘best’ partner among a list of considerations rather then finding the ‘ideal’ partner.
Product Lines Currently Represented: One of the best indicators will be the product lines (brands) the potential partner already represents. This reveals a great deal about their experience, strengths and focus. There may be some lines that would be competitive with the manufacturer’s product and preclude any potential for a representation agreement. This is particularly important for exclusive representation agreements. Manufacturers want to avoid ‘line collectors’ – companies that try to represent as many product lines as possible in hopes that ultimately one or two will be huge successes.
Industry Focus and Technical Knowledge: Most agents and distributors focus on particular industries. Though their focus may not be a perfect match, it can be used as a guide. If particular technical knowledge is required, such capabilities will need to be identified.
Years of Experience: Manufacturers are sometimes attracted to relatively new agents and distributors that may be more aggressive given their relative need to grow and succeed versus other competitors in the market. On the other hand, a mature, experienced partner may have the needed contacts to ensure greater success for the exporter.
Sales Structure: This is a critical indicator. It describes how the foreign company sells and to whom. For example, does the distributor only sell to retail locations, but never to the end-user? Does the distributor sell to large accounts?
Current Customers: If research has determined that particular customers are crucial, such as government agencies, some clarification by the company needs to be made to ensure they will be contacted.
Customer Support: If training, parts distribution or product repairs will be necessary, determine what customer support functions the company is able to provide.
Office Locations: The location of the main office and any other offices will indicate the geographical sales focus of the company. It will help determine what part of the territory it can effectively cover.
The Illinois SBDC International Trade Center can assist in finding suitable foreign partners. We subscribe to databases that list foreign companies by industry and sales activities. The State of Illinois Office of Trade and Investment offers direct assistance in finding and vetting foreign partners, as does the US DOC Peoria Export Assistance Center within the U.S. Commercial Service. Please don’t hesitate to contact us for your next partner search. For more information, call (309) 677-3075 or email firstname.lastname@example.org.