Handling international sales: choosing the right partner.

SMEs cannot sustain international business stalemate, calling for effective partnerships. However, companies shall leave a sales-only evaluation approach to include several other parameters to assess the advantage of a partnership. Moreover, SMEs must avoid self-proclaiming sales wizards and unstructured lip services, as there is no room for waste, and data analysis can help from the decision-making stage.

The role of local distributors.

Business literature shows that a local distributor is a fundamental asset in market expansion. However, cooperation between the manufacturer and local distributors must go beyond a commercial process.

After the initial reap of benefits (also known as “low hanging fruits”), commercial partnerships tend to reduce profitability; the parts will start blaming each other with disruptive effects on commitments. Companies should invest more in strategic marketing and foster long term cooperation that produces better market intelligence and resilience.

Local distributors are a great asset to get insight into foreign markets and develop new ways to handle operations. If that does not happen, both parties shall go back to the basics and nature of their cooperation.

Strategic thinking.

A subsidiary is a considerable tool for market uncertainty reduction. Due to its integration with the headquarter and reliability, it will promptly share market intelligence and respond to demand differentiation or market constraints responsively.

Unsolicited proposals are not a good start.

Too often, companies choose partners and foreign markets following enthusiastic and too simple statements about potential and demands. The company will align with the local supplier, losing power in product and service positioning. Typically, the company does invest little in strategic marketing, overly relying on the knowledge of local distributors in addressing customers. This approach is called the “Beachhead strategy”.

Distributors are recipients of strategic market decisions, and companies must not expect the former to invest much to set the products and nurture the market. At the same time, new Firm-Specific Advantages are the actual value of distributors: adding expertise in operations handling in specific circumstances is as important as sales.

Deeper cooperation.

A mixed approach.

Once companies realise that Beachhead strategies are not profitable in the long term, they retain the option to steer towards a mixed approach. First, the manufacturer will create a subsidiary to handle a client that needs product customisation and guarantees relevant volumes, leaving smaller, commodity recipient clients to the local distributors. Second, the subsidiary will interact with the local distributor by giving strategic marketing guidelines. Third, the subsidiary shall create new FSAs combined with Country-Specific Assets (CSAs) and integrate them into the headquarters knowledge.

Choosing the right local distributor.

Companies must look beyond sales potential in identifying the right distributor. While the market acquisition is a primary goal, overly focusing on sales can lead to misjudgements in operation handling, integration, and corporate culture development.

In line with the recommendation about unsolicited proposals, companies should choose markets first, then look for potential local distributors; too often, international expansion activities follow the inverse path, creating confusion at the strategic level.

Companies should cooperate with a local distributor that has no mandate from competitors. While reducing commitment, sharing strategic insights with a compromised distributor would be benefit competitors and reduce product positioning, as the local distributor is likely to make up/down selling at its advantage.

Companies shall find a match in terms of culture, vision and operations. By sharing a vision for future development, cooperation will run smoothly, and the achieved stability will lay down the path to more significant investments in strategic marketing. Forward-looking partnerships are functional to create a regional network of distributors that cooperate in developing new FSA and market intelligence.

SMEs cannot sustain international business stalemate, calling for effective partnerships. However, companies shall leave a sales-only evaluation approach to include several other parameters to assess the advantage of a partnership. Moreover, SMEs must avoid self-proclaiming sales wizards and unstructured lip services, as there is no room for waste, and data analysis can help from the decision-making stage.