It is the right time for your company to go international, you have detected opportunities in one country for your products and you know you need a business partner to grab them.
Be sure that a big question will come up soon: “How to choose the right business partner?”
For more than 15 years now, I have been supporting foreign companies entering, growing and investing in Vietnam and South East Asia. I have always been surprised by their “conversion rate”, that is to say the percentage of companies that actually reach their objectives after 2 years. And whatever the sector of activity, this rate remains quite low at around 30%.
The main reason is always the same: the difficulty of finding and keeping THE right partner in a country, a market and a culture that you did not originally master.
So, in concrete terms, how do you choose a good business partner in Vietnam and ASEAN?
There are 4 main steps to follow, all of equal importance:
1. Upstream: set your objectives and MEANS!
2. In the target country: define the right criteria for selecting a partner who will MATCH YOUR NEEDS!
3. NEGOTIATE a clear agreement that protects you!
4. Ensure a PERMANENT MONITORING of this partner over time!
1. What are your objectives and what are your means?
A few years ago, an EU company came to me explaining that they were about to leave Vietnam after 3 years of trying to develop business there, through a local distributor. They were not happy with its sales results and had very little control over the actions of that business partner. When I asked this company about their initial objectives, investment plan, and milestones …. I realized they had none!
In other words: when you prepare your export plan, set yourself goals. And above all, be clear about the resources you can allocate to reach them: human resources, available time, and financial resources. And if internally you lack of some of them: rely on service providers!
Once you’ve set the timing and budget of your business plan, I advise to add 25% on top for safety and don’t start until you’re ready for it.
This is what we’ve done with that EU company: new business plan, new goals, new business partner and a deep review of this action plan on a monthly base… and today, 2 years later, they are distributed nationwide, with sales growth of 35% / year and Vietnam has become their most successful country in Southeast Asia.
2. Select a good local business partner
It might not be the most visible, the easiest to find, or the one you’re most comfortable chatting with. Don’t give in to the easy way because for instance (I’ve witnessed it!) your return ticket is 3 days later. It is above all a partner who will match what you need locally and who is motivated by your project or your product! This takes time to find.
Therefore, there is no point in starting your search before you have precisely set up your selection criteria. And there is no point in coming for a business trip before you have a clear meeting’s agenda and before you are sure each meeting has been well prepared.
And keep in mind the cultural differences. A yes is not always a yes, and the most important information is rarely shared in early meetings. Getting support from local resources in this process is often essential to have access to the “off”, before and after official meetings.
3. Negotiate a contract that protects you
In any business, and even more so in Asia, everything depends on the balance of power and a well-understood division of interests. Ask yourself the question: “What does this partner need me for and how can I be sure that this will always be the case in the future?”.
Local distributors are often approached by many people in these fast-growing markets. So you have to make yourself indispensable and clearly assume your strengths.
And last but not least: write down a clear agreement, in which you commit yourself gradually… according to the respect by the partner of his own commitments! He must deserve the exclusivity that you might give him later on.
4. Check regularly that this contract is respected!
Once the deal is signed, the hard part begins: implementation! It is important to both help and support your partner, but also to control him.
Ask for reporting and send people on site regularly. Your partner will all the more respect you if you follow him closely. This can easily be organized by using a local representative who will protect your interests.
One famous French fashion brand asked our support for a strict follow up: we train salespeople, we do store checks once a month to control displays and we arrange anonymous customer’s visits from time to time. As a result: this distributor proposes 4 brands in its store but the first one you will see when you enter the shop and the first one the sales staff will mention to you is that French brand!
And do not forget that we are in emerging markets and not very mature. We must therefore show responsiveness and agility. A good partner should be able to move you forward when necessary.
All above may sound like common sense, but few companies take the time to go through all of these steps. One last tip: do not try, alone and within a few months’ time, to understand a country, a culture, consumers’ expectations and on top of that a new business partner. Use support from people who have field experience. This is what we call the learning curve.
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