Using Joint Ventures to Move International Partnerships
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Going International, One Step at a Time.

For many midsize companies, international business is the Great Unknown. You may be doing business in a few overseas markets, and see the potential for growth. What is your next step? You could go all-out and open one or more overseas sales offices, but do you really have the expertise and resources for such an initiative? A better solution lies in strategic partnerships with overseas companies who are already experts in their markets. Here"s a look at the basics of getting serious about international trade:

  • Determine your goals. There are a lot of reasons why you might want to ramp up your international expansion, but if you don"t clarify what they are, you could easily spin your wheels with little to show for your efforts and expense. "The two questions to ask yourself are, ‘what do we want to accomplish?" and ‘what is our timeline?"" explains Chicago-based consultant Laurel Delaney, author of Exporting: The Definitive Guide to Selling Abroad Profitably. She also recommends evaluating the resources, both human capital and financial, you can devote to the project. Although specific goals will be unique to each company, Delaney sees two promising scenarios: building on current sales, and expanding into a restrictive market. Once you"ve thought through your objectives, it makes sense to document them in a detailed business plan.
  • Choose a partner. The best partners are the ones you already know. Usually, these are export customers or suppliers based in the foreign market. "Look at your value chain," Delaney suggests. "Who do you rely on? Who do you trust? Who is responsive and creative when it comes to devising solutions that work?" Once you"ve narrowed the field, you should plan to visit each potential partner to learn more about them. Where do they stand among the competition? Do they work with your competitor? What is their legal and ethical standing? "Just because you"re making a lot of money with someone doesn"t necessarily mean that they"re the ideal partner for a joint venture," Delaney points out.
  • Craft an alliance. There are a number of forms that a global strategic alliance (GSA) can take, and each has its benefits depending on your goal. If you have a strong, internationally recognized brand, you might consider a licensing or franchising arrangement. If your partner has a well-developed distribution network, you might offer terms that ensure exclusivity to get a leg up on the competition. Or you might invest in a joint venture agreement that allows your partner to expand in ways that might otherwise be prohibitive. The exact nature of the strategic partnership would, of course, depend on your needs and those of your potential partner.
  • Protect yourself. The final component is to create a legal agreement that protects you and your company. Here, Delaney is unequivocal. "Get yourself the absolute, best international attorney," she says. "You have to do that." Nonetheless, you should do your homework long before sitting down with your legal advisor. This includes creating a business plan, assessing risks (reputational, legal, financial, intellectual property, etc.), and starting a list of questions to ask. Two issues that bear special consideration are establishing the terms of an escape clause, and limiting liability, particularly under the Foreign Corrupt Practices Act (FCPA).

Embarking on a joint venture or other type of international strategic partnership can be a logical next step to grow your business, but it means assessing your goals as well as those relationships you already have in place. "More often than not, the best way forward is with a familiar, trusted partner," Delaney concludes. "The opportunity can be right in front of you."

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