Distribution & Business PartnersAgent, Distributor or ResellerSetting up an OfficeJoint VenturesLicensingAcquisitionsFranchisingDoing it by yourself

Distribution & Business Partners

Finding the best way to develop your company in Asia.

Asia has been gaining impressive economic growth and generating numerous opportunities for companies of all sizes. The region has performed well in the recent global financial crisis and is one of the most important growth markets. Yet, the business environment in the region is diverse and for Western businesses context is significantly different from their domestic countries. When you are confident about your market potential in Asia, we will be at your service to find out the best way getting to targeted market and get you distribution & business partners.

The key question most exporters ask themselves is “how can we get into the Asia market?  can we do this ourselves, or do we need a local partner to make it in Asia.”

Different strategies are possible:

  • Using an Import Agent, Distributor or Re-seller.
  • Setting up an Office.
  • Joint Ventures.
  • Licensing.
  • Acquisitions.
  • Franchising.
  • Doing it by yourself

Import Agent, Distributor or Reseller

Using a Local Partner

The majority of companies that enter the Asian market do so through a Local Partner. There are three main ways to go about this:

Indirect business with clients via sole-representative:

You will select a distributor for the selected as your sole representative. At the outset, you will discuss all aspects of your business with them, including identification and selection of appropriate clients, and product/service marketing. This will be the simplest way of doing business with abroad. Just as appointing a sole agent above, finding the right company for you is not an easy process.

Indirect business with clients via non-exclusive distributors

You may talk to more than two distributors at any time.  As they identify and speak to your end-user clients, the potential for communication issues or misunderstandings will be less than talking to your clients direct.  You may wish to bear in mind, however, that your distributors could approach the same end-user client and introduce the same products for different prices. Allocation of different products or regional coverage to each distributor may be an idea, but the latter may not work as most distributors with an import function operate nationwide.

Indirect business with clients via agent

You will talk to an agent and they identify your potential clients for you.  Generally speaking, they operate small scale and have specific industry expertise and do not hold any stock. If you manage to identify the most suitable person for your business, it can turn out to be very effective, but finding the right intermediary is a hard process.

Setting up an Office

here are some things to consider for businesses thinking of expanding into the region by setup an office:

Strategy:

Purpose – What do you want your new office to achieve. This may sound like a stupid question. SALES and more SALES of course. Well yes, but how do you want to achieve those sales? What is the selling strategy according to the local business customs. Will it be exactly the same as for the home market?

Function – Exactly how will this outpost operate. Will we just have someone in Asia who answers the phone for generating quotations and for pre and post-sales visits, as well as maybe providing local support for technical questions? If so do we still plan to ship our product directly from our home factory to the end-user/purchaser. who now has to handle importation issues and have to deal with billing and chasing some payments. If we do want to ease the purchase path for our customers by providing a full-service local office then what legal form should it take.

Local issues:

Location – Where? Do we decide location based on where our highest density of customers is or maybe on where it isn’t, or should we consider where it may be easiest to hire a suitably qualified salesperson. Maybe the issue should be more about selecting a city/state that is easy from a language or travel connections point of view. Maybe, we should look at whether employment law or other regulatory compliance will be easier in one place versus another.

Hiring – For most companies, there are two clear options: (a) transfer an experienced person from the HQ team to the new office or (b) hire a new person locally. If you go with option (a) then will your proposed transferee have all the skills they need?

Training – Have you given thought to the training required. If you hire a new person then, of course, you plan to have them to HQ for product training but maybe they will need other training to be effective in your new remote office.

Don’t underestimate cultural differences.

Each country has its own laws and some of them seem very strange, but you have to comply with them. The mistake some businesses make is they think, “We’ll do business the same way in every Asian country.” That doesn’t work. You have to understand how things work in all those different countries and adapt to that local system of doing business.

Employ staff that understands the languages.

There are complications in setting up in Asia, but in my opinion, these are not big hurdles. Obviously, though, there are language differences in places such as mainland China, Japan, and other countries. You need to ensure that some of your staff really understand both the language as well as the culture, including local practices.

Joint Ventures

What is a joint venture?

A joint venture involves two or more businesses pooling their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are also shared. The reasons behind forming a joint venture include business expansion, development of new products or moving into new markets, particularly overseas. Your business may have strong potential for growth and you may have innovative ideas and products. However, a joint venture could give you:

  • more resources
  • greater capacity
  • increased technical expertise
  • access to established markets and distribution channels

Entering into a joint venture is a major decision. Businesses of any size can use joint ventures to strengthen long-term relationships or to collaborate on short-term projects. A successful joint venture can offer:

  • access to new markets and distribution networks
  • increased capacity
  • sharing of risks and costs with a partner
  • access to greater resources, including specialised staff, technology, and finance

A joint venture can also be very flexible. Partnering with another business can be complex. It takes time and effort to build the right relationship. Problems are likely to arise if: the objectives of the venture are not 100 per cent clear and communicated to everyone involved the partners have different objectives for the joint venture there is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners different cultures and management styles result in poor integration and cooperation the partners don’t provide sufficient leadership and support in the early stages. Success in a joint venture depends on thorough research and analysis of aims and objectives. This should be followed up with effective communication of the business plan to everyone involved.

Licensing

Licensing is common within the Asian market, and foreign companies establish contracts with Asian companies all the time.

Asia is partly a sophisticated retail market, and is in fact one of the biggest and most diverse markets in the world for the licensing of brands and characters in the area of consumer products.

Disney for example is a company with a long and lucrative history of licensing in Asia. Popular characters can be found on products as varied as cosmetics, stationery, food and beverages, clothes, and smartphones.

Acquisitions

Acquisition of a company which is already established in your target sector with existing offices, distribution network, and contacts etc. can be an effective route to market. However, this market entry strategy tends to suit larger companies. However, there are a number of considerations to keep in mind such as suitable target companies, organisational and technical due diligence and the costs. The acquisition of another company could represent a deal breaker option to quickly penetrate and prosper in a target market compared to an organic expansion. There are many good reasons for growing your business through an acquisition. But there are risks as well.

Advantages of Acquisitions

  • Obtaining quality staff or additional skills, knowledge of your industry or sector and other business intelligence.
  • Accessing funds or valuable assets for new development. Better production or distribution facilities are often less expensive to buy than to build.
  •  Your business underperforming. if you are struggling with regional or national growth it may well be less expensive to buy an existing business than to expand internally;
  • Accessing a wider customer base and increasing your market share.
  • Diversification of the products, services and long-term prospects of your business.
  • Reducing your costs and overheads through shared marketing budgets, increased purchasing power and lower costs;
  • Reducing the competition. Buying up new intellectual property, products or services may be cheaper than developing these by yourself.

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What Can Go Wrong with an Acquisition

  • An acquisition could become expensive if you end up in a bidding war where other parties are equally determined to buy the target business;
  • A merger could become expensive if you cannot agree on terms such as who will run the combined business or how long the other owner will remain involved in the business
  • Acquisitions can damage your own business performance because of time spent on the deal and a mood of uncertainty.

Franchising

Franchising is simply a method for expanding a business and distributing goods and services through a licensing relationship.  In franchising, franchisors not only specify the products and services that will be offered by the franchisees but also provide them with an operating system, brand, and support.

Advantages of the Franchise Model

There are some benefits to those looking at franchising as a method of expanding business operations. These include access to the most talented individuals, easily obtaining expansion capital, and less growth risk being involved.

Many hardworking and driven people prefer to run a business for profit rather than earn a salary as an employee, and franchising will offer those talented people the opportunity to succeed. If franchisees are paying to buy outlets in your chain, you will not need to use much of your own capital or request additional financing from your banks or investors to set up more operations. In contrast with opening your own outlet yourself, when franchising you put relatively little money into opening each new location. This lessens the risk and makes franchising an attractive option, as well the added advantage of working with a product or brand that is already tried and tested.

Disadvantage of the Franchise Model

As franchisees are independent businesses, they cannot be instructed as employees can. Their goals may ultimately be different from the franchisor’s, leading to potential areas of conflict. In addition, as each franchisee is an independent business, it may be quite difficult to get everyone to cooperate and work together, and each franchisee has an incentive to profit from the other’s efforts to generate business. Concerning innovation and new ideas, negotiations need to be held and new ideas accepted by the franchisees –  they are not obliged to implement any innovations as they would if they were employees.

Doing it by yourself

A minority of companies enter the Asian market by themselves. It can work for your company –  this depends very much on the nature of your business and your considerations around the risks versus benefits of such an approach.

Going direct involves you supplying your products or services to your clients without the involvement of any intermediaries. This way, you will gain knowledge of who you are selling to, obtain end users’ direct feedback and understand customer needs better; cutting-down the number of middlemen also enables cheaper price. However, you will need to be prepared to deal with a large amount of communication with the client directly leading to communication difficulties and misunderstandings.

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BENEFITS OF DOING BUSINESS IN JAPAN

Towards the end of the 19th Century, Japan rapidly embraced western technological influences to become a center of creativity and development. Following its defeat in WWII, Japan experienced tremendous economic expansion and growth and swiftly became the world’s most successful exporter.

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