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Local partners

Updated Saturday 1st May 2010

Your local partners are vital to global success, explain Theo Paphitis and Colin Gray.

For Theo Paphitis, getting the right person locally jumps you ahead of the competition:

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Theo Paphitis
Local partners are really invaluable.  I think statistics for succeeding or failing with or without a local partner are, have got to be over ten to one in my opinion, have got to be.  A local partner who knows their way around is invaluable, and what was important about Nam and Long was they knew the market, but not only that, they knew the people.  They knew the customer base, personally, and they knew the ministers and the government officials and the people they would have to work with to ship the boats into Vietnam.

(0’45”)

Colin Gray agrees that getting international partnerships right matters:

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Colin Gray
Whenever we survey small firms, the ones that want to export or set up overseas, finding the right part of the deal is always at the top of their list of difficulties and their headaches and nightmares.  It however is absolutely essential if you're going, unless you're going to spend a lot of time there or maybe pay a member of your staff to go there, and even then they might not have been in that culture, in that country, in that economy for quite some time and they may not be well connected or connected enough.  So what you're buying are the connections.

So therefore you can go, sometimes the UKTI presumably organise trips abroad where they take some business people from here who try to make up, link up, Chambers of Commerce are also, they have, of course there are British Chambers of Commerce in lots of, particularly in Europe but elsewhere as well, South America, Argentina, Brazil, they can help you.  They should, it’s one of their functions, is to find potential local partners or relatively trustworthy ones as far as they can tell.  And depending on what you're selling, I mean that’s, to me it’s absolutely essential, you need that.

It may be later, you’ve got to treat that also as a learning experience, so you're learning from your agents as much as you can about the culture, about what you might need to do, what changes you might need to make to product and service back at home to make it more attractive out there, if that’s where it’s coming from, those sorts of things.  And you inevitably have tensions, because you're each trying to get different cuts of the cake, that’s what happens, and at some point maybe you'll part company.  And I know one thing though if you do, you’ve got to be really, really careful of the agreement that you sign, because sometimes there are departure clauses which are so strong, you end up coughing up a lot of money just to break the partnership.

And we had that problem with an agent selling our courses in Spain where he was dreadful, he really just didn’t perform at all, and then it became came fairly clear, he didn’t care because he knew in the contract he’d signed, he was going to get ongoing compensation for our sales, even though he didn’t originate them, for a good year or more, and I've heard stories like that in different contexts on many, many different occasions, and I think that you’ve got to be really very, very careful of the agreement you’ve got with your own agent or with other partners.

So, again, it’s essential to have legal contacts as well that you might be able to handle from firms and solicitors here, but it may be that you’ve got to also then entrust yourself to a local legal department, which of course is fraught with risks of trust and so on, so forth.  But that’s why these things cause a huge headache, they're essential, but they bring nightmares and problems in their train, so you can't really do without them but…  And if you do take them, you're potentially buying in trouble.  If it works, it’s great, you know, but chances of little things going wrong I think are quite high always.  But you’ve got to make sure you can disengage without penalising yourself as well, that’s the other thing to do.

(3’13”)

The Open University Business School has a postgraduate course which can sharpen your understanding of Issues In International Finance And Investment.

 

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