Executive Insights: International Partnering—A Systematic Framework for Collaborating with Foreign Business Partners

Abstract

One consequence of market globalization has been the growing incidence of collaborative ventures among companies from different countries. Small and large, experienced and novice, companies increasingly are choosing partnerships as a way to compete in the global marketplace. Motives for international collaborative ventures are varied and complex, including a desire to leverage resources and assets, retain flexibility, reduce risks, gain speed, and capitalize on each partner's strengths. The systematic framework presented here can be used by managers as a practical, ten-step approach to establishing successful collaborative ventures. The article also discusses four major types of international business partnership—distributor agreements, licensing, franchising, and joint ventures, and highlights key success factors for each. A major player in express package delivery, United Parcel Service (UPS) has been actively globalizing its operations for more than 20 years. The company first entered Canada and Germany and then other markets without a strategic plan or much commitment. The approach was simply enter markets one by one, set up operations, and wait for the market to develop. When available, UPS acquired an existing delivery company in order to get established more quickly. In exploring entry into Japan, UPS encountered a significant challenge. While UPS is competent in distribution and logistic networking, it knew little about the Japanese market and quickly realized that it needed a partner with customs clearance expertise. In a market well known for nontariff trade barriers, UPS also required assistance in deciphering the complex legal, structural, and political environment. A local partner would provide specific market expertise and help UPS overcome entry barriers. Furthermore, with a legacy of losing money in overseas operations, UPS did not wish to risk much capital in Japan. For these reasons, partnering with a qualified Japanese company made most sense. Yamato of Japan emerged as a prospective partner. It was experienced, had access to distribution channels, and was well capitalized. Interestingly, when UPS began negotiations, it inquired whether Yamato would be interested in a purchase. Yamato management asked the selling price of UPS—not exactly what UPS had in mind! As it turned out, there was a good fit and sufficient rationale for the two companies to establish a strategic alliance. UPS realized that a partnership with Yamato could not be a one-way street and arranged to bring packages back to the United States for delivery from Yamato. This opened up the market in both directions for each company. Teams of employees were exchanged to learn about organization and business processes, which provided valuable experience in making each company a truly global player.