When it comes to expanding to a new country, direct selling companies have a strategic choice to make: They either establish a wholly-owned subsidiary or grant the sole distributorship to a local entity. Rarely, some also choose to go into a joint venture with a local partner.
Those who choose to grant exclusive distributorship do this for various reasons. Some of them lack the finances to fund a start-up abroad. Some of them do not have the management resources to devote to a country far from home. And some others do not want to take the various risks involved in opening a new market. Looking from this perspective, to go through a local partner might seem to be an easy way out. But in reality, is that so?
First of all, choosing the right local partner is an overwhelming task in itself. Yes, the home office may be receiving emails from local entrepreneurs every single day. They claim they know the country and the market in and out, what network marketing is all about, and many of the local network marketers… We know that these claims rarely turn out to be true. So, there must be objective policies and procedures to evaluate enquiries coming from abroad for two important reasons: Not to choose the wrong partner, and not to miss the right one.
Then, there is the necessity for policies and procedures to manage the negotiations successfully. Although each market might have its own peculiar requirements, it is to the company’s benefit to have the principles at hand applicable to all situations.
When the agreement has been reached to walk together, probably the most difficult phase comes. That is, operations! The local entrepreneurs, especially if they had some direct selling exposure before, may choose to operate in line with their own rights and wrongs, but not the home office’s. At times, the local partner may indeed, be right because s/he knows the market and the local people. But many of the times, the local partner is bound to be wrong since the company headquarters usually has had experiences in various markets before.
At the first glance, partnering with a local seems to be easy and economical. Examples show that this is not always the case. I have seen several reputable network marketing companies who were very successful in several markets, failed in others simply because of the deficiencies of their local partners. Can you imagine how difficult it is to take a new start afterwards? So, this strategic choice is far from being problem-free, and requires a very professional approach from day-one.
