Creating wholly owned subsidiaries takes a lot of time and money. By partnering with locals companies get access to business connections, supplier networks, and speed up market acceptance. But how should companies go about finding the right partner?
First think about your culture, not just the local culture. Many times companies jump onto the first local partner they find. However, you must remember these partners will be the key to your success. If their corporate values don’t match yours issues could arise in the future. When looking for partners take your time and do your research. Set-up interviews and get to know the companies on a personal level.
Another option for companies is to enter into a joint venture. As discussed in a previous blog in this series this can bring many competitive advantages. However, companies must be careful. When entering into a joint venture make sure it is a merger of equals. That means both parties share equal responsibilities, costs, beliefs and size. Make sure these terms are clear and each party understands. Many times when smaller companies enter into joint ventures with larger companies the smaller companies lack the infrastructure needed to be successful.
Finally, companies should consider the merits of acquisition. This allows companies to have full control over local business units while still benefiting from all the established relationships and networks of the local company. Many times this is the final goal of companies to fully enter a new market. In the chemical industry this can be especially benefitial because plants are already set-up and appropriate suppliers, who know the regulations, are in place.
There are many ways of speeding up the process of expanding into emerging markets. However, in some cases even when all of the above tips are applied the process is still slow. Remember that investing in emerging markets needs to be the focus of the entire company, not just one department if you plan on being successful. Rushing just for the sake of launching a subsidiary will most likely backfire. Take your time and be precise.
I hope you enjoyed this blog series and welcome any discussions and comments. Missed a blog post in this series? Be sure to check them out here:
Blog 1: Balance Speed with Precision
Blog 3: Don’t Export your IT strategy
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