The most critical decision is not how to enter the market, but to find the “ideal” partner! Through networks At trade fairs Field research Through embassies/trade commissioner Partner search on the net Partnering programmes The partner finds you © 2018 Taylor & Francis

Issues in partner relationships © 2018 Taylor & Francis

Patchwork from Old America? What is this? Patchwork from Old America? Patchwork yes, but of products and markets Product groups Country markets © 2018 Taylor & Francis

Leaves responsibility Leverage to the local rep concerning marketing decisions Limited market insight at HQ Adaptation to local markets irrespective of HQ intentions Limited manage- ment resources at HQ Leaves responsibility for local decisions to local rep Issues in exporter–intermediary relationships I Limited resources/market insight I © 2018 Taylor & Francis Solberg 2003

Issues in exporter–intermediary relationships II Limited manage- ment resources at HQ No/limited dedication by local rep “Everyone” turns sour “Wrong” projects, too few projects or poor follow-up Limited market insight at HQ Issues in exporter–intermediary relationships II Limited resources/market insight II © 2018 Taylor & Francis

Issues in exporter–intermediary relationships III Marketing insight Cooperation with local rep Export success Number of sales trips Customer contact Salesperson’s independence Salesperson’s responsibility Issues in exporter–intermediary relationships III Role of salesperson © 2018 Taylor & Francis

The perennial dispute between centre and periphery Headquarter Subsidiary Our subsidiaries are bad marketers; they cannot sell what we develop Our HQ develops products that nobody needs Unless we constantly control our subsidiaries, we run risks, synergies are not exploited and things get out of hand We get 200 visits a year and we have to fill out dozens of forms; I don’t have time to get my job done! HQ strategies are unrealistic; they completely disregard the local realities Very often our strategies are not executed at the local level Our HQ is getting bigger and bigger and we get less and less done! I have enough bosses to do what I think is best © 2018 Taylor & Francis

Potential conflicts They don’t sell enough Sell products that need adaptations Too high margins Sell to the “wrong customers” Poor follow-up Not up to quality standards © 2018 Taylor & Francis

Basic premises Control Goal alignment Relationships Performance © 2018 Taylor & Francis

First, some agency theory Interests of the principal Interests of the agent Bounded rationality Risk aversion Opportunism Incentives Asymmetric information Control Goal alignment? © 2018 Taylor & Francis

Controls and incentives Control mode Content Incentive Controlling the results of the operation Outcome control Commission Controlling how the operation is carried out Process control Fixed salary Control through mutual understanding and trust Goal attainment Clan/relational control © 2018 Taylor & Francis

Conflicts Formal information exchange Social bonds Guidelines Empathy/ flexibility Attitudes Output control Commitment Market knowledge Informal information exchange Process control Trust Incentives Sales growth Investments in relations Objectives Product complexity Profitability Culture Dependence Market share Role distribution Resources Opportunism There are so many factors that may affect the exporter–distributor relationships – but how ? © 2018 Taylor & Francis

Relational activities Investments in relations Information exchange Social relations Flexibility Control modes Outcome control Process control Clan control Performance Market position Profitability Strategic Relational factors Cultural closeness Resources Power Relational quality Predictability Functionality Potential Stability Well, may be like this: A relationship model between the HQ and its foreign subsidiaries © 2018 Taylor & Francis

Process control Social relations Outcome control Investment in relations Clan control Flexibility Information exchange Performance Relational quality Power Cultural closeness And here you can see the results of research from Norway (based on Solberg 2006) Resources © 2018 Taylor & Francis

A less complicated model – with much the same info Outcome control Process control Clan control Relationship quality Social relations Perfor- mance Flexibility Solberg 2006 © 2018 Taylor & Francis

And the direct effect on performance Outcome control Process control Clan control Social relations Perfor- mance Flexibility Based on Solberg 2006 © 2018 Taylor & Francis

A portfolio of relations Cultural distance  need for sensitivity High Cultural relations Complex relations Limited relations Functional relations Low High Low Product complexity  need for interaction A portfolio of relations © 2018 Taylor & Francis

Standardised beta values in the four cells: Dependent variable=relationship quality Limited relations Functional relations Cultural relations Complex relations Clan control Process control Outcome control Social relations Investment in relations Information exchange Flexibility Part in local marketing Intro role of agent R2 Adj. .25c -.25 -.01 .68a .02 .05 .23 -.28b .32 .688a .59c -.14 .13 .28 .00 .06 .24 .510a .08 -.01 .02 47b -.02 .28 .32c .07 -.24 .510a .38b -.31c .27 .12 -.19 .13 .28c . 20 .11 .210b © 2018 Taylor & Francis

Some conclusions I Cultural distance  need for sensitivity Cultural relations Social relations are critical. Flexibility and information exchange are important. Agent plays pivotal long- term role. Complex relations Clan control and flexibility are critical to relationship quality. Process control is counter- productive. High Limited relations Social relations and clan control are critical. Agent important only in the introduction phase. Functional relations Clan control is key to relationship quality. Social relations are a supplement. Low High Low Product complexity  need for interaction Some conclusions I © 2018 Taylor & Francis

Some conclusions Implications Importance of social relations pervades the findings. The simpler the product  the more important the social relations Clan control becomes important with complex products Flexibility is called for when cultural distance is high Info exchange is important to reduce cultural distance “The more we are together, together, together …” And – the good news: dining and wining are crucial in most cases! It is impossible to control all facets of sales processes of complex products  so build trust and local competence, and leave the rest to the locals The uncertainty surrounding relations with culturally distant partners is alleviated by flexibility and by information © 2018 Taylor & Francis

More conclusions Investments in relations may be regarded as specific assets and do NOT necessarily produce relationship quality! The simpler the product and the closer the culture  the less important the agent Active participation by the exporter in “limited relations” is counterproductive in the longer run! Outcome control is mostly relevant in the absence of other relationship mechanisms Process/behaviour control is at best not effective or (in complex relations) negatively correlated to relationship quality © 2018 Taylor & Francis

So, how to achieve clan control? Meet expectations Be reasonable  flexibility Power helps a lot So does cultural sensitivity (understanding) But most of all – social relations! © 2018 Taylor & Francis

Ending your relations? When? You outgrow your partner/partner outgrows you Partner does not fulfil his/her obligations Control your local marketing effort Costs exceed benefits Changes in the distribution structure © 2018 Taylor & Francis

Propensity to terminate intermediary relations Monitoring Severance payments Contractual restrictions Probability of termination The termination dilemma Conventional wisdom Market performance of foreign intermediaries Propensity to terminate intermediary relations Based on Petersen et al. 2006 © 2018 Taylor & Francis

Be careful! Loss of face Loss of loyalty Loss of local market knowledge Sunk costs in the relationship Costs of setting up new unit/partner Litigation  time and costs © 2018 Taylor & Francis

Approach for entry mode switch at initial negotiations Hidden agenda I Open relations Letter of intent agenda II Strategy for entry mode switch Terminate Integrate Approach for entry mode switch at initial negotiations Conceal Reveal How do you relate to your partner when switching your entry mode? © 2018 Taylor & Francis Based on Petersen et al. 2000

So – prepare for the break-up Generous (but not too generous) indemnities Direct and personal relations with key customers Build it into the contract/expectations © 2018 Taylor & Francis

hands off local implementation Let your local partners do the job! Multilocal Global Preparedness for internationalisation Low High Industry globality Coordination is not warranted by the market situation but monitoring is certainly a good thing, given the learning effects across markets. You are in a good position to influence your partners Global customers and global competitors play “chess” in the global market place. Coordination and monitoring not only gives you the necessary market insight, but is also greatly needed to curb opportunism, achieve a uniform approach and leverage opportunities across markets. Monitor, but hands off local implementation Tight control and monitoring Coordination is just redundant, irritating for your partners and costly. Let each partner do their work without too much interference. You are not in a position to give good advice. You should however monitor your partners’ activity so as to enhance your market knowledge. Coordination is carried out through main partner? Your firm risks being alienated from the decision process, and thereby failing to embark on a necessary learning process. Let your local partners do the job! Catch 22 HQ’s role in coordinating and monitoring the international marketing mix © 2018 Taylor & Francis

Governance matrix Confederation Federation Local baronies Civil war HQ Market insight at HQ Deep Shallow HQ HQ Helly Hansen 2017? Confederation Helly Hansen 2015 Federation Helly Hansen 2005 Helly Hansen 1980 Helly Hansen 2000 HQ Helly Hansen 1970 HQ Helly Hansen 1995 Helly Hansen 1990 Local baronies Civil war Helly Hansen 1960 Influence on marketing decisions Mainly the local rep Mainly the central HQ Governance matrix Based on Solberg 2000 and 2002 © 2018 Taylor & Francis