Debunking The Top Ten Myths About International Distribution Agreements
An American company was negotiating its first agreement in Mexico. The Latin distributor continually refused to agree to any timelines or fixed amounts. The negotiation dragged on until the U.S. company brought in a bi-cultural Mexican-American to broker an agreement.
It turned out that sufficient trust had not been established between the companies. Once the distributor felt it had someone that would convey accurate information, and once the bi-cultural negotiator convinced the American company to invest more time in building the relationship, the contract got signed. The relationship ultimately ended up being wildly successful for both companies.
Negotiating a crossborder agreement flat out takes a lot more time to negotiate than the same agreement within your country, or between a U.S. and a Canadian company. Expecting negotiations to move at the pace of a typical domestic agreement is almost guaranteed to result in disappointment and frustration.
This concept is simple on its face, but in reality is often very difficult for some to accept. This is especially true for U.S. businesses who are hard-charging, “get ‘er done” kinds of companies. These organizations have deadlines and quarterly sales targets, and managers who hover over subordinates wanting to know why things are taking longer than the deadlines they created for themselves.
The reasons these agreements take so much longer varies. Time zone differences and language issues definitely play a role. Differing cultural expectations, though, usually have a larger impact.
In many places—Turkey is certainly one—your partner will want to take a long time to get to know their supplier, the people they’ll be dealing with, the management style, the company culture. In these countries, it’s all about the relationship, and the contract negotiation is a way to develop that relationship.
Other cultures simply relish the negotiating process. Many Middle Easterners and North Africans just love the process of seeing how many concessions they can squeeze out of every nook and cranny of the negotiation. This is simply a natural part of them getting to know you. And knowing this helps you formulate your negotiating strategy. If you go in with your bottom line on any position, you’ll find it difficult to reach agreement with a partner who expects to barter every point.
Germans are notorious for their desire for precision. They often want to get every last phrase correct, and they may think a sentence that is clear to you needs still more detail. Japanese companies often take a long time to negotiate agreements because they like to reach consensus on all points, and reaching consensus–both within their own organizations, and then with you—often takes time, sometimes a lot of time.
Latin American companies may take a lot of time to negotiate agreements because their perception of time, timely response, and urgency simply are quite different than in North America.
To effectively negotiate great distributor relationships in the international arena, you need to get a bit zen. Negotiating styles vary widely from country to country, and you must accept that your distributor is not going to change their culture suddenly to meet your arbitrary timelines.
It helps a lot to relax, and just enjoy the process of seeing the many different styles of negotiation. Getting frustrated will not force your foreign partner to be more like you!
In the end, continuing to build a good relationship with the distributor is most important – if you have that, you are much more likely to have a productive business partner and a better agreement than by simply rushing to meet artificial deadlines. And you may also need to help educate your own bosses to help manage their expectations.
Doris Nagel is managing partner of Globalocity, and has over 25 years of hands-on global experience, focusing on strategic partnering, indirect sales channel management, and market entry. She’s a frequent speaker and author, and is currently working on a book on international distributor networks. Get a free excerpt from the book here.
Editor’s note: This is the sixth in a series of articles on Debunking The Top Ten Myths About International Distribution Agreements. Check out the previous articles in the series:
Myth #1: We don’t have time for a contract – we need to get busy selling!
Myth # 2: How we found our distributor is totally separate from our contract.
Myth # 3: Contract templates are great, because that way we can skip the legal review costs.
Myth #4: We Can Just Have Our Local Contracts Lawyer Review Our Agreements
Myth #6: Two extremes: We never give exclusivity unless forced to, or, we give exclusivity freely.
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