Business partnerships crucial in growing exports

06 Dec, 2020 - 00:12 0 Views

The Sunday Mail

Trade Focus

Allan Majuru

JOHN Maxwell, a renowned author, is famous for the saying “teamwork makes the dream work.” This saying brings up an important dynamic for consideration for businesses to increase their share of the export market. 

The current global and economic trends provide incentives for companies to venture into the global competitive landscape, and with this push, export partnerships are an important strategy for developing successful international markets.

The need to strengthen partnerships with foreign businesses cannot be overemphasised in discussions around the nation’s economic matrix. 

In fact, President Mnangagwa’s Second Republic has been working on re-building relations between Zimbabwe and the rest of the world. 

This is because the “Zimbabwe is Open for Business” mantra recognises that if the country is to achieve Vision 2030, there is a need to create strong partnerships with businesses from across the world. 

Further to this, the recently launched National Development Strategy (NDS1) emphasises engagement and re-engagement with the rest of the world as one of the fundamental areas that the nation will prioritise in order to move our economy forward. 

Companies can also work on their partnerships with various players in global trade and international target markets.

Partnerships in the form of consortiums, consolidations or working with agent marketers or distributors can prove beneficial to growth. 

As the adage goes, “If you want to go quickly, go alone. If you want to go far, go together.”

Partnerships give a soft landing in export markets because the partners have a better understanding of the business, social and political terrain, all which are crucial factors in increasing the acceptance rate for Zimbabwean products. 

That local representation, through partners, gives confidence to local buyers and potential users. 

In some countries and certain sectors, it is mandatory for a foreign business to have a local technical partner, who will act as the first point of reference should there be need to trace back the origin of a product. 

For example, if exporting food to the United Kingdom, the Food Standards Agency (FSA) requires that exporters develop partnerships with local businesses. 

This applies in the pharmaceutical sector where most countries require that businesses bringing in products should have some form of local representation, which can be achieved better by strengthening partnerships with like-minded businesses. 

For this sector, partnerships with local representatives is one of the requirements in most countries for companies that want to register pharmaceutical products. 

To enhance these strong linkages with businesses in foreign markets, most activities by ZimTrade the national trade development and promotion organisation are structured to create platforms for improved engagement between local businesses and foreign partners. 

Activities such as inward buyer missions and outward seller missions create an environment that promotes better partnerships between local businesses and partners in other countries. 

Developing business partnerships with local firms in regional and international markets is one strategic choice for export firms which has a lot of advantages and can prove crucial for growing Zimbabwe’s exports.

Partnering with various intermediaries along the value chain presents opportunities for complementary resources which include logistics and market experience. 

The exporter will obtain useful channels and can likely compete better with other companies or exporters in the target market. 

One of the challenges often faced by local businesses, particularly small and medium enterprises (SMEs) is financing product launch or operations that will yield positive returns from export markets. 

Other challenges could be the lack of the requisite skills. 

To ensure that these challenges do not affect prospects for exporting, a partnership is one way which ensures a considerate degree of success and bridges various gaps that an exporter might have. 

This is because successful business partnerships ensure harmonisation of the abilities and skills of various contributors to the partnership. 

This results in a stronger consortium as it also allows for the different partners to focus on what they know best rather than trying to become a jack of all trades but master of none. 

The need for partnerships become even more apparent when considering SMEs and getting them involved in exports. 

SMEs account for a large number of businesses in Zimbabwe and have the potential to generate a lot of economic growth. 

Although markets need to be developed such that they represent opportunities for growth of SMEs, this can be reversely achieved through local partnerships. 

This will ensure the development of an export-oriented SME sector which is sustainable and can increase sales to Zimbabwe’s traditional and new markets. 

Through strengthened collaboration between SMEs and businesses in foreign countries, SMEs will increase their competitiveness in those markets. 

It is however important for small business to understand that, in most cases, seeking partners requires that they have a good product and are ready to meet demand especially when the partnership is focused on sourcing buyers. 

One of the ways to build such a capacity back home is for SMEs to come together and form an export consortium. 

This way: they become more attractive to financiers; can attract larger base of capital and credit; and can borrow funds to further grow their businesses. 

For example, the history of Colcom begins with a cooperative of pig breeders that was established to assist marketing of pigs from local farmers. 

Due to the strengths in the operations of the National Pig Breeders Co-operative, the grouping was allowed to run the pig processing facilities owned by Cold Storage Commission, culminating in the building of the Colcom’s own processing factory that was opened in January 1962 at the present site in Harare.

This is also the similar arrangement behind launch of SPAR in Southern Africa. SPAR International where the local and regional companies drew franchise from was formed in 1932 in the Nertherlands through partnership programmes and today it has grown globally with over $US40 billion sales in 2019. 

The name SPAR was originally known as DESPAR which meant through united co-operation everyone regularly profits.

The key element in this partnership is a commitment to the open exchange of business knowledge and information for the betterment of customers and investors. 

This has seen the export of this franchise to over 48 countries and over 13 300 outlets globally serving 14 million customers daily. 

In Southern Africa alone, the retail giant says it “operates six distribution centres and one Build It distribution centre, supplying goods and services to over 1 000 SPAR stores across southern Africa.”

Everything being said and done, it is important, however, to take note of some key aspects for consideration when one is looking to get into a partnership with consolidators, distributors and various other agents. 

When dealing with a consolidator, who will also be the marketer, one needs to assess whether the partner has sound knowledge and understanding of the markets that the business intends to export to. 

The partner also needs to have a sound understanding of the products being marketed as they will be representing these products in the respective markets and if they do not come across as experts that might not work well when negotiating with buyers. 

Locally companies like Merchandise Carriers, Warpack, Brands Africa, Edge Services, Brand Action and MMS have partnered with domestic manufactures in field marketing and merchandising services to grow market share. 

This could be a strategy that exporting companies especially in the processed foods could adopt for foreign markets and seek to partner with such firms to push for market share growth of their products in foreign markets. 

The extent of risk apportionment is also a key aspect in the agreement. 

At which point does the producer pass on risk, if at all? 

The degree of control one has over the processes being done by other business partners will be important especially if the largest risk remains with your business. 

The right partners will also need to be organised in such a manner that everyone complements rather than competes and hence there needs to be no conflicting interests within the consortium. 

With a distributor or marketer, they need to be able to handle your products in the right fashion and this speaks to infrastructure and the same applies for logistics partners. 

If its fresh produce, it would need partners with the right cold chain facilities and transporters with refrigerated trucks. 

Bull Red, Three Choirs, Inscor Distribution and Brands Africa are some Zimbabwean distribution companies that have leveraged on partnerships in local and international trade. 

The experience and expertise of distribution companies can offer reduced risk and costs in penetration of foreign markets

These are some of the aspects for consideration but in short, the partner(s) needs to enhance local businesses otherwise the partnership ceases to be beneficial. 

Allan Majuru is the chief executive of ZimTrade.

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