First I started writing about negotiations, then I shared my views on working and doing business with people from foreign cultures, as well as now I want to share some of my views on a similar issue: Partnerships with Foreigners!?
If you are partnering with a foreigner, of course different cultures come into play. However before that since it is a partnership, it is necessary to look at the basic dynamics that make up a partnership. There are many motivations to combine horizontal or vertical forces and partner with companies from the same sector. These endeavors: launch new products, lead technology and develop disruptive innovations, reduce costs, increase efficiency, strengthen sales and distribution, scale-up in supply chain, create a logistics pool, reduce infrastructure costs, increase penetration in retail and getting help in parts of the business where profitable and production difficulties appear. Reasons for partnering can be for obtaining financing, opening up to new markets, improving cash flow, and so on (1).
Once the partnership is formed, it has the following advantages for partners (2): They share profits and risks. Skills and capabilities of every partner is available. A synergy occurs and more balanced decisions are made. There is hope that this partnership will also provide friendship and emotional support amidst challenging times. Business opportunities that couldn’t be handled alone can be evaluated.
Yet also in partnerships, things may not always go as planned. Inevitable conflicts and unmet expectations are the greatest areas for concern. When any of those occur, the following types of malfunctions are encountered (2): A battering of parties involved in intense emotional conflicts; reduced productivity among employees and partners; the wasting of time with non-work-related matters; a loss of income upon the termination of the partnership and the additional costs of conflict and separation.
Whether you are getting married or establishing a law firm with someone or partnering with a foreigner in a big business, a good partnership necessitates: that parties must have a clear vision of the future; be open to change; be of the mindset and character to solve problems with a win-win logic; value interdependence, promise, and commitment; having trust in each other; sharing information and giving feedback are some of the most important features. Often between partners a “black cat” appears because their vision of the future is not clear. If visions are not shared at the onset or if one of the parties changes the vision, a partnership will generally encounter difficulties because expectations will differ (3).
If the partner is also a foreigner things can get a little complicated. Right here, two researchers working at Hofstede’s company called Hofstede Insight, the cultural researchers I mentioned last week, divided the cultures of the countries into seven clusters of societies with shared mindsets as Competitor, Organizers, Connected, Reciprocators, Diplomat, Marathonian and Craftsman, and explained the characteristics of each as follows (4):
Competitor: Such cultures do not care about uncertainty and love to fight. This cluster includes United States, Australia, New Zealand, and United Kingdom. These cultures score high on the “individualism index” and view negotiation as a competition. They view failure as part of the game but do not believe any rules govern the negotiation. They can criticize their companies, including their bosses. They view their relationship with their firm as purely business and do not expect more from their company or employees. They respect your expectations in a competitive culture and are sincere in building trust. They want to know what drives you. Contribution to success is important.
Organizer: They believe in the importance of structured organizations and follow the rules. Organizer cultures value structure and everything that goes with it, but hierarchy does not govern them. Organizers respect their superiors according to their competencies. In organizer cultures, things are done methodically, step by step. No matter where you are in the corporate hierarchy in France, you can’t get away driving a small car, but in Germany, even small executives have to drive a good-sized German car. Top executives should drive a premium car. Organizers believe in an open and candid discussion of the issues at hand and weighing the pros and cons of the various options for addressing them. They want to find the best option, buy the best technology, the best service or products. Organizers believe in planning for tomorrow.
The Connected: Believes in openness and expects you to believe it too. Connected cultures value individuality. They ignore hierarchy and accept people without worrying about their status. They believe in strong ties with others and seek consensus. They don’t mind uncertainty, partly because they think long-term. Connected cultures are democratic, but if you’re not involved in the network of leads, it can be difficult to walk through the door, let alone partnership. You should take the time to build relationships in Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Netherlands, Norway, and Sweden. The search for a win-win solution is essential in all matters. People in connected communities communicate openly and expect you to do the same. They can talk candidly about their company’s weaknesses and goals, and they want to get inside information about your organization from you. They will want to know why they should cooperate with you.
Diplomat: These cultures value individual freedom and respect hierarchy. Diplomatic cultures, especially France and Belgium, accept hierarchy because they do not like public disagreements and prefer to make arrangements to avoid them. They are usually well-educated and humorous diplomats, but they are also quite aloof. In these cultures, it is necessary to act formally in meetings unless your potential partner asks you to be more comfortable. For example, if you speak English in France, make sure your speaking style matches your correspondents style.
Reciprocator: People in these cultures interact through the exchange of favors. This culture likes certainty and does not appreciate the public posting of differences. Cultures of reciprocity operate based on the “I pat you on the back, you pat me on the back” mentality. In cultures of reciprocity, partnership negotiations take a long time and you may find that the process can go back and forth. This cluster includes many countries in the Middle East, South America, Latin America, Southeast Asia, and East and West Africa: Angola, Argentina, Bangladesh, Brazil, Bulgaria, Burkina Faso, Cape Verde, Chile, Colombia, Costa Rica, Ecuador, Egypt, El Salvador, Ethiopia, Ghana, Greece, Guatemala, Honduras, Iran, Iraq, Jordan, Kenya, Kuwait, Libya, Lebanon, Malawi, Mexico, Morocco, Mozambique, Nigeria, Pakistan, Panama, Peru, Portugal, Romania, Russia, Saudi Arabia, Senegal, Serbia, Sierra Leone, Slovakia, Slovenia, South Korea, Suriname, Syria, Taiwan, Tanzania, Thailand, Trinidad, Turkey, UAE, Uruguay, Venezuela, and Zambia.
“Marathonian: May hide their true goals. Marathonian cultures, like those in Asia, see bargaining or partnership issues as a permanent process. Individuals in such cultures honor those higher in the hierarchy. They want to get ahead, get praise from their peers and earn financial rewards. They accept uncertainty as part of the game. Marathonians can hide their true goals from you. A book called The Art of War attributed to General Sun Tzu from the sixth century B.C.E. enjoys great popularity in China and around the world. He recommends using cheats to achieve your goals among other things. To consolidate an agreement you have to be patient and accept that negotiations can run in circles.
Craftsmen: They pay as much attention to details as a surgeon. Craftsman societies in fact there is only Japan in this category, believe in meticulous attention to detail, even in mass production. The Japanese pride themselves on their dedication to aesthetics and details. Focusing on the relationship first, the craftsman sees the big picture and every little detail as important.
Our Yıldız Holding global experience encompasses nearly every country’s culture. Although we first began with exports, we have undoubtedly achieved the greatest accumulation of knowhow in the field of partnership with the joint ventures we have realized in our country. Our foreign partnerships have been a sort of preparation for us, at least at the thinking stage, in our opening to the world. With these partnerships, we may not have achieved all the advantages we had hoped for in technology and competition. Our partners found trust in us in the local market they wanted to be in. They proceeded with us with our local experience and our strength in the market.
The global company we established under the name of pladis in the biscuit and snack fields became the third largest biscuit company in the world. Likewise, we are the largest food company in Turkey, England, the Middle East and North Africa.
Although we were thinking of opening up to the world at the beginning of the 1990s and even dreaming of today, our close target was to establish partnerships with foreigners in the strategic area we deem necessary. Today, conditions have changed for some categories, in this case, we have ongoing partnerships and those we have terminated. The contribution of each of them to our business, including the partnerships we have terminated, has been extremely meaningful.
In partnership with foreigners, the first offer is usually from them and even some have wanted to buy us. We have always rejected this option. When they decided to invest in the field of food, the results of their research always pointed to us. Sometimes our strategy to partner with foreigners coincided with their offers. Our first foreign partner became Cerestar in 1993. Cerestar was the largest in Europe in starch and glucose, owned by Begin Say, one of the largest producers of beet sugar. We partnered with them. Why is that? Because glucose production in Turkey seemed to be non-existent, very little. Glucose is technically a necessary sugar. If there is no glucose, chewing gum, chocolate coated and similar products are candied on the shelf. It was not available in Turkey and its price was higher than sugar, even on dry matter basis. However, technically it should have been cheap and after we invested, its price dropped. After that, other foreigners and locals invested in the same field. The market has settled into a smooth course. Cargill is the one that does this business on a large scale in Turkey. Years after our partnership with Cerestar, Cargill acquired Cerestar. Cargill has its large-capacity factory in our country. Also, since Cargill bought Cerestar in the world, we are a 50/50 shareholder in Pendik Nisasta Company in our country. So in the end, we were rivals with Cargill, but we became inevitable partners. Cargill makes the same product in its own factory and we do the same in our partner factory. We both make good money. No problems arise. At Pendik Nişasta, we used to pay licenses to Cerestar for some productions, we don’t pay licenses anymore and the business continued like this for years.
But for the first time, I don’t know if it’s for the reasons I explained above, we couldn’t match up with a partner. Let me explain why:
As aforementioned above, in the 1980s the investment of a global company called CPC and a 100% local Vaniköy company used to process corn and produce glucose. In the end, only Vaniköy (The Süleymangil Family) survived and glucose was sold at exorbitant prices. The family had made a new investment for capacity increase, but they were in a financial stalemate. Kent (Yakup Tahincioğlu) and we (Ülker), its two largest customers, became partners of the company to continue the investment, because this vertical integration investment was essential in terms of cost and supply. But later, as a result of a family dispute, they transferred their majority shares over to Cargill, which made it a very attractive offer to enter Turkey. At that time, Cargill (A. Blankenstein) told us that ‘We pay well, I don’t recommend you stay with us.’ I didn’t understand. But just before the first Sugar Feast, they had made a hefty price increase in glucose. This put us all in a difficult position. Because orders had been taken before the holiday, prices were agreed. Already, due to such monopolistic attitudes, we had taken Cerestar as a partner and established Pendik Starch Industry Enterprise as a strategic business. We even received incentives as “Strategic Investment”. It was the first comprehensive starch and derivatives manufacturing company in the country. But alas, we became a 50/50 partner with Cargill, which later bought Cerestar. Our strategic investment had become a fairy tale. Pendik remained an efficient and profitable, but stale business
For example, another family company, Arcor, is an Argentinian company. A large chocolate confectionery company that is very successful, especially in Latin America. Because in Argentina, sugar is 250 dollars a ton, whereas, in Turkey, it is 1000 dollars. It is also not possible to import due to restrictions. Of course, we have to protect farming and the sugar beet farmers, but if we want competitive industry and employment growth, we must make agriculture competitive as well. If sugar becomes this expensive compared to the world, everything will go up because sugar is an ingredient in all food. Sugar is a source of energy. If you make sugar expensive, you’re doing a great disservice to low-income people who are muscular and need more energy.
If I go back to our partnerships, when we decided to make baby food, we brought in an expert from Nestle. After establishing the baby food factory, Hero from Switzerland came and said “let’s be partners”. Thinking about the future, I accepted this proposal and we made a good partnership in the end. Our partnership no longer exists, we only do sales and distribution, but we did a good job together. Then came Kellogg’s of the USA in 2005, we founded Kellogg’s Med with them.
In 2009, we established the Continental Confectionery Company with Gumlink, one of the largest chewing gum companies in Europe, and started the production of chewing gum and confectionery with the latest technology. Today, the export of the factory in Çorlu has exceeded the production for the domestic market. In 2010, we made a joint venture agreement with the world spice leader McCormick. In the same year, we signed a partnership agreement with Eckes-Granini Group, the leading fruit juice producer in Europe, to establish a new company to operate in the fruit juice sector. But since we left some categories in our global journey, these companies are no longer in our organization.
We also established a joint venture with SCA in personal care, in 2011. In 2012, we made an agreement with Japanese Nissin on instant noodle production, and then later we ended these partnerships due to our decision to focus on our main business.
As I said, we continue with some, we ended it with others, and throughout all of it amassed quite a large amount of learned experience. The articles of association and general assembly minutes of these companies have been registered and have been announced over the years. There is information that researchers can benefit from on many issues such as company structure, working conditions, monitoring and control mechanisms, etc. Of course, it is necessary to count the managers and lawyers who are experts in this subject (5). Would I recommend a joint venture to young entrepreneurs who want to develop their own business and step into the world? Under certain conditions, I would say yes. They will benefit and they have to decide for themselves whether the conditions are suitable or not after certain thorough inquiries. For example, it is necessary to remove joint ventures from being only in the domestic market. It is also important which geographies other than Turkey will be included. I think the first stage should be close places, both geographically and culturally. I think it is necessary to extend joint ventures to the old borders of the Ottoman Empire. Sharing the financial risks, expanding the distribution network and supply power were very important in the ventures we established in Turkey by joint ventures. These three immediately made partnerships possible. In this context, it is the “why should we be together?” with your partners. You have to find the answer to this question. I believe that it is necessary to decide which joint ventures are strategic and which are opportunist, today and in the future. What is the importance of joint ventures for Yıldız Holding’s vision? What are the geography and financial risks, what are the advantages for the partners, for us? What should be the scope of joint ventures, which categories should they cover, what should be in the future? How should we combine them with our global strategies? After all, how much know-how, knowledge, and experience do we gain from these, and how we will benefit from these in the future?
It is useful to create a strategy by adding more questions to these, reviewing them and determining the situation of each category, each joint venture and each market; then we can conduct our relationship with a partner accordingly. Then it would be advantageous for both parties.
Young entrepreneurs need to make such inquiries for the future of their business. Based on my experience, I can say that there are certain difficulties in partnering with foreigners, the first being is the aspect of long-distance and the second is the different corporate cultures that are fed by the cultures of the specific countries involved such as Competitor, Organizers, Connected, Reciprocator, Diplomats, Marathonian and Craftsman. In Joint Venture companies, it is not only necessary to combine business, but also to develop their corporate culture. Afterward, proximities geographic distances requires empathy. We solve this problem by putting ourselves in the other person’s shoes. When I look at Poland, I say, “Poles and Hungarians are alike.” When I look at history, I see the Austro-Hungarian Empire. Although the Austrians do not like the Germans, I know they like the same foods that the Germans also eat, and Hitler was Austrian. This is how foreigners perceive us when they come here. We’ve all read history. What was in our history? There was the Ottoman Empire. Then, these are the places where our joint ventures will be easiest to attain. This is our goal. Why? Because every time I go, they offer Turkish Cuisine. What they describe is Ottoman Cuisine. If you go to Greece, you order the same stuffing, if you go to Lebanon, you order the same stuffing, even if you go to Pakistan. It’s a culture. What interests us is the culture of living of the people and the culture of food. If you say to the waiter “bring me your favorite food” in wide geography stretching as far as Tel Aviv, it is your favorite dish. We should not neglect development in this direction.
If you are going to enter into a joint venture, do not do it only for Turkey, as I said, set your eyes on our old borders. If you say these markets are a bit risky, I would say, isn’t a ‘venture’ a part of an adventure anyway? Of course, that is provided that you manage the risks correctly …
Note: This article is open source and can be cited by mentioning the author. Does not require copyright.
(1). Bamford J. et al. (2021). Joint Ventures and Partnership in a Downturn, HBR.
(2) Gage D. (2004). The Partnership Charter, Basic Books, NY.
(3) Larbie J. and Townsend H. (2013). How To Make Partner And Still Have A Life, Kogan Page.
(4) Coene J. and Jacobs M. (2017). Negotiate Like a Local, Hofstede Insights.
(5) Relevant provisions in Turkish Commercial Code https://kms.kaysis.gov.tr/Home/Kurum/24308261?AspxAutoDetectCookieSupport=1 and Trade Registry Regulation https://www.mevzuat.gov.tr/MevzuatMetin/21.5.20124093 .pdf can be found in Turkish. For an Overview of the Industrialization Process in Turkey, Doğan, M. (2013) An Overview of the Industrialization Process in Turkey, Marmara Geography Journal, Issue 28, July (Also in Turkish).