Defining Partnership

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What do we mean by partnership?

By partnership, we mean a long-term collaboration, whereby two (or more) partners design and implement a venture together. Whilst partnerships will evolve over time, an interest to pursue a long-term, commercial partnership needs to be present early on, when Connect to Grow commits its support.

 

Principles of partnership

  • There is a shared goal and shared objectives. Both partners have a mutual interest in the venture succeeding. This might be to exploit the market potential for a specific product or service, or adapt products or services to meet the needs of new or existing customers.
  • The relationship is expected to be collaborative rather than transactional. This means that the partnership will involve more than just buying and selling the product or service of an Indian partner. So the purchase of new equipment with no other engagement is unlikely to count. Similarly, repeat transactions of items for resale, especially where the Indian partner takes no risk, would be unlikely to count. Ideally, there should be value addition in the target country. Furthermore, collaboration implies the partners will work together to set the direction and targets.
  • There must be a continuing contribution from both partners. The contribution could come in the form of knowledge (e.g. about the buying habits of particular markets), expertise (e.g. about the most cost effective way to manufacture a specified product or the delivery of a particular service or an innovation) or resources (e.g. people, money, technology, equipment). If one partner expects to be paid on a commercial basis for their technical assistance or know-how, this is unlikely to count. We recognise that partnerships may not endure for ever, but there is an expectation that the relationship will be long-term.
  • The partners share in the rewards: if the activity flourishes, then both partners benefit. This can be structured in many ways and may include financial and non-financial benefits (such as brand or reputation). It is likely, however, that the benefits will be directly related to the level of sales (though may be tempered by the level of contribution).
  • The partners share in the risks: a key reason to work in partnership is to reduce risk, but no business activity is entirely risk free. Ideally, the level of risk is clear at the outset and will usually not exceed the committed investment of time and resource, but sharing the risk will align the partners in seeking success. This risk might be financial or non-financial (such as brand or reputation).

What forms can partnerships take?

Connect to Grow does not prescribe specific organisational or legal forms for partnerships.  But the following types of partnerships can be useful to consider. Below are examples of partnership structures that Connect could support:

Type of partnership Example
Franchise African company dealing in FMCG sets up as a franchisee of an Indian FMCG company, selling its product and meeting its other brand norms (and pays franchisor)
Licensing arrangement African company seeking a system innovation (such as warehouse receipting, low-cost eye surgery) sets up and uses the innovation of an Indian company, paying a royalty for doing so
Distribution partnership African company providing consumer durables or manufacturing equipment for sale partners with an Indian company to develop the product or market together for long-term expansion with the Indian company as the supplier, African company as distributor, and both investing for return (share of revenue is agreed based on input of effort and risk
Joint Venture African company seeking innovation in a manufacturing process jointly sets up a new business with an Indian company that deploys the Indian company’s process
Investment Indian company that manufactures machinery, takes an equity stake in an African company which then uses the Indian company’s machinery
Strategic alliance African agribusiness agrees jointly with an Indian agribusiness to develop new seed varieties for the African market, with an agreed cost and revenue sharing formula.

It is important to note that in most cases, the form that the partnership will take between two enterprises will only become clear once significant interaction has taken place between the possible partners and the Connect team. The Connect team will help enterprises come to the most suitable partnership agreement.

More information

Read the partnership considerations on the Indian and South Asian/African eligibility pages for more information about the partnerships Connect can support.

Read this Checklist  to learn more about developing a mutually beneficial partnering agreement.

Find out more about how Connect Partnerships work in our video ‘Two hands are better than one’ 

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