France

Strategic recommendations

Today, many companies are mainly interested in the booming markets of the BRICs and the latest development in the MIST countries.

France is the

  • 2nd largest economy in Europe,
  • 8th largest exporter in the world,

but also

  • 6th largest importer in the world.

Despite how open the French markets is, many companies are unsuccessful in their efforts to export to France, claiming it is already a “closed shop”.

However, this is merely an excuse often used by those who themselves lack a willingness to even minimally adapt to the conditions of the French market.

To begin, the inability to speak the language may pose a problem.

While language barriers may play a role here, this is not the only reason. One cause of misunderstanding is often the lack of acceptance of other market conditions such as demand, business practices, negotiation techniques, and forms of communication in the opposite culture.

Despite the effects of globalization, markets and people are still very different.

ACCT seeks to help businesspeople to understand the French better and to recognize how French companies function. Ultimately, ACCT would like to provide a practical guidebook to anyone interested in contacting French companies. A profound knowledge of the rules of the game regarding relationship management, tender preparation, negotiation techniques, etc., should help to prevent you from applying your learned behavior one to one onto the French market, and in doing so avoid frustration while forming successful business relationships in France.

Advantages and disadvantages of the different sales options:

Direct sales

Company acquisitions and participating interests

The advantages of strategic alliances and acquisitions of companies and/or shares:

  • Increased market acceptance by relying on an existing image
  • Rapid positioning in fiercely competitive markets through the use of the other company’s expertise in sales and distribution
  • Easier market access by using the other company’s existing listings
  • Optimal customer service

In addition:

  • Securing the market shares gained
  • Optimizing the field sales activities of both companies by offering a wider range (this is especially important if you only have a small range yourself)

Company acquisition or participating interests are the ideal route, but not the easiest:

  • On the one hand, you must find a company that ideally matches your own company. This must also be in line with the sale of shares.
  • On the other hand, it should be noted that French management culture is very different from that of foreign companies. If you do not carefully plan ahead in this regard, it could lead to a clash of two cultures.

From the search to sealing the deal

In France, on average, 50% of all French companies are for sale in succession.

Often, the negotiating companies do not place enough emphasis on finding congruent synergies that match each other. This is of great importance as small and trite differences can quickly develop into serious conflicts. This can have negatives consequences for the company.

Therefore, it is recommended not to acquire just any company that is for sale, but to define a well-thought-out profile of your ideal target company, taking the possible synergies into account, both on the sales level in terms of “cross-selling” and at the product level regarding “up-selling” and directly mentioning these in the negotiations.

Of course, these considerations require carefully drawing up a target company portfolio as well as an argument tailored to the French company (the French usually will not have any inhibitions about selling their company to a foreign entity).

PMI – Post Merger Integration

A takeover of the company can cause a lot of unrest for all parties involved.

In order to avoid the departure of important employees, integration must not be carried out with a heavy hand.

In order to ensure a smooth integration of the companies after a takeover, it must be done in several steps:

Cultural awareness: Employees of both parties need to be made aware of intercultural differences in workshops in order to avoid everyday conflicts. Step-by-step integration:
  • Educating all stakeholders about the usefulness of the takeover – this requires quick wins, which can usually be generated the fastest in procurement and distribution
  • Harmonizing the finance and information system
  • All other aspects such as processes, manufacturing, and research and development can only be converted by applying a great deal of sensitivity, i.e., based on mutually agreed benchmarks, with the aim of working out and combining the respective best practices.

Recruiting your own field sales representatives

For companies with extensive industry know-how that requires explanation and which seek to address key accounts, direct acquisition is recommended and a local sales representative is required to do so.

The “man of the first hour” must by no means be someone who has just switched to this field. Entering a foreign market requires recruiting the best sales professionals:

  • Who have relevant contacts in the industry, i.e., an existing clientele,
  • Who have experience, if possible with the same or related products,
  • With the appropriate sales characteristics, i.e., strategic thinking and assertiveness,
  • Whose native language is French,
  • Who is aware of French sales and negotiation techniques.

These specialists are best found through professional head hunting.

Cross-border acquisition

Direct sales are possible, either as a market test or a permanent solution, if the order value allows for them.

However, field sales representatives (FSR) are needed who are proficient in the language of the target country and have minimum experience with local business practices, particularly with regard to:

  • Acquisitions
  • Negotiations
  • Customer support

Otherwise, they need to be trained to do so.

Setting up a local presence

Customer acquisition, support, and retention can be significantly optimized by setting up a communications and local office in the target country.

The objective is to give customers a proper business workflow.

It is also a testament to the sustainability of your company on the market.

Establishing a liaison office as a first step is an appropriate solution and has no tax obligations.

As soon as local staff have the power to negotiate contracts independently, or if, under special conditions, a warehouse is maintained in the target country, an accounting department must be set up on site to determine the profits of the activities and declare them locally to the tax authorities.

Once your company is classified as a permanent establishment, however, you have the obligations of a subsidiary without its advantages, i.e., local image and limited liability.

This is when you should consider establishing a company.

Indirect sales

Commercial agent

Commercial agents can be helpful if the offer consists of standard or low-level products that do not require consulting but to which the logistics for receiving significant orders does not present an obstacle.

The search is not always easy, since good CAs, for the most part, already have enough clients. In this regard you usually should also plan for marketing investments as well as the technical support if they are complex products (those in need of explanation).

The risk of using commercial agents is that compensation for terminating an agreement can be up to two years’ worth of commission.

Retailers

Wholesalers/distributors can be enlisted if the offers consist of standard products which have small order volumes or require certain transport logistics such as refrigerated products.

The search for such actors is also not always easy due to the fact that good distribution partners usually already have a strong client base.  In order to attract and retain distribution partners, it is advisable to support them with marketing investments.