AGENTS AND AGENCIES

Types of Agencies

• Agents and agencies are appointed by firms to represent them. There is a wide range of activities concerning representation

• 1. Brokers – usually buy or sell goods for their principals (the firms they represent) and sometimes they never handle the consignments themselves.

• There are various types of brokers• A) brokers/dealers on the Stock Exchange buy

and sell shares for their clients, who cannot go on to the “floor” of the Exchange and deal for themselves if they are not members. The client asks the broker/dealer to buy or sell shares for him, and the broker takes a commission on the purchase or sale

• B) ship brokers arrange for ships to transport goods for their clients. The brokers operate mainly from the Baltic Exchange or one of its branches

• C) insurance brokers arrange insurance cover with underwriters who pay compensation in the event of a loss

• D) The Commodity Markets – in these markets brokers buy and sell commodities, e.g. cocoa, tea, coffee, rubber, etc., on behalf of their clients

• E) The Metal Exchange – the market for buying and selling ores and metals in bulk, also employs brokers to deal on behalf of companies

• There are other Exchanges where companies use brokers to represent them, either because the company does not have a membership of the Exchange, or they want to use the broker’s specialized knowledge of the market.

• Contact between buyers and brokers is done by phone, cable, fax as prices in the market tend to fluctuate quickly, even by the minute in the case of bullion and foreign currency.

Confirming houses

• The agents often receive orders from abroad, place them, arrange for packing, shipment, insurance, and sometimes finance or purchase the goods themselves, then resell them to the client. They may act on a commission, but if buying on their own account will make profit on the difference between the ex-works price and the resale price they quote the importer

Export managers

• If a firm does not have a branch in the country it is exporting to, they can appoint an export manager. He will deal under his own name, but use the address of the company he represents. His job is primarily to develop the market for the exporter, and for his services he may charge a fee, or arrange for a profit sharing scheme between himself and the exporter.

Factors

• These agents can buy and sell in their own names, i.e. on their own account, receive payment, and send accounts to their principals. They often represent firms exporting fruit or vegetables

Manufacturer’s agents

• This agent represents a manufacturer and obtains goods, then resells them. The agent may work on a commission, i.e. buying the goods on consignment, or, if described as a merchant, he will buy the goods from the manufacturer on his own account, that is to sell them for his own profit. If he is a sole agent, he agrees only to sell his principal’s products, and not those of a competitor, and the manufacturer would probably agree not to supply the sole agent’s rivals in his country.

Buying agents

• Buying agents or buying houses, buy products on behalf of a principal and receive a commission. The agency is employed to get the best possible terms for their principal, and will try to find the most competitive rates in shipping and insurance for them. Buying houses often act on behalf of large stores

• The orders sent to buying agents are called indents, and are of 2 types:

• - open indents – the agent chooses his/her supplier• - closed/specific indents – the supplier is named by the

principal

Finding an agent

• Sources:• advertising• Trade Journals• Government departments of trade• Chambers of Commerce• Consulates• Trade Associations• banks

Letters to these organizations

• Opening – tell the organization who you areWe are a large manufacturing company specialized in…We are one of the leading producers of..Explaining what you wantWe would like to appoint a sole agent in Scotland to act

on our behalf selling…Closing – say that you would be grateful for any help

that can be given:We would be grateful if you could supply us with a list of

possible agents

Offering an agency

• Once you have found out the names and addresses of prospective agents, you can write to them direct

Guide for a manufacturer offering terms to a prospective agent

• Opening• 1. Tell how you obtained his name• You were recommended to us by the Saudi Trade Commission in

London• 2. Explain who you are• We are an established company manufacturing…• 3. convincing the prospective agent that the products you make

are worth taking and will sell in his market:• Wide range of products, attractive design, fully guaranteed for

one year, prices quoted are extremely competitive for a product of this quality, growing demand for this product, it will lead the market, it will overtake sales of all competitive brands

Exclusive or non-exclusive agency

• There are 2 types: • 1. sole/exclusive agency – your agent will only be

supplied by you in a particular area, and he will not sell products that compete with yours

• 2. non-exclusive agency – there is no such undertaking

• The agency contract explains the conditions on which the agency will be operated and what the rights and obligations of the agent and principal are.