ISSUES FORISSUES FOR

CONSIDERATION

OPTIONS FOR EXPORT MARKET ENTRY

• Agents

• Distributors

• Selling Direct and Using Your Own Resources

• Trade Fairs

• Franchising

• Licence Agreements

• Joint Ventures

• Export Houses

• Government contracts

• Buying Houses

LET’S LOOK AT AGENTS & DISTRIBUTORS

• Differences between agents and distributors

• What will they do for our business ?

• Where and how can we find them ?

• The interview process• The interview process

• Appointment – the legal contract

• Communication and cultural issues

• Motivation

• Monitoring and evaluating performance

WHAT IS A DISTRIBUTOR ?

• Independent contractor who purchases goods for resale

• Usually takes legal title to the goods

• Buying from a business and selling for own account at

prices that are calculated for the distributor’s own benefitprices that are calculated for the distributor’s own benefit

• A distributor is a business Partner

WHAT IS AN AGENT ?

• Marketing or sales agent - seeks orders on behalf of a

client (‘the Principal’) in return for an agreed commission

on each order

• The agent is briefed on appropriate prices and terms and

then approaches businesses within a designated areathen approaches businesses within a designated area

• The agent legally binds the business they represent to any

contract they sign for product orders

• An agent never owns the goods he is selling and to all

intents and purposes is just an extension of the Principal

• An agent is a business Partner

ADVANTAGES OF A DISTRIBUTOR

• Has an established presence in the market

• You can rely on their expertise

• You delegate the distribution and selling functions to them

• The financial risk is largely theirs• The financial risk is largely theirs

• Your investment is negligible

• May simply be the most appropriate method of getting goods

to market

ADVANTAGES OF A DISTRIBUTOR

• Has an established presence in the market

• You can rely on their expertise

• You delegate the distribution and selling functions to them

• The financial risk is largely theirs• The financial risk is largely theirs

• Your investment is negligible

• May simply be the most appropriate method of getting goods

to market

DISADVANTAGES OF A DISTRIBUTOR

• Little control can be imposed once goods have become

the property of the distributor - you cannot dictate the

customers they sell to or the prices they charge

• A distributor’s time may be split across many product

lineslines

• Any lack of commitment on your part will inevitably

result in a similar lack of commitment on their part

• If the sales potential is high your distributor may not have

the presence to exploit it

• Some countries have legislation that can provide for

rights to compensation on termination of agreement

ADVANTAGES OF AGENTS

• You retain absolute control of marketing and advertising,

including pricing and the terms and conditions of sale

• You maintain direct contact with your customers

• An agent’s commission is based on a percentage of net

sales so that remuneration is directly linked to sales so that remuneration is directly linked to

performance

• You obtain the services of an experienced local national

and benefit from his market knowledge

• Your investment is negligible

DISADVANTAGES OF AGENTS

• You usually retain the financial risk arising from sale of goods

• Within the EEA, agents have a right to compensation or

indemnity upon termination of the relationship

• Agents take less responsibility than distributors so your

responsibilities are correspondingly greaterresponsibilities are correspondingly greater

• Agent’s time usually split between you and other exporters

• If sales are not forthcoming, agent may not make an effort to

promote your product

• If there is great potential, agent may not have resources to

exploit this

HOW CAN YOU FIND THEM ?

• Advertise in the trade press and use the Internet

• Ask your suppliers and potential customers

• Ask professional associations in your target market

• Ask other exporting companies selling complementary products

• Advertise at Trade Fairs

• Do your own market research, contacting, long/short listing and

qualification of prospects

• Commission a ‘Partner’ search from a Government support agency or

a private export consultancy

• ALWAYS try to shortlist and interview several prospects (be wary of

sole candidates and unsolicited offers)

QUESTIONS TO ASK A POTENTIAL PARTNER

• How long have you been established ?

• Do you specialise in any particular sector or customer

segment ?

• What is your turnover ?

• What is your share of the market ?

• How many active accounts do you have ?

• How many staff do you have ?

QUESTIONS TO ASK A POTENTIAL PARTNER

• Will I have direct contact with your sales staff ?

• How big is the territory that you cover ?

• What office/storage facilities do you have ?

• What product ranges do you already carry ?• What product ranges do you already carry ?

• How many principals do you already work for ?

WORKING WITH OTHER CULTURES

Look out for differences in:

• Communication style

• How things are managed

• Leadership and management• Leadership and management

• Approach to risk

• Reaching decisions

• Negotiating style

MOTIVATING, TARGETS, MONITORING & EVALUATING

• Rigorous interview and selection process

• Frank and open negotiation of objectives

• Terms and conditions of the legal agreement

• Introducing a trial period• Introducing a trial period

• Setting realistic targets and incentives

• Monthly/quarterly activity reports

• Annual review of performance

MOTIVATING, TARGETS, MONITORING & EVALUATING

• Clear definition of responsibilities

• Speedy implementation of corrective action

• ‘End user’ comfort analysis

• Sharing of supply-chain monitoring report

• Effective communication and use of IT

• Keeping control

• Annual senior review meeting

MOTIVATING, TARGETS, MONITORING & EVALUATING

• Annual price review

• Product orientation training

• Regular face to face meetings

• Periodic strategy review

• Measurement of partner benefit from Agreement• Measurement of partner benefit from Agreement

• Level of integration

• Must be a ‘Two Way Street’

THE PRICE OF FAILURE - AGENTS

• Under-performance

• Compensation on termination

• Restrictions on post-termination activity

• Damage to Principal’s profile• Damage to Principal’s profile

• Lost opportunity

THE PRICE OF FAILURE - DISTRIBUTORS

• Loss of market share

• Exposure of Intellectual Property

• Potential damage to your Brand

• Possibility of compensation• Possibility of compensation

• Potential loss of market good-will

• Post-Agreement competition

SOME TIPS

• Market entry is best undertaken as a project

• Every good project needs a Plan

• Roles & resources are inevitably going to be factors

• Research is critical to your success• Research is critical to your success

• Be clear about the reason for a market visit

• Stick to your partner selection process

• Make sure your team is in agreement

• You may need to review some issues several times

• Some issues could make your project ‘no go’

CONCLUSION

• Negotiate your terms with clarity and purpose

• Put the agreement in writing

• Avoid uncertainty- deal with all points

• Take legal advice• Take legal advice