Managing an agent and distributor
3 likes3,199 views
This document discusses options for entering export markets, focusing on the differences between agents and distributors. It provides details on finding, selecting, and motivating potential partners; outlines advantages and disadvantages of agents and distributors; and emphasizes the importance of clear communication, monitoring performance, and having a well-defined plan for market entry.
Managing an agent and distributor
- 2. 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
- 3. 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
- 4. 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
- 5. 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
- 6. 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
- 7. 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
- 8. 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
- 9. 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 tosales 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
- 10. 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
- 11. 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)
- 12. 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 ?
- 13. 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 ?
- 14. 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
- 15. 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
- 16. 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
- 17. 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’
- 18. 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
- 19. 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
- 20. 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’
- 21. 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