The fourth and final blog on market entry.
Your chosen representative should have a thorough understanding of competitive products and prices to assist in product modification, advertising requirements, or changes.
• Does this representative have a good network and good contacts?
• How many years’ experience does this representative have in your market sector? You may opt for a company that is established and has a good network of contacts but may not be particularly flexible or open to change. Or you may prefer to appoint a young, energetic company that is out to prove itself and is flexible and innovative but does not offer extensive experience or contacts.
• Does this representative have good knowledge of the local market? Good representatives should be able to assist you in your marketing program and give you the benefit of their local market knowledge.
Tips to remember when working with an agents and distributors.
• Schedule regular market visits.
• Schedule regular training for them on your range.
• Have a timetable for regular performance reviews.
• Set realistic performance standards and revise regularly when market conditions change.
• Have a clear termination procedure.
• Exporters can rely too heavily on their agent for useful feedback and relevant information. Make sure you check local conditions and market feedback yourself.
One way to clarify your thoughts when you come to choosing an agent or a distributor is to develop an ideal partner profile and compare candidates against a standard set of criteria.
The agent or distributor should have a good understanding of the market, so look carefully at their current customers, contacts, networks and place in your target market.
Here are some suggestions on the type of questions you could ask prospective agents:
• To check stability, try to find out their history with other customers
What are your financial resources? What is your credit rating? (There are credit agencies that can provide a report on potential partner credit ratings.)
• To check their relevant product or service knowledge ask:
Do you have experience with similar (product) lines? What is your marketing and service strengths?
• To check their management capability – ask:
How long have you been an agent or a distributor? What are some of your successes with other clients? For distributors ask about their strengths in marketing and customer service?
• To check their compatibility with your company – ask:
What is the size of your business? What systems do you use? How many staff do you have? How do you choose your staff? What experience did your staff members have before you employed them? How are they qualified for this work? Have you worked with any other British companies? If so, which ones, and for how long?
To check an agent’s product or service mix – ask:
What do you like about my product or service? Do you represent any companies with products or services which conflict with mine? What are your sales projections for my products or services – and why? (Ascertain that these sales projections are realistic)
• To check whether their distribution network is what you need – ask:
What is your geographical coverage? How often do you personally get to each of the markets indicated? Do you have staff in place in each of these markets? Have you ever faced political trouble in the markets you cover? If so, what was the result? Have you ever been forced out of a market? If so, why?
• To check their sales capability and marketing policies – ask:
Can you give me examples of your sales capability? What marketing policies do you use? What incentives do you give your staff? How are your staff trained and supervised?
• To check their promotional expertise – ask:
What is your approach with marketing budgets? What experience have you had in handling marketing budgets? If called upon, how do you deal with the media in the markets you cover? What experience have you had in dealing with the media? How do you deal with the media in markets where you don’t speak the language? (If applicable.)
• To check their ease of location and facilities – ask:
Where and what facilities do you have for customer access? Where is your warehouse? How large is it? How is it protected? What services do you provide for your customers from your warehouse?
Points to consider when entering into an agency or distributor agreement
An agent or distribution agreement is a legal document, even if it is a verbal agreement. It is recommended that you document the agreement in a written contract and seek advice from a legal professional with international contract experience prior to signing anything.
Your agreement should set out all the terms and conditions of the agent/supplier relationship, with no ambiguities or areas that are unclear.
Before drafting an agreement, you should agree exactly who does what within the agent/supplier relationship.
Again, it is then imperative to engage legal advice when having the agreement drawn up.
Drafting agreements and making changes when two parties have differing views on core issues can be a waste of time and money. It is wiser to agree on the big issues first, then start the detailed work of the actual contract.
The key issues you should discuss with your potential agent and agree at a high level before entering into a legal agreement could include:
• The product ranges.
• What you, the exporter (supplier), will provide: for example, printed brochures, price list, new product briefings, product training, and so forth.
• Supply of samples: at what price, who pays for their cost and freight, the length of time samples will be available, and the process and payment for their return.
• The territory covered: the geographical area and market segment.
• How the goods will be supplied.
• How online sales in the territory will be managed.
• Commission: the amount and the conditions.
• Reporting: monthly or quarterly, and the content of the reports
• Communications: how the timeliness of communications on major issues will be dealt with. For example – delivery delays or major customer issues.
• Brand management: you can set some controls over the use of your brand.
• Ownership of trademarks and intellectual property.
One of the difficulties exporters are confronted with when drawing up contracts is the lack of uniform regulations around the world. This means that parties must refer primarily to the rules set out in their agreements, which in turn makes the careful drafting of such contracts absolutely vital.
Most exporters will be faced with drafting an international distributorship agreement. The ICC Model Distributorship Contract provides a uniform contractual framework that incorporates the prevailing practice of international trade.
Almost all companies engaged in international trade work with some distributors overseas. Here are some important points to remember in dealing with distributor:
• Select your distributors – don’t let the distributors select you.
• Look for distributors capable of developing your markets, not just selling your products.
• The skills, qualities and network which each distributor can bring to your relationship may be different – make sure you discuss your expectations so that these are clearly understood.
• Never assume a distributor will undertake a task without discussing it first.
• Set clear performance criteria in your distributor’s agreement and monitor these closely.
• Get to know the distributor well before signing an agreement.