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| Sunday, 11 April 2004 |
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| News Business Features Editorial
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Developing an export strategy ... Continued from Last week By Hemal Dias Once the company has pre-qualified some foreign representatives, it may wish to travel to the foreign country to observe the size, condition, and location of offices and warehouses. In addition, the company should meet the sales force and try to assess its strength in the marketplace. If traveling to each distributor or representative is difficult, the company may decide to each of them at worldwide trade shows. Negotiating an Agreement with a Foreign Representative When the company has found a prospective representative that meets its requirements, the next step is to negotiate a foreign sales agreement. Export Associations, Trade Missions in overseas countries can provide counseling to firms planning to negotiate foreign sales agreements with representatives and distributors. The International Chamber of Commerce also provides useful guidelines. Most representatives are interested in the company's pricing structure and profit potential. Representatives are also concerned with the terms of payment, product regulation, competitors and their market shares, the amount of support provided by the local firm (sales aids, promotional material, advertising, etc.), training for sales and service staff, and the company's ability to deliver on schedule. The agreement may contain provisions that the foreign representative: * Not to have business dealings with competing firms (because of anti-trust laws, this provision may cause problems in some European countries); * Not to reveal any confidential information in a way that would prove injurious, detrimental, or competitive to the principal firm; * Not to enter into agreements binding to the local firm and, * Refer all inquiries received from outside the designated sales territory to the local firm for action. To ensure a conscientious sales effort from the foreign representative, the agreement should include a requirement that it apply the utmost skill and ability to the sale of the product for the compensation named in the contract. It may be appropriate to include performance requirements such as a minimum sales volume and an expected rate of increase. In all cases, escape clauses and other provisions to safeguard the supplier may be limited by the laws of the country in which the representative is located. For this reason, the supplier should learn as much as it can about the legal requirements of the representative's country and obtain qualified legal counsel in preparing the contract. These are some of the legal questions to consider: * How far in advance must the representative be notified of the supplier's intention to terminate the agreement? Three months satisfy the requirements of many countries, but a verifiable means of conveyance (i.e., registered mail) may be needed to establish when the notice was served. * What is just cause for terminating a representative? Specifying causes for termination in the written contract usually strengthens the supplier's position. * Which country's laws (or which international conventions) govern a contract dispute? Laws in the representative's country may forbid the representative from waiving its nation's legal jurisdiction. * What compensation is due to the representative on dismissal? Depending on the length of the relationship, the added value of the market the representative created for the supplier, and whether termination is for just cause as defined by the foreign country, the supplier may be required to compensate the representative for losses. * What must the representative give up if dismissed? The contract should specify the return of property such as: patents, trademarks, name registrations, and customer records. * Should the representative be referred to as an agent? In some countries, the word agent implies power of attorney. The contract needs to specify if the representative is or is not a legal agent with power of attorney. Factors to Consider When Choosing a Foreign Representative or Distributor The following checklist should be tailored by each company to its own needs. Key factors vary significantly with the products and countries involved. Size of Sales Force * How many field salespeople does the representative or distributor have? * What are the short- and long-range expansion plans, if any? * Would it need to expand to accommodate your account properly? If so, would it be willing to do so? Sales Record * Has its sales growth been consistent? If not, why not? Try to determine its sales volume for the past five years. * What is the average sales volume per outside salesperson? * What are its sales objectives for next year? How were they determined? Territorial Analysis * What sales territory does it now cover? * Is it consistent with the coverage you desire? If not, is it able and willing to expand? * Does it have any branch offices in the territory to be covered? * If so, are they located where your sales prospects are greatest? * Does it have any plans to open additional offices? Product Mix * How many product lines does it represent? * Are these product lines compatible with yours? * Would there be any conflict of interest? * Does it represent any other local firms? If so, which ones? (names and addresses) * If necessary, would it be willing to alter its present product mix to accommodate yours? * What would be the minimum sales volume needed to justify its handling your lines? Do its sales projections reflect this minimum figure? From what you know of the territory and the prospective representative or distributor, is the projection realistic? Facilities and Equipment * Does it have adequate warehouse facilities? * What is the method of stock control? * Does it use computers? Are they compatible with yours? * What communications facilities does it have (email, fax, telex, etc.)? * If your product requires servicing, is it equipped and qualified to do so? If not, is it willing to acquire the needed equipment and arrange for necessary training? To what extent will you have to share the training cost? * If necessary and customary, is it willing to inventory repair parts and replacement items? Marketing Policies * How is the sales staff compensated? * Does it have special incentive or motivation programs? * Does it use product managers to coordinate sales efforts for specific product lines? * How does it monitor sales performance? * How does it train its sales staff? * Would it pay or share expenses for its sales personnel to attend factory-sponsored seminars? Customer Profile * What kinds of customers is it currently contacting? * Are its interests compatible with your product line? * Who are the key accounts? * What percentage of the total gross receipts do these key accounts represent? Principals Represented * How many principals is it currently representing? * Would you be its primary supplier? * If not, what percentage of the total business would you represent? How does this percentage compare with other suppliers? Promotional Thrust * Can it help you compile market research information to be used in making forecasts? * What media does it use, if any, to promote sales? * How much of the budget is allocated to advertising? How is it distributed among various principals? * Will you be expected to contribute funds for promotional purposes? * How will the amount be determined? * If it uses direct mail, how many prospects are on the mailing list? * What type of brochure does it use to describe the company and the products that it represents? * If necessary, can it translate your advertising copy? The practice of international marketing revolves around how to market your products or services in markets other than the country in which the product or service was developed or manufactured. Apart from the obvious considerations of marketing to consumers with perhaps a very different set of needs and circumstances than those you are familiar with, successful international marketing requires an understanding of logistics (distribution, trade channels, warehousing and delivery flow etc), legal and taxation aspects, trade laws and many other areas. An international marketing strategy must have at its base solid research into competitors and the market environment in each country. All subjective matters in this series of articles are based on affiliated sites of Sydney University and the US Department of Commerce, for more readings please visit WWW.UNZCO.COM or any clarification please write to mailto:[email protected]>[email protected] Hemal Dias is General Manager, International Marketing, currently attached to a BOI project of Coco Lands Ltd. This information based on wide experiences, exposures and negotiations in International Markets such as USA, Canada, Australia and EU member countries. |
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