Learning unit summary (International distribution).
Objectives. In this unit you will learn:
This will be achieved by:
In finishing this Learning Unit, you will know the different possibilities that a company has for creating a network of international representatives and negotiation factors with possible agents at the time of signing contracts.
In general, it would be ideal for an exporter to be able to sell direct to his final client with no need for intermediaries. In this way the exporter: reduces cost of sales, increasing the product's Competitiveness; is in direct contact with the market, obtaining a continuous feedback of information; he can control the company's marketing policy directly. However, the truth is that this is not always possible (due to the costs involved or market idiosyncrasies) and in these cases the company should seek an intermediary.
We will analyze the most appropriate profile of a Foreign trade representative or agent, how to find him, how to apply control mechanisms, etc. What we must keep in mind is that the representative or agent is only useful when he starts to sell. Finding the agent isn't the end in itself, rather obtaining orders through him.
We will learn about selling into hypermarkets and department stores. You will outline the organization of a purchasing department. You will learn how to best approach department stores. You will examine the role of purchasing agents. You will analyze an interview with a purchasing manager.
To help overcome the difficulties encountered in International markets, it may often be in the interests of small and medium size Companies to resource a separate
organization for the promotion and/or
sale of their products abroad. It is quite common in Europe. It consists
of uniting the export departments of several companies to form one Common one for use by all.
Trading Companies are companies that sell domestically produced products abroad. They play an important role in giving an impulse to foreign trade and operate as commission agents for exporters. The Trading Company usually operates by finding a client who wishes to purchase a certain product somewhere in the world. Generally, these are clients who require a component that is almost unique and incorporated into their own product so it can be difficult for them to find a vendor. Japanese trading companies (Sogo Shoshas) or the corresponding in South Korea (Chaebols), are the ones that are furthest from the prototype of small companies described; they have a higher number of employees which allows them to specialize in specific products: cement, steel, heavy machinery and food.
Sales Subsidiary. This formula enables having much stricter control of the marketing policy. For the company, the creation of a subsidiary means a long-term investment. Thus, the company should make a series of really in-depth research studies, in order to prevent any mistakes. Alternatively, the company could create a sales subsidiary but only when the sales potential is really high. Fully owned subsidiaries have been viewed as an international movement of capital. Now, however, capital transfers are accompanied by technological flow, managerial control, and access to input and output markets otherwise unattainable to the receiving country.
The various formulae analyzed so far correspond to what we could describe as a traditional distribution chain: from manufacturer to importer, from importer to wholesaler, from wholesaler to the representative, from the representative to the sales point and from the sales point to the end user. Once the necessary experience has been obtained, it cedes the opportunity to sell its products to those people or companies that wish to invest, creating a direct sales point similar to the one already set up.
Finally, we will analyze how e-business can influence International distribution. We believe that companies nowadays should look at digital distribution strategies. We see a business environment changing from consolidated multinational companies with established distribution channels selling "atoms" to pure Internet start-ups which only sell "bits". When we think about "bits" products we automatically think about digital distribution over the net, a global, flexible, instantaneous distribution which in many cases will not be controlled by national customs controls. What's more, implementing digital distribution strategies can create tensions in our traditional distribution network if we cannot create synergies.
(c) EENI- Business School (1995-2014)