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For any Business Organization which is eyeing a foreign market as a part of its Exports strategy, getting its Marketing and Supply chain in place forms a critical part of the initial process which will determine his initial foray into the markets.
While doing business in foreign markets is very lucrative, the initial cost of marketing can be very high until business volumes pick up sufficiently to justify the kind of expenses being incurred. However the expenses are justified keeping view the long term potential of the country and the export market.
Every market in each country is unique and is characterized or influenced by the local ethos, culture and traditional practices. In most cases the exporters would find it more expensive to station themselves or open offices in the foreign countries initially until them are able to add sufficient volumes. They do go through a period of learning curve where in they get to understand the markets, the customer requirement and this helps them fine tune their offerings in the times to come.
However it become imperative for exporters to be able to find the right representatives or marketing agencies in the foreign country who will be able to market their products, book customer orders and help finalize negotiations. Such trade representatives or marketing agencies can be sourced through various resources.
In most of the cases the Trade Fairs and Exhibitions are the best places to meet with the relevant professionals in said area of expertise. Besides the trade directory and listings too provide details of the players in the market.
However exporters would have to take time to travel to the foreign market, be in the market, understand the potentials and be able to choose the right partners.
Once the marketing plan has been finalized and marketing agents identified the next task on hand for the Exporter would be to set up a supply chain model to be able to service the foreign markets. It is essential to have this arrangement in place before the marketing initiatives are kick started, for one cannot have customers waiting for products, especially in case of exports that involve longer lead times. Businesses for long have practiced appointing distributorship as a model of supply chain that has been working well all over the world.
So essentially here we are talking about signing up with two different Export Sales Agreements. In the first instance the Exporters would need to identify and sign up a Sales Agent or Sales Representative Agency and a Country Distributor. In some of the markets you might find a Marketing Agency cum Distributor who is a dominant market player in which case you stand to benefit from having to deal with one agency.
There exists a lot of difference between the two agreements required in the above cases for the roles and responsibilities as well as liabilities are totally different in both cases.
| Business Area | Sales & Marketing Agency | Country Distributor |
| Business Objective | Marketing, Locating Customers, Building & Developing Sales Leads, Negotiate & Close Sales Order. | Buys product Stocks, Manage inventory, Service Customer Order, Execute and affect deliveries, Collect Payment. |
| Stocks Ownership | Does not Own Stocks. Only Co-ordinates for Customer Delivery directly from Source or through Distributor. | Owns and Maintains STOCKS |
| Compensation Model | Commission based | Profit Mark up on Product Cost |
| Pricing Control | Influences pricing with Exporter, but the last call is left to Exporter to close the deal. | Can Take independent call on pricing as the ownership of stocks lies with self. |
| Credit Risk | With the Seller/Exporter | With Self |
Apart from the above two channels, Exporters sometimes use Consignment Sales Agents too. When the Exporter is initially getting a feel of the markets and is looking to tap the customers he would need to hold the stocks at hand so that he is able to offer immediate delivery to the new customer and help bag orders. In such cases the exporter will use a Consignment Agent who will import and hold the consignment on behalf of the exporter.
Once the orders are received and the consignment is delivered, the Consignment Agent will receive payment from the customer and in turn repatriate the amount received back to the Exporter after keeping the agreed amount of margin as per his agreement. In such cases the stocks are owned by the Exporter until it is invoiced by the Consignment Agent to the Customer.
The Consignment agent acts as a custodian of goods only and does not carry any other ownership. He provides a legal entity for the Exporter to send goods to in the foreign country and manages the supply chain services as per instructions of the Exporter.
The entire responsibility, risk including marketing, pricing, collections and liquidation of stocks lies with the Exporter.
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