ABLE Limited, UK manufacturing company has taken a decision to expand business overseas using either distributors or agents. However, ABLE Limited does not know differences between distributors and agents. Introduction The distribution channel consists of various middlemen who are involved in the movements of the products from the manufacturer to the final consumer. “Some of the activities involved in the various chain processes include: placing orders, storage, repackaging into smaller sizes, advertising, selling and information feedback (Stone & McCall, 2004).
” The roles of the middlemen can sometimes be confusing and that is why it us necessary to know the functions of the various middlemen before engaging in any transaction with them. Organizations that choose to expand their businesses oversees have obviously invested a lot of time and money in the new project. For them to ensure that their business will succeed, they need to work with the right intermediaries especially those who are able to undertake a lot of activities in marketing is therefore very crucial in making decisions.
Import agents and distributors are important in marketing the suppliers’ products. “The main differences between the two intermediaries are seen in the transfer of ownership and the supplier’s control of the goods. It will therefore be wise for ABLE limited to know the roles or responsibilities of the distributors and agents so that the management can decide on which intermediary will be more beneficial to the company (Fisher, S. & Fisher, 1998). ” ? Agents Agents in international trade refer to the middlemen who engage in looking for potential customers.
They are useful for expanding businesses in new regions because they are knowledgeable in a specific line of business and have links to suppliers and clients in the area. “In addition, agents engage in promotional activities thus are good or attracting more customers (Rugman, Collinson & Hodgetts, 2006). ” For agents to provide these services they are paid a fee which can either be in form of retainer fee, salary or commission depending on the terms of agreement. Agents will never posses the goods that they trade in; their role is just to create opportunities and facilitate trade.
Through this action, they can create a legal relationship between the company; ABLE limited, and their international customers. ABLE limited needs to establish the extent of the agent’s authority specifically, in terms of the lengths with which they are supposed to negotiate with the clients in order to deal with its agents well. For example, if the agents are allowed to negotiate prices and other contractual terms. Such conditions need to be specified in their contract and agreeable by both parties prior to engagement in any business activities.
When making payments, it is important to know how they will be calculated especially if the agents are paid on commission basis and the dates for payment. ? Distributors Unlike agents who never posses goods, import/ export distributors possess products that they trade in. Distributors will but goods from exporters and sell them at a profit to potential customers (Stone & McCall, 2004). ABLE limited will therefore retain title over the commodities until trade negotiations with the distributor are complete. The import distributor therefore takes a risk of failing to benefit from sales if goods are not purchased.
Depending on the agreement terms, the distributors are able to pay for shipments and even undertake after sale services. The distributor is more than a re-seller of the products. A distributor is a person who operates in a given geographical area and can only sell the goods bought in that territory. “The distributor is thus expected to expand his activities in the region he operates in and market the goods in ways that have been specified in the contract thus linking the exporter and distributor (Fisher, S.
& Fisher, 1998). ” Distributors can either operate under exclusive distributional agreements, exclusive purchasing agreements or selective distribution agreements where the supplier will choose regions that will enable them meet their objectives. In determining the price that the distributors will pay, it is important for ABLE limited to know whether the price that is being paid is net or gross or has discounts and who will be responsible for shipments. In addition, the contracts can also state how prices will be reviewed.
When making the import distributors payments, ABLE limited will need to look at how the payments will be made and the duration for payment. Conditions for the sale of products need to be agreed on in advance. Meeting marketing targets is important in business as they determine the level of sales to be made. This will mainly relate to import agents than distributors. When looking for agents, it is important that good agents are chosen because some may result in an organisation losing a lot of money.
The Commercial Agents Regulation Act (1994) that was also used in parts of Europe was passed. This enhances the exporter’s rights so that they could not be taken advantage of by unscrupulous agents. Before this regulation, most of the terms were not bound in contract and if losses were incurred, they were severe. To conclude, we can say that both agents and distributors are necessary in marketing manufacturers’ products. It is important that the manufacturers ensure that they engage with the right people who will not defraud them but enable them increase their profit margins.
Businesses like ABLE limited that are looking to expand their operations internationally need to be aware of the legal and contractual requirements that will ensure that such businesses are safe. References Fisher, S. & Fisher, D. (1998). Export best practice: commercial and legal aspects. Federation Press, p. 82-88 Stone, M. A. & McCall, J. B. (2004). International Strategic Marketing: A European Perspective, Routledge, 2004, p. 109 Rugman, A. M. , Collinson, S. & Hodgetts, R. M. (2006). International business, 4th Ed. Prentice Hall/Financial Times, 2006