The
commercial
agent
is a individual or legal entity that steadily is dedicated to making
mediation in international trade operations as unemployed person for
manufacturers, wholesalers or distributors, normally receiving a
remuneration in the form of a commission but without taking risks in
operations. The commercial agent carries out its work independently
by third parties without meeting any employment obligation with the
company for which they work. They usually have a minimum structure
and the success of their business resides in having legal, commercial
and technical updated information of the market and product in which
they operate. The advantages of a commercial agent are to allow the
company to maintain control over the commercial pricing policy,
branding, communication and promotion. This enables a lower cost of
sale allowing higher gross margins for the company; The agent
receives remuneration represented by a commission on their sales,
being less expensive than having a commercial on staff or move
overseas owns sellers. Being a person of small structure, the company
gets a better understanding of the market getting more feedback
(information market: trends, products, competitors, legal
regulations, sales expectations), even going to maintain direct
contact with the clients, which facilitates customer loyalty. Is
simpler the agent training obtaining a further diversification of
business risk in different customers, which in turn, provide to the
exporting company a lower difficulty to establish in the country of
destination when it sees fit. The drawbacks are generally originating
from the difficulty of finding the right commercial agent and once
gotten (except EU) many are reticent in providing market information.
Other normally transferred the problems to the company instead of
solving directly and are not liable for the solvency of the customer.
It should be particularly careful with those who say cover more
territory that really control and usually tend to be multi portfolio
so they end up focusing on those products that provide top sales and
not the entire portfolio.
There
are several types of commercial agents, which are distinguished by
their own specialization. Import
Agent
are demand-oriented product abroad that they need to satisfy the
customer portfolio who already have established in their home
country. Export
Agent are oriented to offer products of their country of origin to
customers in foreign markets and the basis of its populari in having
a competitive product offering. Import
and Export Agents
better known as brokers, working in both directions of foreign trade
operations, characterized by having a wide range of products and
specialized in a small number of countries or geographic area, with a
little developed structure distribution. General
agents
are geared to work for companies that guarantee them exclusivity in a
given geographic area for the full range of current and future
products in a minimum period of time, usually five years. Purchase
Agents
work as central purchasing locating suppliers to lower prices that
customers pay to their regular suppliers. They are usually employed
by hypermarket chains, department stores and manufacturers that
consume a large volume of raw materials. Other forms of brokering is
usually the Commission
Merchants,
which are self employed intermediaries without duration or stability
characteristics of a commercial agent, and that its activities are
limited to specific business operations. The Representatives,
often linked to the company by contract working type with a fixed
salary and may be a wage or commission, but in both cases are
considered as company employee. The Trade
Commissioners,
are the direct trading of the company doing sales management for the
enterprise in a foreign country and having a structure created by the
actual company in situ to serve the market, but legally separate from
branch or subsidiary commercial.
On
the basis of our experience we suggest to export through a commercial
agent in the following cases: when the company is in an initial phase
of international expansion; when financial resources are not
sufficient to reach foreign clients directly; when the company want
to enter a market where potential customers are very low or very
high, but the return you get will not be enough to serve them moving
own salesmen; when potential customers are public agencies or
companies those who access is required through institutional contacts
which provides us the agent; when the sector to which the company
belongs is characterized by having very chargeable prices and is
require of a person who negotiates in a agile and permanent each
tender; when the product not require a service post sale; and when
the demands may be served to the final customer without the costs of
transport make more expensive excessively the sale price. In these
last two cases, if requires a service post sale or the cost of
transportation make more expensive the sale price, is recommended use
a dealer,
that gives these services and has a logistics infrastructure in the
country of destination which are not available to commercial agents.
As we noted in the previous article, any type of agent selected will
be framed within the form of access as direct export without in any
case the Agent assumes any liability.
When
a company has experienced a process of direct export through a
broker, it would advance your export policy giving a greater role to
your agent or go to the achievement of trade
agreements
that will boost their export activity and will involve taking some
responsibility by the other part. One of the major trade agreements
is the Piggy
Back,
which is used by the company that wants to enter a foreign market by
leveraging the distribution network of another company that is
already established in the target market. Many times the alliance
between producers of complementary products or consumer companies
that share the same distribution channel or the same points of sales,
are the basis of such agreements, and is useful for companies that do
not have the ability to create your own commercial distribution
network. In such cases the benefit is mutual, because the company
installed abroad (or channeler) gets the advantage to make profitable
its distribution network and increase product range acquiring a
greater negotiating skills with customers; and in turn the supplier
acquires the advantage of access to foreign markets at a lower cost
through a network that is already operational, which will allow know
how your product behaves in the market and make an estimate of
potentials sales. These agreements have the exclusive distribution
feature either using its own brand or creating a new brand that
should be register for greater effectiveness.
The
Consortia and Export Groups, such as the case of the Pool-Partenariat
typical of France, consist in the grouping of companies with 4 or 6
members constituting a company to manage its operations in foreign
markets, which could be created in the market of origin or
destination (own from Russian, African or Chinese market). Many times
private agencies respond to the interests of the government of a
particular country support these companies as they are characterized
by similar distribution channels between them being able to share
marketing costs, giving them greater bargaining power with large
accounts in the destination country. Also used by businesses with
less legal rigidity and have intention of share with other companies
promotion costs and logistics. Clusters,
which are groups and companies in the same sector of a particular
geographical area, often make this type of agreement with other
cluster in the advanced country of destination, thus completing the
productive activities of different value added.
In
Europe, other consortia and export groups are the European
Economic Interest Grouping
(EEIG)
created to foster cooperation between European companies, consisting
of the creation of an entity with legal personality between 2 or more
companies from different EU countries compromised to perform an
activity together. Tipically have a very wide field of activities,
ranging from manufacturing or marketing of a product or provide a
service developmental in R + D, until submit bids in contests. As the
name clearly indicates, is to meet certain requirements like that are
to be a minimum of native partners in countries of the European Union
and in the name of the company should be added EEIG abbreviations or
words "European Economic Interest Grouping" registered
office inside the EU. The partnership contract should be formalized
in a public deed and registered in the mercantile registry of the
registered office of the new partnership, have a tax system of fiscal
transparency and no more than 500 workers; For all these reasons,
this type of agreements are usually used in the field of consultancy,
engineering or architecture for access to preferential financing,
maintaining joint and unlimited liability by part of all partners on
all debts acquire.
The
License
Agreements,
consist in authorize the manufacture of a product to a company
transferring its patent, trademark or industrial design with the
appropriate know-how and Copyrigths. In such agreements interact one
licensor and a licensee, the main reason for this type of agreement
are the barriers to entry of certain markets due to the existence of
monopolies, high tariffs, excessive transport costs, the return on
investment in R + D or lack of resources for use other routes. The
greatest risk of such agreements resides in the Licensee itself,
which may become a competitor in the future so it can be very
important to control the registration of the patent. The grant of the
license allows to obtain revenue from 4 different lines: a fee or
initial deposit, deposits or royalties, fees for additional services
(training, quality control, etc.), and revenues by sell of
complements (components, parts, ingredients, etc.).
The
trade agreement known as Joint
Venture
has its roots in the difficulty for one company to have the means
necessary for the creation of a subsidiary or distribution of a
product in a foreign market, therefore, resorts to an alliance with
another to give out effort, with the aim to complement although is
lost some autonomy. In each case, a type of contract is specific
because there is no single or standard model although containing
common features. Is usually given in companies that have legal and
economic autonomy, located in different countries, which are a common
society (with its own legal personality and independent management
agencies) or sign a contract to jointly develop a lasting or
temporary activity. Sometimes is usually the only form of access to
foreign markets too closed and also a way to established abroad in
many cases.
The
Establishment
Abroad
by medium or large enterprises strongly consolidated in their country
of origin, is made by a delegation, which is usually the form easiest
and least costly of establish in the external market, without
actually having its own legal personality because it only boasts a
showroom and reduced staff, with the aim of achieving the expansion
and control the sales network; makes no direct invoices to customers
and take no risks; Delegation
allows you to analyze the market return before creating the
subsidiary. Another means of establishment abroad is Commercial
Subsidiary which
consists in creating a partnership
with legal personality in the destination country controlled by the
matrix. This one purchase the products to the matrix and resells
theme in their market assuming all risks inherent in the operations.
Performs own managements of an importer and distributor with the
advantage of knowing the market well and have direct contact with
customers. In the first phase it is advised that the branch manager
is an expatriate provided by the matrix, to ensure control and
knowledge necessary for the development of the activity. The location
of the subsidiary shall meet three basic criteria: 1st- Commercials,
because it must find the greatest geographical proximity to potential
customers and most centers of consumption; 2nd- Logistics, it is
necessary to analyze communications be it to transport products as
the travel of executives between the matrix and the subsidiary; and
3rd- Legals, because it is essential to know perfectly the rules on
the constitution of companies, the existence of aids, the treatment
to foreign investments, the tax benefits, the conventions on double
taxation, the labor laws, etc.. Also, there is the Subsidiary
of production
that consists in the creation by the company their own production
facilities in a country abroad for the manufacture and sale of
products, or to produce different product lines and components that
are then exported other countries that already have their
distribution network, this being the alternative of greater
commitment and risk. Is often, large multinationals strategy since it
requires extensive financial resources and managerial, with the
advantage of reducing costs for supplying a great emerging market
and countries or sectors with restrictions on the presence of
non-national companies. The 3 alternatives for a subsidiary of
Production are: through the constitution of a new company allowing to
adapt the structure exactly to the needs choosing the location and
proceed by stepwise of investment and contracting; through the
Acquisition of an Existing Company allowing quick access to an
existing market share despite the problems with parallel activities;
and through the creation of a Joint Venture where the subsidiary be
independent of the matrix and allowing in their capital participate
an external partner mainly requested in protected markets where it is
necessary to have a local partner for overcoming obstacles, and in
cases where there are restrictions by standards to the foreign
investment which prevent a non-national company has holdings of 100%
capital in a local company.
Ultimately,
we mentioned the International
Franchise
which is defined as a system of collaboration between two legally
independent parties linked themselves by a contract where the
franchisor gives to the franchisee in exchange for a economic
remuneration or fee, the right to use their trademark and their
know-how business for a limited time and in a specific territory. The
Franchise responds to the need for constant renewal of its supply in
the market , forced by the relentless and growing emergence of new
competitors and the need to offer new services. The Franchise gets a
closer relationship with the consumer through a better specialization
focused on the product knowledge, a better service and a better
consumer care. They differ from other contractual arrangements
because are based on a unique product or service, by a unique way of
doing business, the business name, the good reputation or the patent
that the franchisor has developed. The Franchises already exist in a
variety of sectors and the U.S. dominate over 40% of all retail
sales. Franchises provide security by reliance on the creation of a
network of outlets supporting an entire distribution system, where
different franchisees interact with each other, getting the maximum
benefits for the different parties. The franchisor ensure to the
franchisee a minimum return, a quality product, their originality and
the knowledge offered by the fact of joining a lower commercial risk
business due to the experience that provides the chain that is
already operational. At international level facilitates the expansion
due to changes in distribution channels in different countries and
retail habits that allow the need to adapt the offer to the tastes
and practices of the local market.
For
more information or require services related to this article, please
contact through our website www.externalexpansion.net
or directly our email info@externalexpansion.net.
Also
read the following related article:
DIFFERENT WAYS TO ACCESS INTERNATIONAL MARKETS
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