Venturing into a developing market can be a rewarding experience. It can also be nerve-racking, especially when that market has vastly difference social and business cultures, languages and government regulations. That’s when having the right representative can spell the difference between success and failure.
Establishing your own local office instead of using a representative is always a possibility, but it’s expensive and is rarely needed early in an export initiative. In some countries you cannot operate in their domestic markets except through a state-approved representative.
A representative will be familiar with local conditions and can help you find buyers, arrange distribution channels, handle documentation and provide after-sales service. If your deal involves complex implementation, a representative is almost a necessity.
There are three basic types of representatives but the boundaries among them are blurred. A large import-export firm may include them all under one umbrella. For example:
An agent is an individual or firm you employ, usually on commission to sell your product or service. This gives you the greatest control over how your products are handled.
A distributor is a firm you choose for its distribution channels in the market. It buys your products from you and then resells them. This has obvious advantages, but mistakes by the distributor can affect your product’s reputation.
Full-service trading houses handle multiple aspects of exporting, such as market research, transportation and advertising. Some firms buy your product outright, while others may act as agents on commission.
The person or firm that represents you must, obviously, be both effective and reliable. "But before you decide on a representative," says Alison Nankivell, EDC Regional Manager for China, "you have to understand what market you’re going after and how that market is segmented—by industry, region, political or economic divisions. Then you pick a representative whose capabilities match your market segment. If your product is advanced technology, you’d want a representative who has a technical as well as a sales background."
One way of finding potential representatives, says Nankivell is through contacts at trade fairs. You can also check with sources such as the Canadian Trade Commissioner Service, which has officers in Canadian embassies and consulates abroad. Trade associations and local chambers of commerce (both American and Canadian) are also helpful. You might also consult other suppliers and companies in your sector to obtain information about particular representatives.
If you have an attractive product or service, you may be approached by firms wanting to represent you. Be even more careful of people who make unlikely claims of past success, or who will push you to sign an agreement on the grounds that only they can complete the deal. If you’re entering a large market such as China or India, don’t give it all to a single representative. Instead, split it into zones of responsibility and find an effective representative for each zone.
Finally, it’s important to understand a potential representative’s approach to business integrity. If he or she offers a deal that doesn’t meet your standards, perhaps because it involves payments of doubtful legality, turn it down. If you don’t you risk not only severe damage to your company’s damage to your company’s reputation, but also civil litigation, criminal prosecution, monumental fines and even imprisonment.
But careful planning can lead to excellent results, as the experience of a Canadian telecommunications firm demonstrates. "The company’s senior management carefully investigated the market segments that drove their business in China," Nankivell says, "and discovered that these segments differed significantly in new business flowed into them. They then found agents to take specific responsibilities for those segments. This allowed them to keep their operations in Canada, while using agents to maximize sales to China.
In short, the right representation can contribute a great deal to your export success in a local market. So before you start knocking on doors yourself, be sure to find out what an agent, distributor or trading house can do for you.
© 2004. This article was reprinted with permission from ExportWise magazine published by EDC.