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Exporting Basics

CHAPTER 2. Developing Overseas Markets
  Find Overseas Buyers and Distributors

Finding the "right" buyers, agents or distributors for each market is crucial. You need good overseas business partners to generate ongoing sales. Agent/distributor selection is especially important. A poor rep could seriously hamper you in possibly lucrative markets, perhaps indefinitely in countries that impede termination of agent/distributor agreements. Therefore, you want to choose carefully. Here are techniques for finding interested and qualified buyers and distributors.

  Find Potential Buyers

You can't assume that the buyers will find you. You need to search for your own leads. There are two basic sources of "buy" leads:

  • The ones you or your reps develop first-hand
  • Second hand leads -- the ones you hear or read about

Clearly, the best leads are the first-hand leads you uncover on foreign business trips or that your overseas reps find for you. While better, these leads are also more costly to develop. If you don't have overseas reps, or can't afford overseas sales trips, give the "second-hand" leads a try. They're often solid and substantial. However, since your competitors can learn about them too, you want to follow up quickly on these leads. Good trade lead sources include the U.S. Government’s Trade Opportunity Program, FAS Agricultural Trade Leads, Commercial News USA trade leads, and Global Technology Network. Also, the World Trade Center (WTC) network, and many states have their own overseas trade offices. Whatever your source, use due diligence to assure that the buyer is reputable (see Check Out Prospects).

Some of the best leads are for development projects still in the planning stage. These future projects offer opportunities for equipment, supplies and services of all kinds. They often have foreign government backing and assured financing from international development banks. You can find advance notice of proposed projects in the Global Infrastructure Projects Database and each bank's monthly procurement bulletins, including the World Bank, African Development Bank, Asian Development Bank), European Bank for Reconstruction and Development, and the Inter-American Development Bank.

Find Potential Agents/Distributors

Finding and keeping good overseas reps is a four-step process:

    • Identify and contact prospects in each market

    • Screen and select the best prospects

    • Contractually appoint the selected reps

    • Support the reps over time.
    Contact and Screen Prospective Reps

    First impressions count, so what you say first is very important. The initial message should convey basic facts about your company and products and your market objectives, the qualifications you seek in a potential rep, and what the rep could expect from you (pricing, payment terms, delivery, promotional support, etc.). For guidance in communicating with agent/distributor prospects, see sample Introductory Letter to Potential Overseas Representatives and Responses to Inquiries from Agent/Distributor Prospects. You should respond promptly to all serious responses, try to answer all questions as fully as possible, and provide standard product literature. Do use discretion in sending costly product samples, especially if they could be easily copied. Product samples should be reserved for the top prospects.

    Once you've located some prospects, how can you tell who's best? The key is to know what you want in a rep. You should identify the qualifications needed for effective representation and look for reps with the required attributes. The requirements may vary by product, but five basic qualities are fundamental:

      • Experience - a rep with a solid track record as an agent or distributor; expertise in the product area; and strong connections in the user community.

      • Capability - a rep who can market and support the products in the way required (e.g., promote the product, train users, install and service equipment)

      • Motivation - a rep who is enthusiastic about the product and able and willing to give it priority

      • Loyalty - a rep who would not desert you for a competitor or represent a firm with a competing product

      • Honesty - a rep with a good reputation in the industry and good bank and trade references

      To find the best rep, you should compile background information on each prospect, at least on the points below. See Agent/Distributor Qualifications Checklist for more detailed assessment criteria.

        • Current status and history, including background on principal officers

        • Personnel and other resources (sales people, warehouse and service facilities, etc.)

        • Sales territory covered

        • Current sales volume

        • Typical customer profiles

        • Names and addresses of foreign firms currently represented

        • Trade and bank references

        • Capability to meet your special requirements

        • Opinion on the market potential for your products

        Don't hesitate to ask prospects for this information. They'll respond if they want your business. Of course, don't go by what they say alone, since they might well give self-serving answers. You should also seek neutral sources for corroboration. Check the firm's bank references for one. Credit reporting firms, such as Dun & Bradstreet, can provide commercial profiles on foreign firms for a fee. Some Government trade promotion organizations offer a comparable service for their exporters. For example, the U.S. Department of Commerce's International Company Profiles cover the foreign firm's trade experience, size, the companies and products it already represents, principal officers, bank and trade references, financial stability, reputability and its suitability as a possible trading partner for U.S. exporters. A face-to-face meeting with top prospects is also wise at some point, preferably at their premises for a first-hand evaluation.

        Select and Appoint the Best Reps

        Once you've identified the best prospects, you should formalize the appointment with an agent/distributor agreement. These agreements spell out the terms of the relationship and the responsibilities of each party. See Sample Foreign Representation Agreement for illustrative provisions. These agreements usually cover the following points

          • Products covered

          • Territory covered (e.g., country)

          • Degree of exclusivity

          • Minimum sales/purchase obligations

          • Responsibilities for marketing, promotion, shipping

          • Responsibilities for technical support, training, after-sales service

          • On-hand inventory requirement

          • Allocation of expenses

          • Terms of commission/payment

          • Handling of complaints and disputes (e.g., arbitration)

          • Conditions of termination

          These points are negotiable. Aim for a mutually beneficial agreement that motivates the rep and protects your interests. The rep will seek your commitment to respond promptly to orders, deliver the product on time, pay the agreed commission, provide training or other specified support, and pay a fair share of any joint marketing and promotion expenses. These are reasonable conditions. In turn, you should seek the following commitments from the rep:

            • To apply the utmost skill and ability to the sale of your products

            • To effectively perform the marketing, promotion and support tasks you specify

            • To meet any performance goals you specify (e.g., sales volume and growth)

            • Not to handle competing lines

            • Not to disclose confidential information about your company and products

            • Not to bind you to agreements without your prior approval

            It's also vital to have an escape clause in the agreement. You need the flexibility to make a safe, clean break if the rep doesn't perform as agreed. Most agreements call for a specified duration (usually one year), with automatic annual renewal, unless either party opts to terminate. Typically, advance notice is required for termination (e.g., 30, 60 or 90 days), and it usually must be for cause if before the normal term (e.g.,failure to meet specified performance levels). However, some countries limit termination rights in order to protect local businesses. Without an enforceable termination clause, you might have to retain a poor performer longer than you want, or pay a high fee to sever the relationship. You should consult an internationally experienced attorney before signing any agent/distributor agreement.

            Support Your Overseas Reps

            Good reps need your cooperation and support as much as you need theirs. Treat them as you would your domestic sales force. Prices, terms and commissions should be reasonable. At the least, you should:

              • Alert your reps to planned changes to the product line, pricing and delivery

              • Respond promptly to their calls and correspondence

              • Provide product training and customer support as needed

              • Consider help with promotions, including cost sharing for trade shows and media ads

              • Deliver the goods when and as promised

              If volume warrants, make periodic visits to help motivate the reps and also get a better feel for what and how they're doing.


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