How it works
The agent is exporter’s representative. Agent does not own goods, but takes commission.
Often no payment until sales are made.
Agent may have competing interests or may not perform. Can be difficult to end arrangement.
The distributor imports goods and owns them from that point.
Also arranges distribution
Exporter is paid on delivery of goods to distributor. Distributor often has systems
The distributor may have competing products and may not promote an exporter’s products
adequately. May not have national coverage.
Set up local company to manufacture or be a sales subsidiary
The entity can be wholly owned or
a joint venture.
Where exporter has majority control, they are in charge. Works well when exporter has established buyer.
Some countries do not permit foreign ownership.
Expensive to set up.
Profits may not flow for some time.
Lack of local knowledge, networks may be a barrier.
Technology or know-how is sold in return for fee
Low investment required. If it works well, the money keeps flowing in.
Exporter could lose control of intellectual property. Good auditing needed
to ensure exporter
is paid correctly.
Acquire a local business
Buying business is a shortcut to setting up a local company.
Exporter can get premises, distribution systems, staff, storage, etc. Good for services.
Culture of acquired company may not fit. Exporter may inherit business liabilities. Requires careful due diligence.
Sell directly to major customers
The end customer, such as a large retailer, imports directly.
Works well when few end-users or with bulk commodities.
No middle person.
There is nobody to take exporter’s side in resolving local issues. Usually
no long-term commitment.
Products or services advertised online, orders taken online and products delivered by mail or via local warehousing, or online for some services.
Suitable for low-value products – books, electronics, clothing, toys. Uses electronic payment systems - PayPal, WeChat, Alipay.
Involves many small transactions and lots of servicing. Can be hard in developing countries to register with large platforms (e.g. Amazon
Form a joint venture
A new business is established with inputs from exporter and a local entity. Profits divided as agreed.
Relatively low capital required. Exporter gets access to local networks and exerts some control.
Exporter inherits local partner’s business image, which is fine if it is a good image, but difficult if not.
Set up franchises
Complete package is put together with branding, manuals and instructions. In return, fees are paid, some up-front, and some as a percentage of sales.
Can work well for service businesses. Franchisees can own their own business and have strong interest in making it work well.
Business needs adapting for different markets, languages and standards. Disputes common,
so good resolution mechanisms required.