Arrangement
How it works
Pros
Cons
Appoint an agent
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.
1/9
Agent may have competing interests or may not perform. Can be difficult to end arrangement.
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.
Appoint a distributor
The distributor imports goods and owns them from that point. Also arranges distribution and marketing.
Exporter is paid on delivery of goods to distributor. Distributor often has systems and staff.
Agent may have competing interests or may not perform. Can be difficult to end arrangement.
The distributor may have competing products and may not promote an exporter’s products adequately.
May not have national coverage.
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.
2/9
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.
Agent may have competing interests or may not perform. Can be difficult to end arrangement.
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.
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.
3/9
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.
Agent may have competing interests or may not perform. Can be difficult to end arrangement.
There is nobody to take exporter’s side in resolving local issues. Usually no long-term commitment.
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.
4/9
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.
Agent may have competing interests or may not perform. Can be difficult to end arrangement.
Culture of acquired company may not fit. Exporter may inherit business liabilities. Requires careful due diligence.
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.
5/9
License technology or know-how
Technology or know-how is sold in return for fee or commission.
Low investment required.
If it works well, the money keeps flowing in.
Agent may have competing interests or may not perform. Can be difficult to end arrangement.
Exporter could lose control of intellectual property. Good auditing needed to ensure exporter is paid correctly.
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.
6/9
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.
Agent may have competing interests or may not perform. Can be difficult to end arrangement.
Business needs adapting for different markets, languages and standards. Disputes common, so good resolution mechanisms required.
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.
7/9
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.
Agent may have competing interests or may not perform. Can be difficult to end arrangement.
Exporter inherits local partner’s business image, which is fine if it is a good image, but difficult if not.
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.
8/9
Sell online to consumers
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.
Agent may have competing interests or may not perform. Can be difficult to end arrangement.
Involves many small transactions and lots of servicing. Can be hard in developing countries to register with large platforms (e.g. Amazon or e-Bay).
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.
9/9