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5. Developing Your Marketing Plan 54
Comparison of Agents and Distributors
Issue
Agents
Distributors
Generally Favors
Type of representation
Exclusive or nonexclusive
Exclusive or nonexclusive
Neutral
Size of company
Often a one-person company Can also be small operation,
but generally larger than
agents
Distributor, depending on the
industry
Sale to foreign end-user
made by …
Agent
Distributor
Neutral
Takes title to the goods
during the sale
Typically, no
Yes
Distributors, because U.S.
company deals with only one
company
How does representative
earn its profit and does the
U.S. company have strong
control over foreign pricing?
Generally, through
commissions paid to agent
directly by U.S. company.
High control over pricing.
On the margin between their
purchase price from the U.S.
and the selling price to the
local end-users (or next level
of distribution .) Generally,
low control over pricing.
Agents, because U.S.
company has more control
over foreign pricing.
Marketing activities such as
advertising, trade shows,
translation of marketing
materials
Low compared to
distributors
High compared to agents
Distributors, assuming such
activities are not to be done
by the U.S. company
Customer support activities
such as training, warranty
repair, customer inquiries
Low compared to
distributors
High compared to agents
Distributors, assuming such
activities are not to be done
by the U.S. company
Foreign receivable risk
assuming terms not payment
in advance
Risk is potentially high
because sales can be to
different buyers each time
Probably lower because
sales are to the same
distributor(s)
Distributors
Overseas inventory
maintained?
Generally, no
Generally, yes
Assuming maintaining a
foreign inventory is of benefit,
distributors
Speed of delivery of goods to
foreign end-user
Slower compared to
distributors if no inventory is
maintained
Faster compared to agents If
inventory is maintained
Assuming maintaining a
foreign inventory is of benefit,
distributors
Direct contact with end-user
to solve technical issues
or other customer support
issues
Likely
Unlikely, depending on
specific role assumed by
distributor
Probably neutral as U.S.
companies may either prefer
or not prefer to deal directly
with foreign end-users
Knowledge of importing
procedures and local
regulations
Perhaps lower than
distributor, but varies greatly
Generally strong
Distributors
Termination of relationship
concerns
Difficult to say. In some
countries, agents can be
legally treated as employees,
making termination
complicated.
Also difficult to say. In some
countries, local laws strongly
favor distributor, making
termination complicated.
Varies by country
Ability to effectively represent
U.S. products
Depends on specific
background and industry
contacts
Depends on specific
background and industry
contacts
Neutral
Preference of local market
Varies by country, but some
markets tend to use agents
more than distributors
Varies by country, but
some markets tend to use
distributors more than agents
Neutral – depends on market
Reprinted from James F. Foley, The Global Entrepreneur: Taking Your Business International,
Second Edition. (Jamric Press International, ISBN 0-9753153-0-7) pp. 123-124
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