Free Online Course in International BusinessKnowledge StatementKnowledge of Terms and Conditions of Purchase or SaleGoalThe goal of this material is to introduce you to the terms and conditions associated with a purchase/sale in international business and their effect on the different relationships that are established between parties to the transaction, including agents, sales representatives, distributors, licensing, franchising and joint venture partnerships.Learning ObjectivesYou will be able to• identify terms of purchase/sale. • identify advantages and disadvantages of terms of purchase/sale. • identify the different relationships that can be established between buyers and sellers. IntroductionAn international manager many encounter different approaches in working with international customers. Other companies utilize distributors or wholesalers. These relationships are commonly referred to as the modes of entry. The way terms and conditions apply to the purchase or sale or goods along with their advantages and disadvantages are important applications in the sales transaction process.There are three steps: 1. to understand the different modes of entry 2. to learn the commonly used terms of sale 3. to understand the ways they work within commercial contracts Modes of Entry – RelationshipsThe modes of entry used by an exporter will depend on the product or service being sold as well as the country targeted for entry. Each mode of entry has its advantages and disadvantages based on the relative risk of a buyer and target country. These advantages and disadvantages will obviously affect the costs of the venture/transaction and ultimately the profitability of the international business. The experience of a seller as well as the company support in terms of personnel and finances will also help to determine the best mode of entry. Remember that the mode of entry is just that, the entry. Once the relationship has been established and experience and critical mass gained, it can be changed. It may cost to make a change, but long term profitability should be increased.AgentAn agent will represent the manufacturer in the target market and be responsible for making contacts with potential buyers, doing sales presentations and demonstrations and negotiating transactions. An agent normally does not take possession of merchandise since it is usually shipped directly to a buyer. An agent is paid a commission for the sale. The rate of the commission depends on industry standards as well as the value of the product, the value of the transaction and the market restrictions. An agent may be based in the country of export or import. Before signing an agent agreement with an individual based overseas, it is imperative that an international manager be aware of the local laws governing agent contracts and the labor laws that may apply.• Advantages to the seller • low cost • quicker entry • lower time commitment • can be a domestic sale • US laws pertain • Disadvantages to the seller • low return • reduced control • no market experience • increased market costs due to middleperson DistributorA distributor is normally located within the target market and is responsible for purchasing, stocking, and reselling merchandise. In many cases, a distributor is focused on a specific industry, trade, or channel of distribution and may provide sales, marketing and logistics services as well. The level of service will depend on the price of the products and profit margin for both parties. The responsibilities of each party should be clearly spelled out in the contract.• Advantages to the seller • market entry control • higher return • development of relationships • experience in export marketing • Disadvantage to the seller • increased costs • increased time for market entry • reduced knowledge base for international expansion • fewer market targets • increased time commitment from company resources The differences found between agents and distributors are as follows: • Agent • exclusive or non • small company • fewer resources • may be domestic sale • commission based • do not take ownership of product • no responsibility of market relationships • agent protection laws do not favor exporter • Distributor • exclusive or non • usually larger than agent • in market relationships • usually takes ownership of products • more market responsibility
|
About Us | Terms of Use | Contact Us | Partner with Us | Press Release | Sitemap | Disclaimer | Privacy Policy
©1999-2011 OpenLearningWorld . com - All Rights Reserved