1. International Distribution Strategy
Depends on mode of entry:
Exporting
Contract (franchise, licensing, joint ventures)
Direct foreign investment

2. International Distribution
Direct foreign investment/joint ventures
Perform all distribution functions on your own through ownership/partnership of manufacturing, distributors, retailers
The United States
Foreign Soil
X owns/operates its own manufacturing plant
Foreign customer
U.S. Company
X owns/operates its own sales offices
Foreign Retailer
Foreign distributor
X owns/operates its own retail stores

3. International Distribution
Exporting
Sell directly through your own U.S. sales force.
Sell indirectly through independent (U.S. or foreign) intermediaries.
Sell indirectly through an outside distribution system with regional or global coverage (e.g., Export Management Company).

4. The Exporting Process Exporting Considerations
Physical Distribution Considerations
Importing Country Considerations
Check for U.S. export requirements
Arrange for payment
Packing & marking
Documentation
Logistics
Tariffs, taxes
Non-tariff Barriers

5. Check Export Requirements
Department of Commerce, Bureau of Industry & Security (formerly Bureau of Export Controls)
What types of products have restrictions:
primarily weapons, technology, defense related
U.S. boycotts:
Iran, Iraq, Cuba, Libya
Bureau of Industry & Security

6. Export Documents

7. Logistics Specialists
Intermodal Marketing Companies (IMCs)
IMC arranges transportation, using a combination of transportation modes, from factory to customer’s port of entry. e.g., truck → rail → truck
a broker: takes a percentage of the cost
Foreign-Freight Forwarder
arranges documentation
advises on scheduling, routing & rates
checks consular, licensing, & labeling requirements
checks export restrictions
offers insurance
provides warehouse storage
will pack/containerize

8. International Exporting Alternatives
Domestic Intermediaries
Foreign Intermediaries
Internet
Direct marketing
Foreign consumer
U.S. Company
Domestic Wholesaler
U.S. Retail Chain
U.S. Retailer, foreign unit
Foreign Retailer
Export Management Company (EMC)
Distributor
Export Merchant Wholesaler (LT, Buy/Sell)
Agent/
Broker
Importer
Manufacturer’s Rep
Export Agents/Brokers (ST, Fee/Commission)
Foreign Sales Corporation (FSC)

9. Intermediaries: two general types
Types of intermediary relationships
Distributors; buy & resell; longer term
Agency; works on sales commissions
agents – short term; e.g., one time
(manufacturer’s) representatives – longer term; independent sales people that represent your company’s products.

10. Exporting: Company-based alternatives
Domestic Intermediaries
Foreign Intermediaries
Internet
Direct marketing
Foreign consumer
U.S. Company
Foreign Retailer
Export Management Company (EMC)
Distributor
Foreign Sales Corporation (FSC)

11. Exporting: U.S. Based Intermediaries
Domestic Intermediaries
Foreign Intermediaries
Foreign consumer
U.S. Company
Domestic Wholesaler
U.S. Retail Chain
U.S. Retailer, foreign unit
Foreign Retailer
Foreign Retailer
Distributor
Export Merchant Wholesaler (LT, Buy/Sell)
Export Agents/Brokers (ST, Fee/Commission)

12. Exporting: Foreign-based Alternatives
Domestic Intermediaries
Foreign Intermediaries
Foreign consumer
U.S. Company
Foreign Retailer
Broker
Distributor
ManagingAgent
Manufacturer’s Rep

13. Assign 4: You will not need to consider:
Webb-Pomerene associations
Foreign Trading Companies*
Foreign Sales Corporation*
* Unless you can provide evidence that your company currently has one and is using it

14. What do intermediaries do? (the short list)
purchase inventory from the manufacturer or export intermediary; assumes risk for selling the product to smaller distributors, retailers and/or end users in the foreign market.
Provide a sales force that is large enough to cover the country or region in which it is located.
local advertising & promotion
warehousing for the product.
JPG consulting, Going Global, Evaluating Foreign Distributors;

15. Locating & selecting intermediaries
Locating Intermediaries - lists provided by gov’ts, chambers of commerce, business publications, etc.
Selecting Intermediaries - screen carefully, be precise about what functions you want performed
Intermediary Evaluation Checklist:
company characteristics: health of the business
experience & reputation
performance: sales force, territory, promotions, product movement
compatibility

16. Channel Design Considerations
Coverage
The number of areas & retail outlets in which a product is represented and the quality of that representation.
Types of coverage
Intensive
Selective
Exclusive

17. The Distributor Agreement
Typical terms include
Contract duration
Typically short periods initially
Geographic and customer boundaries
Well-defined territories and channels
Compensation
Amounts, how and in what currency
Products and conditions of sale
Products to be sold; terms and conditions of sales
Means of communication between parties

18. Motivating intermediaries; provide incentives
Inventory Financing
Cumulative Rebates
for larger quantities, early payments, achieving sales targets, maintaining inventory levels, performing sales promotions, etc.
Returns of Unsold Merchandise
Promotion & Merchandising Assistance
Displays
Advertising
In-store Displays
Financial Assistance

19. Terminating intermediaries
Terminating Intermediaries - be aware that some countries have provisions to protect intermediaries from termination
Example:
Honduras
distributors/agents protected by wrongful termination law (Law of Agents, Distributors and Representatives of Foreign Enterprises)
Requires “just cause” for termination (fraud, negligence, failed sales targets)
terminating a distributor may require compensation

20. What to consider when selecting foreign intermediaries
INTERNAL
Company objectives – cost vs. control
Character; nature of product
Capital resources available to company
Continuity of relationships with intermediaries
Coverage
EXTERNAL
Customer characteristics - what needs should be satisfied?
When, where, how?
Culture – to what extent do we need to adapt?
Competition – what intermediaries do competitors use?

21. Logistics: transportation of goods
Shipping Guinness beer to Bertoua, Cameroon (Africa)

22. 4 days from Douala to Bertoua
From port to patrons
4 days from Douala to Bertoua