Page 181 - DMGT547_INTERNATIONAL_MARKETING

International Marketing

Notes 1. Foreign Distributor: A foreign distributor is a foreign firm that has exclusive rights to
carry out distribution for a manufacturer in a foreign country or specific area. Order must
be channeled through the distributor even when the distributor chooses to appoint a sub-
agent or sub-distributor. The distributor purchases merchandise from the manufacturer at
a discount and then resells or distributes the merchandise to the retailers and sometimes-
final consumers. In this regard, the distributor’s function in many countries may be a
combination of wholesaler and retailer. But in most cases the distributor is usually
considered as an importer or foreign wholesaler. The length of association between the
manufacturer and its foreign distributor is established by a contract that is renewable
provided the continued arrangement is satisfactory to both.
There are a number of benefits for using a foreign distributor. Unlike agents, the distributor
is a merchant who buys and maintains merchandise in its own name. This arrangement
simplifies the credit and payment activities for the manufacturer. To carry out the
distributing function the foreign distributor is often required to warehouse adequate
products, parts, and accessories. Apple Computer now does its own distribution in Japan
because the services of Toray Industry, its foreign distributor, proved inadequate.
2. Foreign Retailer: If foreign retailers are used, the product in question must be a consumer
product rather than an industrial product. There are many channels by which a manufacturer
may contact foreign retailers and trust them in carrying product ranging from a personal
visit by manufacturer’s visit to mailings of catalogues, brochures and other literature to
prospective retailers.

Notes For big items such as automobiles or high volume products it may be worthwhile
for the manufacturer to sell to retailers without going through a foreign distributor.
3. State Controlled Trading Company: For some products particularly utility and
telecommunication equipment a manufacturer must contact and sell to the state controlled
companies.

India has State Trading Corporation (STC) which deals with import and export of cars and
other items which are in SIL. Most opportunities for manufacturers are limited to raw
materials, agricultural machinery, and manufacturing equipment and technical instruments
rather than consumer or household goods. Reason for all this may be the limitations in
shortage of foreign exchange and an emphasis on self-sufficiency as in communist and
socialist countries.
4. End User: Sometime a manufacturer is able to sell directly to foreign end users with no
intermediaries involved in the process. This direct channel is a logical and natural choice
for costly industrial products. For most consumer products the approach is practical for
some products and in some countries. A significant problem with consumer purchasers
can result from duty and clearance problems. A consumer may place an order without
understanding his or her country’s import regulations. When the merchandise arrives the
consumer may not be able to claim it. As a result the product may be seized or returned on
a freight collect basis.

10.3.2 Types of Intermediaries: Indirect Channel

A manufacturer may find it difficult, rather impractical, to sell directly to various foreign parties
(foreign distributors, foreign retailers, state controlled trading companies and end users) for a
majority of products. Other intermediaries have come between these foreign buyers and
manufacturers.

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