For Australian businesses, the international market offers an excellent opportunity for business growth. For companies looking to expand into international markets, sourcing an agent or distributor is generally the first step. Before this step is taken, it is essential to understand the role of the agent and distributor, and to research the type of agent or distributor that will be of benefit to your business.
Agents and distributors will perform different functions depending on the industry involved. The gap between the role of an agent and the role of distributors is fairly wide. While distributors take on ownership of goods and resell, agents only act as representatives. Both roles involve a significant amount of trust on the side of the exporting business.
The specific responsibilities of an agent or distributor need to be well defined, and it’s a good idea to consider this before entering into discussions with specific agents or distributors. The first decision really is whether you want someone to represent you exclusively, or whether you want to try a number of avenues simultaneously. Knowing this in advance will put you in a stronger position to negotiate.
There are advantages to signing over exclusive rights. Having no competition gives agents and distributors an advantage in the new market. Such an agreement can restrict your actions in the future, however, and so should be carefully considered.
Communication is important in any business venture, but it’s particularly important in international ventures. For this reason, it’s a good idea to give yourself time to get to know potential agents and distributors. The working relationship will eventually be a close one.
A number of candidates should be thoroughly investigated. Trade references and credit checks should form a basic part of your research. Travelling to the foreign market is also a good idea, as it allows you to see how the agent or distributor truly operates. You are relying on your partner’s knowledge of the market, so it is worth investing in an investigation of their local reputation.
Legal advice is essential before signing any agreement.
What makes a good partner
Research is one thing, but knowing what it means is another. Some questions to ask yourself include:
- Do I want an experienced agent or distributor? Well-established partners can be an advantage, but newcomers may ask for less and may be more driven to succeed.
- What is their network like? It’s important to confirm their connections.
- Do they know their market? Confirm for yourself the validity of anything a new partner claims.
The part an agent or distributor plays in a business’ overseas expansion is significant. Overseas laws come into play as well as local ones. If you’re considering taking this step, it’s advisable to do as much research as possible before approaching a potential partner. Decide on the things you want them to achieve, and research your own rights and responsibilities carefully.