Agent Advantages to Seller Low Cost Quicker Entry Lower Time Commitment Can be a domestic sale US Laws pertain Disadvantages to Seller Low return Reduced control No market experience Increased market costs due to middleperson Represents the manufacture in market. Does not take possession of merchandise. Paid on commission.

Distributor Advantages to Seller Market Entry Control Market Growth Control Higher return Development of relationships Experience in export marketing Disadvantages to Seller Increased costs Increased time for market entry Reduced knowledge base for int’l expansion Fewer market targets Increased time commitment from company resources Responsible for purchasing, stocking & reselling merchandise. May provide sales, marketing & logistics services.

Agent vs. Distributor 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 not Usually larger than Agent In-market relationships Usually takes ownership of products More market responsibility

Licensing Sale of the right to produce product in a certain manner & use the name Advantages to Licensor Decreased Capital Needs Increased Return on research investment Decreased risk to local government issues Access market faster – market test Extend life cycle of technology Disadvantages to Licensor Less control – No marketing exposure Can steal technology after contract up Create own competitor Brand, quality & image must be protected Contract – negotiations must be thorough & complete

Franchising Advantages to Franchisor Duplicate time Reduced market investment Increased income Duplicate business model Build Int’l Brand Entry to controlled markets Disadvantages to Franchisor Loss of control Need to adapt to local market demands Loss of proprietary information Must be a duplicatable business model. Sale of the right to conduct business in a certain manner

Joint Venture Advantages to Partners Reduced investment Access to controlled markets In Market contacts In Market knowledge In Market Presence Disadvantages to Partners Reduced Control Reduced ROI Chance to loose proprietary information Chance to loose market with a buy out Create local competitor Establish Overseas Presence by partnering with local or international company(ies).

Direct Foreign Investment Advantages to Seller Market Control Local Presence Increased ROI Develop relationships In market knowledge Disadvantages to Seller Increased Investment of time Increased investment of financial resources Increased risk of buy out Increased investment of personnel resources Establish Overseas Presence by creating an Overseas Corporation or Subsidiary

Countertrade Governmental Advantages (Exporter) Protection of Foreign Exchange Reserves Create New Export Products or Markets Provide a Balance of Trade for Political Reasons Acquire New Technology Experience Risks (Importer) Sales Negotiations Standards Contract Profitability

Types of Countertrade Barter Counterpurchase Advance Purchase Buy Backs Bilateral Arrangements Offsets – Co-production – Licensed production – Subcontractor production – Overseas investment – Technology transfer

Consignment Title to the goods Benefits – Cost effective – Market penetration – Experienced seller

Methods of Payment Open Account Documentary Collections Letter of Credit Cash in Advance

Transaction Viability Pricing Strategy Additional Costs Environmental Factors – Inflation – Currency conversion Market Factors – Purchasing power – Competition – Market share Internal Factors – Available resources – Financial parameters

Sources of Information Commercial Sources Credit Bureaus Banks Chambers of Commerce Foreign Trade Commissions Client Web Site Public Documents Accountants Country Risk Sources US Dept. of Commerce The Internet Country Reports Banks Accountants

Relevant Law Law of parties to the contract – Domestic – Foreign Law of the place of execution of the contract. Choice of law. Law of arbitration / enforcement of the contract.

Components of Contracts Currency Incoterms Who is paying taxes, duties, and insurance Transfer of Title Methods and terms of payment Force majeure Warranties Liability Liability for Delay Terminations Law governing the contract ICC arbitration/resolution of disputes Specific Issues relating to distribution agreement