Within the internationalization strategy of a company, the first step will be to decide the way to penetrate a new market. The most commonly used by SMEs is indirect exports, which involves using an intermediary (agent or distributor) to act on our behalf in the local market.

Agent or distributor?

Agents represent our company in the local market in exchange for a commission or salary. The company retains ownership of the products and covers all local marketing costs. The customer portfolio belongs to the agent and possible indemnities for the same must be taken into account if the commercial relationship between agent and company is terminated.

On the other hand, distributors tend to specialize in a market where they represent several complementary products. They require higher distribution margins from agents but assume greater responsibilities. They buy the company’s products and then resell them to their customers, adding a commercial margin, import and store the products.

The advantages of a distributor over an agent are as follows:

• assistance with import formalities
• maintenance of product stock at destination
• can provide local financing
• provide after-sales services
• contribute to the costs of local marketing and promotion of products
• manage a single customer per market
• shared risks in the local market

The disadvantages include:

• shared commercial margin
• limited access and contact with end customers
• less control over pricing
• need for investment of time and resources for distributor management
• dependence on the distributor for access to market information, consumer trends, competitor information…
• dependence on the distributor’s resources and dedication, which will determine the pace of development of
• our products in the market.
• dependence on the distributor for the brand image he/she conveys of our products.

If we finally decide on the distributor formula, a fundamental part is the search for the most appropriate distributors for our company. We need them to market our products in the different markets, complying with certain requirements, such as experience in the distribution of our type of products, the size and dedication of the distributor to the marketing of our brands (which will depend in part on the breadth and depth of its catalog). Several distributors will be necessary to satisfy the demand of different geographic areas.

Choosing the right distributor to work successfully with our company can be a challenge. To do so, we must start with clearly defined objectives and criteria, as well as choose the appropriate contract model to protect us from possible contingencies and, at the same time, be able to take advantage of the full sales potential of the market in question.

In a future post, we will discuss the most appropriate ways to select the right distributor, based on our interests.

Avantia International Consulting helps you in the search and selection of the most appropriate distributors for your company in your target markets. Shall we talk?

Companies and their businesses have long since ceased to be local, not even companies that think they live in a domestic environment do so, because don’t they operate with other companies in their national market that are from abroad? Or even many of them do not sell or deal as intermediaries, distributors or commercial agents for companies of another nationality?

The truth is that the world has become flat and this causes companies to be subject to several legal systems simultaneously on a daily basis, increasing if not multiplying the legal risks that threaten the waterline of the international business they carry out.

In this order, two regulatory changes are being introduced in Spain that mean that companies must mark one more point on their foreign trade map, and do so with rigor and seriousness because of what is at stake.  These two legislative measures set the multi-territoriality of corporate criminal risks and raise the legal compliance requirements of those who do business, whether in Spain or also with or outside Spain.

Looking at a practical case, can my company be responsible for a possible bribe made by a commercial agent abroad in favor of a commercial operation for my company? We could venture to say “No, he/she is just an independent agent, I have nothing to do with it, I just pay his/her commission, whatever he/she does…”.  Thinking in this way would be a natural impulse, although not for that reason right, since the reforms carried out in International Compliance regarding international cooperation and who are competent to judge, made that since 2014 the Spanish courts are competent to know and sentence these facts.

That is, in the case mentioned above, this bribery would be a bribery offense between individuals, for which the Spanish company would be responsible, but also joining such legislative change to the one carried out in 2015 regarding corporate criminal liability, could also be responsible administrators and managers related to this area in a personal capacity, yes, dear reader if you have thought that as an administrator or manager I can go to prison or be criminally liable for these facts? Well, you have read correctly.

Two rules that are modified to adapt to the legal and criminological requirements of the criminal liability of companies, which if not known and, most importantly, properly treated, can bring down to earth so many hours of study, travel, business efforts… in short, a whole business project.

The good thing is that it is a “problem” with a solution and the wise saying goes “that if a problem has a solution it is no longer a problem”… we will talk about it at the breakfast that Grupo T&T will hold together with ACOCEX, on April 21 at the Club Financiero de Madrid, where we will discuss the disease, the patient but also the preventive treatment to keep our business projects safe, we are waiting for you.

Miguel Toledo Murcia

Lawyer. Area Manager
Economic Criminal & Compliance
T&T Lawyers Group
www.grupotyt.es

More info and registration for the informative breakfast on the subject, click here