Chapter 4: FOREIGN MARKET ENTRY STRATEGIES

4.1. International market entry modes

• There are various formats of entering into
international market. It ranges from the simplest
export to foreign direct investment which is more
complex and risky to enter in foreign market.
1. EXPORTING
• is a strategy in which a company, without any
marketing or production organization overseas,
exports a product from its home base.
• This method is the most common approach
employed by companies taking their first
international step.
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Exporting can be
• direct ---sells to a customer in another country
• Indirect-- sells to a buyer (or distributor) in the
home country, which in turn exports the product.
• The main advantage of an exporting strategy is
the ease in implementing the strategy.
• Risks are minimal because the company simply
exports its excess production capacity when it
receives orders from abroad.

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2. Licensing
• Licensing is a simple way for a manufacturer to
become involved in international marketing.
• It is contractual arrangement whereby one
company (the licensor) makes an asset available
to another company (the licensee) In exchange for
royalties; license fees, or some other form of
compensation.
• It is that permits a foreign company to use
industrial property (i.e., patents, trademarks, and
copyrights)

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• The licensor thus gains entry into the foreign
market at a little risk.
• The licensee gains production expertise or a well-
known product or name without having to start
from scratch.
The advantages of licensing are most apparent when:
• capital is scarce
• import restrictions forbid other means of entry
• a country is sensitive to foreign ownership.
• the licensee develops its own know-how and
capability to stay abreast of technology in the
licensed product area.
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3. Franchising
• A company can enter a foreign market through
franchising, which is a more complete form of
licensing.
• Here the franchiser offers a franchisee a complete
brand concept and operating system.
• In return, the franchisee invests in and pays
certain fees to the franchiser.
• Franchisors expect franchisees to do things the
company way.
• Usually franchisors also provide more support and
training than a licensor.
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• Whereas a license fee may be a one-time or
annual thing, franchisees pay fees more regularly.
• When you franchise your brand or business, you
retain an enormous amount of power.
• Usually licensees aren't as tightly controlled as
franchisees.

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4. Management contract
• In some cases, government pressure and
restrictions force a foreign company either to sell
its domestic operations or to relinquish control.
• In other cases, the company may prefer not to
have any FDI. Under such circumstances, the
company may have to formulate another way to
generate the revenue given up.
• One way to generate revenue is to sign a
management contract with the government or
the new owner in order to manage the business
for the new owner.
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• The new owner may lack technical and managerial
expertise and may need the former owner to
manage the investment until local employees are
trained to manage the facility.
• Management contracts may be used as a sound
strategy for entering a market with a minimum
investment and minimum political risks.
• Agreement, for coordinating and overseeing a
contract, is made between investors or owners of
a project, and the hired management company.

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5. Joint venture
• An international joint venture is one in which the
partners are from more than one country sharing
of risk and the ability to combine different value
chain.
• One company might have in-depth knowledge of
a local market, an extensive distribution system,
or access to low-cost labor or raw materials.
• A foreign partner possessing considerable know-
how in the area of technology, manufacturing,
and process applications

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• A joint venture can simultaneously work to satisfy
social, economic, and political circumstances since
these concerns are highly related.

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6. Assembly operations
• Assembly means the fitting or joining together of
fabricated components.
• The methods used to join or fit together solid
components may be welding, soldering, riveting,
laminating, and sewing.
• In this strategy, parts or components are
produced in various countries in order to gain
each country’s comparative advantage.
• Capital-intensive parts may be produced in
advanced nations.
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• labor-intensive assemblies may be produced in a
less developed country, where labor is abundant
and labor costs low.
• This strategy is common among manufacturers of
electronics.

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7. TURNKEY OPERATIONS
• It is an agreement by the seller to supply a buyer
with a facility fully equipped and ready to be
operated by the buyer’s personnel, who will be
trained by the seller.
• A turnkey business is a business that is ready to
use, existing in a condition that allows for
immediate operation.
• The term "turnkey" is based on the concept of
only needing to turn the key to unlock the doors
or to begin operations.

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• To be fully considered turnkey, the business must
function correctly and at full capacity from when
it is initially received.
• In international marketing, the term is usually
associated with giant projects that are sold to
governments or government-run companies
• Such large-scale projects include building steel
mills; cement, fertilizer, and chemical plants; and
those related to such advanced technologies as
telecommunications.

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05/31/2024 15
8. Strategic alliances
• A strategic alliance is a specific form of collaboration
between two or more companies.
• Strategic alliances with stronger overseas partners can
provide a means of overcoming the problems of small
size and lack of resources faced by some companies.
• It can apply to virtually any form of collaboration
between two or more firms, for the following
activities:
 Technology transfer agreements
 Joint product development
 Distribution agreements
 05/31/2024 Marketing collaboration 16
• Generally, each company involved in the strategic
alliance will benefit by working together.
• The arrangement they enter into may not be as
formal as a joint venture agreement.
• Alliances are usually consummated with a written
contract, often with agreed termination points.

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9. Foreign Direct Investment
• The ultimate form of foreign involvement is direct
ownership of foreign-based assembly or
manufacturing facilities.
• The firm can either set up a new operation in host
country or it can acquire an established firm and use
that firm to promote its products in the country’s
market.
• There are two alternatives acquisition and green
investment.
Acquisitions
• Acquisition is transferring the local company to foreign
owner. In this the foreign company invest in local firm
for 100 percent ownership on the existing facility. 18
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• The reasons for wanting to acquire a foreign
company
 product/geographical diversification
 acquisition of expertise (technology, marketing,
and management)
 rapid entry
Greenfield investments
• Greenfield investment is investing from scratch.
• The company entering in international market will
buy land, construct building and hire people to
run the business.
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• A government generally welcomes foreign
investment that starts up a new enterprise (called
a green field enterprise
• That investment increases employment and
enlarges the tax base.
• An acquisition, however, fails to do this since it
displaces and replaces domestic ownership.
• Therefore, acquisition is very likely to be
perceived as exploitation.

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 4.2. Selecting an entry mode

Analysis of entry strategies

• To enter a foreign market, a manufacturer has a
number of strategic options, each with its own
strengths and weaknesses.
• Many companies employ multiple strategies.
• McDonald’s uses joint ventures in the Far East
while licensing its name without putting up equity
capital in the Mideast.
• No single entry strategy is suitable for all products
or in all countries.
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Factors Influencing To the Entry Mode Choice
• Factors influencing in entry mode decisions can be
divided for external and internal factors.
• External factors include target country market
factors, target country environmental factors,
target country production factors and home
country factors.
• Internal factors affecting in the entry mode
decision are company product factors and
company resource and commitment factors
• Type of country chosen dictates the entry strategy
to be used.
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Target country environmental factors
• An environmental factor includes political, economic
and socio-cultural characters.
• One way of classifying countries is by the degree of
control exerted on the economy by the government.
• Capitalism at one extreme and communism at the
other.
• Other systems are classified somewhere in between
depending on the freedom allowed to private citizens
in conducting their business activities
• In free-enterprise economies, a MNC can choose any
entry strategy it deems appropriate.
• In controlled economies, the options are limited.
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Target country market factors
• Small markets support entry modes that have low
break-even sales volumes, like indirect or agent
exporting, licensing, and some contractual
arrangements.
• Markets with high sales potential are possible for
entry modes with substantial break-even sales
volumes.
• Competitive structure is another important
dimension in the target markets.
• Usually most favorable markets are markets, in
which competitor are many non-dominant
companies.
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 Target country production factors
• If cost of production is low in the target country it
encourages some form of local production and high
cost would force against local manufacturing.
Home country’s factors
• The size of domestic market affects to the need to
grow the business outside country borders.
• Other important factors that have influence to the
entry mode choice are home country’s production
costs and policy of the home country towards
exporting and foreign investment by domestic firms.
• Distance between home country and target country
affects the transaction costs of delivering the products.
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 Product factors
• Market entry strategies are also influenced by
product type.
• A product that must be customized or that
requires some services before and after the sale
cannot be exported easily to another country.
• In fact, a service or product whose value is
determined largely by an accompanied service
cannot be distributed practically outside of the
producing country.
• Any portion of the product that is service oriented
must be created at the place of consumption.
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• As a result, service-intensive products require
particular modes of market entry.
• The options include management contract to sell
service to a foreign customer, licensing so that
another local company (franchisee) may be
trained to provide that service.
• Local manufacturing by establishing a permanent
branch or subsidiary there.

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Resource and commitment factors
• The larger companies will have the financial,
managerial resource to commit to enter in various
entry mode like wholly owned subsidiary.
• In contrast; a company with very limited resources
is inhibited to use entry modes that need for only
a small resource.
• Typically in companies the international
commitment has grown along with international
experience over a lengthy period of time.

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 CHAPTER FIVE
INTERNATIONAL MARKETING PRODUCT POLICY
5.1. Planning and development of products for
foreign markets
WHAT IS A PRODUCT?
• Just because a product is successful in one
country, there is no guarantee that it will be
successful in other markets.
• A marketer must always determine local needs
and tastes and take them into account.
• Some products have universal appeal, and little or
no change is necessary when these products are
placed in various markets.
• For other products, modification is necessary in
order to achieve acceptance in the marketplace.
• It is generally easier to modify a product than to
modify consumer preference.
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• That is, a marketer should change the product to
fit the need of the consumer rather than try to
adjust consumers’ needs to fit product
characteristics.
• A product is often considered, in a narrow sense,
as something tangible that can be described in
terms of physical attributes, such as shape,
dimension, components, form, color, and so on.
• This is a misconception that has been extended to
international marketing as well, because many
people believe that only tangible products can be
exported or sold internationally.
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• In many situations, both tangible and intangible
products must be combined to create a single,
total product.
• Perhaps the best way to define a product is to
describe it as a bundle of utilities or satisfaction.
• Therefore, a complete product should be viewed
as a satisfaction derived from the four Ps of
marketing (product, place, promotion, and
pricing) – and not simply the physical product
characteristics.
• Since a product can be bundled, it can also be
unbundled.
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• One problem with a bundled product is the
increased cost associated with the extra benefits.
• With the increased cost, a higher price is
inevitable.
• Thus a proper marketing strategy, in some cases,
is to unbundle a product instead so as to get rid of
the frills and attract price-sensitive consumers.

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 5.2. Product standardization versus adaptation

• Product standardization means that a product

originally designed for a local market is exported to
other countries with virtually no change, except
perhaps for the translation of words and other
cosmetic changes.
5.2.1 Arguments for Standardization
• It is an easy process for executives to understand
and implement, and it also is cost-effective.
• When appropriate, standardization is a good
approach. For example when a consistent company
or product image is needed, product uniformity is
required.
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• Some products by their very nature are not or
cannot be easily modified.
• Musical recordings and works of art are examples
of products that are difficult to differentiate, as
are books.
• A condition that may support the production and
distribution of standardized products exists when
certain products can be associated with particular
cultural universals.
• That is, when consumers from different countries
share similar need characteristics and therefore
wants essentially identical products.
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• For example, watches are used to keep time
around the world and thus can be standardized.
5.2.2 Arguments for Adaptation
• All countries are not the same in their preference
for products due to their difference in economy,
culture, natural environment.
• Climate is a major factor which forces companies
to adapt their product accordingly.
• As petroleum companies are modifying their
product to hot country users and cold country
users.
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• Product adaptation is necessary under several
conditions. Some are mandatory, whereas others
are optional.
Mandatory Product Modification
• The mandatory factors affecting product
modification are the following:
 Government’s mandatory standards (i.e.,
country’s regulations)
 Electrical current standards
 Measurement standards
 Product standards and systems
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• To gain entry into a foreign market, certain
requirements of government must be satisfied.
• The different electrical standards (phase,
frequency and voltage) abroad can easily harm
products designed for use.
• Although the United States has adopted the
English (imperial) system of measurement (feet,
pounds, etc.), most countries including Ethiopia
are employing the metric system, and product
quantity should or must be expressed in metric
units.

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• Some products must be modified because of
different operating systems adopted by various
countries.
• Television systems provide a good example.
• When differences in product operating systems
exist, a company unwilling to change its products
must limit the number of countries it can enter,
unless proper modification is undertaken for
other market requirements.

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Optional Product Modification
• One condition that may make optional modification
attractive is related to physical distribution, and this
involves the facilitation of product transportation at
the lowest cost.
• Therefore, a slight product modification may greatly
facilitate product movement.
• Local use conditions are also requiring optional
product modification, including climatic conditions.
• The hot/cold, humid/dry conditions may affect
product durability or performance.
• Another local use condition that can necessitate
product change is space constraint.
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 5.3. International trade product life cycle

• The life cycle begins when a developed country,

having a new product to satisfy consumer needs
and wants to exploit its technological
breakthrough by selling abroad.
• Other advanced nations soon start up their own
production facilities, and before long less
developed countries do the same.
• Efficiency/comparative advantage shifts from
developed countries to developing nations.

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• Finally, advanced nations that are no longer cost-
effective, import products from their former
customers.
• The moral of this process could be that an
advanced nation becomes a victim of its own
creation.
Stages and characteristics
• There are five distinct stages (Stage 0 through
Stage 4) in the IPLC.

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Stage 0 – Local innovation
• Innovations are most likely to occur in highly
developed countries
• Because consumers in such countries are affluent
and have relatively unlimited wants.
• Firms in advanced nations have both the
technological know-how and abundant capital to
develop new products.
Stage 1 – Overseas innovation
• As soon as the new product is well developed, its
original market well cultivated, and local demands
adequately supplied.
• The innovating firm will look to overseas markets
in order to expand its sales and profit.
• Thus this stage is known as a “pioneering” or
“international introduction” stage.
• Competition in this stage usually comes from local
firms
• Firms in other countries may not have much
knowledge about the innovation.
• Production cost tends to be decreasing at this
stage because by this time the innovating firm will
normally have improved the production process.
Stage 2 – Maturity
• Growing demand in advanced nations provides an
impetus for firms there to commit themselves to
starting local production
• Development of competition does not mean that
the initiating country’s export level will
immediately suffer. The innovating firm’s sales
and export volumes are kept stable because LDCs
are now beginning to generate a need for the
product.
• Introduction of the product in LDCs helps offset
any reduction in export sales to advanced
countries
Stage 3 – Worldwide imitation
• This stage means tough times for the innovating
nation because of its continuous decline in
exports.
• There is no more new demand anywhere to
cultivate
• Firms in other advanced nations use their lower
prices (coupled with product differentiation
techniques) to gain more consumer acceptance
abroad at the expense of the innovative firm.
• Toward the end of this stage, innovator’s export
dwindle almost to nothing, and any production
still remaining is basically for local consumption.
Stage 4 – Reversal
• Innovating country’s comparative advantage has
disappeared. What is left is comparative
disadvantage.
• This disadvantage is brought about because the
product is no longer capital-intensive or
technology-intensive but instead has become
labor-intensive.
• Thus, LDCs – the last imitators – establish
sufficient productive facilities to satisfy their own
domestic needs as well as to produce for the
biggest market in the world, the USA. US firms are
now undersold in their own country.
 PRICING IN
INTERNATIONAL
MARKETING
WHAT IS PRICE?
 6.1. Pricing Objectives
Pricing objectives include:
• Survival
• Maximum current profit
• Maximum market share
• Product-quality leadership
6.2. Determination of International price
• In an era of globalization, one of the challenges
that companies face when selling their products
abroad is how to set appropriate prices.
National Market Size
• For larger countries with the potential for more
sales, this price may be set lower; for smaller
countries, the price may be higher.
Exchange Rate
• Due to discrepancies in the value of different
currency, similar products in different countries
may be priced differently.
Cultural Differences
• How members of certain cultures perceive the
value of certain products, which in turn affects
how much they are willing to pay for them.
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Regulations
• Many countries set price ceilings as well as price floors
on certain products.
Distribution
• companies also must consider the distribution network
by which they are selling their products overseas.
6.3. Delivery Terms and price quotations
• Incoterms are key elements of international contracts
of sale.
• They tell the parties what to do with respect to carriage
of the goods from buyer to seller and export & import
clearance. They also explain the division of costs and
risks between the parties.
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The most common INCOTERMS used in
international marketing are classified in to:
Ex-Works (EXW): The seller makes goods available
to the buyer at a specific time and place, usually
at the seller’s place of business or warehouse.
• The buyer takes delivery at the seller’s premises
and bears all risks and expenses from that point
on.
FAS/Free Alongside Ship/: The price includes cost of
goods and charges for delivery of the goods
alongside shipping vessel, and the seller pays all
charges up to that point.
• This term does not include the cost of loading.
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• The buyer is responsible for the cost of loading on
to the vessel, transportation cost, and insurance.

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FOB/Free on Board/: Refers to a shipping
arrangement where the seller or shipper retains
ownership and responsibility for the product only
until they are loaded on board a shipping vessel.
• Once they are on the ship the obligation transfers
to the buyer.
CFR /Cost & Freight/: The price generally includes the
cost of transportation to the named point of
debarkation.
• The buyer, in turn, is expected to pay for insurance.
• Like FOB, the risk of loss or damage to the goods is
transferred from the seller to the buyer when the
goods pass the ship’s rail.
• CIF (Cost, Insurance and Freight):The seller is still
responsible for all arrangement and transport
costs for shipping goods to the agreed-upon
destination port.
• The receiver then assumes all cost responsibilities
once the ship has reached port.
• The difference between the two agreements (CFR
& CIF) lies in one additional responsibility that falls
on the shipper (seller), who must also provide a
marine insurance on the goods being shipped.
 DDP /Delivered Duty Paid/: The seller delivers the
goods, with import duties paid, including inland
transportation from import point to the buyer’s
premises.
• Ex-works signifies the maximum obligation for the
buyer; delivered duty paid puts the maximum burden
on the seller.
CPT (Carriage paid to) and CIP (Carriage and Insurance
Paid to): Are used in place of CFR and CIF,
respectively for shipment by modes other than water.
FCA (Free Carrier): the term replaces “FOB inland port”,
and may be used for multimodal transport, (including
air).
Price Quotation: A quotation describes a specific
product, states the price for that product as well
as a specified delivery location, sets the time of
shipment, and specifies payment terms.
• When a company receives an inquiry from
abroad, the quotation must be very detailed in
terms of weight, volume, and so on because of
the customer’s unfamiliarity with foreign
products, places, and terms.
• It is a good idea to specify the precise period
during which a specific price or offer remains
valid.
6.4. International pricing policies and strategies
• A number of different pricing strategies are
available to global marketers. Some of the
strategies include:
Market Skimming
• A company use skimming when the objective is to
reach a segment of the market that is relatively
price insensitive and thus willing to pay a
premium price for the value received.
Penetration Pricing
• Is used to stimulate market growth and capture
market share by deliberately offering product at
lower prices.
 6.4. Methods of payment
Cash in advance
• The exporter receives payment before shipment of the
goods.
• This minimizes the exporter’s risk and financial costs,
since there is no collection risk and no interest cost on
receivables.
• However, importers will rarely agree to these terms,
since it ties up their capital and the goods may not be
received.
Letter of Credit
• A letter of credit is a letter from a bank guaranteeing
that a buyer's payment to a seller will be received on
time and for the correct amount.
• Due to the nature of international dealings, including factors
such as distance, differing laws in each country, and difficulty
in knowing each party personally, the use of letters of credit
has become a very important aspect of international trade.
Open Account
• The exporter ships the goods without documents calling for
payment, other than the invoice.
• The buyer can pick up the goods without having to make
payment first.
• A major weakness of the method is that there are no
safeguard for payment.
• Exporters should sell on open account only to importers they
know very well.
• Open account sales are less complex since there are no
documentation requirements or bank charges.
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 Consignment

• Here the exporter retains title of the goods until

the importer sells them.
• Payment to the exporter is required only for those
items sold.
• The method should be offered only to very
trustworthy importers.
• Consignments tend to be mainly used by
companies trading with their own subsidiaries.

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• .
Price Escalation
• It is added costs incurred as a result of exporting
product from one country to another.
• People travelling abroad often are surprised to
find goods that are relatively inexpensive in their
home country priced outrageously high in other
countries.
• The product passes first through the hands of an
importer, then to the company with primary
responsibility for sales and service, then to a
secondary or even a tertiary local distributor, and
finally to the final user.
• The cause of the disproportionate difference in
price between the exporting country and the
importing country, here termed price escalation.
• Specifically, the term relates to situations in which
ultimate prices are raised by shipping costs,
insurance, packing, tariffs, longer channels of
distribution, larger middlemen margins, special
taxes, administrative costs etc.
Approaches to Reducing Price Escalation
Three methods used to reduce costs and lower price
escalation:
• Lowering the cost of goods
• Lowering tariffs
• Lowering distribution costs
a. Lowering Cost of Goods
• If the manufacturer’s price can be lowered, the
effect is felt throughout the chain.
• One of the important reasons for manufacturing
in a country is an attempt to reduce
manufacturing costs and thus price escalation.
• The impact can be profound if you consider that
the hourly cost of skilled labor in a Mexican is
less than $3 an hour including benefits,
compared with more than $10 in the United
States.
• Eliminating costly functional features or even
lowering overall product quality is another
method of minimizing price escalation.
• For U.S.-manufactured products, the quality and
additional features required for the more
developed home market may not be necessary in
countries that have not attained the same level
of development or consumer demand.
b. Lowering Tariffs
• Tariffs account for a large part of price escalation
• Companies seek ways to lower the rate.
• Some products can be reclassified into a different,
and lower, customs classification.
• An American company selling data communications
equipment in Australia faced a 25 % tariff.
• It persuaded the Australian government to change
the classification for the type of products the
company sells from “computer equipment” (25 %
tariff) to “telecommunication equipment” (3 %
tariff).
• The difference between an item being classified
as jewellery or art means paying no tariff for art
or a 26 percent tariff for jewellery.
• For example, a U.S. customs inspector could not
decide whether to classify a $2.7 million egg as
art or jewellery.
• The difference was $0 tariff versus $700,000.
• An experienced freight forwarder/customs broker
saved the day by persuading the customs agent
that the egg was a piece of art.
• It may be also possible to modify a product to
qualify for a lower tariff rate within a tariff
classification.
• There are often differential rates between fully
assembled, ready-to-use products and those
requiring some assembly, further processing, the
addition of locally manufactured component
parts,
• For example, a ready-to-operate piece of
machinery with a 20 percent tariff may be subject
to only a 12 percent tariff when imported
unassembled.
• Repackaging also may help to lower tariffs.
c. Lowering Distribution Costs
• Shorter channels can help keep prices under
control.
• Designing a channel that has fewer middlemen
may lower distribution costs by reducing or
eliminating middleman mark-ups.
• Fewer middlemen may mean lower overall taxes
Administered pricing
• Administered pricing relates to attempts to
establish prices for an entire market.
• Such prices may be arranged through the
cooperation of competitors, through national, or
local governments, or by international agreement.
• In general, the end goal of all administered pricing
activities is to reduce the impact of price
competition or eliminate it.
Government Influenced Pricing
• Companies doing business in foreign countries
encounter a number of different types of
government price setting.
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 6.5. Countertrade

Types of countertrade
• There are several types of countertrade, including
barter, counter purchase, and compensation trade.
Barter: Possibly the simplest of the many types of
countertrade, is a one-time direct and
simultaneous exchange of products of equal value
(i.e., one product for another).
Counter purchase: Counter purchase is an
international trading deal, whereby an exporter
agrees to purchase a quantity of goods from a
country in exchange for the country´s purchase of
the exporter´s product.
74
• The goods being sold by each party are typically
unrelated but may be of equivalent value.
• Under a counter purchase arrangement, the
exporter sells goods or services to an importer
and agrees to also purchase other goods from the
importer within a specified period.
Compensation trade: It requires a company to
provide machinery, or technology and to buy
products made from this machinery over an
agreed period.
• Unlike counter purchase, which involves two
unrelated products, the two contracts in a
compensation trade are highly related.
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• For example, a Japanese company sold sewing
machines to China and received payment in the
form of 300,000 pairs of pajamas.

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 CHAPTER SEVEN
INTERNATIONAL DISTRIUBTION
What is distribution?

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 7.1. Distribution Channels and Intermediaries for International Market

• A set of interdependent organizations

(intermediaries) involved in the process of
making a product or service available for use or
consumption.
• There are broadly two category intermediaries in
marketing products internationally.
1. Direct selling
2. Indirect selling

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1. Direct Channel
• Direct selling is employed when a manufacturer
develops an overseas channel.
• Types of Direct Channel
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.
2. Foreign Retailer: If foreign retailers’ are- used,
the product in question must be a consumer
product rather than an industrial product.
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3. State-Controlled Trading Company: For some
products, particularly utility and telecommunication
equipment, a manufacturer must contact and sell to
state-controlled companies.
4. End Users: Sometimes, a manufacturer is able to sell
directly to foreign end users with no intermediary
involved in the process.
2. Indirect Channel
Types of Indirect Channel
1. Export Broker: The function of an export broker is to
bring a buyer and a seller together for a fee.

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2. Manufacturer’s Export Agent or Sales
Representative : Like a broker, the manufacturer’s
export agent works for commission. Unlike the
broker, the relationship with the manufacturer is
continuous and more permanent.
3. Export Management Company (EMC): An export
management company (EMC) manages, under
contract, the entire export program of a
manufacturer.
4. Cooperative Exporter: A cooperative exporter is a
manufacturer with its own export organization that
is retained by other manufacturers to sell in some
or all-foreign markets.
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• A cooperative exporter is often referred to as a
“mother hen,” a “piggyback exporter,” or an
“export vendor”.
5. Webb–Pomerenes Association: A Webb-
Pomerene association is formed when two or
more firms, usually in the same industry, join
together to market their products overseas.
6. Purchasing/Buying Agent
• An export agent represents a seller or
manufacturer; the purchasing buying agent
represents the foreign buyer.
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7. Country-Controlled Buying Agent
• Country - controlled buying agent performs
exactly the same function as the purchasing
buying agent, the only distinction being that a
country-controlled buying agent is actually a
foreign government’s agency or quasi-
governmental firm.
8. Export Merchant
• Export merchants are independent businesses
that are’ in business to make a profit rather than
to receive a fee.

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 7.2. Selection, motivation and control of foreign middlemen

• The search for prospective middlemen should begin with

study of the market and determination of criteria for
evaluating middlemen servicing that market.
Factors to consider while selecting distribution channels
(i) Product:
• Perishable goods need speedy movement and shorter
route of distribution. For durable and standardized goods,
longer and diversified channel may be necessary.
• Also, for technical product requiring specialized selling and
serving talent, we have the shortest channel.
• Products of high unit value are sold directly by travelling
sales force and not through middlemen.
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(ii) Market:
(a) For consumer market, retailer is essential
whereas in business market we can eliminate
retailing.
(b) For large market size, we have many
channels, whereas, for small market size direct
selling may be profitable.
(c) For highly concentrated market, direct selling
is preferred whereas for widely scattered and
diffused markets, we have many channels of
distribution.
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(iii) Middlemen:
(a) Middlemen who can provide wanted marketing
services will be given first preference.
(b) The middlemen who can offer maximum co-
operation in promotional services are also
preferred.
(c) The channel generating the largest sales volume
at lower unit cost is given top priority.
(iv) Company:
(a) The company’s product-mix influences the
pattern of channels. If the product-mix has greater
specialization, the company can favor selective or
exclusive dealership.
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(b) A company with substantial financial resources may
not rely on middlemen and can afford to reduce the
levels of distribution. A financially weak company has
to depend on middlemen.
(c) New companies rely heavily on middlemen due to
lack of experience.
(d) A company desiring to exercise greater control over
channel will prefer a shorter channel as it will facilitate
better co-ordination, communication and control.
(v) Marketing Environment: During recession or
depression, shorter and cheaper channel is preferred.
• During prosperity, we have a wider choice of channel
alternatives.
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• Motivational tools help to ensure that channel
members give preference to your products over
your competitors.

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