Foreign Representatives and Other Entry Strategies

Summary

Foreign agents are often hired by Canadian companies to represent them in overseas markets as the agent has a knowledge of the business practices, language, laws, and culture.It is important to note that agents do not take ownership to the goods. Agents perform a number of functions such as:

• identify customers for your products and market your goods to these people
• uncover other opportunities / markets for your product
• translate for you and act as your interpreter in business dealings in the foreign country
• validate translation of your publicity materials
• help you with local travel and/or living arrangements
• provide guidance with local government regulations

There are different types of agents. The one you choose to hire is based upon how much you want the agent to do for you and how much you are willing to pay.

• commissioned agents are used most often by exporters. It is the simplest way of doing things - the agent is paid a percentage of a sale only when the sale is made. This provides an incentive for the agent to work on your behalf.
• retainer agents are paid a fixed amount to do certain work for your company over a specified period of time. The drawback is that you are unable to monitor how hard they are working for you as they get paid whether they do anything or not.
• retainer / commissioned agents are placed on a retainer but also receive a percentage from each sale. The retainer provides them with funds to help run their business while the commission gives them additional incentive to work harder on your behalf.
• agents based in Canada are often foreign nationals living in Canada who have been educated in Canada, understand our language and culture, but sell goods to their homeland. They maintain connections to agents in their own country in order to increase their own business sales but will also act for Canadian businesses wanting to enter the market.

Distributors

Distributors are very much like agents except that they purchase your product and then resell it in the local market at a price that they determine.  Often, they will also provide after-sale service. However, you do lose a portion of your profit and have less control over your product and price.

Partnering

Partnering, often referred to as a strategic alliance, is used by many companies in order to break into a foreign market. It is sometimes used to circumvent import restrictions and other trade barriers in foreign markets, or it can be used in a complimentary way when each company has expertise that the other can benefit from. There are various methods of partnering:

• joint venture
• licensing
• cross-licensing
• cross-manufacturing
• co-marketing
• co-production
• franchise

Trading Houses

A trading house serves as a broker for foreign buyers looking for Canadian goods and helps Canadian companies get their products into foreign markets. Trading houses offer a number of services such as:

• sourcing and evaluating foreign buyers (this includes credit checks)
• negotiating prices, sales agreements and shipping arrangements
• preparing the necessary export documents
• arranging insurance
• providing after-sale service

For more information on trading houses and their services, see Trading House Quickfacts on the Strategis website. http://strategis.ic.gc.ca/epic/internet/inwhol-comm.nsf/en/qu00014e.html

For a listing of trading houses in Canada as well as descriptions of the products and countries they deal with, visit the Canadian Federation of Trading House Associations website and click on Directory of Canadian Trading Houses on the left hand menu bar. http://www.caftha.ca

Direct Sales
A company may elect to sell their goods directly, thereby cutting out the middleman and increasing their profit margin. This method could work in an area where the market is similar to the one you are familiar with and there is no language barrier. For example, if you were exporting to the northern US, you may choose to sell directly. However, if there are significant language and cultural differences, the money you spend researching the market may be better spent retaining an agent or other type of representative who is already familiar with the language and business practices in the country you have targeted.

_{Prepared by: Canada/Manitoba Business Service Centre}