CHANNELS OF DISTRIBUTION
A. Pre-reading
The following words and expressions will help you to understand the text:
intermediary = middleman — pośrednik
terms of delivery — warunki dostawy
terms of payment — warunki płatności
available — tu: dostępne
buyer's preferences — upodobania klienta
commission — prowizja
commission agent — komisant
carry stocks — tu: przechowywać towary na składzie
stockist — agent składujący towary
margin of profit — marża zysku
B. FIRST READING OF THE TEXT
Read the text below concentrating on its contents and terminology:
Channels of distribution vary according to the goods you sell, because it is seldom that your customer will be the final user of the goods exported. For example, if you export Polish ham, you are unlikely to sell it to the people who finally eat it. Most probably the ham will have been bought in a supermarket, which in turn will have been supplied by a wholesaler and he may have bought it from your importer. On the other, if you export capital goods such as machinery or construction equipment, you may have exported direct to the final user, a construction company for example.
That is why you as an exporter may well need the services of an intermediary
(middleman) to ensure that the goods reach the final user, you may directly or
indirectly employ even several kinds of intermediary. You may also find out that
using intermediaries is not the best way of servicing your foreign buyers, and that
it would be better to set up your own sales organisation in certain markets to
carry out some or all of the functions of intermediaries.
The most important functions of intermediaries in export include: buyer negotiations, supplying the market, providing after-sales service and supplying information combined with the promotion of goods. To carry out his most important function, which is selling your goods, the intermediary should know exactly your terms of delivery and your terms of payment. Only then he will be able to actively secure orders for you, or sell your goods himself. The next most important task of the intermediary is to ensure that your goods are available in the local market, either by having you supply direct or by his supplying from stock. If you export goods which require service, the service facilities should be set up at the same time as you start selling your product. The intermediary is also expected to supply information about a product to the local buyer as well as to inform the exporter about local conditions, specific requirements buyer's preferences) and other relevant details.
Local sales intermediaries are often called agents. There are two main types of agents: a commission agent and a distributor. The commission agent generally secures orders on your behalf, which you execute direct to the buyer. For this job the agent is paid a commission, hence his name. Rates of commission vary from 2.5 to 15 per cent of the value of the business according to the amount of work involved. His duties include following up orders, seeing that there is no problem with the exporter's documentation or transport arrangements, and ensuring that payment is made in accordance with the agreed terms. As the commission agent does not carry stocks, he generally acts for companies producing capital goods which buyers obtain direct, not via stockists. A sole agent merely means that he is appointed for a particular territory. In the case of a large market, e.g. the Canadian market, often more than one commission agent is appointed.
A distributor acts on his own behalf and account but his usual task is to stock your product and supply local buyers on demand. He usually buys the product
from the exporter and re-sells it with an agreed margin of profit. Because consumer products usually need to be stocked locally and pass through different channels of distribution before reaching the final user, distributors normally handle consumer first necessity and consumer durable goods. A sole distributor is one who has the exclusive importing rights for a given territory. Being the local stockist, he also represents the exporter's interests in the market, provides after-sales service if needed and sends back information to the exporter.
When you appoint commission agents or distributors you should consider the following points: first of all the business in which they are engaged, their standing in the local market, their contacts in your particular trade, their ability to carry out the functions required of them. Once they have been appointed, they should be treated as part of your company, given every help possible, visited regularly and encouraged to visit your company.
To ensure the smooth distribution of your exports to the final user, you may decide to use your own export salesmen or, in case of large foreign markets, to set up a local sales company. This is a common practice for products with a high technology because no one is willing to impart the technical knowledge necessary to sell this type of a product to a third party. Once an exporter sets up local sales companies, he is embarking on a multi-national business operation.
C. LOOKING FOR INFORMATION
I
Comprehension
1. What does the use of various channels of distribution depend on?
2. Why does an exporter need the services of an intermediary in marketing his products?
3. Are intermediaries always the best way of servicing foreign customers? What is the alternative?
4. List the most important functions of an intermediary in the export trade.
5. What should an intermediary know in order to act effectively as an exporter's agent?
6. Why do you think providing after-sales services is of special importance in
export?
7. What type of goods do commission agents generally deal with? Why?
8. What kind of goods do distributors usually handle? Why?
9. What coosiderations shoold an exporter bear in mind when appointing an agent?
10. What should be the exporter's attitude towards his agent?
In what cases is it reasonable to market your products using your own salesman?
II
Comprehension. Complete the following sentences on the basis of the information given in the text and your own knowlwdge:
An agent residing permanently in a market is in a position to .................. .
The agent`s primary function is to ........................... .
Agents sometimes arrange to .......................... .
Commission agents usually act for ...................................... .
A sole distribution has got ................................. .
It is important for your agent to ............................. .
To carry out his duties properly the agent should ........................... .
The use of your own salesman ensures ........................... .
In the case of consumer goods exporters rarely .............................. .
The choice of distribution channels depends on ........................... .
D. REINFORCING TERMINOLOGY
III
Give the appropriate economic term for the words or phrases listed:
A prospective buyer
Products to be sold
An agent securing order on your behalf
A merchant selling in bulk
Machinery or construction equipment
A middleman
Satisfying all needs of the buyers
Furnishing the market with goods
Any activities aimed at the successful selling of goods
Activities in favour of the customer, after the goods are sold
The way of delivering goods and paying for them
12. Goods to be obtained at a given market
13. The likes and dislikes of the customer
14. A man carrying stocks
15. An agent stocking products and supplying local buyers on demand
16. An extra profit involved in re--selling the product
17. Consumer goods with a long life--span
18. Business operations convening in many countries at the same time
EXTENSION
Open dialogue. Complete the following dialogue:
CHOOSING THE AGENT
1. Legal Adviser: Now, we come to another problem: appointing an agent.
2. Businessman: Yes, if I get an agent, how will I pay him?
If you appoint a commission agent ......
Do you think it will include stocking my goods?
1.Oh no, commission agents ..... . If you want your goods to be
stocked locally, you ......
2. I see. How do I pay a distributor?
1. You have to ..... .
2. Yes, that's a good idea. What are some of the things I should
find out about him?
1. Well, among other things ..... .
2. If I decide to sign an agreement with him, what points should
the contract include?
1. It should include ..... .
2. Should my agent be responsible for claims and complaints
against my products?
That will depend on ..... . But I think it would be a good idea ..... .
Cloze test. Fill in the missing words:
The agent's chief duty is to (1) customers and collect orders. If he (2) an order, he sends it to (3) principal who usually dispatches the goods (4) to the customer. The agent himself (5) not, however, sign orders or collect (6) amounts from the customers unless expressly (7) to do so. In additon, he (8) see to proper advertising of the (9) he represents, help representatives of the (10) visiting his territory, submit regular market (11) help settle complaints, and intervene in the case of (12). For his services he is paid a (13) usually calculated on the basis of a (14) of the invoiced amounts after they have been fully (15).
Agents are (16) as a rule, from among local businessmen who can offer a (17) that they will look after the (18) of the corporation they are to represent. Therefore they must have an excellent (19) of all the pecularities and complexities of the (20) market, numerous business (21) with outstanding areas, and (22) contact with customers.