Methods of Foreign Trade, страница 4

Agents may be granted the exclusive right to represent the principals within the contractual territory. Under the exclusive agency agreement, the principals will have the right to sell their goods only through these particular agents inside the territory agreed upon by the two parties. Agents are interested in obtaining the exclusive right as it is profitable for them to be the sole representatives of the principals and it enables them not to compete with other agents of the same principal.

It is necessary to distinguish clearly between the agent and the distributor. The essential difference is that the distributor operates on their own account as an independent purchaser for sale of the supplier's products, getting remuneration from whatever profit they may make out of these sales. He enjoys all rights and incurs all liabilities attached to contracts of supply.

The appointment of a sole and exclusive distributor in a foreign country can and usually does hold considerable advantages for the supplier. As the distributor is a specialist trader, their knowledge of local trading conditions and possession of a distributive network in a given territory will be of invaluable assistance to the supplier wishing to enter into or expand in that market. Besides, local legal and linguistic problems are overcome, sales are more easily promoted and marketing is made more intensively. Moreover, the continuity of supply and rationalization of distribution are made more effective. Finally, adequate stocks will enable to keep the market regularly and speedily supplied and before- and after-sales service is readily provided where necessary.

The relations between commercial agents and their principals are determined by agency agreements, while the relations between the distributor and the supplier are determined by a distributorship agreement (contract) stating that the supplier grants the distributor the sole and exclusive right to purchase from the supplier certain specified goods for sale in a given territory. Agency agreements are usually concluded for three or five years, while distributorship agreements are signed for longer periods of up to seven years, after which the matter can be reviewed with the intention of prolonging its effect.

It is essential to insert into agency and distributorship agreements a statement than whatever the cause of the termination, no compensation will be paid by the principal to the agent or by the supplier to the distributor.

International production cooperation is of great importance for international trade. It may include the creation of large trading and production corporations, associations and JV.

A joint venture (often abbreviated JV)is an entity formed between two or more parties to undertake economic activities together. A joint venture is created on the basis of capital of two or more parties or countries. This method of production is often adopted for projects which are too large or too risky for any one firm to attempt alone. Internal reasons for forming a joint venture are as follows:

·  build on company's strengths;

·  spreading costs and risks;

·  improving access to financial resources;

·  economies of scale and advantages of size;

·  access to new technologies and customers;

·  access to innovative managerial practices.

The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. The firms joining in such a venture may provide different kinds of expertise, for example, technical expertise, but locals have advantages in familiarity local conditions and business practices, in marketing, and in dealing with national governments and the labor force.