Morgan Schaffer knows foreign agents – it deals with more than 150 of them. The Quebec-based company also knows that its reputation overseas depends on them. Choosing the right agent abroad is one of the most important decisions a company can make when it is planning to enter a new market.
For Morgan Schaffer, “it has been a slow, steady, long-term and patient process to establish our products in the electrical industry, which is very conservative,” says Serge Gutieres, global sales director. The Montreal-based company prides itself on manufacturing what it describes as the world’s most precise and accurate transformer monitoring instruments, used in the electric power industry.
Today, Morgan Schaffer serves more than 300 utility clients in 85 countries. “In emerging markets, we are focusing on Russia, Brazil, India, the Middle East and a little bit on China. We have also invested a lot of time in the Philippines, Vietnam, Macau and South America. We export 70 per cent of our sales outside North America.”
One of the backbones of this growth is a network of more than 150 authorized representatives around the world. “Our business sales model works everywhere with representatives – local agents who will do the sales, installation, maintenance and repair of our systems.”
How to choose?
Like Morgan Schaffer, once a company has assessed and gained some business in its target market, it often seeks an agent to grow its products or services in the region. “It is obviously important to choose an agent or representative with solid knowledge of the market, industry sector and local business practices. The person should also have good contacts and skills in your field, together with good credentials and an impeccable reputation. To find one, we advise companies to inquire with their business contacts, Chambers of Commerce, trade or industry associations for references. They should also make full use of Canada’s Trade Commissioner Services (see Who’s Who box),” says Jean Cardyn, EDC’s regional vice-president for South America.
Gutieres adds: “We have usually found agents at trade shows, through recommendations of customers, other agents and industry partners, and sometimes even using a former competitor’s agents.”
A good reference is just the start. A company still needs to do its own due diligence to make sure the agent will serve its interests – there have been cases where an agent has pushed for an exclusive relationship just to keep a product or service out of the market. It all takes an investment of time, training and money.
“You have to be careful with the type of contract you sign with the agent,” says Cardyn. “Get advice from a good lawyer who knows the market, and make sure you are comfortable with the terms. You also want to do a credit check to ensure the agent is financially secure. You can protect yourself by entering into a trial agreement for a limited time period and avoiding exclusive arrangements, especially at the beginning of a relationship.
For Morgan Schaffer: “The agent has to have integrity, good technical knowledge, engineers on staff, know the local industry and be ready to invest money and time for two years before seeing any return on his investment,” says Gutieres. “It takes a minimum of two years to 30 months for us to develop and train a new agent, allow him to penetrate his market and start seeing real sales. In some markets, it took close to four years
“It is always a challenge to work with entrepreneurs in different countries and cultures. Communication is king. Language barriers and different business practices are the two main challenges. To manage that, you have to regularly visit your agents face-to-face to build relationships and trust, understand their market and customers yourself, and adapt your sales strategy.”
Beyond the Call of Duty
Good foreign agents can advise on local financing and transportation options, clear goods through customs, make collections, and help you wind your way through local laws and customs. Others can help you with things that are not in their job description, as Morgan Schaffer’s Gutieres illustrates:
“I was invited two years ago to give seminars on our products in an emerging market. A civil rebellion was going on there at the time, but our agent who picked me up insisted the place was safe. Suddenly, as he dropped me off at my hotel, he pulled out a gun – and handed it to me for my protection! Nothing in my 30 years in sales all over the world prepared me for that. I declined, so the agent arranged for the local police chief to join us for dinner, to make sure I was safe, and then brought me right to my hotel door.”
Cross-section of market distinctions
In India, Vibhav Agarwal, EDC’s regional manager in New Delhi, advises that an agent is especially important if your client is the local or provincial government. “Engaging an agent who understands the functioning and procedures of government, such as preparing and submitting bids, is critical for success in the market.
“Often an exporter is asked to post bid bonds by the Indian buyer and the process can be cumbersome if you are not conversant with local banking practices. An agent with the relevant experience can help in this process and, if financially sound, can bear certain upfront business expenses, which may be required on short notice.”
In Mexico, “Our International Trade Canada colleagues run a Mexico Information Centre with a pre-qualified list of consultants, distributors and agents,” says Johane Séguin, EDC’s chief representative for Mexico.
“We also recommend companies touch base with the Canada-Mexico Chamber of Commerce in Mexico. Three provinces (Québec, Ontario and Alberta) also have representations in Mexico, and can provide contacts and advice in this area.”
In the Middle East, EDC’s chief representative Jean-François Croft in Abu Dhabi emphasizes a few contract-related precautions. “It is difficult for one agent to cover multiple countries in this region, since every market is strongly relationship-based. A local presence is usually necessary, since buyers want to be serviced locally. As well, because of local laws and regulations, it is wise to include very specific, measurable and time-limited objectives in the contract. It is then legally easier to renegotiate or terminate a contract if needed.”
Although often used interchangeably, International Trade Canada makes a distinction between agents and representatives. An agent generally secures orders from foreign customers in exchange for a commission. A representative specializes in sales and service within a specific geographic area. Both options are usually less costly than setting up your own direct-sales office.
Canadian companies can register with the Virtual Trade Commissioner, an online tool that provides country information, market assessments, in-country contacts and events, and names of trade commissioners with responsibility for your country and sector of interest. For links to this and other services, including questions to ask agents before you commit, visit tradecommissioner.gc.ca.
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