How To Find and Use An Export Management Company
How To Find and Use An Export Management Company
Nelson T. Joyner
Chairman, The Federation of International Trade Association
This article discusses an alternative approach to direct exporting through the use of an
export management company (EMC), an export intermediary acting as your export
department. This approach requires limited use of a firm's time and resources in building
an export business. One advantage cited for use of an EMC is that it gives the firm instant
access to foreign market knowledge and export know-how. Furthermore, most EMCs will
not charge you a fee for their services, and they will frequently pay you on whatever terms
you sell to your best U.S. customers. You will have relatively few out-of-pocket costs.
THREE QUESTIONS
If the answer to any of these three questions is "No," then do as over 5,000 small (and
even some large) manufacturers have done: turn over the job of building an export
business to a specialized export sales firm called an Export Management Company
(EMC).
1) Does your firm have the time and specialized knowledge to enter export markets?
2) Does your firm have the money or specialized personnel needed to develop an
export business?
3) Is your business growing at a satisfactory rate?
Some EMC's Act as an Agent. The EMC establishes the marketing presence in foreign
markets soliciting orders from foreign customers in the name of the manufacturer.
Invoicing is done in the name of the manufacturer and the EMC helps the manufacturer
with all the details of the export transaction. The manufacturer bears the risk of
nonpayment, and may be asked to extend credit to the foreign customer. "Agent" EMCs
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are paid a commission on export sales. The EMC may suggest an export price, but his
principal has final say on price and even whether to accept the order.
EMCs are experienced in all facets of exporting: foreign travel, export marketing, etc. Here
are the typical strengths:
An ability to handle all details. EMCs have the know-how to answer inquires, prepare
quotations, enter orders, handle shipping details, and get paid. They are export
professionals. The lifeblood of an EMC is active contact with foreign firms.
An ability to establish a strong foreign distribution system. They have the know-how to
select agents and distributors, and to manage their distribution network.
They are experts on business conditions abroad. EMC executives travel for first-hand
experience. Even at the home office, they constantly appraise market conditions and sales
opportunities.
Their profits are based on how successfully they export. Thus, they're motivated to do a
good job.
EMCs operating on a commission basis will usually want a commission that equals - or
even exceeds - your best domestic commission. This might range from 10% for consumer
goods to 15% or more for industrial products.
EMCs functioning on a buy-sell basis will ask for your best U.S. discount plus an extra
discount. EMCs that do accept the manufacturer's best U.S. price will usually have to mark
up the product more than a U.S. distributor in order to make a profit.
In addition to commissions or discounts, an EMC may charge for other items. Some EMCs
will ask for "special event" contribution such as a 50/50 sharing of costs to exhibit in a
foreign trade show. EMCs may require a contribution for advertising and other promotional
activities, usually on a shared basis.
A few EMCs ask for a monthly retainer, especially in the early stages of establishing export
sales. It is unusual for a well-established EMC to ask for a retainer for other reasons.
Export sales come quicker. EMC's already have a network of foreign agents and
distributors. Your product, if compatible, will have a built in distribution system. If you were
to build your own export business, it will take much longer to realize sales.
Your out-of-pocket expenses will be less.
An EMC has the time. Even with adequate financial resources, you may lack the time
necessary to build an export business because of other priorities.
You will learn from a pro! There's no better export practitioner than an EMC. If you want
your own export department eventually, then prepare yourself by seeing how an EMC
operates.
EMC's, for the most part, are relatively small and may have limited financial resources.
Thus, some may not be able to stock your product, or to offer extended in-house financing
to foreign customers.
EMC's focus their efforts on those products that bring them the most profits. New lines, or
those with limited potential, may be overlooked.
Most EMC's do not cover Canada. Yet Canada is among the best potential export markets
for many U.S. products.
With EMCs, manufacturers relinquish some degree of control over the export effort. EMCs
are independent businesses, When an EMC acts on a buy-sell basis, manufacturers
sometimes have no control over who buys, the selling price, the degree of promotion, etc.
FINDING an EMC.
Finding an EMC that can handle your products is not as easy as it should be, EMCs tend
to be very independent. They don't readily band together, nor do they generate much
publicity about themselves. EMCs are often lumped in with other types of export
intermediaries that may not be suited to handling your products on an exclusive basis.
Here are several sources for locating EMCs that might be able to handle you products:
• Your industry trade association. Many trade groups have EMCs as active
members, or your association may know of EMCs experienced in exporting similar
products.
TO SUM UP.
Many U.S. Manufacturers have found they can develop a profitable export business
without their own export department through the use of an Export Management Company.
No matter what your goods are, you will find an EMC capable of building your export
business. EMCs come in many forms and shapes, and aren't always easy to locate. While
they may ask for an extra discount or extra commission, their requests are often justified.
Nelson T. Joyner, a former EMC proprietor and author of How to Build an Export
Company, currently serves as Chairman of The Federation of International Trade
Associations