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International OperationsSales, Distribution and Manufacturing
Different International Sales Strategies                                  Help                             Let Someone Do ...
Agent/Rep. vs.Distributor/DealerAgent/Representative           Distributor/Dealer/                               LicenseeE...
Control and Costs                                           Subsidiary                                      JVControl     ...
Manufacturing StrategiesDomestic Production                    Foreign ProductionPros and Cons                          Pr...
Manufacturing StrategiesAdditional key issues:             y• Title to the WIP and products• Bailment• Technical assistanc...
Managing The Risks1.   Performance Risks2.   Channel Conflicts3.   Financial Risks4.   Supply Chain Management5.   Intelle...
1. Performance Risks
Performance Risks:Pre-qualifications• Business/Marketing Plan  (Initial and Annual)• Credit Checks• References• Distributo...
Performance Risks:Term• Length of Initial Term• Renewal   – Automatic (Evergreen) Unless     not Renewed   – Expire Unless...
Performance Risks:Termination•   Grounds    –   Breach Only?    –   Cessation of Business?    –   Insolvency/Bankruptcy?  ...
Performance Risks:Marketing Obligations        g     g•   Distributor Efforts     – Commercially Reasonable     – Best Eff...
Performance Risks:Minimum Sales• Exclusive vs. Non-Exclusive• Penalties for Failures to  Meet  M t• Inventory Levels• Loca...
Performance Risks:Training•   Kinds     – S l       Sales     – Installation     – Support•   Expenses•   Locations•   Fre...
Performance Risks:Demos, Shows, Visits •   How Many? •   At What Cost?                       15
Performance Risks:Literature/New Media• Legal:   –   Authorship   –   Copying   –   Printing   –   Translating• Local cust...
Performance Risks:Records, Reports, and Audits •   Records      – Sales      – Customer Information      – W        Warran...
2. Channel Conflicts
Channel Conflicts      Manufacturer                           •   Two or More Channel                               Member...
Channel Conflicts:    Exclusivity                      PROGRAMS TO MANAGE CHANNEL CONFLICT        Saturation Policy       ...
Channel Conflicts:Ex Territory Sales•   Territory•   Ex Territory Prohibitions     – Forbidding Sales Outside of       Ter...
Channel C fli tCh    l Conflicts:House accounts•   House accounts     – If Exclusive, Even as to       Company?           ...
Channel Conflicts:Post TerminationConsequences•   Inventory    – Sell off    – Buy Back•   Transition Assistance•   Carryo...
3. Financial Risks
Financial Risks:Prices•   Scheduled Prices•   Discounts Off List•   Changes to Price Schedules     – Unilateral vs. Mutual...
Financial Risks:Payment Terms • Payment Due   – In Advance   – On Delivery   – Net 30 • Type   – Check   – L tt of Credit ...
Financial Risks:Taxes and Duties• C t  Customs D ti             Duties• VAT, Sales, and  Other Product Taxes• Withholding ...
4. Supply Chain Management
Supply Chain Management:Forecasts• Frequency         g• Coverage• Binding vs.  Non-Binding• Component Liability           ...
Supply ChainManagement:Orders•   Format•   Minimum Order Size•   Frequency•   Lead Times•   Reschedules•   Cancellations• ...
Supply Chain Management:  pp y           gDelivery•   Carrier Selection    C i S l ti•   Risk of Loss     –   Warehouse   ...
5. Intellectual Property
Intellectual Property Issues:Products• “Products” Definition   – Fixed   – Flexible• Product Changes   – New Versions and ...
Intellectual Property Issues:Rights Granted•   Making/Manufacturing•   Copying•   Modifications•   Translating•   Combinat...
Intellectual Property Issues:Ownership• Product Modifications• Enhancements, Add-ons,  Combinations  C bi ti• Localization...
Intellectual Property Issues:Enforcement• Policing Third Party  Infringement   – Right vs. Duty           vs• Allocation o...
Intellectual PropertyIssues:TrademarksT d     k•   O es p    Ownership•   Use•   Quality Control•   Registrations         ...
6. Risk Allocations
RiskAllocations:All   tiCustomer Support•   Installation•   Maintenance•   Support    – Tier 1/Level 1    – Tier 2/Level 2...
Risk Allocations:Indemnification•   Indemnity by Manufacturer             y y     – Intellectual Property        (Except C...
Risk Allocations:Disclaimers•   Customary and Typical     – Merchantability     – Fitness for Particular       Purpose•   ...
Risk Allocations:Limitation of Liability•   Exclusions    – Consequential Damages    – Punitive/Special Damages    – Lost ...
7. Dispute Resolution
Dispute Resolutions:Governing Law•   What Governing Law Means•   What Governing Law Doesn’t                          Doesn...
Dispute Resolutions:Venue•   Not Same as Governing Law•   Fixed Locations•   Alternative Locations•   Bifurcated Locations...
Mergers &MAcquisitions•   Termination Rights and    Obligations•   Change of Control•   Distributors May Be Seen As a    C...
Take-Away Items•   Consider Global Strategy Up    Front•   Get Correct Legal Advice Up    Front                           ...
ContactIan KesslerOwnerSanukE-mail: ian@sanuk.comAmit KumarAssociate General Counsel; Head of Licensing and Business Trans...
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International Operations - Ethna Piazza

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Transcript of "International Operations - Ethna Piazza"

  1. 1. International OperationsSales, Distribution and Manufacturing
  2. 2. Different International Sales Strategies Help Let Someone Do It Pay Someone Let Someone Else Make/Sell Let Someone Someone Sell &OOwn P t of Part fYourself Sell Sell For You Else Make/Sell For You That Someone Direct Sales Joint Franchise Distributor Licenses Sales Representative Venture Commissioned C i i d Distributor Di t ib t Distributor Di t ib t Licensee is Li i Licensee Makes/ Li M k / Hire Agents Sells By Resells Jointly Owned Sells Product,Employees Solicit Prescribed For By You and Pays Orders Marketing Plan Profit Another Royalty AKA Can Be A: More Flexible AKA Supply or Corporation, Corporation Compared to Manufacturer Marketing Partnership, LLC Sale of Representative Agreement or Other Technology Special Cases: Special Cases: Special Cases: OEM Teaming Know-How Private Label Agreements Show How Show-How$ $ 2
  3. 3. Agent/Rep. vs.Distributor/DealerAgent/Representative Distributor/Dealer/ LicenseeEnd Customer is the Customer Distributor is Your CustomerNo Inventory InventoryPlaces Orders Purchases for Own AccountCommissions MarkupDoesn’t Handle $$ Handles $$No After Sales Services After Sales ServicesLimited Local Assistance Local Assistance with Market Conditions or Manufacturing 3
  4. 4. Control and Costs Subsidiary JVControl Distributor Agent Cost 4
  5. 5. Manufacturing StrategiesDomestic Production Foreign ProductionPros and Cons Pros and ConsDo it yourself or let someone handle Let someone handle all/part of itall/part of itOwnership of Machinery Ownership of MachineryEmployees EmployeesAbility to Control y Ability to Control y Competitors 5
  6. 6. Manufacturing StrategiesAdditional key issues: y• Title to the WIP and products• Bailment• Technical assistance agreements• Intellectual property negotiations• Product development• Minimum order quantities• Level load/On-demand production• Pricing arrangements g g – Cost plus – Fixed fee 6
  7. 7. Managing The Risks1. Performance Risks2. Channel Conflicts3. Financial Risks4. Supply Chain Management5. Intellectual Property6. Risk Allocations7. Dispute Resolutions8.8 Mergers & Acquisitions Acq isitions 7
  8. 8. 1. Performance Risks
  9. 9. Performance Risks:Pre-qualifications• Business/Marketing Plan (Initial and Annual)• Credit Checks• References• Distributor Growth History• S Success i R l t d Fi ld in Related Fields• Clear with Social/Environmental Affairs• Whether they work with competitors• In-person meeting in their office 9
  10. 10. Performance Risks:Term• Length of Initial Term• Renewal – Automatic (Evergreen) Unless not Renewed – Expire Unless Renewed Affirmative• Impact of Distributor/Manufacturer Investment 10
  11. 11. Performance Risks:Termination• Grounds – Breach Only? – Cessation of Business? – Insolvency/Bankruptcy? – Change of Control? – At Will?• Notice/Cure Period• Effective Date• Liquidated Damages• Non-payment Termination Provision 11
  12. 12. Performance Risks:Marketing Obligations g g• Distributor Efforts – Commercially Reasonable – Best Efforts• Distributor’s Expenditures – Staffing – Marketing – Advertising• Company Efforts p y – Distribution Obligation – Company Contribution 12
  13. 13. Performance Risks:Minimum Sales• Exclusive vs. Non-Exclusive• Penalties for Failures to Meet M t• Inventory Levels• Local modifications 13
  14. 14. Performance Risks:Training• Kinds – S l Sales – Installation – Support• Expenses• Locations• Frequency• Annual Sales Meetings 14
  15. 15. Performance Risks:Demos, Shows, Visits • How Many? • At What Cost? 15
  16. 16. Performance Risks:Literature/New Media• Legal: – Authorship – Copying – Printing – Translating• Local custom• Web sites/Social Media 16
  17. 17. Performance Risks:Records, Reports, and Audits • Records – Sales – Customer Information – W Warranty Information t I f ti • Reports – Market Overview – Competitive Reports • Audit Rights 17
  18. 18. 2. Channel Conflicts
  19. 19. Channel Conflicts Manufacturer • Two or More Channel Members Compete for the Same BusinessChannel A Channel B • Examples Include: – Direct Versus Channel – Channel Versus Channel Customer • Destructive When Margins Erode 19
  20. 20. Channel Conflicts: Exclusivity PROGRAMS TO MANAGE CHANNEL CONFLICT Saturation Policy Limited PolicyMany channel partners with Few channel partners withrelatively easy requirements for exclusive or quasi-exclusiveauthorization. th i ti territories. t it i Limited Limited Selective Selective S l ti Saturation Saturation Selective PolicyModerate number of resellers.Specific requirements. Someterritory overlap. 20
  21. 21. Channel Conflicts:Ex Territory Sales• Territory• Ex Territory Prohibitions – Forbidding Sales Outside of Territory – Forbidding Marketing Outside Territory – Forbidding Transshipping/Gray Marketing – Website prohibitions• Manufacturer disclaimer as to grey market goods 21
  22. 22. Channel C fli tCh l Conflicts:House accounts• House accounts – If Exclusive, Even as to Company? p y – Specific Lists – Channels – Fields• Distributor with retail outlets• Competing products 22
  23. 23. Channel Conflicts:Post TerminationConsequences• Inventory – Sell off – Buy Back• Transition Assistance• Carryover Services• Customer Lists 23
  24. 24. 3. Financial Risks
  25. 25. Financial Risks:Prices• Scheduled Prices• Discounts Off List• Changes to Price Schedules – Unilateral vs. Mutual – When Effective – Frequency – Most Favored Customer Clauses• Resale Price Maintenance laws vary widely 25
  26. 26. Financial Risks:Payment Terms • Payment Due – In Advance – On Delivery – Net 30 • Type – Check – L tt of Credit Letter f C dit – Wire Transfer 26
  27. 27. Financial Risks:Taxes and Duties• C t Customs D ti Duties• VAT, Sales, and Other Product Taxes• Withholding Taxes• May impact decision to manufacture instead of solely distribute 27
  28. 28. 4. Supply Chain Management
  29. 29. Supply Chain Management:Forecasts• Frequency g• Coverage• Binding vs. Non-Binding• Component Liability 29
  30. 30. Supply ChainManagement:Orders• Format• Minimum Order Size• Frequency• Lead Times• Reschedules• Cancellations• Component Liability 30
  31. 31. Supply Chain Management: pp y gDelivery• Carrier Selection C i S l ti• Risk of Loss – Warehouse – Loading Dock L di D k – In Transit – FOB – FCA – EX WORKS• Import and Export Licenses pp and Approvals• Insurance Costs• Broker Fees 31
  32. 32. 5. Intellectual Property
  33. 33. Intellectual Property Issues:Products• “Products” Definition – Fixed – Flexible• Product Changes – New Versions and Upgrades pg – Fixes, Updates, Releases• Localization 33
  34. 34. Intellectual Property Issues:Rights Granted• Making/Manufacturing• Copying• Modifications• Translating• Combinations 34
  35. 35. Intellectual Property Issues:Ownership• Product Modifications• Enhancements, Add-ons, Combinations C bi ti• Localizations and Translations• Documentation and Literature 35
  36. 36. Intellectual Property Issues:Enforcement• Policing Third Party Infringement – Right vs. Duty vs• Allocation of Expenses• Allocation of Recoveries 36
  37. 37. Intellectual PropertyIssues:TrademarksT d k• O es p Ownership• Use• Quality Control• Registrations 37
  38. 38. 6. Risk Allocations
  39. 39. RiskAllocations:All tiCustomer Support• Installation• Maintenance• Support – Tier 1/Level 1 – Tier 2/Level 2 – Tier 3/Level 3 39
  40. 40. Risk Allocations:Indemnification• Indemnity by Manufacturer y y – Intellectual Property (Except Combinations and Modifications) – Manufacturing Defect – Design Defects• Indemnity by Distributor – Intellectual Property From Combinations and Modifications – Misrepresentations and Fraud – Ad ti i I j i Advertising Injuries• Trademarks?• Have the products been cleared from an IP perspective in the distributor’s country? distributor s 40
  41. 41. Risk Allocations:Disclaimers• Customary and Typical – Merchantability – Fitness for Particular Purpose• Atypical – Non infringement Non-infringement – Error Free (software) – Uninterrupted (software) 41
  42. 42. Risk Allocations:Limitation of Liability• Exclusions – Consequential Damages – Punitive/Special Damages – Lost Profits/Lost Revenues• Loss of Data• Caps – Fixed Amount – 1X to 3X – Time Period 42
  43. 43. 7. Dispute Resolution
  44. 44. Dispute Resolutions:Governing Law• What Governing Law Means• What Governing Law Doesn’t Doesn t Mean• Which Jurisdiction? – D Dangers – Drafter of Contract – Compromise – Benefits of International Arbitration 44
  45. 45. Dispute Resolutions:Venue• Not Same as Governing Law• Fixed Locations• Alternative Locations• Bifurcated Locations 45
  46. 46. Mergers &MAcquisitions• Termination Rights and Obligations• Change of Control• Distributors May Be Seen As a Cost Item by Strategic Buyers 46
  47. 47. Take-Away Items• Consider Global Strategy Up Front• Get Correct Legal Advice Up Front 47
  48. 48. ContactIan KesslerOwnerSanukE-mail: ian@sanuk.comAmit KumarAssociate General Counsel; Head of Licensing and Business TransactionsTaylor Made Golf CompanyE-mail: amit.kumar@tmag.comClark LibensonPartnerAllen Matkins Leck Gamble Mallory & Natsis LLPE-mail: clibenson@allenmatkins.comEthna PiazzaPartnerAllen Matkins Leck Gamble Mallory & Natsis LLPE-mail: epiazza@allenmatkins.com @ 48
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