2. Different International Sales Strategies Do It Yourself Pay Someone Sell Help Someone Sell For You Let Someone Sell For You Let Someone Else Make/Sell & Own Part of That Someone Let Someone Else Make/Sell Direct Sales Sales Representative Franchise Distributor Joint Venture Licenses Hire Employees Commissioned Agents Solicit Orders Distributor Sells By Prescribed Marketing Plan Distributor Resells For Profit Licensee is Jointly Owned By You and Another Licensee Makes/ Sells Product, Pays Royalty AKA Manufacturer Representative AKA Supply or Marketing Agreement Can Be A: Corporation, Partnership, LLC or Other More Flexible Compared to Sale of Technology Special Cases: OEM Private Label Special Cases: Teaming Agreements Special Cases: Know-How Show-How $ $ As responsibility decreases, up-side opportunity decreases and need for financing decreases.
6. Manufacturing Strategies Additional key issues: 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 Cost plus Fixed fee
9. Performance Risks: Pre-qualifications Business/Marketing Plan (Initial and Annual) Credit Checks References Distributor Growth History Success in Related Fields Clear with Social/Environmental Affairs Whether they work with competitors In-person meeting in their office
10. Performance Risks: Term Length of Initial Term Renewal Automatic (Evergreen) Unless not Renewed Expire Unless Renewed Affirmative Impact of Distributor/Manufacturer Investment
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
12. Performance Risks: Marketing Obligations Distributor Efforts Commercially Reasonable Best Efforts Distributor’s Expenditures Staffing Marketing Advertising Company Efforts Distribution Obligation Company Contribution
13. Performance Risks: Minimum Sales Exclusive vs. Non-Exclusive Penalties for Failures to Meet Inventory Levels Local modifications
14. Performance Risks: Training Kinds Sales Installation Support Expenses Locations Frequency Annual Sales Meetings
17. Performance Risks:Records, Reports, and Audits Records Sales Customer Information Warranty Information Reports Market Overview Competitive Reports Audit Rights
19. Channel Conflicts Manufacturer Two or More Channel Members Compete for the Same Business Examples Include: Direct Versus Channel Channel Versus Channel Destructive When Margins Erode Channel B Channel A Customer
20. Channel Conflicts:Exclusivity Limited Selective Saturation PROGRAMS TO MANAGE CHANNEL CONFLICT Limited Policy Few channel partners with exclusive or quasi-exclusive territories. Saturation Policy Many channel partners with relatively easy requirements for authorization. Limited Selective Saturation Selective Policy Moderate number of resellers. Specific requirements. Some territory overlap.
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
22. Channel Conflicts:House accounts House accounts If Exclusive, Even as to Company? Specific Lists Channels Fields Distributor with retail outlets Competing products
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
27. Financial Risks: Taxes and Duties Customs Duties VAT, Sales, and Other Product Taxes Withholding Taxes May impact decision to manufacture instead of solely distribute
29. Supply Chain Management: Forecasts Frequency Coverage Binding vs. Non-Binding Component Liability
30. Supply Chain Management: Orders Format Minimum Order Size Frequency Lead Times Reschedules Cancellations Component Liability
31. Supply Chain Management: Delivery Carrier Selection Risk of Loss Warehouse Loading Dock In Transit FOB FCA EX WORKS Import and Export Licenses and Approvals Insurance Costs Broker Fees
39. Risk Allocations: Customer Support Installation Maintenance Support Tier 1/Level 1 Tier 2/Level 2 Tier 3/Level 3
40. Risk Allocations: Indemnification Indemnity by Manufacturer Intellectual Property(Except Combinations and Modifications) Manufacturing Defect Design Defects Indemnity by Distributor Intellectual Property From Combinations and Modifications Misrepresentations and Fraud Advertising Injuries Trademarks? Have the products been cleared from an IP perspective in the distributor’s country?
41. Risk Allocations: Disclaimers Customary and Typical Merchantability Fitness for Particular Purpose Atypical Non-infringement Error Free (software) Uninterrupted (software)
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
44. Dispute Resolutions: Governing Law What Governing Law Means What Governing Law Doesn’t Mean Which Jurisdiction? Dangers Drafter of Contract Compromise Benefits of International Arbitration
45. Dispute Resolutions: Venue Not Same as Governing Law Fixed Locations Alternative Locations Bifurcated Locations
46. Mergers & Acquisitions Termination Rights and Obligations Change of Control Distributors May Be Seen As a Cost Item by Strategic Buyers
48. Contact Ian KesslerOwnerSanukE-mail:ian@sanuk.com Amit KumarAssociate General Counsel; Head of Licensing and Business TransactionsTaylor Made Golf CompanyE-mail:amit.kumar@tmag.com Clark LibensonPartnerAllen Matkins Leck Gamble Mallory & Natsis LLP E-mail:clibenson@allenmatkins.com Ethna PiazzaPartnerAllen Matkins Leck Gamble Mallory & Natsis LLP E-mail:epiazza@allenmatkins.com
