There are two main categories of intermediaries in indirect channels: domestic agents and domestic merchants. Domestic agents do not take title of goods, may or may not have possession, represent the manufacturer, and work for a commission or fee. Domestic merchants always take title of goods, may or may not have possession, do not represent the manufacturer, have decision-making power, work for a profit, and undertake risk. Common types of intermediaries include export brokers, manufacturer's export agents, export management companies, cooperative exporters, and purchasing/buying agents.

1. Types of Intermediaries
INDIRECT CHANNEL
Group Members
Mr. Kiran Prasad
Pradeep
Nagaraj
Harish
Keerthi
Chandrahas
Sampath M uppala

2. INDIRECT CHANNELS
In Indirect channels a manufacturer does not have to
correspond with foreign parties in foreign countries,
instead they deal with middle man who in turn sell the
product to final users.
Although there are many intermediaries, all can be
grouped under two broad categories :
Domestic Domestic
Agents Merchants

3. Basic differences B/W the two
DOMESTIC AGENTS DOMESTIC MERCHANTS
TITLE OF
THE GOODS
NEVER ALWAYS
POSSESION MAY OR MAY NOT MAY OR MAY NOT
REPRESENT- MANUFACTURER MANUFACURER’S
ATIVE OF
PRODUCT
DECISION HAVE POWERS NO POWERS
MAKING
WORK FOR COMMISION OR PROFIT
FEE
RISK NO YES
UNDERTAKE
N

4. DOMESTIC AGENTS

5. Export Broker
 The function of export broker is to bring a buyer and
seller together.
 He may be assigned some or all foreign markets in
seeking potential buyers.
 He can negotiate the best deal for the seller (i.e.,
manufacturer) but cant conclude the transaction without
prior approval of the seller.
 May operate at its own name or of the manufacturer.
 For any action performed he gets fee or commision.
 He doesn’t take the title of the goods.
 He has no financial resposiblities.

6. Advantages (Export Broker)
 Useful because of his extensive knowledge of the
market’s supply, demand & foreign customers .
 Due to this - can negotiate best terms for the seller.
 Valuable associate for highly specialized goods &
seasonal products.
 Is used by small manufacturer’s with limited
financial resources, selling their goods in broad
markets.

7. Manufacturer’s Export Agent
(Sales Representative)
 Is a independent businessperson who retains his or her own
identity by not using the manufacture’s name.
 Have freedom to select when, where & how to work within the
assigned territory.
 Like export brokers, he also works for commission.
 But, unlike export broker he has continuous and more
permanent relationship with the manufacturer.
 He works under contract which defines territory, term of sale,
methods of compensation & is renewable by mutual agreement.
 He may take possession but not the title of the goods, thus
risk of loss remains to the manufacturer.
 He carries several product lines i.e. he may represent
manufacturer of related products.

8. Advantages (Manufacturer’s Export Agent
/ Sales Representative)
 Manufacturer can avoid fixed cost associated with
having own sales & distribution organization ,
because commission is paid when sales are made.
 Have extensive knowledge of specific foreign
market.
 As he carries several product lines in his bag so the
expense of doing business is shared by other
manufacturers.
 Allows manufacturer to capitalize his time,
money, and expertise on production rather than
marketing aspect.

9. Export Management Company
 Manages entire export program under contract.
 Also known as combination export manager (CEM),
because it may function as export department for several
allied but non-competing manufacturers.
 In this regard those export broker & export agents who
represent combination of clients can also be called as
EMC’s.
 They have greater freedom and considerable authority.
 But unlike export brokers & agents, they provide extensive
services, ranging from promotion to shipping arrangement
& documentation.

10.  Foreign buyers usually prefer to deal directly with
the manufacturer rather than through a third party.
Therefore, an EMC usually solicits business in the
name of the manufacturer and may even use the
manufacturer’s letterhead.
 EMC requires at least a one-year contract to handle
a manufactured products. More often it is three year
contract.
 They get compensated in the form of salary, or
commission or both.

11.  Many EMC are also traders (i.e. export merchants).
As they are both agents & merchants, EMC are
engaged more in sell-buy method than commission
arrangement. In that case EMC takes the title of the
good (i.e. ownership). They are compensated by
discounts on purchased goods, & such discounts are
many greater than what other middleman receive
for domestic market.

12. Advantages (EMC)
 It has international marketing expertise and distribution
contacts overseas.
 For many service provided an EMC’s cost are relatively
low because of efficiency of scale (i.e. cost can be spread
over the products of several clients.
 In addition provide shipping efficiency because it can
consolidate many manufacturer product in one shipment.
From this company can get better freight rates.
 It also provide financial services, by guaranteeing payments
and collecting from overseas buyers
 It allows manufacturer to concentrate on internal efforts and
its domestic market.

13. Cooperative exporter
 A cooperative exporter is manufacturer with its own export
organization that is retained by other manufacturer to sell in
some or all foreign markets.
 It works like an export agent, & sometimes act as a broker.
 Cooperative exporter’s motive in representing other
manufacturers primary involves its financial intrest.
 Having fixed cost for the marketing of its own product, the
cooperative exporters desires to share its expenses and
expertise.
 Because of these activities it is often referred as “mother
hen”, piggyback exporter”
 Ex/ GE, Singer, Borg-Warner.

14. Advantages (Cooperative Exporters)
 Relationship b/w cooperative exporter and its
principal is very long one.
 This arrangement provides easy & low-risk way for
the principal to start marketing overseas &relation
continues as long as unrelated & non-competative
products are involved.

15. Webb-Pomerene Association
 This association is formed when two or more firms, usually
in the same industry join together to market their product
overseas.
 It provides information to member firms, set prices, allocate
orders & sell products.
 It arranges shipping, frieght consolidation, rate negotitation
 This association takes possesion of the goods but not the
title.
 As cooperative organization it tends to work on non-profit
or expenses basis.

16. Purchasing/Buying Agent
 As we seen earlier , an export agent represents a seller ; the
purchasing/buyer agent represent the foreign buyers.
 They seek a product that matches his principal’s (i.e. buyer’s)
preferences & requirement.
 He acts on the behalf of buyers seeking the best possible price.
 Also known as commission agent, buyer for export, export
commission house, export buying agent.
 Since the agent operates on an order basis, the relationship with
buyer or seller is not continuous.
 This arrangement does not offer steady bolume of business
neither reduces financial risk.

17. Country-Controlled Buying Agent
 This type of agents perform exactly the same functions as
the purchasing/buyer agent, the only difference is that this
agent are actually a foreign government agency.
 They are empowered to locate & purchase goods for its
country.
 This type of agents have permanent office in the suppliers
country or make a formal visit when the demand arises.

18. Resident Buyer
 This intermediary also perform the same function as by
purchasing agent
 But it is usually located near highly centralized production
industries.
 It is different from the P.A because it is retained by the
principal on a continuous basis to maintain a search for
new products that may be suitable .
 It also maintain continuous relationship with the
suppliers .

19. DOMESTIC MERCHANTS

20. Export Merchant
 It seeks out needs in the foreign market and purchases from
manufacturer in its own country to fill all those needs.
 Goods they generally deals are staple goods, undifferentiated
products or unbranded products.
 They resells this products in foreign markets in its own name.
 It assumes all risks associated with ownership
 It works for profit motive
 They may or may not have a steady relationship with their
suppliers.

21. Export Drop Shipper
 Export Drop Shipper also known as desk jobber or cable
merchants is a special type of Export Merchant.
 In this case, the export drop shipper takes the order from overseas
in turn places the order with a manufacturer, directing him to
deliver the product directly to foreign buyer.
 The manufacturer collects his payments from the drop shipper,
who in turn is paid by the foreign buyer.
 It is common for marketing of bulky products of low unit value( e.g.
coal, lumber, construction materials).
 Relationship is not continuous.

22. Export Distributor
 Unlike Export Merchant & Export Drop Shipper , an Export
Distributor has a continuous relationship with the manufacturer.
 Have exclusive rights to represent manufacturer & sell in some or
all foreign markets.
 Located in manufacturers own country
 Export distributor operates in its own name or that of the
manufacturer.
 Export Distributor usually sells the manufacturer’s product abroad
at manufacturer list price & gets agreed percentage as
remuneration.
 Export Distributor is either paid by commission or allowed a
discount for its purchase.

23. Trading Company
 Sometimes those who want to buy & those who want to sell have no
knowledge of each other or no knowledge of how to contact each other,
Trading Companies came into existence to fill this gap.
 Trading company may buy and sell as a merchant.
 Handle goods and consignments and act as a commission house for some
buyers.
 By representing several clients it looks like an EMC except for the fact that it
 Has more diverse product line
 Offer many more services
 Is larger and better financed
 Takes title that is ownership to merchandise
 Is not exclusively restricted to engaging in export trade
 Goes beyond the role of an intermediatry by engaging directly in production,
physical distribution channel development, financing and resources
development