The principal (manufacturer) entrusts the introduction of his products/services on the foreign market to an intermediary.
Advantages:
- limited financial risk as the cost of the market entry (commission, …) is only due after turnover
- limited investment as the fixed/overhead costs are for the account of the intermediary
- the partner knows the market allowing for an ‘easy’ access to customers
- the partner can present, thanks to the different complementary products he represents, a full range of products and spreads his costs over several suppliers
Disadvantages:
- the commercial strategy is in control of the intermediary and the supplier is thus, to a certain extent dependent of the partner
- profit sharing with the partner
- the partner is an independent entrepreneur and the possibilities to instruct him are limited
- the partner is often more a specialist of the market than of the product/ service -> limited product knowledge
- the intermediary controls all communication with the customers
- today’s partner may be tomorrow’s competitor