Agent

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Russian: Агент

Agent is a person or business authorized to act on another's behalf. To understand better the dissimilarities between Agent and Principal (while these dissimilarities are considered as negligible in USA) one could use the following check-list [1] (Table 1). An agent is usually a small firm or an individual located in the importing country who acts as a manufacturer's (seller's) representative for the exporter. Therefore an agent does not take title to the goods it sells but earns a commission on the sales it makes. In its relationship with an agent, the exporter is known as the Principal. An agent often has several principals and generally sells a group of complementary products rather than products that compete directly with one another. The agent will handle all of the sales functions for the exporter, from the initial prospecting for customers to the close. The agent is usually given varying support by the exporter: Some exporters provide only the bare minimum of a sales brochure and a price list, while the more experienced exporters provide training on the product's characteristics, analysis on the competitors' products, information on the sales and service philosophy of the company, sales support in the form of samples, catalogs (translated or adapted), trade advertising, and financial support to attend trade shows, technical visits by corporate engineers, participation in sales incentive programs, and so on [2].

Table 1. Who am I? - Check-List

Comparative Factors I am Supplyer’s Distributor if….. I am Principal’s Agent if…..
Risk
  • I buy products for my own risk and account.
  • What, me take a risk? No way!
Customers Belongingness
  • I sell products to my customers.
  • I sell products to Principal’s customers.
Compensation
  • My compensation is the difference between my buy price and my sell price.
  • My compensation is a flat commission.
Sales Amount Information
  • I don’t brag when I make lots of sales for the Supplier. Otherwise, the Supplier will start thinking: “Gee. If it’s so easy, maybe we should be there.”
  • When I make lots of sales for the Principal, I blow my own trumpet for a bonus or other incentive based compensation.
Pricing Policy
  • I set the price of the products to my customer.
  • My prices to the customer are none of Supplier’s business.
  • The Principal advises me what price to sell its products for.
  • The Principal and I consult closely about what price I should sell its products for.
Sales Policy
  • I set my own sales policies.
  • The Principal sets my sales policies.
Authority
  • I have authority to promote, market and sell Supplier’s products pretty much as I determine.
  • I promote, market and sell Principal’s products pretty much as the Principal determines. I must conform to Principal’s directions and only operate within my scope of authority.
Customer's Perception
  • The customer perceives me as the supplier.
  • The customer perceives the Principal as the supplier
Contacts wits Customers
  • I discourage the Supplier from contacting my customers. I try to keep the Supplier in the dark.
  • I have no problems if the Principal communicates directly with its customers provided the Principal doesn’t keep me in the dark.
Non-Payment
  • If heaven forbid, the customer doesn’t pay, it’s my problem.
  • If heaven forbid, the customer doesn’t pay, it’s Principal’s problem.
Ad and Promo Costs
  • I bear my own advertising and promotional costs out of my gross profits. If I’m lucky, and the Supplier is in a generous mood, the Supplier may contribute to a trade show booth or some other cooperative promotional campaign, on an equal basis with its other distributors.
  • The Principal covers my advertising and promotional costs.
Ad and Promo Costs
  • I have my own warehouse. The goods are mine! I bought them.
  • I may have a small warehouse. But I don’t own the goods. I hold the goods for the Principal, who pays the storage and insurance fees. The warehouse is for buffer stock only. the Principal usually ships direct to its customers.

References

  1. Auerbach, R. Am I an agent or a distributor? - www.marketnewzealand.com/auerbach -accessed 01/27/2007
  2. David, P., Stewart, R. International Logistics: The Management of International Trade Operations - Thomson: Mason, Ohio. 2007. – Sec.4-3a.
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