Export Channel Decisions of Two U.S. Companies

1. Wayne Engineering

Wayne Engineering is a leading manufacturer of side loaders, recycling vehicles, and recycling and garbage trucks. It uses Tradesur Inc. to handle the promotion, marketing, and distribution of its products in overseas markets.

TradeSur is an export management company (EMC) located in San Diego, California, with more than eighteen years of experience in the export market. It has established distribution channels in several countries. As a EMC, its major func­tions include the following: (1) promoting, marketing, and distributing U.S.-made construction equipment in Latin America and Europe; (2) handling complex logis­tics and outsourcing of various phases of the production process when necessary; (3) managing complex construction and infrastructure requirements by coordinat­ing with multiple manufacturers of equipment worldwide and assembling the end product; (4) establishing links with several financial institutions to help overseas buyers to finance their purchases, enhance their cash flows, and expand U.S. exports; and (5) arranging independent financing of turnkey projects for qualified government agencies and corporations from eligible foreign countries.

2. Farouk Systems

Farouk Systems, Inc. (FS), a Houston-based manufacturer of natural hair care and spa products, wanted to get a foothold in the Southeast Asia, following its suc­cessful entry in more than sixty countries, including China. The company sought distributors in Singapore to market its products. With the help of the U.S. Com­mercial Service, which locates potential buyers and distributors for U.S. firms, the company was able to appoint a distributor from a list of prospective candidates.

Singapore was considered a good market for U.S. beauty care products be­cause Singaporean women spend an average of nearly $80 a year on such goods, compared with 17 cents spent by women in China. There is, however, intense competition from various providers in the market.

Final selection of the distributor (True Line Beauty) was based on a number of factors: experience within the Southeast Asian market; solid foundations within the industry; experience in conducting hair shows and educational seminars; sound financial position; and personal chemistry and gut instinct. Farouk Sys­tems also considered the extent to which the potential candidates were willing to look at the long-term perspective and invest in the brand.

The distributor, True-Line Beauty (TLB), was formed twelve years ago and has twenty employees. True-Line Beauty asked for and received exclusive distribution rights in a number of other countries, including Malaysia and Taiwan. Its sales force travel across the country explaining the benefits of the product (e.g., natural ingredients that are environmentally friendly) and offering incentives such as re­funds if the product does not sell or one free bottle for every so many sold. Once a new beauty shop or spa has shown interest, TLB provides training for stylists and demonstrates new cutting and coloring techniques using FS products.

Efforts have been quite slow in developing markets outside Singapore. True- Line Beauty’s approach appears to focus on tackling one market at a time. If certain specified performance benchmarks (e.g., sales, profit margins) as stated in the contract remain unmet over a given period of time, the U.S. company has the option of finding another distributor with the requisite capability to do the job. However, flexibility is the key in evaluating performance expectations and establishing goodwill.

Source: Seyoum Belay (2014), Export-import theory, practices, and procedures, Routledge; 3rd edition.

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