As has been seen, there are considerable advantages in selling direct to the foreign buyer but also some disadvantages. Similarly there are pros and cons for indirect selling, and the exporter must consider them all and decide which method best suits his particular needs.

Generally speaking indirect selling is more popular with a new exporter because it involves less investment and is less risky, while direct selling becomes more worth while as export sales increase and the exporter's knowledge of both the techniques of exporting and the problems of particular markets develops. Indirect selling involves the employment of an agent or distributor overseas. All of these offer the exporter their knowledge of the market and their network of customers, and save him the expense of setting up his own sales force and seeking his own customers.

In choosing an agent the exporter must endeavour to find one who is likely to look after his interests and really work for his commission. If he is already an agent for similar manufacturers there is the danger of divided loyalties when it comes to passing on the orders he receives. The size of the agent's business is important and so are the extent of his knowledge of the type of product the exporter wishes him to sell and his knowledge of the market. If the agent is to be a del credere agent he will take on financial responsibility for his sales and thus be responsible for collecting payment from the buyers, but the exporter must expect to pay him a higher rate of commission for his service.

An agent who is to be appointed as a distributor for the goods buys them from the exporter and resells them in his own right on certain terms and conditions laid down in the contract. He is usually given the privilege of being the sole distributor for the exporter's product within an area and in exchange is expected to maintain the exporter's image, possibly to display the product sign and even the recognisable layout for the showrooms and forecourt. If the product sells well he will be anxious to retain his franchise and will do everything he can to protect the exporter's interest and will be prepared to sell the goods at a price agreed with the exporter.

There are considerable advantages in appointing an agent whether he is a commission agent or a distributor, but against these must be weighed the disadvantages of lack of personal contact between the exporter and the foreign buyer and the lack of opportunity to develop directly sales and a knowledge of the market.

Joint Ventures

As an alternative to selling his product abroad himself, either directly or indirectly, the manufacturer may sell the right to manufacture it overseas under licence. This is a simple way for a manufacturer to become involved in marketing abroad and he gains entry to a market at little risk. In return for a royalty, the overseas producer gains the right to use a manufacturing process, patent rights and trade secrets, and saves himself the time and expense of building up similar expertise and a product name. The exporter does of course lose control of the manufacture of his product and the right to sell it himself in competition with the licensee.

To maintain the marketing responsibility and yet have the goods manufactured outside China, the Chinese producer could enter into a contract with a foreign manufacturer to produce the goods for him. He could possibly form a partnership with the overseas producer or even buy him up.

There are a number of other joint venture opportunities available to the producer. For instance, he could join in a partnership with an overseas firm willing to put up some capital which, with his know-how, would enable them to manufacture the goods abroad. Alternatively he could invest his capital jointly with foreign investors to establish a company to manufacture his product in their country. Another possibility is to join with Chinese producers of similar goods to form a marketing group that will share the costs of agents, advertising, local showrooms, sales staff and research, etc. , but as the rewards are not always evenly distributed there is the danger of conflict between firms participating. Large firms can also assist small ones by giving them the use of their research and marketing facilities to enable them to find outlets for their goods without the expense of setting up their own export sales organizations.