Export Management Company Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Export management companies (EMCs) act for contracting organizations as outsourced international trade intermediaries for products or services in overseas markets, usually in lieu of an in-house export or international marketing department. Offering full-service export assistance, EMCs can vary in size, scope, geographic areas of operations, and level of specific technical or product expertise. EMCs handle all aspects and details of the export process, including documentation, regulations, distribution, and sales, and are usually paid on a commission or performance basis. Normally representing an organization’s products or product line on an exclusive basis, EMCs work overseas with their own appointed networks of exclusive dealers, distributors, and export representatives in specific target markets.

EMCs operate in two forms: as exclusive distributors who take title (ownership), control, and responsibility of a good or service being exported, or as a sales representative or agent with no title, limited control, and responsibility, and subsequent minimized risk for these products. In this second approach, ownership of the good or service remains with the contracted organization or manufacturer (principal). EMCs are usually liable for all fixed costs associated with an export operation, including internal and external staff and overseas representatives, international travel, and communications. Most EMCs do not maintain their own overseas representative offices, warehousing, distribution, sales, or service subsidiaries, but many maintain strategic alliances with similar companies in selected target markets.

As distributors, EMCs normally operate under a “buy-sell” arrangement and receive specific price discounts from client organizations from which they derive their incomes from. As agents, EMCs usually work on a commission-on-sales basis. Commission rates can vary dramatically from EMC to EMC depending upon the relative competitiveness of a client organization’s products in particular markets and the capabilities, capacity, and associated exports of the EMC. Historically, the commission rate has been approximately 10 percent for consumer goods and around 12–15 percent for industrial products. With the rise of services exports, and in the bio-technology, information, communications, and technology exports, commission rates can vary and are normally a function of the price of the product calculated against the relative difficulty of its marketing over time.

In addition to overseas sales and marketing, EMCs can also provide other services to organizations, including participation—on the principal’s behalf— in overseas trade shows, conducting of in-market research, localization of product specifications and product adaptation, and lobbying of governmental and regulatory entities.

Technology, communications, and the globalization of trade influence the roles and function of EMCs. Most recently, developments in information and communication technology have closed the gap between domestic and international marketing by making the process of contact and communication with overseas clients easier, and “DIY” exporting more feasible and effective. This is having an effect on the number of organizations that use EMCs, some of whom are countering this trend by offering online export facilitation services and internet-based expertise services themselves.

Aside from a performance-based incentive process and associated motivations, benefits for organizations utilizing EMCs are that they can rapidly acquire a “ready made” export sales and distribution entity that has market and channel access and expertise. This translates to an immediate market presence. Organizations have, subsequently, the potential to shorten the time it takes to evaluate and access a specific target market, and can streamline the target market selection process. EMCs can often dramatically speed up export licensing and regulatory approvals and, if selected for the “distributor” role, can minimize the risk of exporting to an organization by assuming foreign credit risk and the managing of complex and diverse international credit, collections, and nonpayment.

Alternatively, by maintaining an outsourced entity for export development, an organization may not be maximizing the financial benefit of international trade, and can limit the development of internal export expertise, contacts, and sales networks. Most EMCs are smaller firms and have limited financial capacity and internal resource capabilities. Subsequently, economic imperatives can focus their efforts on products or markets that have a higher potential for near-term returns, rather than putting resources behind activities that represent a more strategic export opportunity for the principal. Finally, by using an EMC, an exporting organization can find that it has relinquished control of their product, organization name, and reputation in the export market.

Bibliography:

Australian Institute of Export, Export Handbook, 19th ed. (Australian Institute of Export, 2008);
Richard Barovick and Patricia Anderson, “EMCs/ETCs: What They Are, How They Work—Export Management Companies, Export Trading Companies,” Business America (July 13, 1992);
John W. Cadogan, Sanna Sundqvist, Risto T. Salminen, and Kaisu Puumalainen, “Market-Oriented Behavior: Comparing Service with Product Exporters,” European Journal of Marketing (v.36/9–10, 2002);
Thomas A. Cook, The Ultimate Guide to Export Management (AMACOM, 2001);
Export Trading Company Affairs, U.S. Department of Commerce International Trade Administration, www.ita.doc.gov (cited March 2009);
Carl A. Nelson, Exporting: A Manager’s Guide to the World Market (International Thomson Business, 1999);
Justin Paul and Rajiv Aserkar, Export Import Management (Oxford University Press, 2008).

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