What’s an Export Management Company? An EMC is an independent firm which, in effect, acts as the exclusive export sales department for non-competing manufacturers. Their loyalty is to their U.S. manufacturers and they are working hard to develop a successful export business. An EMC functions in foreign markets just as a sales representative or exclusive wholesaler functions for a manufacturer in t
he U.S. An EMC usually has a formal agreement with manufacturers (whom the EMC often calls the “principal” or the “factory”) to “manage” their exports. Sometimes EMCs will represent all of a manufacturer’s product line, but not always. The EMC generally receives exclusive rights to sell in all foreign markets, but, again, not always. EMCs should not be confused with Export Trading Companies (ETC’s) – organizations that specialize in procurement on behalf of foreign clients. An ETC has no “loyalty” to a particular manufacturer. They are seeking the best terms for their clients. Some EMC’s Act as an Agent. The EMC establishes the marketing presence in foreign markets soliciting orders from foreign customers in the name of the manufacturer. Invoicing is done in the name of the manufacturer and the EMC helps the manufacturer with all the details of the export transaction. The manufacturer bears the risk of nonpayment, and may be asked to extend credit to the foreign customer. “Agent” EMCs are paid a commission on export sales. The EMC may suggest an export price, but his principal has final say on price and even whether to accept the order. Other EMC’s Act as a Distributor. More frequently, EMCs operate as an exclusive distributor on a “buy-sell” basis. The EMC buys from the manufacturer at a set price and resells to foreign customers at prices established by the EMC. The EMC is responsible for invoicing and bears the risk of nonpayment. The EMC pays the manufacturer on agreed terms – usually similar to the manufacturer’s terms for their best U.S. Customers Note well: when the EMC is acting as a distributor, the manufacturer may have no control over the export price and not even know who the foreign customers are. However, many EMCs work closely with their principals on both pricing and customer relations. This is particularly true if the products are technical and call for special servicing and/or installation. EMC’s Come in All Shapes and Sizes
No matter what your product, one or more of the 1,000 U.S. Export Management Companies is capable of handling your export. But they are not alike. Some EMCs are relatively large, handling lines from 50 or more U.S. Manufacturers, cutting across a wide range of industries and exporting to most world markets. Other EMCs are smaller and will have a few carefully selected principals. Some EMCs specialize in certain products and/or focus on selected regions or countries, while other EMCs are generalists. Some EMCs may be involved in other export related activities such as procurement on behalf of foreign clients. Most EMCs are independent businesses. How an EMC Exports
EMCs usually have long established sales networks abroad. Some have established foreign sales and warehousing subsidiaries. But more commonly, EMCs appoint export agents, or representative, and networks of exclusive distributors and dealers in each foreign market. EMCs are experienced in all facets of exporting: foreign travel, export marketing, etc. Here are the typical strengths:
An ability to handle all details. EMCs have the know-how to answer inquires, prepare quotations, enter orders, handle shipping details, and get paid. They are export professionals. The lifeblood of an EMC is active contact with foreign firms. An ability to establish a strong foreign distribution system. They have the know-how to select agents and distributors, and to manage their distribution network. They are experts on business conditions abroad. EMC executives travel for first-hand experience. Even at the home office, they constantly appraise market conditions and sales opportunities. Their profits are based on how successfully they export. Thus, they’re motivated to do a good job. What Does an EMC Charge? An EMC’s charges to their principals vary depending upon the product, the degree of promotion required, and the EMCs method of operation. EMCs operating on a commission basis will usually want a commission that equals – or even exceeds – your best domestic commission. This might range from 10% for consumer goods to 15% or more for industrial products. EMCs functioning on a buy-sell basis will ask for your best U.S. discount plus an extra discount. EMCs that do accept the manufacturer’s best U.S. price will usually have to mark up the product more than a U.S. distributor in order to make a profit. In addition to commissions or discounts, an EMC may charge for other items. Some EMCs will ask for “special event” contribution such as a 50/50 sharing of costs to exhibit in a foreign trade show. EMCs may require a contribution for Advertise and other promotional activities, usually on a shared basis. A few EMCs ask for a monthly retainer, especially in the early stages of establishing export sales. It is unusual for a well-established EMC to ask for a retainer for other reasons. Are the Extra Discounts Justified? Some manufacturers feel that EMC services are not worth the extra commission or discount they get. But remember, an EMC has many costs that even domestic distributors do not have. Some of these include:
Commissions or special discounts to their foreign agents. The cost of running an export business: experienced personnel, communications, foreign travel, and export paperwork. Promotion costs, if not shared with their principals. EMCs claim, with some justification, that they receive little or no benefit from the manufacturer’s domestic promotion. Therefore, they want lower prices or higher commission rates as the EMC will be responsible for export promotion and other special expenses. An EMC Could Build Your Firm’s Export Business
Should you use one? Here are four advantages to using one:
Export sales come quicker. EMC’s already have a network of foreign agents and distributors. Your product, if compatible, will have a built in distribution system. If you were to build your own export business, it will take much longer to realize sales. Your out-of-pocket expenses will be less. An EMC has the time. Even with adequate financial resources, you may lack the time necessary to build an export business because of other priorities. You will learn from a pro! There’s no better export practitioner than an EMC. If you want your own export department eventually, then prepare yourself by seeing how an EMC operates. (fita.org)
