Explain various types of Domestic Agents. Distinguish between domestic agents and domestic merchants.
The various types of domestic agents are:
Export Management Companies (EMC): In some countries there are export management companies (EMCs) who manage, under contract, the entire export activities of a manufacturer. An EMC is sometimes known as a combination export manager (CEM) because it may function as an export department for several allied but non-competing manufacturers. When compared with export agents, the EMC has greater freedom and considerable authority. The EMC provides extensive services ranging from promotion to shipping arrangement and documentation. Moreover, the EMC handles all, not just a portion, of its principal’s products. In short, the EMC is responsible for all of the manufacturer’s international activities. EMC may be compensated in the form of a commission, salary or retainer plus commission.
Export Broker: An export broker is expected to have extensive knowledge of overseas markets and foreign customers. Export broker brings the exporter and the customers together. An export broker does not take possession or title to the goods, he only negotiates on behalf of the seller. He cannot conclude the transaction without the approval of the seller. He works on commission.
Manufacturer’s Export Agent: Like export broker, manufacturer’s export agent receives a commission for assisting manufacturers in exporting goods. Manufacturer’s export agents focus more on sale and handling of goods. By availing the services of export agent, an exporting firm is not required to have an export manager to handle all the documentation and shipping tasks. However, an export agent is familiar with the limited market and as a result, an exporter needs the services of a number of export agents to cover different parts of the world.
Purchasing Agent: Purchasing agent works on behalf of the foreign buyer. Purchasing agent resides and conducts business in the exporter’s country. The primary task of purchasing agent is to seek a product that matches the foreign buyer’s preferences and requirements. Purchasing agent acts in the interest of the buyer by seeking the best possible terms. He receives commission from buyer for the services rendered.
Country Controlled Buying Agent: Country controlled buying agent is similar to purchasing agent. The only distinction is that a country controlled buying agent is foreign government’s agency or quasi government firm. Such agent is empowered to locale and procure goods for his country.
Resident Buyer: A resident buyer is an independent agent who is located near highly concentrated production centers. He is retained by the principal on a long term basis to maintain continuous search for suitable new products.
The differences between domestic agents and domestic merchants:
- Ownership or Title to the Goods: Domestic agents never take title to the goods regardless of whether they take possession of the goods or not. On the other hand, domestic merchants take title to the product they sell.
- Remuneration: Domestic agents provide their services for commission while domestic merchants earn profit on their dealings.
- Control: An exporter maintains his overall control if he hires the services of domestic agents. An exporter does not have much control over domestic merchants.