Home country middlemen or domestic middlemen located in the producing firm’s country provide marketing services from a domestic base. By selecting domestic middlemen as intermediaries in the distribution processes, companies relegate foreign market distribution to others. Domestics middlemen often many advantages for companies with small international sale volume, those inexperienced with foreign markets those not wanting to become immediately involved with the complexities of international marketing, and those not wanting to become immediately involved with the complexities of international marketing, and those wanting to sell abroad with minimal financial and management commitment. A major trade off when using home country middlemen are limited control over the entire process. Domestic middlemen are most likely to be used when the marketer is uncertain or desires to minimize financial and management investment. A brief discussion of the more frequently used types of domestic middlemen follows.
Manufacturer’s Retail Stores
An important channel of distribution for a large number of manufacturers is the owned or perhaps franchised retail store. Disney Benetton and many of the classic Italian luxury goods markers take this approach.
As global retailers like Ikea, Costco, Sears Roebuck, Toys R Us and Wal-Mart expand their global coverage they are becoming major domestic middlemen for international markets. Wal-Mart with more than 1,600 stores in nine foreign markets is an attractive entry point to international markets for US suppliers. Wal-Mart offers an effective way to enter international markets with a minimum of experience,. For example, Pacific Connections, a California manufacturer of handbags with $70 million in sales ventured into overseas markets in Argentina, Brazil, Canada and Mexico through its ties to Wal-Mart and as trade restrictions are eased through alliances such as NAFTA, new global retailers are being created – Gigante from Mexico is a good example of this trend.
Export Management companies
The export management company (EMC) is an important middleman for firms with relatively small international volume or for those willing to involve their own personnel in the international function. EMCs range in size from 1 person upward to 100 and handle about 10 percent of the manufactured goods exported. An example of an EMC is a Washington DC based company that has exclusive agreements with 10 US manufacturers of orthopedic equipment and markets these products on a worldwide basis.
Typically the EMC becomes an integral part of the marketing operations of its client companies. Working under the names of the manufacturers, the EMC function is a low cost independent marketing department with direct responsibility to the parent firm. The working relationship is so close that customers are often unaware they are not dealing directly with the export department of the company.
The export management company may full or partial responsibility for promotion of the goods credit arrangements physical handling market research and information on financial patent and licensing matters. An EMC’s specialization in a given field often enables it to offer a level of service that could not be attained by the manufacturer without years of groundwork. Traditionally the EMC works on commission although an increasing number are buying products on their own account.
Two of the chief advantages of EMCs are minimum investment on the part of the company to get into international markets and to commitment of company personnel or major expenditure of managerial effort. The result, in effect is an extension of the market for the firm with negligible financial or personnel commitments.
The major disadvantage is that EMCs seldom can afford to make the kind of market investment needed to establish deep distribution for products because they must have immediate ales payout to survive. Such a situation does not offer the market advantages gained by a company that can afford to use company personnel. Carefully selected EMCs can do an excellent job, but the manufacturer must remember that the EMC is dependent on sales volume for compensation and probably will not push the manufacturer’s line if it is spread too thinly generates to small a volume form a given principal, or a cannot operate profitably in the short run. In such cases the EMC becomes an order taker and not the desired substitute for an international marketing department.