Managing foreign distributors: case studies of four exporting SMEs

Abstract: Most SMEs expand internationally by forming partnerships with foreign
distributors, as they often lack the resources and international experience
to successfully perform all export functions themselves. However, the
management of foreign distributors is often regarded as problematic since
it is a highly demanding task. Our research investigates three specific
problems that SMEs are faced with when managing foreign distributors,
namely the selection, support, and control of foreign distributors. To
describe these problems, we have conducted case studies of four exporting
SMEs: Propulse AB, Composite Scandinavia AB, Liko AB, and Index Braille.

The conclusions drawn in this thesis are as follows:

• When selecting foreign distributors, SMEs generally rely on selection
criteria such as prior experience, networks and connections, market
coverage, and distributor size. The prospective distributors are located by
using recommendations and connections, the personal knowledge of the
territory, trade fairs, and by distributors contacting SMEs directly. Then
the evaluation of candidates and the final choice is made based on visits
to the distributor and a marketing, promotion, and/or business plan
provided by the distributor. The selection is later finalized in a written
contract covering obligations and expectations of both parties.

• SMEs support their foreign distributors by nurturing strong
relationships, regular communication, field visits, invitations for the
distributor to visit, territorial protection, promotional support,
technical support, training, business advice, psychological rewards, and
finally by providing distributors with adequate margins.

• For control of foreign distributors, SMEs start by evaluating their
performance by implementing standards such as sales volume, the cost of
having the distributor, and the distributors’ sales and marketing input.
The performance is monitored employing the SMEs’ own statistics and
performance appraisals, and is then compared to mutually set objectives. In
addition, SMEs utilize strong relationships, motivation, resources needed
by the distributor, favourable terms of trade, and coercive threats and
actions in order to increase the control over distributors.