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Manufacturing companies that have been largely dependent upon marketing and selling their products primarily in their home markets simply can’t survive any more with such a business plan. At the same time, independent manufacturers’ reps are finding myriad opportunities partnering up with offshore manufacturers to sell in the U.S. market and testing the sales waters in foreign countries. That’s why casting a net over international waters is such a strategic move for both manufacturers and the reps with whom they go to market.

That’s the view of many industry experts including Allan Lamberti, CSP, chairman and CEO of the Billiken Group, LLC, a company specializing in the sales training and development of individuals and organizations.

Headquartered in Woodstock, Georgia, Lamberti maintains that “There are certainly thousands of small manufacturers in China and Japan that are seeking foreign markets for their products. But it’s not just Asia-based companies but also those located in South America, India, Israel and EU countries such as Italy and Spain that have their eyes on U.S. and Canadian markets. Making their jobs just a little bit more difficult, however, is the fact that they’re being exposed for the very first time to the North American independent rep business model and it’s something they’re not familiar with. What follows for them with their initial efforts can be a great deal of confusion.”

Lamberti counsels that education of these foreign manufacturers is a key factor in their success or failure in international activities. “Consider for a moment that a manufacturer in Taiwan might have the greatest product in the world and is interested in bringing it to the U.S. market. Since there’s little familiarity with the U.S. rep model, manufacturers’ initial reaction to reps is simply wanting to know how many products the rep is going to order. He fails to realize that the U.S. rep doesn’t take title to merchandise. I don’t know how many times foreign manufacturers come into a meeting with the expectation that a rep here serves as a distributor for the entire country. They come in thinking the rep is the exclusive purchasing agent who takes product into inventory and then markets and sells the product nationwide.

Absence of Control

“In addition to failing to realize that a rep doesn’t just show up with an order, these manufacturers have to come to terms with some other matters including the fact the rep doesn’t devote all of his attention to just one line; they can’t control the rep or his schedule; they can’t require sales reports from reps, etc.

“This lack of experience on the part of manufacturers emphasizes how important it is to educate international manufacturers on how to go to market here.”

One way to counter that trend and to educate foreign manufacturers, according to Lamberti is to align himself with several foreign trade organizations including JETRO (Japan External Trade Organization) and KOTRA (Korea Trade-Investment Promotion). “Every country has some sort of a trade association that attempts to stimulate business with foreign markets. My thinking in aligning myself with them is to serve as an ally and consultant as I liaise and teach the North American business model to foreign manufacturers.”

He adds that in addition to working with those trade organizations, visitors to MANA’s LinkedIn discussion group will often find him networking with principals and reps and weighing in on matters related to international trade.

In his role as consultant and teacher, Lamberti explains, “I provide company management with the tools they’ll need to be successful and to be able to manage expectations. Basically, they have little or no experience with the rep business model. They really don’t know how their product will be sold or how they’ll pay reps. I provide them with all the definitions they’ll need including what a rep and what a distributor are.”

He adds that he generally begins his educational efforts by posing a number of basic questions that prospective reps are bound to pose to a foreign manufacturer. “For instance, they’ve got to be prepared to answer such rudimentary questions as these:

• Tell us about your company.
• Who is the owner?
• What’s your business plan?

“When these questions are asked and answered, this serves as the beginning of the clarification that a rep is not a distributor, and that’s a big help.”

Understanding the Business Model

Voicing agreement with Lamberti is Hank Bergson, president, Henry Bergson Assocs., LLC, Katonah, New York. Bergson, former president and CEO of NEMRA, who conducted MANA’s seminar for manufacturers earlier this year, notes that “The greatest concern I’ve had with assisting foreign manufacturers in bringing their products into this market is to teach them to understand the business conventions followed here. Primary among the lessons they must learn is the sheer vastness of the market that they’re interested in. In order for any foreign company to achieve success and staying power in this market, they’ve got to learn in a hurry that you can’t make a couple of sales calls in Chicago in the morning and expect to make a few more after a drive to Atlanta that same afternoon. They just have no comprehension as to how large we are.”

He continues that the geographical expanse of the country isn’t all they’ve got to learn.

Consider the pressing need to deliver a product that the market wants and needs. As an example, Bergson cites the experience of one offshore manufacturer of LED lighting. “At the outset, this company thought they had the world by the tail with their innovative products. But the problem was they failed to consistently deliver a product that was marketable in this country. Compounding the problem was their expectation that customers would pre-order the product. When that didn’t happen, the end result of their approach was that their efforts ended in failure. Ultimately, they blame the rep for their failure.”

Then there’s trend of reps negotiating for a shared territory development fee for new business development. “Obviously, there’s a growing number of independent reps in this country that will hardly consider a foreign line unless the manufacturer shares in the development of the business. What that means is the rep often requests a retainer and many foreign manufacturers are unwilling to agree.”

When this type of stalemate occurs, Bergson, whose marketing and consulting company has a particular expertise in reaching the electrical marketplace through and with independent manufacturers’ representatives, says, “The manufacturer may have to rethink their business strategy. What it comes down to is they either pay the stipend or come up with some other enhancements or guarantees that will interest the rep.”

The Need for Creativity

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Lamberti concurs when he says that scenarios such as the above can represent a major challenge/opportunity for the rep. “The ‘Golden Goose’ here is that these new companies with new products haven’t yet ventured into our marketplace. This may be the ideal opportunity for the rep. At the same time, however, the rep has to be in a position to support the effort with time, activity and finances in order to make it work. When it comes to those requests for shared territorial development support, I generally try to come up with a creative program that both parties can live with.”

Bergson explains that part of the problem in understanding the U.S. rep model emanates from a feeling held by some foreign manufacturers that “They don’t want to be confused with the facts. They’ve had some success in one segment of the marketplace, but when they venture into another segment, it’s a whole different ballgame. They’ll fall back on a philosophy of ‘Look, I’ve already made up my mind, don’t confuse me with those facts. Besides, what you’re telling me can’t be true because that’s not the way we do it overseas.’”

To combat these and other challenges, both consultants emphasize how important it is for manufacturers and reps interested in transacting business internationally to conduct their due diligence prior to striking any business agreements with partners.

• “Get yourself educated, advises Bergson. “Consult with your rep association and work with a consultant if needed. But bottom line, do the necessary groundwork.”
• “Rep organizations, especially MANA, have plenty of resources that rep and manufacturer members need to avail themselves of,” says Lamberti. “This will go a long way toward eliminating potential problems.”
• Make use of international trade associations.
• If you’re working with foreign manufacturers, make sure they have a physical presence in the United States.
• Make sure a foreign marketing partner has the proper support for its reps — product samples, literature, website, etc.
• Physically visit foreign manufacturing facilities before partnering with a company.
• Consult with a rep-savvy attorney and work with a written contract.
• And, finally, after conducting your homework, don’t close your eyes to the opportunities presented by international trade — if it’s the right fit.