China - Using an Agent to Sell US Products and Services China-using-an-agent
China‘s fast-growing economy attracts international participation, including exports from U.S. small and medium-sized enterprises (SMEs). Unlike large international or multinational companies that establish operations for branding, marketing and various business activities in China, SMEs with limited budgets when expanding their businesses usually start with fostering a sales network through regional agents or distributors. Sales agents and distributors can assist in keeping track of policy and regulation updates, both locally and nationally, collect market data, and quickly respond to changes. In addition, U.S. SMEs can take advantage of existing networks enjoyed by their agents and distributors and expand their businesses through such contacts. However, there are some drawbacks to this approach. Employing a third party results in an additional cost to your products and you may also lose some control and visibility over sales/marketing. It also has implications for intellectual property rights protection, increasing the risk of your product being copied or counterfeited.
Given the above considerations, companies need to select agents and distributors carefully. Companies should conduct due diligence, verify any information that’s provided, and act on red flags. There is no specific standard for international due diligence; however, some of the frequently asked questions in the following checklist may be useful in a company’s investigation of a potential business partner:
- Do they represent any competing companies/products?
- Can you communicate effectively with your counterpart?
- Are they legitimately registered?
- Who are the shareholders?
- Are they financially sound?
- Is it possible to arrange a site visit to their office/facility?