Be sure that your product will be strongly
represented among the agent's product mix.
Finding a partner / agent
you have products of promising sales potential in India, you can either
set up a base in India or appoint a distributor or an agent. Setting
up base is preferable because Indians like to see foreign companies
investing in their country rather than just selling. Whether you set
up a joint-venture or appoint distributor, you will need to select
your partner. What precautions should you take?
Foreign firms that are serious
about pursuing opportunities in the Indian market need to be alert
to the following considerations while choosing an agent or distributor
At first glance, many agents
appear to have excellent industry and customer contacts. They would
typically have developed and nurtured these contacts over time, and
their primary interest in a distributorship is to sell to these contacts.
These agents may have little motivation to develop new markets or
new customers. It is important to gauge your prospective agent's ability
and keenness to develop new networks and contacts.
Some potential agents will provide
impressive lists of foreign principals, covering dozens of products.
Check out if those lists are dated, and some of the relationships
exist. An agent with many principals and product mandates could find
it difficult to devote management and resources to every additional
relationship that he takes on. Do your follow-up homework to make
sure that what you are told you will get is what you get. Be sure
that your product will be strongly represented among the agent's product
Many agents will also play up
their widespread distribution network and country-wide presence. They
will project a professional image, backed by well-qualified staff.
Very often such agents will leave the distribution of a new product
or service to this network, without making any extra effort, because
this approach has worked in the past. Make sure your prospective distributor
is committed to actively promoting your product.
Foreign firms should avoid the
temptation to establish a relationship with an agent or distributor
merely because he is the most persistent or the keenest out of many.
These attributes will not necessarily make the best agent or distributor,
because the following additional factors need to be considered before
making a final choice of agent or distributor:
who the customers are and where in India these customers will
make their buying decisions. A potential distributor who handles
products similar or related to those of a hi-tech foreign firm,
need not necessarily be the best choice. This is because several
Indian firms have very effective distribution channels, and can
offer foreign principals more by way of marketing savvy than mere
product knowledge. Agents with fewer principals and smaller set-ups
can prove to be more adaptable and committed and those with a
large infrastructure and a bigger market reputation. A small agent
could be ideal where a flexible strategy is called for.
may be a conflict of interest where the potential agent handles similar
product lines, and many agents do. Foreign firms should decide up-front
whether or not this will be acceptable, to avoid complications later on.
By the same token, foreign companies should decide if they will need
more than one agent. It is not uncommon in India to appoint three to
four representatives for different products, locations and even markets.
firms should examine all distributor prospects, and thoroughly
research the more promising ones. Credit and reputation checks
are becoming easier, with a number of private organizations now
providing these services in India. Even established distributors
are known to have exaggerated their capabilities.
way of identifying suitable agents is to look for distributors of
related and even competing products. Foreign firms can screen a few
unsolicited applications, seek more information on specific areas, and
see who responds best to these.
gauge what an agent can do, you should evaluate him in the Indian
context. This means rather than focusing on the plushness of the agent's
office, look at his address, and references from lawyers and
accountants. For technical products, a visit to the agent is critical.
The agent's general facilities, staff and experience should be reviewed
at this time. It is vitally important that you check the potential
agent's reputation. This can be done by checking with local industry
sources and associations, potential clients, bankers, other foreign
companies and the agent's competitors. These steps will ensure that
selection of an agent or distributor is not left to chance alone.