An exporter attempting to control the tendency
of a channel intermediary (agent or distributor) faces impediments resulting
from the geo-political separation of the two entities. The exporter relies
on the intemediary for its local knowledge and access to local customers.
The intermediary has the potential to facilitate the exporter’s market
entry and follow-up market development activities. The exporter, therefore,
faces two sets of decisions: how to select the best FCI for their requirements
and, once the contract is signed, how best to manage the relationship so
that the exporter’s needs are met.
Agency theory (Bergen, Dutta, and Walker Jr,
1992) provides a framework which suggests that intermediaries have a natural
tendency to act opporturnistically in the absence of appropriate controls,
and local laws often prevent exporters from effective implementation of
governance mechanism contained in the contracts designed to prevent such
actions (Giberga, 1981). This presents the exporter with moral hazard and
adverse selection problems (Jensen and Meckling, 1976). The FCI can withhold
information that is useful for the exporter’s selection of the intermediary,
but once the contract is signed, local conditions and on-going transaction
costs create buffers and raise exit barriers making governance measures
ineffective. In addition, cultural sensitivities between the parties at
the interface create further challenges to decision makers at the channel
interface. So how can an exporter bring about an optimal solution to this
problem? Recent channels literature has shown (Bello and Gilliland, 1997;
de Mortanges and Vossen, 1999; Heide, 1994; Karunaratna and Johnson, 1997)
that a carrot and stick approach such as a relational approach combined
with moderate control measures are likely to be effective in achieving
a relationship that is less likely to violate the personal sensitivities
of the entities at the exporter channel interface. A management system
that commits appropriate resources in the form of materials, knowledge
and a flow of information that enables the parties to adjust their
expectations and behaviour has the potential to bring about a long lasting
exporter-intermediary relationship.
With the availability of information technology,
information flow appears to be an interesting topic of further investigation.
It is likely, for instance, that information systems that enable the exporter
to monitor the intermediary’s sales efforts and the intermediary to access
the exporter’s inventory and product experts, for instance, may result
in a better performance outcome and has the potential to create a micro-effect
that may bring the parties closer together and create greater relational
effects. Further influences and interactions are possible.
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Amal
Karunaratna, The University of Adelaide, Australia
References
Bello, Daniel
C. and David I. Gilliland (1997), "The Effect of Output Controls, Process
Controls, and Flexibility on Export Chennel Performance," Journal of Marketing,
61 (January), 22-38.
Bergen,
Mark S., Shantanu Dutta, and Orville C. Walker Jr (1992), "Agency Relationships
in Marketing: A Review of the Implications and Applications of Agency
and Related Theories," Journal of Marketing, 56 (3 July), 1-24.
de Mortanges,
Charles Pahud and Joost Vossen (1999), "Mechanisms to Control the Marketing
Activities of Foreign Distributors," International Business Review, 8 (1),
75-98.
Giberga,
Ovidio M. (1981), "Laws Restrain Agency Agreement Termination," in Foreign
Business Practices. Washington D.C.: Department of Commerce.
Heide, Jan
B. (1994), "Interorganizational Governance in Marketing Channels," Journal
of Marketing, 58 (1), 71-85.
Jensen,
Micheal C. and William H. Meckling (1976), "Theory of the Firm: Managerial
Behavior, Agency Costs and Ownership Structure," Journal of Financial Economics,
3, 305-60.
Karunaratna,
Amal R. and Lester W. Johnson (1997), "Initiating and Maintaining Export
Channel Intermediary Relationships," Journal of International Marketing,
5 (2), 11 - 32. |
