Foreign Distributors Research Articles

The Russian Permanent Establishment: A Trap for Foreign Distributors?

The author discusses the Oriflame decision, which held that both a tax deduction for licence fees and input VAT should be denied, as Oriflame OOO was the PE of its Luxembourg grandparent company. The case is discussed from an international perspective considering, inter alia, OECD Action Point 7 on preventing the artificial avoidance of PE status.

Effect of exporter’s incentives on foreign distributor’s role performance

A foreign distributor’s motivation to perform local marketing tasks for an exporter is often poor due to agency conflicts and transaction cost constraints characterizing the export channel. While exporters may engage in actions such as offering incentives and overseeing partner activities to improve foreign marketing, such intrusions into partner operations often fail to enhance the distributor’s role performance. Drawing on motivation theory, the authors develop a model explaining the efficiency of different incentive types in enhancing the distributor’s motivational context to act on behalf of the exporter, thereby improving relationship quality, distributor relationship-specific investments, and, consequently, distributor role performance. The authors use a sample of 278 European exporters to test hypotheses regarding relationship factors that mediate and moderate the incentive–role performance relationship. The results indicate that the impact of low-powered incentives (LPIs) substitutes for the effect of high-powered incentives on relationship quality and specific investments, the key mediators driving distributor role performance. In addition, exporter oversight of distributor activities weakens the effectiveness of LPIs to increase distributor-specific investment. The authors derive implications for designing portfolios of incentives, with inferences based on efficiently matching incentive-induced motivational context with foreign distributor’s actions required to accomplish exporter goals.

Beyond the boundary between China and the West: changing identities of foreign-registered film theatre companies in Republican Shanghai

This article re-examines the film theatre companies managed by Chinese individuals but registered under foreign laws, focusing on the representative film theatre owner. He Tingran and his companies. The article elucidates three roles of the foreign-registered film theatre companies: the capitalist, nationalist and social reformer. The owners of these companies occasionally switched between their Chinese and foreign identities to obtain various benefits, enjoying the various privileges of extraterritoriality, as well as maintaining control over the unconditional oligopoly of foreign distributors. This tactic included proclaiming the interests of the entire Chinese film industry within the foreign companies' association, on which they exerted a strong influence. The identity of being a foreign-registered film theatre company became crucial for resisting foreign pressures and protecting the domestic film market and film theatre culture post 1930s. However, these practices by the foreign-registered film theatre companies were not concluded either in terms of simple capitalist activities or blind nationalism; the many owners of those companies aimed to reform society through establishing a universal cinema culture.

Parallel imports, product innovation and market structures

This paper sets up a two-country model in which there is one domestic manufacturer authorizing its product to a distributor in a foreign country to investigate the effect of parallel imports (PI) on product innovation of the former. The distributor can sell the product not only to its own market (i.e., the foreign market) but also back to the domestic market if parallel imports are allowed by the domestic government. We find that if the manufacturer adopts a two-part tariff pricing scheme when selling its output to the foreign distributor, permitting PI necessarily decreases the manufacturer's product innovation. This result however is very sensitive to market structures. If the domestic market becomes duopolistic or oligopolistic, the above result is definitely reversed—PI has a positive effect on the manufacturer's product innovation. Finally, if there are more than one distributor in the foreign market, parallel imports may increase or decrease product innovation depending on the consumers' quality valuations in the two countries.

Some Unintended Consequences of Parallel Trade in Pharmaceuticals

It is widely argued that international arbitrage, or parallel trade (PT), in patented drugs may increase consumer surplus in the relevant countries but at the expense of R&D investment. We show how the effects of PT depend on the vertical contract (linear pricing or dual pricing) between the manufacturer and the foreign licensee or distributor and on whether and how drug prices are regulated and reimbursed. We find that, contrary to what policy makers generally predict, we should be more concerned with the impact of PT on aggregate consumer surplus than on R&D investment. Copyright © 2014 John Wiley & Sons, Ltd.

A CAPACITATED REPLENISHMENT-LIQUIDATION MODEL UNDER CONTRACTUAL AND SPOT MARKETS WITH STOCHASTIC DEMAND

Various large-scale suppliers frequently use web-based spot markets, along with discount stores and foreign distributors, for inventory liquidation. Recognizing the potential benefits of such practices, we consider a multi-period, integrated replenishment, and liquidation problem for a capacitated supplier facing stochastic demand from a spot market along with its primary market (with higher priority contractual customers). In each period, the supplier must decide: (i) how much to produce, and (ii) if there are excess units left after sales to the primary market, how many of these to liquidate. We show that the optimal policy is characterized by two quantities: the critical produce-up-to level and the critical retain-up-to level. We establish bounds for these two quantities. We identify two practical benchmark policies and establish thresholds on the unit revenue earned from the spot market such that one of the two benchmark policies is optimal. We provide closed form expressions to determine these thresholds for the infinite horizon problem under specific conditions on the available production capacity. In general, it is difficult, if not impossible, to theoretically determine these thresholds in closed form for the finite horizon problem. Hence, we report results of a computational study to gain insights regarding the behavior of the optimal policy with respect to the spot market revenue. Our computational results also quantify the benefits of the optimal policy relative to the benchmark policies and examine the effects of demand correlation.

Audience Heterogeneity and the Effectiveness of Market Signals: How to Overcome Liabilities of Foreignness in Film Exports?

This study extends research on the importance of market signals in international markets for cultural products by examining not only when market signals are important but also what types of market signals are most important to which audiences. Specifically, we argue that audience heterogeneity influences the effectiveness of commercial performance and artistic acclaim as market signals in international film markets. Audience heterogeneity refers to the differences in the cultural knowledge and preferences of domestic and foreign consumers (end audiences) and product specialization of domestic and foreign distributors (intermediary audiences). Our empirical setting is the European film industry. We use a large sample of films produced and distributed domestically and internationally in Europe between 2004 and 2009. We find that domestic commercial performance and film festival participation increase international film success, but also that their effects depend on the cultural distance between countries and the use of major or independent distribution in the domestic and foreign markets.

Marketing Channels in Foreign Markets: Control Mechanisms and the Moderating Role of Multinational Corporation Headquarters–Subsidiary Relationship

To manage marketing channels, subsidiaries of multinational corporations (MNCs) must balance mandates from headquarters (HQ) with the local realities of the foreign markets. The performance implications of subsidiary–distributor relationship efforts thus are contingent on the HQ–subsidiary relationship. Drawing on marketing channels, economics, and organization theory literature streams, the authors (1) describe the complex performance properties of output and process control mechanisms that MNC subsidiaries deploy to manage foreign distributors and (2) conceptualize the HQ–subsidiary nexus along three attributes that should moderate the performance effects of control mechanisms: task coordination, or HQ's central coordination of processes across subsidiaries; subsidiary decision involvement, or two-way communications and consensual decision making between HQ and the subsidiary; and relational disharmony, or the extent of the HQ–subsidiary conflict. The authors test the hypotheses using field data from German and Japanese MNCs in the United States and Bayesian models that account for measurement error, endogeneity in the control mechanisms, heterogeneity in country of origin, and nonlinear and interactive terms for the latent constructs. The results demonstrate the importance of the HQ–subsidiary relationship for managing the subsidiary–distributor relationship.

Cultivating learning and fostering flexibility in international distribution

Research examining the relationship among learning orientation, strategic flexibility, and performance is assessed in an international setting focused on exporting manufacturers involved in contractual relationships with foreign distributors. Adopting a learning orientation—developing skills in creating, acquiring, and transferring knowledge—has generally been believed to significantly impact performance. In the current research, however, the relationship between learning orientation and performance was not direct, but found to flow indirectly through strategic flexibility. The results suggest that learning orientation develops a set of firm capabilities, such as flexibility, that eventually lead to enhanced performance.

ABIL's dilemma: to brand or not to brand in India

Subject area Marketing strategy, product positioning, brand building, and economies of scope. Study level/applicability MBA groups, marketing consultants and business management students of undergraduate and postgraduate level. Case overview Abhishek Industries Limited (ABIL) is an entrepreneurial venture of Mr Abhishek Batra that came into being in 1993. ABIL is the leading supplier of Terry Towels to some of world's leading retailers including Wal-Mart, JC Penney and Sears. In spite of some business fluctuations, ABIL has an impressive performance record that is reflected in its financial data. The concern, however, is that of product commoditisation, since established foreign importers and distributors prefer to sell the products under their own brand name. Consequently, even though the export margins may be lucrative; the lack of a brand presence is what bothers the senior management of the company. Given an optimistic domestic business scenario, the senior management is once again evaluating the odds to enter the domestic market using its own brand name. While some of the younger managers are optimistic and want ABIL to emerge as a brand, some senior colleagues are unsure. Expected learning outcomes The student's skills will be sharpened in working through a problem; it will help the students take an active role of a thinker, analyser, evaluator, decider and implementer; it will assist the students in learning to reason with the given quantitative as well as qualitative data; it will help the students think critically and reason effectively; it will make the students realize that the emphasis is not on solution. Rather, the process of arriving at a solution is more important. Supplementary materials Teaching note.

Benefits‐based drivers of exporters' attitudinal commitment toward their foreign distributors

PurposeThis study seeks to investigate the benefits that trigger exporters' attitudinal commitment and examines their effects by taking into account the temporal dynamics of cross‐border interfirm relationships.Design/methodology/approachA qualitative field study led to the generation of hypotheses that were subsequently tested with structural equations modeling using data collected during two consecutive surveys of exporters.FindingsThe economic benefits that foster exporter's commitment include importer's specific investments, importer role performance, and exporter economic performance.Practical implicationsImporters can secure their foreign suppliers' commitment by investing in their business relationships and improving their distributive performance. They also need to monitor exporters' economic performance. The study highlights the importance of exporters' perceptions in building their commitment. Thus, importers need to communicate intensively about their actions to promote exporters' brands.Originality/valueUnlike previous research, which has focused mostly on behavioral antecedents of commitment, this study depicts the exporting context using the exporter perspective and highlights the importance of economic benefits in shaping their attitudes. A mixed design involving both qualitative and quantitative methodologies facilitates this approach. Relational exchange theory's temporal assumptions about business relationships are reflected by the use of longitudinal data.

Trust, Institutions and the Choice between Outsourcing and FDI

I model how the interplay among institutional quality, trust and contract incompleteness aects rms’ decisions about their international mode of organization. A producer wants to form a partnership with a foreign distributor, through either Outsourcing (O) or Foreign Direct Investment (FDI), but is uncertain over his commitment. A non-committed partner will try to engage in illicit activities: for FDI, he can steal business plans, blueprints, etc; for Outsourcing, the distributor collects the revenue and may default on his payments. In a dynamic model with Bayesian learning, one-sided incomplete information and non-observable investments, I show that reputation-building may induce a change in the long run from FDI to Outsourcing. In accordance with the empirical literature, I show that for weak institutions, entry happens via FDI when uncertainty over the commitment is high and via Outsourcing when it is low. Conversely, with sound institutions entry is always via Outsourcing. If entry took place via FDI, I show that after some time Outsourcing may become preferable to FDI. The level of trust at which this change happens is decreasing in the institutional quality. Finally, I study how institutional reforms aect producers’ expectations about doing business in the foreign country via FDI, taking into account several new empirical results about the behavior of outside investors in a foreign country. Considering foreign producers’ myopia, I nd that the impact of reforms over expectations is usually positive. However, if institutional quality is high, reforms aect the expectations of current domestic producers via prots, while the eect over a current myopic foreign producer is via diminished environmental uncertainty, the opposite happening if institutional quality is low. Moreover, if the myopia starts at the end of the period of ownership control over the partnership (FDI), when institutions are weak the foreign producer will not expect much from the reforms, whereas current domestic producers will be optimistic.

Intra- and Interfirm Coordination of Export Manufacturers: A Cluster Analysis of Indigenous Chinese Exporters

Export manufacturers face challenges associated with intrafirm coordination among functional units and interfirm coordination with foreign distributors. The majority of research on export coordination examines intra- and interfirm coordination strategies separately. Consequently, limited insights have been gained into how export manufacturers combine the various intra- and interfirm coordination strategies to achieve export success. Using a cluster analysis, the authors incorporate both intra- and interfirm coordination strategies as inputs to identify profiles of export manufacturers. They identify four distinct profiles: balanced coordinators, interactive coordinators, flexibility-only coordinators, and unfocused coordinators. The authors find that the best performers are balanced coordinators, or the export manufacturers that concurrently deploy multiple intra- and interfirm coordination strategies.

Sino-US intellectual property dispute: a new chapter in WTO history

On 10 April 2007, the USA initiated two disputes against the People’s Republic of China (PRC) in the World Trade Organization. In one dispute (the ‘IPR Dispute’), the USA requested consultations with China concerning the protection and enforcement of IP rights in China. In another dispute (the ‘Market Access Dispute’), the USA requested consultations with China concerning certain restrictions on distribution of imported copyright works and certain restrictions on market access for foreign distributors of copyright works. The focus of this article is the IPR Dispute. In this dispute, the USA requests consultation on four issues: 1. the thresholds that must be met in order for certain acts of trade mark counterfeiting and copyright piracy to be subject to criminal procedures and penalties under PRC law; 2. the confiscation of infringing goods by Chinese customs authorities, and the disposal of such goods following removal of their infringing features; 3. the scope of coverage of criminal procedures and penalties for unauthorized reproduction or unauthorized distribution of copyright works; 4. the denial of copyright and related rights protection and enforcement to creative works of authorship, sound recordings, and performances that have not been authorized for publication or distribution within China. In this article, each IP-related complaint levelled by the USA is held up to scrutiny, examining it within the context of Chinese law and interpretational guidance. The authors then predict possible grounds upon which future complaints may be lodged.

The impact of national culture and communication on exporter–distributor relations and on export performance

Interorganizational relations have been a major focus of marketing scholars in the past 2–3 decades. In this study, we explore the impact of national cultural differences, a factor that is unique to international relations, on behavior variables in exporter–foreign middleman relations. Furthermore, we argue that communication has an extended role in international channel relationships, and that it influences relationship variables in a different manner than in domestic relationships. The study supports that national cultural distance and communication have significant impact on trust and commitment, that communication may influence variables differently than in domestic relations, and that the degree of commitment toward the foreign distributor or agent is directly related to the financial performance in that market.

Overcoming export manufacturers’ dilemma in international expansion

Learning and acquiring local market knowledge from foreign distributors are central to manufacturers’ export market performance. Drawing from the resource-based view, we propose that manufacturers need to develop stronger local market competence while simultaneously minimizing the costs of distributor opportunism in order to compete successfully in the export market. Cultural distance and other barriers, however, may hinder the development of local market competence for the manufacturer while contributing to the occurrence of distributor opportunism. In order to overcome these barriers, we examine the impact of three alternative forms of manufacturer governance – trust, knowledge sharing, and contract-based relationship – in export channels. Findings suggest that all three governance mechanisms contribute to enhancing the manufacturer's competence to exploit local market opportunity. However, of the three, trust seems to be the only effective way to curtail distributor opportunism.

The Main Strategic Directions in Improving of Export Development in Lithuania

The article deals with the main problems of strate-gic directions of export selling and promotion. The ex-port development factors and their economic impact as well as efficiency of export enhancement and promotion tools up to now have not been examined enough from the viewpoint of strategy, though the special investiga-tion of the effectiveness of segregated export promotion tools are badly needed. Thus the different concepts on strategies, competitive advantages, marketing and in-ternational marketing are analyzed. The best practice on export enhancement and promotion used in different countries and published in scientific articles and books are overviewed. The analysis of the main statistical data on Lithuanian export has been provided in the form of figures and diagrams. The analysis led to the conclusion that Lithuanian exports after Lithuania’s entering EU were growing up and structure has been changed from export to Eastern markets to Western ones faster. The problems discovered are the structure of goods ex-ported: 25 percent of export remains on export of oil refining products, which heavily depends on Russian oil supply, composition of Lithuanian exports by technology level: high technology goods amount less than 10 per-cent and just about 20 percent of it is attributed to the high and medium quality products. The causes of such situation were weakness of Lithuanian Economic Devel-opment Agency (LEPA), not enough information on for-eign markets, low value added of exported goods, un-willingness of managers to take risk, lack of funds, very few logistic centers abroad, dependence on foreign dis-tributors, intentional delays and underdevelopment of export insurance and export enhancement and promo-tion framework. Lithuania’s membership in EU crashed barriers for Lithuanian goods composed by Russia. The export of goods and services from Lithuania to Russia has been growing successfully from 2005. The most in-teresting and new export promotion tools used in Ger-many, Austria, Pakistan, India Sweden and other devel-oped countries has been analyzed as to compare with measures and weaknesses of tools used in Lithuania. The gap between developed and developing countries like Lithuania remains significant in the development of new products, quality, structure of goods exported, per-formance of environmental and safety requirements. As the result of the research the main strategic directions for export development and promotion for Lithuania are suggested.

The Achilles' heel of an enduring relationship: Appropriation of rents between a manufacturer and its foreign distributor

A blind spot in the resource based view (RBV) of the firm is the rent appropriation process. The RBV argues that rents accrue directly to holders of competitive resources. In reality, the potential rents in an international partnership are up for grabs as they arise on both sides of the border. Dysfunctional acts may strain even the longest and most successful relationships. With this predisposition the literature focuses on opportunistic behavior in partner switching. Our study considers a more complex mechanism where satisfaction in expropriating rent drives partner switching likelihood. The notion of a time-tested stable relationship is a misnomer; vulnerability grows over time, as one or both partners gain bargaining power in an enduring relationship. Establishing significant credible commitment, not the eradication of opportunism, builds satisfactory cross-border relationships. The higher the stakes and the longer the relationship, the stronger is the satisfaction between the committed partners.

Distributors' Business Characteristics, Buyer/Seller Relationship and Market Orientation

The high level of customer concentration that suppliers normally face in competitive domestic and international business markets makes selecting customers a critical issue. This study empirically examines the relationship between the supplier's market orientation, the buyer-seller relationship and requirements for foreign distributor characteristics. Based on an exploratory study of more than 80 Australian wine export oriented firms, it appears that firms presenting the strongest market orientation and a longer term buyer-seller relationship perspective select their overseas distributors differently than those firms with a weak market orientation and a shorter-term perspective in their business relationships. The difference between the groups lies in the role that different distributors' business characteristics play in the selection of overseas business partners. Our results suggest that firms, which are both strongly market oriented and long-term oriented are more likely to select overseas distributors who (1) have an important sales force, (2) have good knowledge about the Australian wine industry, and (3) have a management culture and capabilities similar to the producer firm. We also demonstrate that the former group achieved better business performance, in accordance with the literature on market orientation and buyer-seller relationship.

The Effectiveness of Upstream Influence Attempts in High and Low Context Export Marketing Channels

International strategic alliances in marketing channels have become increasingly common in recent years. The parties to the alliance often involve exporters and foreign distributors. In the context of this type of alliance, the channel partners view themselves as equals or colleagues rather than channel captain and follower. Therefore, influence rather than power becomes the relevant construct, especially when communication flows upstream rather than downstream. In this study, we examine such influence attempts as they occur across different cultural contexts to determine whether cultural differences are related to such upstream influence attempts.