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their own network of distributive organisations to sell their goods at home and abroad. But this is beyond the means of smaller companies because it implies enormous capital outlay. That is why a great volume of business is handled through middlemen: agents and distributors.

Selling firms turn to commercial agents for their services mostly when they try to develop a new market for their goods in a foreign territory. Agents are instrumental in distributing the principal’s product as they know the commercial conditions and changes in the market of their country. They have their own storehouses, showrooms, repair workshops, or service stations for providing after-sales services.

However, sales through agents have certain disadvantages as sellers are not in a direct contact with the market. They also completely depend on agents’ diligence, efficiency and experience in handling business. Therefore, sellers always treat the matter of selecting an agent very seriously.

Any overseas agency agreement should include in detail all the duties and obligations to be undertaken by both parties. The main purpose of an agent is seeking out customers and contracting with them on the principal’s behalf for the sale of the principal’s products in their country. The main provisions included in an agency agreement should clearly define the territory in which the agent is entitled to act, time of the agreement validity, quantities an agent undertakes to sell annually and an agent’s remuneration.

A sales agent comes as an intermediary between the principal who sells and the customer who buys. The relations between commercial agents and their principals can be determined by agency agreements either on a commission or a consignment basis. Concluding an agency agreement on both a commission and a consignment basis means that the goods sent remain the absolute property of the principal until delivered to the buyers.

The commission agent buys and sells goods in the principal’s name and for the principal’s account and charges a commission for their work. The consignment agent also sells goods in the principal’s name and for the principal's account and operates like a commission agent but the consignment agent performs a wider range of functions. In many cases the consignment transactions are concluded on a sale or return basis in which case the agents are to dispose of the goods within an agreed and limited period of time. If the agents fail to sell the goods within the stipulated time, they are to return the unsold goods to the principals. The liability of either party for return of the goods should be stipulated in the agreement. In addition, the consignment agent pays duties and taxes and for obtaining the import license, if necessary, as well as often for advertising and for keeping the goods in a consignment warehouse and such an agent gets a higher commission accordingly. Also, a consignment agent may have to provide technical advice and after-sales service to customers. Under this type of an agency agreement, payment to the principals can be effected by agents by remittance either per each item or for the whole lot sold.

Agents may be granted the exclusive right to represent the principals within the contractual territory. Under the exclusive agency agreement, the principals will have the right to sell their goods only through these particular agents inside the territory agreed upon by the two parties. Agents are interested in obtaining the exclusive right as it is profitable for them to be the sole representatives of the principals and it enables them not to compete with other agents of the same principal.

Agents versus Distributors

It is necessary to distinguish clearly between the agent and the distributor. The essential difference is that whereas the commercial agent is engaged in the negotiation with customers about a contract for the sale of goods on behalf of the principal and for the principal’s account for which the agent gets an agreed commission, the distributor operates on their own account as an independent purchaser for sale of the supplier’s products, getting remuneration from whatever profit they may make out of these sales. In the former case the principal usually incurs the obligation to supply to and has the right to be paid directly by the customer; in the latter case it is the distributor who enjoys all rights and incurs all liabilities attached to contracts of supply.

The appointment of a sole and exclusive distributor in a foreign country can and usually does hold considerable advantages for the supplier. As the distributor is a specialist trader, their knowledge of local trading conditions and possession of a distributive network in a given territory will be of invaluable assistance to the supplier wishing to enter into or expand in that market. Besides, local legal and linguistic problems are overcome, sales are more easily promoted and marketing is made more intensively. Moreover, the continuity of supply and rationalisation of distribution are made

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2)An agent gets an agreed sum of money as payment for the intermediation service.

3)Distributors operate in their own name as independent buyers.

4)Agents get their remuneration from profits they make out of sales.

5)It is a distributorship agreement that determines the relations between the agent and the principal.

6)A distributorship contract provides the distributor with the sole and exclusive right to trade.

7)Both agency and distributorship agreements are signed for a similar time period.

11.Summarise what agency and distributorship agreements set forth.

LANGUAGE STUDY

1. Find the English equivalents for the following word combinations.

Старательность агента; от имени принципала и за его счёт; юридическое действие договора; отчуждать (продавать) товары; берёт на себя обязательство продать; в предусмотренный период времени; технические консультации; получение лицензии на импорт; вознаграждение агента; несёт обязанность; назначение единственного эксклюзивного дистрибьютора; непрерывность поставок; с намерением продлить действие договора; включить положение в агентское соглашение; прекращение действия.

2. Word building: complete the following table.

3. Match the words on the right with their definitions on the left.

4.Complete the following sentences with the correct forms of the words in 3.

1)The distributor usually … all rights coming out of the contract.

2)Large and light repair … are available on the premises of this plant.

3)An agent’s commission is also called … .

4)He was paid $1000 … for the loss of the job.

5)It is not an easy part to … with other countries in international trade.

6)The sellers are to remedy the defects … .

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residents. A venture can be for one specific project only, or a continuing business relationship. In terms of ownership, it may be a corporation, limited liability company, partnership or other legal structure, depending on a number of considerations.

R e m e m b e r !

A joint venture is a commercial undertaking entered into by two or more parties, often by setting up a separate joint-venture company in which all partners have shares, to enable resources and skills to be shared. In practice joint ventures encompass a broad range of operations, from merger-like operations to cooperation for particular functions, such as research and development, production, or distribution.

As far as specific goals of joint ventures are concerned, it is necessary to point out both competitive and strategic goals.

Competitive goals:

•influencing structural evolution of the industry;

•pre-empting competition;

•defensive response to blurring industry boundaries;

•creation of stronger competitive units; and

•improved agility.

Strategic goals:

•synergies;

•transfer of technology/skills; and

•diversification.

The point which makes joint ventures so effective is combining different resources of different countries. In such a way the country which has a better or cheaper resource provides it to float to a joint venture. This is the consequence of international labor division and specialisation. In Russia the residential party usually provides land or buildings. A counterparty provides equipment and usually finances all short-term assets. Joint ventures are fully independent. They should be self-supporting and self-financing, which means that

•the Russian government has no right to give them any state orders and joint ventures don't receive any obligatory planned assignments from the authorities;

•joint ventures determine their production programmes, i.e. the volume and assortment of their production themselves; and

•they are entitled to do business with foreign buyers directly, whereby the marketing of products to users is carried out at the agreed prices with account of world market prices.

The only thing they should do for the purpose of creation of joint ventures is to get the registration and an export licence. These enterprises also pay for the land and for the water consumed. Foreign partners gain a lot participating in joint ventures on the Russian territory.

•They gain a direct access to the Russian market. Joint ventures may be set up in any branch of the economy.

•They may gain cheaper labor and resources, which reduces production costs and makes the finished products more competitive, and, as a result, they gain profit. Foreign participants may repatriate their share of profit abroad.

•Joint ventures create additional production capacities, i.e. increase the volume of goods produced for their customers.

The Russian side is also interested in setting up joint ventures.

•The main interest of the Russian participant is to satisfy the requirements for the domestic market. Nowadays, spheres in which joint ventures emerge have broadened. They appear not only in the production field, but also in building and various services (financing, consulting and selling). They may be set up in any branch of the Russian economy: agriculture, industry, trade, construction, service sector, etc. They appear to produce certain goods intended not only for the internal market but for exporting, too.

•Foreign technology and progressive foreign management experience are attracted because foreign partners are interested in introducing advanced technologies. Thus, on the one hand, foreign partners

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5.What is the point making joint ventures effective?

6.Joint ventures should be self-supporting and self-financing. What is the main message behind this statement?

7.What do foreign countries gain participating in joint ventures and what are the main interests of the Russian side? Complete the table.

8.What documents are submitted by partners for registration? What are the foundation documents and the feasibility study?

9.Speak about management in joint ventures.

10.How are profits divided between the parties involved in JVs?

11.What might the reasons for liquidation of a joint venture be?

12.Match up the half-sentences below.

13. Summarise the advantages of joint ventures.

LANGUAGE STUDY

1. Match the words on the left with their definitions on the right.

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•предусматривают поставку заранее определенных видов продукции, ориентированной на специфические требования и запросы конкретного потребителя;

•носят целенаправленный характер, поскольку осуществляются на основе предварительно получаемых поставщиком заказов;

•характеризуются длительностью и устойчивостью.

При прямом методе торговли возникает определённая финансовая выгода, поскольку сокращаются издержки на сумму комиссионного вознаграждения посреднику, снижаются риск и зависимость результатов коммерческой деятельности от возможной недобросовестности или недостаточной компетенции посреднической организации.

Преимущества прямого метода — возможность установления более тесных контактов с иностранными потребителями, лучшее изучение условий рынка, более быстрое приспособление своих производственных программ к спросу. Этот метод также позволяет постоянно находиться на рынке, учитывать его изменения и своевременно на них реагировать.

В то же время использование прямого метода торговли подразумевает наличие коммерческой квалификации и торгового опыта. В противном случае финансовые издержки не только не сократятся, но могут значительно возрасти. Кроме того, международная торговля по сравнению с внутренней является более рискованной, что обусловлено экономическими, политическими, правовыми, и социальными условиями в разных странах, их традициями и обычаями, а также большими расстояниями между торговыми партнёрами. В результате часто бывает целесообразно, а иногда просто необходимо использовать посредников для проведения международных торговых операций.

3. Косвенный метод предполагает покупку и продажу товаров через торговопосредническое звено на основе заключения специального соглашения с торговым посредником, предусматривающего выполнение последним определенных обязательств в связи с реализацией товара продавца. Крупные промышленные компании к услугам торговых посредников прибегают при реализации продукции на отдаленных, труднодоступных и малоизученных рынках, рынках малой емкости, при продвижении новых товаров, при отсутствии в странах-импортерах. Более половины международного товарного обмена осуществляется при содействии торговых посредников, т.е. независимых от производителей и потребителей товаров торговых фирм, организаций.

4.Простые посредники (брокеры) подыскивают и сводят продавцов и покупателей, но сами не принимают непосредственного участия в сделках. Очень часто в международной торговле прибегают к услугам агентов, к которым обычно относят посредников, действующих на рынке в интересах и от имени экспортёров или импортёров, т.е. принципалов. В агентских соглашениях обычно оговариваются полномочия посредников по наиболее существенным условиям внешнеторговых сделок, а также дополнительные обязательства агентов, например, исследование рынков, реклама, предпродажная доработка товаров, техническое обслуживание и т.д. Чаще всего агентские соглашения регулируют общие условия сотрудничества агентов и принципалов, а поставки или закупки товаров осуществляются по отдельным контрактам, заключаемым в рамках таких соглашений.

5.Основной объём международной торговли опосредствуется независимыми торговыми фирмами, занимающимися перепродажей товаров (дистрибьюторы), которые отличаются от простых посредников и поверенных тем, что они от своего имени и за свой счёт заключают договоры куплипродажи, с одной стороны, с продавцами, а с другой – с покупателями. Существуют ещё три особых типа посредников, роль которых настолько значительна, что часто о них говорят как об особых способах торговли: биржи, торги, аукционы.

6.Международное производственное кооперирование (МПК) – процесс реализации производственных связей для совместной деятельности на основе международного разделения труда. Следствием этого процесса является создание совместных предприятий с капиталом партнеров разных стран. Таким образом, ресурс одного партнера становится фактором производства для другого, а следовательно, международное производственное кооперирование основано на использовании прямых иностранных инвестиций и является процессом взаимного инвестирования.

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