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Marketing nutrition through your own local offices

So, you want to find out what are the cons and pros of having your own people working out of your own facilities (usually an office and a warehouse, if even that at the beginning). Here is a brief list coming out of my own experiences with similar exercises – not all of them successful, even remotely.

Johannesburg, South Africa – 1 February – 2017: Livestock Feeds
Johannesburg, South Africa – 1 February – 2017: Livestock feeds supplier. Warehouse full of animal feed bags

Say you are a major manufacturer of an additive or nutritional supplement in the U.S. and you want to expand your business in Belgium, for example. You consider whether to trust a local distributor or open your own subsidiary office there.

In the last issue, we examined the pros and cons of working with a distributor, and hopefully you have made up your mind whether or not to trust your life’s work to someone else. Now, let us run the same exercise for the proposition of investing in having your own office there, because if that does not work for you either, then perhaps you should stay at home – which is not a bad idea either, especially if you have yet to conquer your local market.

So, you want to find out what are the cons and pros of having your own people working out of your own facilities (usually an office and a warehouse, if even that at the beginning). Here is a brief list coming out of my own experiences with similar exercises – not all of them successful, even remotely.

Pros: Having your own office in a foreign market

Your people work only for you

If you recall from the previous issue, when working with a distributor, you run the risk of having to compete with myriad other products this distributor represents in the market. It does not have to be similar ones. It is just a matter of how many hours a day one works and how many times you can visit a customer. So, having your own people working only for you and your products is a boon that cannot be replaced. We assume these people are trained and motivated properly, but you already know how to do that, right?

You enjoy all possible margins

That does not mean you get to skin your customers, but rather that you do not have to pay your distributor for the privilege of using their services and network. Some of these savings will have to be spent for your own activities, so do not count on 100% of the distributor’s margins showing up in your profit line. There are expenses that you have to have if you operate your own office, not to mention the expenses associated with having to work in a usually unknown (and sometimes hostile) regulatory system.

You establish a direct relationship with the market

In my opinion, this is the best advantage. You get to know the market, react to it faster, and develop a kind of a relationship that would be otherwise impossible. That is, you are there for the long run because this is a long-term process. Markets are usually fixed through personal relationships, especially when it comes to added-value products, and changing suppliers requires time, patience and persistence. And, a bit of understanding of local culture.

Cons: Having your own office in a foreign market

You need to find the right people

Good luck with that, because everybody is looking for them. In fact, I have been actively involved in our industry for 20 years, and I believe this is the rarest and most valuable commodity. You can have a product without competition, but if your sales people just do not get it, you can have zero sales. And, it is not just salespeople; it is everyone, including the technical people who sometimes forget they work for a commercial entity and try to save the world. I will say it again, if only to emphasize how difficult it remains to find the right people: good luck with that.

You need to invest more capital up front

Let me put it plainly here: If you don’t have the money to invest in opening a new market, then don’t even consider it – not through your own office nor through a distributor. Both require capital (money, time, people, resources, energy, sedatives, etc.). If you do not have an excess of capital to lose, keep exploring your familiar hunting grounds. In my experience, biased and not, only 10% of such endeavors succeed. The other 90% make richer people like me who provide services. Do not be lured by the apparent success of a handful of companies that made it. Numerous others remain in the shadows not daring to expose their failures in fear of upsetting their established local markets.

You cannot easily pull the plug and go

With a distributor, and a clever agreement, you can pull the plug and go when sales drop to a level you consider unacceptable. It is not the same when you have to fire a host of employees and sell a bunch of buildings and equipment, not to mention the money you wasted on permissions and lots of red tape. So, it is better to start small, explore the market and then decide if this is a market you want to stay or not. I can only but recall Charles (one of the most clever business development managers I ever knew) who, having established a lucrative business in the U.S., pondered for two years whether to expand in Canada and how to do so. At the end, he decided not to – for reasons that will remain obscure – but not because he had any lack of people, connections or anything else. It was just not the right market in which to expand.

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