Internationalization for Beginners in a Challenging Year
What do Amazon, Apple, and Coca Cola have in common? In almost every country, people drink Coke, use Apple products, or have an Amazon account. The products and services of these three companies have thrived due to internationalization. Internationalization prioritizes creating goods and services for foreign use. Internationalization has received renewed attention in 2020. The havoc COVID-19 has wreaked on the world economy this year has taught businesses the necessity of diversifying (via internationalization) and the dangers of being overly reliant on any one Partner or national market. Many businesses in the United States likely reflected on this tough lesson over the Labor Day weekend, pondering how or if they’ll recover.
There are six types of Partners that any company or entrepreneur interested in entering a new market must consider: Manufacturers, Distributors, Wholesalers, Retailers, Vendors, and End Users.
Manufacturers create products from components or raw materials at factories on assembly lines. Once the items have been assembled, they can either be distributed for sale as is or sent to other manufacturers that will use them to create other products. In the latter situation, the items are referred to as intermediate goods, which are goods used to create other goods. Products such as salt and silk are examples of intermediate goods. Examples of manufacturers include the General Motors Corporation, Boeing, and Panasonic.
Distributors continuously buy goods from manufacturers to sell in large quantities to wholesalers, vendors, retailers, or industrial end users. Distributors are vital to manufacturers, and vice versa. Manufacturers profit from products sold to distributors, and distributors help manufacturers reach markets that they are unable to target on their own. Distributors usually have their own warehouses where they store inventory before it’s shipped off to buyers. Examples of distributors include the ABC Supply Company, Airgas, and WESCO Distribution.
Wholesalers buy goods in bulk from manufacturers, distributors, or vendors to sell in large quantities to retailers or industrial end users. These goods are stored in warehouses where they wait to be resold, typically for a lower price. Examples of wholesalers include Costco, AmerisourceBergen, and Alibaba.
People sometimes use the terms “distributor” and “wholesaler” interchangeably, or have trouble distinguishing the two. Although their functions are complementary, they are not entirely analogous. Not only do distributors typically serve a larger market than wholesalers, but also their relationships with the manufacturers that supply them fundamentally differ.
During the sales cycle, distributors vigorously market a manufacturer’s products. Distributors also proactively gather feedback from their various clients to convey to the manufacturer. Wholesalers don’t do this, since they are not bound by the types of exclusivity agreements that often exist between manufacturers and distributors. The sole mission of a wholesaler is to ensure that its retail clients have whatever they need in stock. If a given manufacturer doesn’t have the product that the wholesaler’s client is requesting, then that wholesaler is free to get it from any entity that does. In essence, distributors act as sales agents for specific manufacturers, while wholesalers act as buyers for retailers in general.
In recent years, online wholesalers have become involved in “dropshipping,” which is: when a customer orders a product from an online retailer, which transfers the order to a wholesaler (or factory), and, from there, the wholesaler (or factory) fulfills the order by shipping the product directly to the customer. This method has become controversial, because, although convenient for the retailer (since it doesn’t have to store or ship any inventory), margins tend to be low and quality often suffers. Moreover, dropshipping doesn’t allow for the retailer to buy in bulk. So, if the customers purchase items, the retailer has to pay for each item individually (along with additional shipping and handling fees), which cuts into profits. Quality control measures often fall by the wayside during dropshipping, as the retailer does not physically inspect the items that are being sent to its customers. Since the retailer never actually sees (in-person) the products that are sold on its site, it’s easy to set up dropshipping scams. In such instances, fraudsters create and promote fake sites that don’t actually have any products, simply pocketing money from unsuspecting retailers or customers, and disappearing.
Retailers sell finished products, such as clothing, directly to consumers through physical stores or online platforms. They buy their inventory from distributors, wholesalers, or vendors. Popular retailers include Walmart, Kroggers, and TJX Companies.
Vendors and retailers are very similar (synonymous even), because they both sell finished products directly to consumers. Akin to wholesalers however, vendors purchase products in large quantities from manufacturers or distributors in order to resell them at wholesale prices to retailers. Examples of vendors include Infor, Locus Robotics, and Blue Yonder.
End Users buy finished products for personal or business use. In other words, customers are normal end users. Meanwhile, industrial end users buy raw materials or intermediate goods on an industrial scale that they use to manufacture their products. End users and industrial end users can be seen as the final step in the supply chain, as they consume finished products.
Now that the basic definitions and main differences between manufacturers, distributors, wholesalers, retailers, vendors, and end users have been established, one question comes to mind: What is the Meridian 74 Group, and what can it do for my business? The Meridian 74 Group is an internationalization services startup based in New York City and Faro, Portugal that helps companies export, expand, manufacture, and outsource to the United States, India, Spain, Nigeria, Philippines, Portugal, and Guyana.
The M74 Group will be offering two Consulting packages: the Essential and the Premium. The Essential offers “seamless introductions to trusted potential Partners, plus full negotiation facilitation,” while the Premium offers all that plus “robust market entry guidance” via “risk assessments and competitor analysis.” The Group is also pioneering a Subscription service that will connect businesses like yours to its verified networks of Partners and Affiliates (primarily logistics companies) via two user-friendly databases. The objective of the Consulting and Subscription services is to save clients time, money, and effort throughout their market entry journey. Consulting and Subscriptions are just two of the Services that M74 intends to provide, in order to empower businesses of all sizes to adapt to and overcome the many challenges that this year has been throwing their way.
COVID-19 has further emphasized the importance of being able to react quickly to sudden challenges. For example, supply chains across the United States and the world have experienced major disruptions, as the pandemic has halted or delayed the manufacturing and movement of many finished goods. As a result, distributors and wholesalers have had difficulty acquiring new inventory, because certain products are barely being produced or transported right now. These supply chain issues—when compounded with the fact that people in many places are being forced to stay at home to avoid catching or spreading the virus—have compelled brick-and-mortar businesses (especially smaller and more local ones) to close. Meanwhile, many factories have opted to shut down, rather than risk their employees’ health or lose money. This has resulted in shortages of various products and the loss of innumerable jobs.
COVID-19 has also led to the enactment of protectionist trade policies worldwide. According to the World Trade Organization, “As of May 8, 27 countries implemented a total of 38 export controls on food since the outbreak of the pandemic.” For instance, in India, export contracts on rice have almost ceased to exist due to such controls. As a consequence, the price of Indian basmati rice is expected to drastically increase for its largest importers (Saudi Arabia and Iran). Due to these new trade barriers and the resulting increase in prices, food insecurity is expected to skyrocket in developing nations that rely heavily on food imports. War-torn places like Yemen and the Central African Republic, which were already grappling with extreme hunger prior to the pandemic, are faring even worse now.
Many countries have implemented restrictions on the export of other essential products besides food, such as medicines and medical devices. According to Global Trade Alert, as of March 21, “A total of 54 governments have implemented some type of export curb on medical supplies and medicines associated with the COVID-19 pandemic.” This raises both supply chain and public health concerns. If global medical suppliers are adversely affected by these new policies, people’s access to lifesaving medicines will be further curtailed, as will innovations in the healthcare field.
The M74 team aims to do much more than just guide you through the challenges discussed above. Their mission is to deliver all of the data and tools your business will need to not only survive, but thrive, in these unprecedented times.
Maryfaustina Ifezue is an intern at M74. She is a sophomore at Hofstra University in Long Island, New York, where she studies Supply Chain Management.
The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.