The advancing development of international cooperation and trade is making international business increasingly complex. Business transactions not only need to be seen from a commercial point of view; it is also necessary to take technical, legal, fiscal and human factors into consideration.

Interplay in Export

When exporting, the constant interplay of conditions in the country of origin, the exporting company and the target country need to be taken into account and reconciled. The provisions of the OECD Model Agreement (especially Section 5), for example, have made it quite difficult for a company to set up a sales organisation in a foreign country without at the same time establishing a place of business there.

Go Local

Since, however, the administrative requirements for setting up a place of business are more or less the same as for a foreign subsidiary, it makes sense in this case to opt for setting up a legally independent subsidiary from the outset.

Import and Distribution

Using an importer/distributor is often a popular option, especially in the early stages of developing a foreign market. However, what may at first glance appear to be a simple solution poses several major disadvantages. First, it is risky because everything depends on one person or organisation (the importer/distributor is your only customer in that market); if, for whatever reason, you break off business relations, you could lose your entire market share. Second, it is expensive because the importer/distributor needs margins, which increase the price of your product and reduce its competitiveness. Third, an importer/distributor usually handles a range of products, which results in your product(s) not receiving the exclusive and intensive attention (especially in marketing) which is required in order to optimally develop the market.

Driving your own Success

After considering the alternatives and weighing up all the arguments, there is really one option that stands out: developing a foreign market with your own local operation.

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