International Trade/Offshore Manufacturing/Sourcing/Export/Import/Consulting Role of EMCs Has Changed By Jeffrey Graham Whether one uses the term exporter, importer, trader, export management firm or global trading company, the function is basically the same. All of these companies function as a trade intermediary in the international sales/distribution channel. The role of the trade intermediary is to expand the sales of the manufacturer or service provider in global markets, primarily by setting up networks of foreign distributors. Most trade intermediaries are not capable of covering an entire region, such as all of South America. Being able to cover an entire region like Latin America, for example, requires a large and well-qualified staff. Most small global trading companies can not afford the specialized personnel it requires. For the most part, global trading companies used to "take title" to the goods they sold. That is, the manufacturer would fill an overseas order, and the global trading company would then pay the manufacturer directly for the goods and then sell them to the foreign distributor. Two occurences changed the whole nature of global trading before the Internet came into prominence in the early 1990s: the arrival of the fax machine and the rise of the international trade specialist as an occupation. The fax machine eliminated the telex operator and saved considerable time for employees. The rise of the international trade specialist has had an enormous impact on the way global trading companies operated. First of all, it meant that one trained specialist could do the work of three employees. It also meant that schools and universities began producing graduates who were skilled in international business practices. Manufacturers, who had been long dominated, often unwillingly, by global trading companies, could now set up their own international department and had a larger pool of qualified job candidates from which to choose. In the U.S., this effectively killed the large global trading company. Today, all you need is access to the Internet and a home office and you're accepted as a global trading company. Twenty years ago, if you did not have the proper banking and trade references, you had no credibility and were unable to do business. Foreign freight forwarders will continue to play a large role in moving goods from one place to another. It is important to make a clear distinction between a foreign freight forwarder and a trade intermediary. There are some trade firms that claim to offer both services, but this is unusual. You can, in some cases, eliminate a foreign freight forwarder and save some money. But what happens if you make a tiny mistake in your paperwork? About 37% of the paperwork for international business is improperly completed, resulting in losses in the hundreds of millions of dollars. The real figure may be much higher. Most trade intermediaries are incapable of covering an entire region well because they do not have access to the resources to do so. Maintaining a distributor network, as was done by the old-style trading companies, required expenditures for "distributor support" and regular trips to visit foreign distributors, in which lavish amounts were spent on entertainment and gifts. Most manufacturers today are unwilling to pay for these costs, given that their margins are squeezed by competition. Another factor is that many of today's most profitable products for export involve advanced technology. These high tech products require that a trade intermediary must really know the foreign markets quite well. Smaller intermediaries means that this is difficult because it requires a large staff to accomplish. It is a choice that has been dictated by the changes in the global marketplace. Jeffrey Graham is president of JPG Consulting, a Philadelphia, Pa.-based international business consulting company founded in 1995, that sponsors the Going Global Advertise on this site Put your company on this site!