Monday, August 25, 2008


Any dealer can become an agent or distributor of a company with an undertaking with the company that the latter supplies the stocks solely to the former in a specific region or area. It has both merits and demerits as by taking as agency of any specific company the agent has the sole rights to distribute to the dealers regularly and timely. But he is not supposed to sell the stocks of the competitor of the products or services of that particular company. For this, the agent gets fixed margins because he has to solely concentrate on the distribution and marketing of the company’s stocks. His responsibility is also to strengthen the market for that particular products or services.

But the problem with the agency business is that the agents of other areas dump their stocks in this area by giving little discounts to the marketed prices which is popularly called as undercutting or underselling in the business parlance. Besides, the agent has to lift the specified stocks regularly and some times the agent may be compelled to buy more stocks during the schemes. All companies come out with schemes periodically so as to give more benefits to the agents. But unfortunately the agents do not digest the extra profits and on the other hand, they pass on the extra benefits as there is pressure to sell the stocks. Sometimes the agents of other areas may enter this area thereby offloading their stocks. In this process of underselling or undercutting ultimately the consumers get the stocks at lower prices because in every stage the benefits are passed on to the next stage because of competition.

Although the company clearly prescribes the specific margins for the agents to enjoy, the latter rarely enjoy the benefits of margins because of competition.


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