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Is it always right to close exclusive agencies in a give market? What are the risks?
The one of the important risk that market coverage will be limited and it will be costly. Also most of the executive agencies offer post payments which are risky for the business and some time, if they are not able to sell the product, the payments will be late making the capital short for the organization.
The Risk or you may short coming that you may face in having a sole agent or distributord are
1.You may not know what is the true market situation whether it is good or bad
2.You may have the risk of putting all the eggs in one basket and be dependent on one party for any good or bad situation.You would be only limited to know the market situation through the lens of your exclusive agent.
3.In case of tenders in the area, there could be situation where the tender is to be distirbuted to different parties , then you may get only a portion of the tender if you have one agent.
4.You may be bullied by your sole agent into giving more discounts on products as there is no competitor for him for your products in the market
5.The sole agent may take your businsess for granted if he does not have a competitor for your product in the market.
6.While your distributor may only work for profits with less volume and you as manufacturer may work for volumes and market share.If there is no compeition , you may not be able to get the desired results from you agent/distributor.There could be clash of end results
7.Later on if you need to correct the sitauation and change the distirbutor , you may find it difficult to go in the market and get an non-exclusive agent as you have a past record of giving exclusivity
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