Know-How Exchange : Other

Adding a distributor in Poland with exclusive to Poland is your right, and will not be liked by your German distributor. But the German distributor will have to understand that unless they are able to fully meet the needs for your products in Poland (which I suspect they can't), your company needs to go after the full amount of sales possible in Poland. They will complain, but so long as you are fair and it is obvious they aren't getting near the full amount of sales possible in Poland, it will work out.

That said - what percentage of total sales in Poland do you think they are currently getting? If you think you could get 100k euro and they are selling 20k, then definitely you need a distributor. If you think they are getting 80% of the total, then maybe you should make it official that they are the distributor (and see if you can talk them into opening a Polish office or other method to get that last bit of lost sales).

A bigger concern to me is the differential pricing. The issue this is going to bring up is the Polish distributor selling back into Germany, undercutting the German distributor. You can put all the rules you want in to tell the distributor not to do this, but it is going to happen. And the German distributor will have a real complaint when it does. You might get away with it some while Poland is not in the Euro, but it will become blatantly obvious about the price differential once Poland is on the Euro. I would think long and hard before doing this. You may get some additional sales in Poland, but lose sales (or a distributor) in Germany. Not knowing your market or pricing or anything, I suspect the German market is worth more, and if so, I would price it in Poland at the same price as Germany - yes you will lose sales that you may have gained a a lower price in Poland, but will protect the German sales.

First, you've got stones to ask Randall if he's read your question.

Second, never, EVER sign any kind of exclusive deal with ANYONE.

Third, if your deal with your German agent is country specific, you have some scope of expansion elsewhere in Europe.

As you've said, Poland is not Germany. Even now, the Poles have little love for the Germans ... and vice versa.

Given the exchange rates and the horrors of currency exchange between the Zloty and the Euro (at least until 2015 when Poland is obliged to switch to the Euro), I would think the Poles would hate dealing with the Germans and vice versa (there being roughly 4 Euros
to the Zloty).

Where Polish buyers source their materials or products from is really none of your German dealer's business. If he or she loses market share in Poland then they'll make it up in Germany. They will do this because, and if you value the longer term profitability of the relationship, you will be helping them do it.

As for the first and second parts of your question (1, and 2.) consider working WITH your German agent to source new GERMAN customers to make up for his or her potentially lost sales in Poland.

You take the hit for this, you grease the skids, and you make it worth the German dealer's while to hang in there with you, rather than taking you to court—which may be their right.

You do this for the longer term health and well being of your company and your relationship with the German agent. What's worth more to you? The relationship? Or the possibility of going to court (in Europe) and possibly losing?

It will cost you up front but if the Germans play ball, you win on the long tail. It costs your German dealer less up front, but they then stick with you as the supplier and are thus, locked in ... so to speak.

You then set up whatever deal you'll set up with your Polish agent but you will cover your ass through STRINGENT clauses to cover the Zloty/Euro switch and the Polish agent's "right" when Poland joins the main EU, to spread out into other regions, which may include Germany, where they might then directly compete with your current German agent on their turf.

The German agent will not like this and to stop this happening you must put all this in action NOW. You must look out, toward the marketing climate of 2022, not simply look down at your contract-tied shoes as they are laced here and now in 2012.

You look into the future and you plot all of this out on time and geographic specific terms to protect your German agent, and to direct the short term sales growth of your Polish agent. Remember, if they are to remain in the EU, in 2015, the Poles lose the Zloty, and God alone knows what kind of firestorm that could unleash.

Into these contracts you instill time or term limits, at the time that such documents and contracts expire, you then write in the rights to renew AND you ought to assert your rights to pursue NEW markets elsewhere in Europe, but that do not, at that time, conflict with the shorter term vision of your current Polish and German concerns.

They will be looking at 2 to 3 year growth. You, having the farther vision, you must be looking toward 7 to 10 year growth ... and possibly beyond.

When you are driving on ice and your car begins to skid you do not put on the brakes, you steer your car in the direction you want it to go in and you gently put your boot down.

NOTE: I am not a contract or logistics lawyer and the aforementioned opinion is just that: OPINION. It is NOT legal or logistic advice, nor should it be deemed as such.

Good luck to you.