The process of breaking any agreement or a long term contract by any party involved in the foresaid transaction or business, maybe defined as the termination of contract. And, the fees which needs to be paid in levy of this is called, termination penalty.
The termination penalties and the provisions restricting the termination of middleman can adversely affect a market structure, like follows:
1. Most of the times, due to the emergence of any termination penalty, the freedom of a marketer is restricted as it prevents them to make required adjustments in their strategies as per the changing needs of target market.
2. By restricting the termination of a middleman, a country also curbs the flexibility of its operations. Because, a middleman is terminated either when he is not performing well that is up to the standards set by company or the market conditions requirements changes which forces the company adopt different channels of distribution.
3. When a marketer is curbed from terminating the unsuccessful or experimental channels of distribution, then it negatively impacts its risk taking and creative abilities.
In United States of America, a middleman can be terminated in a very simple manner, by just dismissing him. There, no complex legalities are required to terminate someone who is either underperforming or can't be involved in new channels of distribution strategies.
Although, there are some provisions too, which give a chance to middleman to put forward his say on the matter in view. For example, in a southern state of United States, Colombia, the company needs to compensate a middleman for terminating him. They generally pay ten per cent of a middleman's annual pay for all the years of his services rendered by the company. But, such processes are very lethargic as they require a lot of patience and cautious behaviour.
An Export Management Company is a privately owned organization who works independently to facilitate transactions between various manufacturers, sellers, wholesalers and retailers who do not compete amongst themselves.
Sometimes, an export management company is called an export department who operates independently. There are several reasons for this, such as:
1. An Export Management Company acts as a representative of all the small firms in a country or a particular region, who finds it difficult to operate and market on their own, globally.
2. An Export Management Company not only helps a company in settling down or keeps a track of its operations, but it prominently takes part in all its operations, especially, the marketing.
3. An Export Management Company actively handles the products services of an organization, promotes it across the markets set up globally, provides information regarding credit, finances the operations of an organization and extends the overall support, whenever required.
An intermediary is a person who facilitates the interaction and further transactions between two parties, for getting some commission or fees. However, with the involvement in operations across the boundaries, an intermediary's nature of business can also change.
In domestic operations, an intermediary keeps the entire possession of goods. While, in foreign operations, an intermediary can only facilitate the interactions, they are not given any sort of possession.
A domestic intermediary has all the rights to set the price for any product and service involved in business transactions between two parties. While, a foreign intermediary is not allowed to interfere between any business proceedings concerned with the parties.
Also, a domestic middleman has to arrange everything related to the shipping of products and services. However, a foreign intermediary is not involved for shipping products and services across the national boundaries.
A domestic intermediary is also involved to promote and sell the products services effectively, as they know the parties very well. While, a foreign intermediary is given no task to involve in any product and service's advertising.