We have recently been approached by an EU medical manufacturer to assist his company in negotiating a distribution contract with a potential distributor in Saudi Arabia.
The company has made the appropriate research and due diligence. The challenge now is to further understand the distributor’s organization, sign a win-win agreement and have the beginnings of a personal relationship.
The Saudi Distributor has no particular experience with our client’s product categories. He wishes to use the product in order to enter the new market segment. He is also asking for exclusivity and willing to allocate resources to marketing our client’s product.
If you are a medical manufacturer/company, here below are few elements of what you need to watch, as we did with our Client, when negotiating contracts with your ME distributors:
Legal: It is recommended to have a solid contract with the key components of the relationship. However, do not get stuck in long legal details, as it is the case in some western countries. A MOU highlighting the essential terms and conditions will suffice.
Verbal communications: Please consider that your partners may work/communicate with a different language. Yes, Arabs speak English but they may not have the same interpretation or understanding as English native speakers. Therefore, the written agreement should be followed by extensive verbal communications to ensure that the distributors have fully understood what was agreed.
Value: Ask your distributors in what specific segments they can demonstrate value. If they embark into a new segment, then look at their capabilities (strategic, financial, notoriety, logistics,..;) and see if there is a match with your objectives for the market
The above info demonstrates somehow the strengths and weaknesses of your partners.
It also helps to evaluate whether you should grant them a total or partial exclusivity. In some cases, you can negotiate exclusivity by channel, product, market segment or type of Customer.