What distinguishes a distributor from an agent in an international business setting?

In an international business context, the key distinction between a distributor and an agent lies in their roles concerning the ownership and sale of products. A distributor purchases products from a manufacturer or supplier and then takes ownership of them, subsequently selling those products directly to retailers or customers. This means that the distributor bears the financial risk associated with inventory and is responsible for marketing, sales, and distribution.

On the other hand, an agent acts as an intermediary who facilitates sales for the principal (the manufacturer or supplier) but does not take possession of the products. The agent earns a commission or fee for their services, but they do not buy and sell products themselves; instead, they represent the principal's interests to the market.

Understanding this distinction is crucial for businesses operating internationally, as it impacts how they approach distribution strategies, pricing, and market entry. By identifying the correct role of each entity, companies can better structure their partnerships and optimize their operations in different markets.