Monday, March 22, 2010
Sunday, March 21, 2010
I HAD been a distributor of San Miguel Beer and, presently, of Coca-Cola, both of which treat their distributors as true business partners. It is not always that way between multi-national companies (MNC) and their dealers.
Following is from a friend who had a bitter experience with a big, bad MNC, which continues operating and continues to mistreat and even abuse treat its business partners in the worst way. I have written about it several times. I find his contribution to this column interesting
Being familiar with the business model and the roles and expectations of both the multinational and the distributor, he wrote the following Ten Commandments of Fair Trade, as a guide to MNC on how not to treat their business partners:
Commandment One: Thou shall not use the bait of initial support. Bad MNC is notorious for promising marketing and promotional support to their distributors, as well as favorable in-house financing rates. A few months later, however, all support disappears into thin air. Furthermore, distributors are suddenly endorsed to a third-party bank for their financing (without prior notice), saddled with rates much higher than agreed upon.
Commandment Two: Thou shall not impose unreasonable quotas under the constant threat of termination. Bad MNC has been known to force distributors to sell at a loss, just to meet quotas. Is that how a "partnership" works?
Commandment Three: Thou shall not pull out thy products from the market without any explanation. One fine day, distributors of bad MNC were shocked to learn that batches of a certain milk product were being recalled. No explanation nor prior warning was given.
Commandment Four: Thou shall not instigate and fuel a price war. A near-scandal broke out among bad MNCs Central Luzon distributors when they found out that one dealer was being given ridiculously high discounts, and subsequently underselling counterpart distributors from Metro Manila. Obviously, Manila distributors were forced to lower their prices, but because the discounts were so unbelievable, many were forced to close. It turns out that the "discounts" was part of a scam perpetrated by bad MNC’s Regional Sales Manager, who has since fled with the money and gone into hiding. Oops.
Commandment Five: Thou shall share thy profit evenly. If distributors are working to the bone making the business earn, and yet are still at a net loss after five years of operation, something is wrong.
Commandment Six: Thou shall not condone tax evasion. Distributors of bad MNC pointed out that if they pay the local tax of one percent on gross sales imposed by cities, they would operate at a loss. Bad MNCs reply? Fine, don’t pay the tax.
Commandment Seven: Thou shall not deliberately delay lawful reimbursements. Bad MNC has a very effective – albeit crooked – way of dealing with the valid complaints of its distributors. They delay the reimbursements for months on end, thus crippling the distributor’s cash flow.
Commandment Eight: Thou shall not "hand over the empty bag". Whenever bad MNC has a problem account, or a buyer whose payment habits are terrible, they just pass these on to their distributors. These problem accounts suddenly become the distributor’s dilemma. Nice, right?
Commandment Nine: Thou shall not tolerate any conflict of interest cases, under any circumstances. The DTI is currently investigating a situation wherein bad MNC allowed yet another one of their regional sales managers to have an illicit affair with the managing officer of one of its distributors. Despite numerous parties repeatedly calling their attention about the matter, bad MNC took a hands-off policy. In a way, they actually encouraged the affair, since the distributor was achieving record sales. It was soon discovered that the numbers were padded, ghost deliveries were being made, and the unfaithful couple were all behind it.
Commandment Ten: Thou shall not ignore nor disrespect the proper authorities. The Department of Trade and Industry (DTI) has the power to enforce grave sanctions on a company for violating any of the commandments written above. They have full authority on the matter thanks to Ministry Order (MO) 69. MNCs cannot assume that they can get away with bullying Filipino entrepreneurs just because they are big.
The DTI does have the teeth with which to to bite the bad MNG back. Now, if only Jesli Lapus, the new DTI head, would only do something about this.