Investing In Ireland

Market Entry Strategy

Ireland is a small open economy with a heavy dependence on international trade. As a result, the introduction of products and services into the Irish market is relatively uncomplicated. Standard international marketing and distribution practices are widely utilized in the Irish market. Moreover, e-commerce practices are being adopted by the Irish government and in the business community. American companies with quality products and services will receive enthusiastic support from local business partners toward achieving their goals and objectives in Ireland. Many successful U.S. companies in the Irish market see Ireland as a gateway to opportunities in the UK, as a natural location for distribution throughout the EU (Ireland is a member of the Euro zone), or as a logical springboard for sales across Europe. In addition, more and more companies are looking for strategic Irish partners for contract manufacturing, joint ventures, transfers of technology, licensing, and logistics and value added service agreements.

Ireland’s tax regime and incentives to business are considered by some to be the most cost-effective in the world. Also, as noted above, Ireland offers many advantage in doing business that are not available in other countries in the region. Additionally, Ireland has the competitive advantage of being a member of the EU - an integrated market of over 450 million consumers. Over the last few years, U.S. companies have come to recognize that their business interests in Europe are well served by Irish partners who possess knowledge of EU directives, regulations, and distribution channels that will allow them to expand their business quickly throughout the broader EU marketplace. Whatever their business goals, U.S. companies interested in doing business in Europe should consider Ireland.

Using an Agent or Distributor

Selling a product in Ireland is facilitated by the compact size of the market and, depending on the expected sales volume and use of marketing techniques, may be achieved through any of the following distribution methods:

• the establishment of a local sales office to serve Ireland and provide a distribution point for Western Europe;
• through an agent or distributor whose activity may cover specified areas, the entire country, or include Western, Eastern or Central European markets;
• through established wholesalers or dealers in Ireland; and
• directly to department stores, chain stores, retailer cooperatives, consumer cooperatives, or other organizations.

International firms usually have one exclusive representative for the entire country, although it is common for the representative to appoint sub-agents to cover certain sectors of the market, if sales and profit margins warrant. In addition, a sales representative located in Ireland may be in an ideal position to market a product throughout the European marketplace. Consumer goods are best sold through a distributor carrying stock for immediate delivery and sale, whereas capital goods and industrial equipment are more effectively marketed through a commissioned agent. In the case of certain raw materials with low mark-ups, or for capital goods and supplies for which there are limited numbers of potential users or buyers, direct sales techniques are effective. Regular communications and visits to a newly appointed representative in Ireland are useful to establish successful relationships, get a better understanding of market specifics, trends, and developments, and to assist in the resolution of any early problems.

An effective and responsive after-sales-servicing system should be incorporated into distribution plans. Frequently, U.S. firms will rely on the Irish distributor to handle the details of labeling and packaging for European preferences regarding the product and, if necessary, registering the product. The familiarity and fluency of many Irish business firms with the varied languages of Europe also underline Ireland’s capacity as a springboard for sales to continental Europe, as well as to Central and Eastern Europe.

Three kinds of distribution agreements are covered by Irish legislation: exclusive, quasiexclusive, and informal. In an exclusive distributorship, the distributor has the sole right to sell specified goods within a defined area. Quasi-exclusive distributorships allow the
distributor to sell almost all the specified products within a defined area. Informal distributor arrangements impose heavier obligations on the distributor. If contractual obligations are not met in a distribution agreement of indefinite term, it cannot be terminated until reasonable notice and/or fair compensation is provided. In general, grantors should consider protecting themselves by entering into agreements for definite periods rather than an indefinite period. In addition, specific performance targets clauses should be incorporated into the distribution agreement.

Under EU legislation (Commercial Agents Regulations 1994), a commercial agent is a self-employed intermediary who has continuing authority to negotiate the sale or the purchase of goods on behalf of another person, or to negotiate and conclude such transactions on behalf of the principal. Each party is entitled to a written document setting out the terms of their contract. EU legislation regarding unilateral termination of distribution agreements (EEC 86/653) applies and is designed to provide the local distributor with some degree of protection and monetary compensation when an agreement is terminated for reasons other than cause. The legislation will apply regardless of any clause in the agreement itself, and the parties may not deviate from the legislation as long as the distribution agreement is in force.

Establishing an Office

There is a distinction between incorporated and unincorporated business entities in Ireland. An incorporated entity has a legal status separate from its owners and is capable of suing and being sued in its own name. Incorporated entities include private limited companies, public limited companies and unlimited companies. Unincorporated entities may be a sole proprietorship set up by an individual, or a partnership. The most basic form of company is the sole proprietorship, and there are few legal formalities or costs associated with this form of business, which appeals to small enterprises. The owner is personally liable for the business and has managerial control as well as direct access to profits. U.S. companies may conduct business in Ireland through a branch or a place of business. A branch is a considered a division of a foreign company trading in Ireland that has the appearance of permanency, a separate management structure, an the ability to negotiate contracts with third parties, as well as reasonable financial independence. Branches must file company financial statements with the Registrar of Companies.

U.S. firms interested in establishing an office in Ireland should review the following: Enterprise Ireland’s website (http://enterprise-ireland.com) for a comprehensive practical overview and advice on evaluating and/or establishing business operations in Ireland. The Irish government website (http://www.basis.ie) for information on how to set up a business in Ireland from registration and legal advice to guidance on taxation and employment issues.

Franchising

Substantial opportunities exist for U.S. companies to establish franchise systems in Ireland across a wide range of industries. The sector has experienced steady growth in recent years as the number of international franchise systems operating in Ireland continues to grow and indigenous franchise operations continue to expand both in Ireland and overseas. The growth of the economy over the last ten years and the resulting increase in disposable income, together with the many changes in consumer buying patterns and the spread of suburban living, have all contributed to the growth of the franchising sector. U.S. franchises lead in terms of market share, representing over 40% of the franchise operations in Ireland. There are few regulations concerning franchising and none that limit market access to U.S. firms. The EU Regulation 4087/88 EEC regarding franchising provides a unified code for the 25 member states. Its primary focus concerns price fixing, transfer pricing, non-competition clauses and exclusive dealing. It also exempts certain franchise agreements from the EU anti-trust regulations.

Direct Marketing

Irish companies spend in excess of $250 million on direct marketing services annually. The Irish Direct Marketing Association (http://www.idma.ie), the representative body for direct marketing in Ireland, has 350 members ranging from financial services firms to telecommunications companies and law firms. Telemarketing, in particular, has spearheaded the growth of the direct marketing sector
in Ireland as a large number of companies, including Dell, United Parcel Service and American Airlines are now providing telemarketing services from Ireland. These international firms are serving both the Irish and European marketplaces from their Irish telemarketing operations. Mail-order sales are small. Certain firms have used this technique successfully in combination with their usual retail outlet operations. Promotion is carried out by catalog, or by newspaper advertisements with no personal contact. Hobby centers, Do-It-Yourself (DIY) or home improvement stores, auto supply centers, and discount stores are also enjoying success.

Joint Ventures & Licensing

No formal regulations relating to joint ventures in Ireland currently exist. In each case, the terms of the joint venture are the subject of a co-operation agreement between the parties concerned. Generally, the agreement sets out the basis on which the parties are to co-operate on a particular joint venture. Numerous international firms have joint venture and licensing arrangements with manufacturers based in Ireland. Government approval is not necessary for licensing agreements and no statutory restrictions are imposed on the amounts of royalties or other details of licensing arrangements. However, an international firm intending to license the use of its trademark to a company based in Ireland must designate the licensee as a registered user, and an appropriate application must be lodged in order to prevent any future legal problems.

Enterprise Ireland, the state agency responsible for the development of indigenous Irish industry, continually seeks to develop joint ventures, licensing, technology transfer, and other types of strategic alliance arrangements between Irish and international firms (http://www.enterprise-ireland.com). The objective is to bring successful Irish companies with available resources of capital, management, technical knowledge, and skilled workers together with international firms that have comparable strengths, particularly in areas of product development and marketing. U.S. firms can gain access to the European marketplace by adopting a joint venture/licensing strategy incorporating Ireland. As with all business investment decisions, U.S. firms considering joint venture, licensing, or other strategic alliance arrangements in Ireland should seek professional advice regarding the legal, financial, and taxation implications of the agreements being negotiated. The U.S. Commercial Service at the U.S. Embassy in Dublin (http://www.buyusa.gov/ireland) can assist U.S. companies in addressing these issues.

Selling to the Government

As a member of the EU, Ireland has adopted EU public procurement directives. All Irish works, supply, services, and utility procurement project notices which fall within the guidelines of EU public procurement directives are published electronically in the Official Journal of the European Community (OJEC) "S" series (http://ted.eur-op.eu.int). The Irish government also has its own Public Sector Procurement portal (http://www.etenders.gov.ie) that provides electronic access to all Irish public sector procurement opportunities published in the OJEC and in the national and local print media. The U.S. Commercial Service in Dublin actively monitors and reports on major procurement projects offering opportunities for U.S. firm (http://www.buyusa.gov/ireland).

Distribution & Sales Channels

According to the most recent data, approximately 53,000 retail outlets and 2,500 wholesale outlets sell and distribute goods in Ireland. While the distribution system, especially at the retail level, still consists of small outlets by American standards, it is moving toward larger, more economically viable units to satisfy changing market needs. Retail outlets in Ireland range from the large department stores to the small shop owned and operated by an individual. Although most retail outlets are small, such enterprises are decreasing in number, as efficiencies of scale and purchasing power become the major competitive factors bearing on profit margins. A trend toward larger outlets has been underway, with the formation of chains, expansion of existing department stores, and the establishment of medium-sized department stores.

On January 1, 2005, the Irish government removed a legislated maximum 6,000 square meter cap on retail warehouse floor space in Dublin and most other major cities in Ireland, as designated under its National Spatial Strategic. IKEA is expected to enter the market as a result of this change in legislation, along with the development of other large-scale retail stores. The increasing tempo of commercial and industrial development, as well as suburban development, is bringing about significant changes in the distribution system. Wholesalers supply a variety of services to associated small retailers, including sales promotion, advertising, and retail training. In some cases, they combine small retailers into a buying group in order to achieve purchasing economies and increased purchasing power with manufacturers.

The number of discount firms, especially those stocking consumer electronics and domestic appliances, continues to increase, and the number of self-service stores is rising steadily. Self-service is not confined to small merchandising units as department stores and gas stations also have incorporated this sales technique in their operations. The Irish food retail trade is very receptive to new food product ideas and is constantly monitoring developments in new products in the international marketplace. As few chains import directly, the major food retail chains often use specialized importers to administer the logistics of importation and distribution. As a result, there are a large number of food importers, many of whom are quite small, serving the retail trade. Some of these importers are also distributors of Irish produce and, indeed, some also are local manufacturers. Most importers/distributors have adequate distribution facilities to most parts of Ireland.

There are over 9,500 food retail outlets (i.e. grocery stores) of varying sizes in Ireland. Two distinct segments exist within the sector -- the supermarket multiples, and independent retailers. The food retail sector is dominated by three multiple chains, while a number of smaller chains also operate. The multiples dominate the grocery trade in the greater Dublin area accounting for about 75 percent of retail sales. A number of smaller EU-based retail chains (e.g., Lidl and Aldi) have also entered the market, establishing medium-sized stores in the smaller towns around the country. Outside of the main urban areas, many of the independent retailers are affiliated to "symbol groups" which facilitate the attainment of purchasing economies of scale through procurement from a central purchaser.

Selling Factors & Techniques

U.S. firms should maintain close liaison with distributors and customers in order to exchange information and ideas. In most instances, communication through telephone or e-mail is sufficient but the understanding developed through periodic personal visits is
the best way to keep distributors apprised of new developments and to resolve any problems quickly. Prompt acknowledgement of correspondence is recommended. Vigorous and sustained promotion is often needed to launch products. Products must be adapted to both technical requirements and to consumer preferences. It is not sufficient to merely label a product in conformity to national requirements. For the development of a product’s full market potential, quality, price, packaging and after-sales service are key. U.S. exporters may also wish to consider warehousing in Ireland for expeditious supply and service for customers in Ireland and Europe.

Distribution methods vary by product, as well as with individual commercial relationships. Methods must be tailored to fit market conditions in each instance. U.S. companies can utilize successful distribution techniques practiced in the United States as a threshold for approaching the Irish market.

The Shannon Free Trade Zone, established in 1947, and located at the Shannon International Airport, is the world's oldest operating free zone. This facility provides an attractive international distribution and warehouse center serving Western Europe because it provides the unique combination of a custom-free industrial zone and direct access to air and surface transport to the United Kingdom and other European markets. Raw materials and partly or completely manufactured products may be imported into the free zone in any quantity and held there without payment of duties or taxes. Processing, sorting, grading, or repackaging of the goods may take place within the zone, and buildings may be leased or built. As sales require, the goods held in the free zone may then be withdrawn from inventory and re-exported to other countries or imported into Ireland for consumption after payment of appropriate duties, value-added taxes, and excise duties. If the goods are re-exported to another country, duties and taxes, as appropriate, will be payable in that country. Principal advantages of the free zone to American firms are:

• the existence of a European base of supply to assure customers prompt delivery and service,
• the ability to maintain inventory at low cost, and
• eligibility for the reduced 12.5 percent corporate tax rate in Ireland.

Adequate warehousing facilities are available in major Irish cities. Bonded warehouses are operated in Dublin, Cork, Limerick, Waterford, and Galway. The Dublin Port Company maintains the largest warehousing organization in the country. In addition to storage facilities, the Board provides services needed by distributors such as packing, sorting, bottling, and transport service. Imported goods liable to a duty may be stored in a bonded warehouse in the port area or other locations without payment of duties or taxes. The goods may remain there until needed, at which time they are cleared for Irish consumption by payment of duties and taxes, or sent to the country of destination. Certain types of processing (inwards and outwards) are allowed in the bonded warehouses under official supervision. Inwards processing is the temporary importation of raw materials or products for additional manufacture or processing. Merchandise imported for additional processing and eventually re-exported out of the EU is eligible for customs-free treatment. The re-exported goods may be partly or totally processed. Irish import duties and taxes are levied only on those goods that are not reexported for final sale in the EU. To qualify for inwards processing, the Irish or EU firm must prove to customs that it is necessary for them to use imported goods instead of EU goods.

In addition, the firm must state its intention to export products manufactured from the imported goods (or equivalent goods available in the EU). It must also assure that, upon re-exportation, the conditions set forth in the authorization are satisfied, the exported goods are accounted for, and the entered goods are identifiable and relate to specific imported products In outwards processing, an Irish firm may export goods for further manufacture or processing from the EU customs area and then re-import the final product. Duties and taxes are levied on the increased value added by the expatriate manufacturing or processing when the goods are returned to Ireland, not upon the total value of the product. Only firms located in Ireland or another EU country are eligible to take advantage of this option and should first gain approval by the Irish customs authorities.

Electronic Commerce

The Irish Government remains strongly committed to its policy of ensuring that Ireland becomes a major hub for e-commerce in Europe. To achieve this goal, the government developed a comprehensive e-commerce strategy that includes: (a) world-class international telecommunications connectivity, (b) pro-active e-commerce legislation (Electronic Commerce Bill 2000), (c) an e-commerce campus in a 100-acre National Digital Park, (d) support for SMEs to develop e-commerce strategies, and (e) an ‘Information Age’ program for the educational sector. Ireland’s two major airlines, Aer Lingus and Ryanair, both operate highly active on-line reservation systems. New arrivals in the market include Google, eBay, PayPal, Yahoo, Amazon, and Overture, which have all have recently established operations in Ireland.

Trade Promotion & Advertising

Ireland does not host any major international trade fairs, except in the tourism sector. In international terms, Irish trade fairs are small-scale events that attract local trade and consumer audiences. Thus, they principally offer sales and promotional opportunities for Irish agents and distributors. In general, the international element of these events is limited to local representatives promoting international brands. Due to the proximity of Ireland to major trade fairs in European cities, most Irish manufacturers, agents, distributors, and end users attend the major European exhibitions in their industry sectors. The U.S. Commercial Service in Dublin promotes U.S. pavilions at European tradeshows to the Irish business community to ensure that U.S. exhibitors receive potential Irish business opportunities that might result.

Ireland has approximately 60 newspapers and 150 periodicals or trade magazines. The Dublin dailies (Irish Times and Irish Independent) and the Irish Examiner (Cork) enjoy national distribution. The Irish Independent (morning) has the largest circulation, followed by the Evening Herald. The Irish Times (morning) has the smallest circulation in Dublin, but reaches the important business and financial markets. There are four national Sunday newspapers, of which the Sunday Business Post is directed at corporate executives. British newspapers and tabloids are widely available in Ireland. The Irish Times, Irish Independent, Irish Examiner, Sunday Business Post, and many regional newspapers also have electronic editions on the worldwide web.

There is increasing competition in the broadcasting sector with independent national broadcasting organizations, Today FM (radio) and TV3 (television) now challenging the state-controlled Radio-Telefis Eireann (RTE) organization. There are also a large number of independent radio stations operating in local areas. The Irish cable television system is available in urban areas with about one-third of the population having cable service, another third having multi-channel service, which includes British TV transmissions, and the remaining one-third receiving only RTE television programming. The Advertising Standards Authority of Ireland (http://www.asai.ie) has
established a code of standards that must be complied with by all advertisers. Advertising films must be approved before showing. Detailed advertising rates can be obtained from most local advertising agencies. There are numerous advertising agencies with a wide range of services in Ireland. Advertising agencies utilize every medium available to advertisers: direct mailings, press, radio, television, point-of-sale advertising, posters, and public transportation vehicles. Other promotional techniques, such as coupons, samples, premiums, and prizes, are also used. The government strictly enforces laws covering gaming and lotteries, as well as restrictive trade practices. Companies that advertise and sell goods and services should obtain local advice regarding provisions of the laws and consumer acceptance of promotional or marketing techniques.

Major organizations engaged in market research in Ireland are mainly headquartered in Dublin. These firms provide the usual range of services, including store audits, consumer surveys, product field-testing, and attitude and motivation research. In general, if the advertising technique works well for a product line in the United States and elsewhere in Europe, the Irish market also should be receptive to the theme. There are differences, however, in spending habits and preferences for types of goods and services, and local opinion should be obtained first for a specific strategy that calls for a major commitment of resources.

Pricing

Sales quotations are usually given on a c.i.f. (cost, insurance, freight) basis, to the point of importation. The c.i.f. quote is generally preferred by Irish importers as they are familiar with the customs charges and taxes on the product that are levied at the time of importation, but may not be acquainted with U.S. trucking and ocean or air charges. Large firms and department stores, however, may purchase on f.o.b. (free on board) terms when they prefer to arrange for shipping and insure the goods themselves. Quotations and invoices can be made in U.S. dollars. Ireland incorporates EC customs duties, and applies a value-added tax (VAT) of 21% to virtually all goods, including imported goods, sold in Ireland.

Due Diligence

Manufacturers seeking an Irish agent or distributor to service the domestic and European markets should consider visiting Ireland to appraise the relative merits of prospective agents. In addition to acquainting the U.S. exporter directly with local market conditions and special sales characteristics, a visit also provides an opportunity to discuss policy and sales campaigns with the agent or distributor, review responsibility for customs fees, taxes, labeling, transportation modalities, business procedures, payments and, if necessary, registration. These responsibilities should always be clearly defined before undertaking a long-term relationship.

The U.S. Commercial Service at the U.S. Embassy in Dublin offers a range of business solutions to U.S. firms seeking agents, distributors, sales, or business partners in Ireland. U.S. firms interested in achieving representation in Ireland are welcome to contact the U.S. Commercial Service in Dublin (http://www.buyusa.gov/ireland) for information on matchmaking services such as the Gold Key Service (GKS) and International Partner Search (IPS).

U.S. firms are strongly encouraged to maintain close contact with newly appointed agents or distributors throughout their working relationship. Since certain products and equipment require servicing to maintain their useful life, the U.S. exporter should determine when this is needed and develop a distribution network to include such servicing by qualified personnel. To develop trust, loyalty, and marketing skills, U.S. producers frequently bring their agents or distributors to the United States for training and marketing assistance.

Large Irish companies have listings on the Dublin and London stock exchanges and in recent years, emerging high technology and Internet companies have secured listings on the Nasdaq and German Neuer markets. Publicly traded companies must publish substantive annual reports which meet the reporting requirements laid down by the accounting bodies and which comply with stock exchange regulations. In addition, company legislation requires that every registered company both privately held and publicly traded must file a set of audited accounts annually with the Companies Registration Office. Copies of such audited accounts can be obtained directly from the Companies Registration Office for a specified fee at http://www.cro. In addition, mercantile agencies such as Dun & Bradstreet Ireland will undertake commercial credit reporting on any company in Ireland. These reports are available on-line at http://www.dbireland.com.