Intermediaries in International Trade. A Case Study of a Gothenburg Based Trading House, Exporting Paper Products to Nigeria

Abstract

An intermediary is found in between the manufacturer and customer and connects the parties in situations where it may be too difficult, time consuming and simply not profitable for them to engage in direct export. The intermediary functions as a bridge between the manufacturer and the customer, and is employed on markets where they have a better ability to handle the export process than manufacturers. There is a cluster of so-called trading houses1 in Gothenburg, Sweden, consisting of intermediaries specializing in export of forestry products to distant markets. This study aims to provide an understanding of why these intermediaries handle export of paper products and will furthermore focus specifically on Nigeria as export market. A case study of one of these trading houses has been carried out, based on interviews with the Managing Director and three employees. An important explanation of the existence of trading houses is their role as financers of high-risk transactions and thus their relations with the bank. An interview with a trade finance expert at Svenska Handelsbanken was therefore included to give insights into the financial aspects of intermediaries’ role. The following three aspects can explain the result of this thesis; intermediaries can enjoy economies of scale and scope when exporting paper to Nigeria, they have a better capacity of handling barriers to trade and they can lower transaction cost. The case company’s competitive advantage are embedded in six factors; economies of scale and scope, experience and network, good reputation, financing, risk taking and handling of the institutional framework The result implies that certain characteristics of the Nigerian market give rise to a need for intermediaries. As long as the market is distant, relatively small and barriers to trade prevail, the role of the intermediary is likely to remain viable.