I agree with what you wrote, and had not my post been so long, I would have added the following two thoughts:
Good distribution and franchise models tend to have the Principal operate a few areas to understand that side of the coin. That experience allows a Principal to negotiate with prospective distributors and guide them afterwards. Also, if a distributor does not cut the mustard, the Principal would have the facility to step in and run the business, or at least give it a fillip to make the point that it can be as lucrative as the Principal claims it should be.
Distributorships are established via contracts, and these would substantially be drafted by the Principal, and include withdrawing the distribution right in a manner that is fair, and hence not subject to being overridden by a court of law. There are many precedents over the last 100+ years of major companies growing in this way.
There are different models of distributorship. Exclusive Distributors per territory suit Principals who have niche markets. That model tends to enable optimal channel control (maintain brand integrity, brand image and pricing points).
I did not flesh out the foregoing model because although I had a clear notion that NEA would do its own distribution in Australia, there may be a case for appointing a distributor in NZ, or not. Similarly in North America, it may be easy to consider Canada being handled via the distribution model, but because of the nature of its geography, some form of regional distributorship may be apt. I support NEA being a distributor in the USA, but it could make sense to hive off some of that territory. I reiterate, the distribution contracts should have a set of buy-back provisions.
There is little point opining on the detail behind the gist of the idea It is a vast subject covered by many viewpoints and examples on the Internet – in respect to Esri, https://doc.arcgis.com/en/marketplace/provider/faq.htm is an example of a sophisticated mixed model based of Esri itself and exclusive distributors. It is a complex document, and https://gdi.net/partnership-with-esri/ gives a clearer picture of how a specific distributor in Central Europe fits into the Esri's marketing model.
If NEA manages this well, within a few years folk are going to reminisce about the "good old days" when NEA shares were less than $10.
NEA Price at posting:
$2.42 Sentiment: Buy Disclosure: Held
