A distribution channel refers to a chain of intermediaries through which products pass before reaching final consumers. Distribution channels include retailers, distributors, wholesalers and the internet. A business participating in a foreign market will sell its products through global distribution channels, while firms operating in local markets sell their products through domestic distribution channels. Distribution channels can either be direct or indirect. A direct channel allows consumers to purchase products directly from the company, while an indirect channel allows customers to buy products from distributors or wholesalers. This paper will provide a summary of an article detailing how to launch a market presence in a global marketplace.
According to the article, any business can exploit global distribution channels by having an effective plan of action. It provides useful information for manufacturers, planning the international market with no experience. The plan involves the following steps: setting expectations, developing resources, studying the local market, hiring a regional manager, and negotiating a distribution deal. Preparing for scandals and fraud, and learning from competitors will result in a successful global distribution channel.
Research and development should guide the expectations of management on the foreign market. Given that risks will be inherent in the global market, the finance department can identify opportunities to reduce the risks by spreading sales revenues across different markets. Before the actual entry, the management can source data on the foreign market to develop the expansion plan. This mainly involves information on the composition and size of the foreign market and the distribution channels that competitors use; how to get and interview a potential distributor. A company can get such data by contacting the embassy in the foreign country.
Establishing healthy relationships with an accountant, an attorney and a bank is extremely essential in the global market. Bankers can arrange meetings with potential customers, while the accountant will help file the appropriate legal documents required when entering a foreign market. Maintenance of good relationships with associations of distributors can lead to successful distribution channels to access a variety of distributors.
Prior to entering the market, it is vital to understand the market norms. Suppliers must find out what differentiates the international market from the local one. This involves information on the distribution channels such as the use of direct sales, the flow of sales through distributors and the number of distributors mainly used. The management should compare the number of days outstanding in the foreign market and the local market before making any decision. An extensive study should identify the management of foreign firms; either through a company expatriate, or a national in the foreign market. Both options have their pros and cons, and management should decide the best way to deal with foreign operations before hand.
Once in the global marketplace, opening with direct sales may be quite expensive and risky. Alternatively, a company can use a distributor so as to reduce risks and costs involved. Selection of distributors should follow a selection criterion. Using an attorney to review distribution agreements ensures a balance between the parties involved. This can also deter fraud and scandals in the foreign market. Having a prospective about scandals and fraud is crucial so as to handle the outcome if such cases arise. In the same way, a company may study competitors in order to learn from their past experience and avoid mistakes in the future.
Planning is the key to avoid expensive mistakes that may occur during the entry process. The entire executive team should be in unison about foreign expansion. Companies should enter a foreign market with adequate knowledge about the market norms. Taking time to select distribution channels, distributors will result in growth of the company. Studying actions of competitors will help to avoid their mistakes again.