With the boom in the globalization and a move towards free trade activities, the importance of international marketing has shown a vertical up graph. There has been a tremendous increase in demand of professionals in this area. International distribution is a very important and inevitable element of international marketing. In this write-up, we will have a look upon the intricacies involved in and the strategies for international distribution. This article has been structured in following manner.

            First part takes a view of general pattern of sales as a firm enters into another country with the help of a local distributor.

            Second part describes the reason for the movements ( in sales ) shown in first part.

            Third part compares two MNCs; one that hires an independent distributor and another that works along with its distributor.

            The fourth and last part puts a light over the ideal principles, which a firm should follow in order to be successful in international distribution.
 

             An established firm looking for new international markets makes a foray into an emerging market, carefully limiting its exposure by appointing an independent local distributor. At first sales take off, revenues grow pleasingly and the entry is praised as a smart move.

             But soon after a while, stagnation sets in and sales plateau. Alarmed, the MNCs managers try to discover what happened. They soon settle on what they perceive to be the main obstacle to sustained growth. The local distributor that got the co. off to a flying start has run out of ideas and now under performing.

             This pattern is repeated again and again as multinationals expand into new markets in developing countries.
 

Now let’s look at the red area i.e. the falling sales.

In case of independent distributors, they achieve initial sales growth by “picking the low hanging fruit”, making easy sales of the multinationals’ proven core products to distributors’ existing customers. But when the challenge shifts to introducing additional products or penetrating market segments in which the distributors are not established local distributors don’t have the necessary skills.

Another reason is lack of interest of distributors in making new investments, which are sometimes required to expand markets.

Another reason often mentioned by managers of MNCs is the lack of drive by distribution organizations. The distributors generally look not for market domination but for a stable midsize business that will make it wealthy but is not too big for it to control personally.

1. Go for a lookout; don’t let others search for you.

            A foray into a new international, market should be the result of a strategic decisions based on an objective market assessment. An MNC rather that waiting for distributors material should go for selecting a distributor after proper assessment.

2. Look for potential distributor.

            Look for a distributor with potential to raise the customer base rather than limiting the products to its existing customers. A distributor who best suits co.’s culture and strategy should be chosen.

3. Long-term view

            Local distributors should be treated as long-term partners so that they are willing to be in long-term market development.

4. Commitment of Money. Men and Minds.

            To retain strategic control MNCs must commit adequate corporate resources. These are money, managers and proven market ideas. This is especially true during market entry, when corporations are almost uncertain about their prospects in new countries.

            Just sending in technical and sales personnel or offering training to distributors’ employees, which is generally done by MNCs is not sufficient. Such support is good but more experienced corporations now go further and do things earlier. One way of being committed is to take minority stakes in autonomous distribution companies.

5. Control the overall marketing strategy.

            An independent distributor is free to adapt MNCs strategies to local conditions. But MNCs should convene and lead planning sessions and exercises authority about which products to sell, how to position them and budgeting. If a firm provides remarkable leadership for marketing, they will be in a position to exploit the full potential of a global marketing network.

            MNCs put their employees on-site,. Some send a few employees to work full-time at local distributors’ offices. Others establish country or regional managers who can keep a close watch on both distributors’ performance and customers’ needs.
 

6. Use distributors as a data-source.

            An MNC’s ability to exploit its competitive advantages is an emerging market depends heavily on the quality of information it obtains from the market.

            In many countries, the distributors’ organizations are the only source of such information. A contract with a distributor must therefore require detailed market and financial performance data.

7. Distributors should be linked together.

             Although an MNC’s primary focus after entering into a new country is establishing a customer base there, the co. should create links among its national distributors as soon as possible. The links may take the form of the regional corporate office or an independent network such as distributors’ council. The transfer of ideas within local markets can improve performance and result in greater consistency in the execution of international strategies. Once the distributors start talking, they also start planning.

             MNCs need to understand that distributors are the implementers of their marketing strategies, rather than marketing departments in their country market. The result will be better working relationships, fewer plateaus and crisis and more consistent growth in market share and sales revenue.

                                                                                                                     Contributed By
                                                                                                                     Sachin Bhatia
                                                                                                                     MPIB (2000-02)