It is important to understand that channel partners are executors of marketing strategy. Companies starting their businesses in a foreign country need to start their business from scratch. As most of the markets are regulated and controlled by networks of domestic channel intermediaries, so it is essential for a company to collaborate with domestic channel members. This collaboration with domestic channel members helps the company to gain from the expertise and knowledge of the channel members. These channel partners also contribute to the necessary regulatory requirements. Channel partners also minimize the risk for the company. Selecting a right distributor in the international market is a challenging task. Companies can use the following guidelines proposed by David Arnold [1] in designing the rules for the selection of international distributors:
Market-led rather than distributor-led selection. The strategic decision to enter a new international market should be based on a careful market assessment. The company needs to select its local channel partners in the foreign market with the same due diligence that is followed in selecting a domestic distributors. The strategy to select a distributor should be market-led rather than distributor-led. Many multinational companies ask the potential customers to name their preferred suppliers before finalizing their distributors. Many companies appoint the distributors who also serve their key competitors. Although these distributors have the market expertise and contacts, they may not give the required focus to a new entrant.
Appoint “company-fit’ rather than “market-fit” distributors. A company should appoint distributors who could serve the company’s longterm goals in the foreign market. Many companies select distributors by “market fit”—distributors serving potential customers with similar product lines rather than ‘company fit’—a distributor with a goal congruence with the organization. It is beneficial to appoint a distributor with a stronger inclination to invest in a relationship that draws on the company’s practice in marketing its products.
Develop distributors with a long-term vision. The international distributors should be selected and developed as long-term partners rather than as temporary vehicles for entry in to the foreign market. This will help the company and the distributor to invest in a long-term market development for mutual benefit.
Provide adequate corporate resources. Companies in international expansion should support the foreign market entry by providing adequate human resources, finances, and marketing capabilities. Many multinationals are adopting cooperative marketing strategies with their distributors by co-ownership. This also helps to increase the effectiveness and efficiency of both the multinational company and the local distribution partner.
Control and own the marketing strategy. The marketing strategy should be managed and owned by the multinational company. The company should decide the different marketing strategies like which products to sell, how to position them, promote them, and pricing. Some multinationals send their managers to work with the local distributor’s offices, and others establish regional offices to support the distributors and customers.
Maintain robust information system with channel partners. It is important for a company to get accurate and detailed products and market and financial performance data for the new country of expansion. Channel partners are always an important source of market intelligence, and many companies make it essential for their channel members to share product, market, and financial data.
Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.
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