7Rules of International Distribution

General Problem statements from MNC Managers

• "The distributor didn't know how to grow the market”

• "The distributors didn't invest in business grow

• "The distributor Just wasn't ambitious enough."

MANAGING THE MULTINATIONAL-DISTRIBUTOR PARTNERSHIP

• We follow two hypothetical multinational corporations (MNCs) as they enter new markets in developing countries.

• The markets and countries are comparable, but M NCI follows a beachhead strategy, reacting to problems as they come up.

• This strategy culminates in a serious disruption of business. In contrast, MNC2 retains control of marketing strategy from the outset and anticipates changes.

Managing the Life Cycleof the International Distributor

1. Select distributors. Don't let them select you.

• Initial moves into new countries occurred in reaction to proposals from potential distributors.

Managing the Life Cycleof the International Distributor

2. Look for distributors capable of developing markets, rather than those with a few obvious customer contacts.• The choice of distributors and the terms of the

relationships should serve the multinational's long-term goals

• look for what we call 'company fit'-a partner with a culture and a strategy we feel comfortable with, in terms of the investment they'll make, the training they'll give their people, and the support they'll ask from MNC’s

3. Treat the local distributors as long-term partners, not temporary market-entry vehicles.

• Structure the relationships so that distributors become marketing partners willing to invest in long-term market development.

• One traditional way of doing this is to grant national exclusivity to a distributor, although such an agreement can become unproductive if conflicts of interest arise once entry is established.

4. Support market entry by committing money, managers, and proven marketing ideas

• To retain strategic control, multinationals must commit adequate corporate resources.

5. From the start, maintain control over marketing strategy.

• An independent distributor should be allowed to adapt a multinational's strategy to local conditions.

• Multinationals should convene and lead planning sessions and exercise authority about which products to sell, how to position them, and budgeting.

6. Make sure distributors provide you with detailed market and financial performance data• A multinational's ability to exploit its

competitive advantages in an emerging market depends heavily on the quality of information it obtains from the market.

• A contract with a distributor must therefore require detailed market and financial performance data.

• The reaction to a request for market and financial data reveals a lot about a distributor. Most distributors, of course, regard data like customer identification and price levels as key sources of power in their relationships with suppliers.

• the willingness of potential distributors to provide such information is one of the prime indicator of whether successful relationships could be achieved.

7. Build links among national distributors at the earliest opportunity.

• the company should create links among its national distributors

• The transfer of ideas within local markets can improve performance and result in greater consistency in the execution of international strategies.

Conclusion

• Multinationals need to do a better job of selecting and working with local distributors

• They must understand that distributors are implementers of marketing strategy, rather than marketing departments in the country-market