Five Steps in the Process of Building Channels for International Distribution Essay Example

reputation of their chosen middleman reflects on the manufacturer itself. Therefore, making a poor choice at this stage can have severe consequences. The process for screening and selecting involves following a specific sequence. It commences by sending each prospective middleman a letter in their native language that includes product details and requirements for distributors. The text proposes several steps to gather information on prospective middlemen: further communication with the most promising respondents to obtain more specific information; verifying creditworthiness and references from other clients; personally assessing the most favorable firms.The text states that accessing financial information on potential middlemen has become simpler through internet companies like Unibex. These companies offer resources from Deloitte International and Dun .

The Agreement

The task of detailing the arrangements with a potential middleman comes after finding and evaluating them. The company, which has been in a buying position, must now transition into a selling and negotiating position to persuade the middleman to handle the goods and accept a feasible distribution agreement. The agreement should include specific responsibilities for both the manufacturer and the middleman, as well as an annual sales minimum. The sales minimum serves as a benchmark for evaluating the distributor, and the exporter may have the right to terminate the agreement if the sales minimums are not met.

Motivating Middlemen

Once middlemen have been selected, a promotional program needs to be initiated to maintain ongoing interest in the manufacturer's products. A larger portion of the advertising budget should be allocated towards channel communications compared to the United States due to the large number of small middlemen that need to be contacted.

Consumer advertising is only valuable if the goods are actually

available. Moreover, few international businesses have the same strong brand image abroad as they do in their home country. In most countries, retailers and wholesalers are not very brand-conscious, but they significantly influence the success or failure of products in their respective countries.

Terminating Middlemen

When middlemen fail to meet expectations or when market conditions require a distribution restructuring, it may be necessary to end relationships with certain middlemen or types of middlemen. In the United States, this process is usually straightforward regardless of the specific type of middleman – they are simply released. However, in other regions, middlemen typically enjoy legal protection that complicates relationship termination.

In Colombia, if an agent is terminated, a final settlement of 10 percent of the agent's average annual compensation multiplied by the years served must be paid. In certain countries, arbitration is required to determine if the relationship can be ended. To avoid such issues, some companies have one-year contracts with middlemen, but there have been successful challenges to termination under these contracts. It is essential to seek legal advice when entering distribution contracts with middlemen. Experienced international marketers understand the importance of carefully screening prospective middlemen to avoid the need for termination. A poorly chosen distributor can not only fail to meet expectations but also harm business and prospects in the country.

Controlling Middlemen

The challenge of controlling middlemen is amplified by the extensive length of channels typically used in international distribution. Some companies address this issue by establishing their own distribution systems, while others opt for franchises or exclusive distributorships to maintain control at the initial stages of the channels. In the current state of the various global markets, most international

marketers face difficulties in exerting a high level of control over their international distribution operations. However, successfully managing distribution channels is a key factor in becoming a prosperous international marketer. In fact, the desire for control is a significant motivator for companies to implement their own distribution systems, both domestically and in the context of international business.