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

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

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  • Pages: 4 (874 words)
  • Published: December 14, 2017
  • Type: Research Paper
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Locating Middlemen

The search for potential middlemen in a specific market should commence with a thorough examination of the market itself and the establishment of criteria for assessing the performance of middlemen in that particular market. While it is essential to adhere to the company's general policy guidelines, there may be instances where expediency outweighs policy. The checklist of criteria may differ depending on the type of middlemen employed and the nature of their association with the company. In essence, these checklists revolve around four key areas:

  1. productivity or volume,
  2. financial strength,
  3. managerial stability and capability,
  4. the nature and reputation of the business.

Significantly, emphasis is usually placed on either the existing or potential productivity of the middleman. Formulating policies and creating chec


klists are straightforward tasks; however, the real challenge lies in executing them.

The primary issues involve the search for information to aid in the selection of middlemen and the identification of available middlemen for handling merchandise. Companies that desire representation abroad should create a list of potential middlemen from various sources, such as the U.S. Department of Commerce, commercially published directories, foreign consulates, chamber-of-commerce groups overseas, manufacturers who deal with similar goods, associations for middlemen, business publications, management consultants, carriers like airlines, and online services like Unibex. The challenge lies in determining which middlemen are capable of performing satisfactorily when selecting them. Potential hindrances include low or potential volume restrictions, financial limitations, and concerns about trustworthiness. If a manufacturer is not well-known internationally, th

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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.

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