In order to be successful in a global market, a marketer must make its products and accessible to customers at all costs. Distribution channels make up the “place” in the 4 P’s of the marketing mix (along with Product, Price, and Promotion).
Distribution Processes and Structures
The distribution process deals with product handling and distribution, the passage of ownership (title), and the buy and sell negotiations.
Negotiations take place between the producers and the middlemen and then between the middlemen and the customers.
Traditionally, import-oriented distribution structures relied on a system where importers controlled a fixed supply of goods. The marketing was based on the idea of limited suppliers, high prices, and smaller number of customers. Today, the import-oriented model is hardly used. Channel structures have become more advanced with overall development.
To understand a foreign distribution system, marketers should never believe that it is the same as the domestic one. Many distribution patterns exist in retailing and wholesaling. Size, patterns, direct marketing, and the resistance to change affect the composure of distribution channels.
● Retail size and pattern − Company’s may either sell to large, dominant retailers directly or distribute to smaller retailers.
● Direct marketing − The challenge in underdeveloped nations is handled through direct marketing. Direct marketing occurs when consumers are targeted through mail, telephone, email, or door-to-door selling. This process also doesn’t take retailer and wholesaler types into consideration.
Choosing Your Middleman
The channel process starts with manufacturing and ends with the final sale to the customer. It is most likely to counter many different middlemen in the process. There are three types of middlemen in distribution channels −
● Home-Country Middlemen − They provide marketing and distribution services from a domestic base in the home country. The parties usually relegate the foreign-market distribution to others; including manufacturer or global retailers, export management companies, or trading companies.
● Foreign-Country Middlemen − For a greater control, foreign-country middlemen are hired who can create a shorter channel and have more market expertise.
● Government-Affiliated Middlemen − Government-affiliated middlemen are often responsible in distribution for the government’s use.
Factors Affecting Choice of Channels
Channel of distribution or middlemen selection must precede the understanding of the characteristics of the foreign market and the established common system there. The major factors to consider while choosing a particular channel are −
● The specific target market within and across countries.
● The goals in terms of volume, market share, and profit margin.
● The financial and organizational commitments.
● Control of the length and characteristics of the channels.