International Marketing Practices

The Distribution Channel

Suppliers

Manufacturers

Wholesalers

Retailers

Consumers

Examination of the distribution channel reveals how to most efficiently deliver a product to the intended customers. Because small to medium sized sawmills often deal in lower volumes than their larger competitors, they often have the option to distribute their product to one or more intermediaries along the distribution channel.

To choose the best distribution system, you must consider your target consumer and evaluate three aspects of distribution:

• Feasibility. What are the market needs and wants, capital requirements, reliability of the distribution channel, and speed of product delivery? • Desirability. Is the system practical? Does it meet your business needs? • Profitability. What costs are involved and can margins be maintained at each level of the distribution system to make a reasonable profit? When choosing a distribution channel, it is important to understand the role of intermediaries. The main functions of intermediaries are to maintain contact with buyers, negotiate on price and delivery, establish contracts and agreements, transfer titles, provide credit/collection, service the product, provide inventory and storage, provide bulk-breaking service, and arrange transportation. The greater the number of intermediaries, the longer the distribution channel. The box below outlines the characteristics of “short” and “long” channels.

Short and Long Distribution Channels

Factor

Short Channel

Long Channel

Number of customers Geographic concentration

Small High

Large

Low

Order size Complexity

Large dollar value

Small dollar value

High High

Low

Product maintenance Low A number of factors, such as the number of customers, geographic concentration, or order size, should be considered when determining a short or long distribution channel. Typically, a longer distribution channel equates to lower profits, but it may make it easier to sell your product. A short channel typically requires more networking and work for the seller , which can translate to higher profits.

Companies interested in exporting need to gain a deeper understanding of the prevailing distribution channels for their products in the markets of destination, as they are often different in each country [1]. For example, in Japan, food products

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