DDG

ID NAME
MBA1Y02183066 MUHAMMAD FAISAL FIDA

SUBMITTED TO: SIR ARSLAN HAIDER

DATE OF SUBMISSION: 11-05-19

SESSION OF SUBMISSION: MBA1.5 FALL2018

FOR GRADING:
COMMENTS: MARKS SECURED:
Seven Rules of International Distribution

SUMMARY

A multinational entering a new market in a developing country knows that on its own, it cannot
master local business practices, meet regulatory requirements, hire and manage local personnel,
and gain access to potential customers. So it partners with a local distributor. At first, sales take
off, revenues grow, and the entry seems like a smart move. But when sales plateau, the corporation
begins blaming the distributor for not investing sufficiently in business growth or expanding
markets, and the distributor claims that it hasn't received enough support and that the corporation's
expectations are too high. 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. A more effective solution is to create an
agreement with strong incentives for appropriate goals, such as customer acquisition or new
product sales. After all, the local distributor is the de facto marketing arm of the multinational in
its country. Even with such a contract, a distributor might simply decide not to sell back the rights
.command might well be backed up in the local courts. In many countries, regulations favor local
businesses over foreign vendors, so the multinational could face a protracted struggle over
distribution rights. Additionally, under a short-term agreement, a local distributor doesn't have
much incentive to undertake long-term business development. The Asia-Pacific manager of a
consumer goods company reported that several national distributors, acting in the belief that sales
revenues were the key to the reacquisition price, had cut prices, boosting overall revenues but
undermining the company's market positioning strategies.

The key to solving such problems lies in recognizing that the phases are predictable and can be
planned for. As a new business grows in an emerging market, its marketing strategy needs to
evolve, and each sequential phase requires different skills, financial investments, and management
resources. The author offers seven strategies to manage the multinational-distributor partnership.
He discusses what to consider when choosing a distributor, how to structure the relationship
between the two partners, what resources the multinational should commit, and what can be
expected in return.