Entry modes - Foreign distributor
6 important questions on Entry modes - Foreign distributor
What is a foreign distributor?
What is over time often the pattern with foreign distributors?
- Initial succes
- Flattening sometimes declining
- MNE starts questioning local partner
- Take control of distribution channel
- Build a self-owen distribution channel
--> Result: local partner and MNE will not invest in each other; lack of long-term commitment to distributor on MNE's end and lack of effort in market development on distributors'end can lead to a vicious circle of bounded reality
What are the disadvantageous effects the MNE questioning the local partner?
- Conflicts between company and local distributor
- Underinvestment in market development (by local partner)
- Strategic market decisions ceded to distributors
- Higher grades + faster learning
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What are the characteristics of success cases of foreign distribution?
- MNEs should keep independent, local distribution partners in the long term, even after stablishing their own local network for primary clients
- Key is to balance competing objectives (use local partner and their knowledge, but also build up your own distribution network as MNE)
What are the guidelines for MNEs managing local distributors?
- Pro-actively select locations and only then suitable distributors (instead of the other way around)
- Focus on distributor’s market development capabilities
- Manage distributors as long-term partners
- Provide resources (managerial, financial and knowledge based) to support distributors for market-development purposes
- Do not delegate marketing strategy to distributors
- Secure shared access to the distributors’ critical market and financial intelligence
- Link national distributors with each other, especially at the regional level (spanning a number of countries
What are the advantages of the direct sales model? (DELL)
- Closeness to end users (understand user needs, forecast demand more accurately, build long-term relationships)
- Savings through eliminating distributors (pass on savings to consumers by reducing selling costs, reduce inventory)
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
