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What are the factors Affecting the Channel Choice in International Distribution?

What are the factors Affecting the Channel Choice in International Distribution?

Owlgen
Course: M.Com

1 Answer

The factors affecting the channel choice:

Resources of the company: If the company has good resources in terms of finance, time and attention, it may prefer direct international marketing. If the company’s resources are scarce, the company may opt for channel having intermediaries.

Size of the Market: The channel choice depends on the existing and the potential size of the market. If the size of the market is larger, the company would require shorter channel.
Buyer: The channel choice also depends on “who is the buyer”. In following cases, shorter channel is found:
  • Government departments,
  • Industrial buyers,
  • Distributors,
  • Wholesalers,
  • Large retail stores.

Characteristics of the Product: Following characteristics of the product also affect channel choice:

  • Unit value: If a unit of product has very low value there is strong argument for using a large channel. If its value is very high, there is strong argument for using a short direct sales type of channel.
  • Perish-ability: Perish-ability product must be sold through relatively short channels or directly to the customer in order to avoid losses. Durable goods can be distributed by a long channel of distribution.
  • Bulk and weight: Bulky item must be sold directly by the manufacturers.
  • Technical nature: High technical products requiring specialized selling ability or service should normally be sold through the shortest channel available or directly by the manufacturer.
  • Standardized products: Highly standardized products should often be marketed through long channel while ordered goods should be distributed directly by the manufacturers.

Environmental Characteristics: The general characteristics of the total environment are a major consideration in channel design. Because of the enormous variety of environments internationally, there is need to delegate a large degree of independence to local operating management or agents. A channel should reflect and respond to underlying environmental conditions in a country.

Criteria for Selection of Channels:

  • Costs: The costs of channel is an important criteria for selection of channel. The point to be considered is how much investment is required on the part of the firm moving its products through a particular channel.
  • Competition: The behaviour of the competitors is another criteria for selection of channel. The point to be considered is what are the firms operating in similar line doing?
  • Feedback: It is very important for an exporter to have the appropriate feedback from the customers regarding the response to the product. The point to be considered is how to get an idea of customers reaction to the product.

January 20, 2019
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