Distribution Strategy

Recognize why and how a firm’s distribution strategy might vary among countries.

A critical element of a firm’s marketing mix is its distribution strategy: the means it chooses for delivering the product to the consumer. The way the product is delivered is determined by the firm’s entry strategy, discussed in Chapter 13. This section examines a typical distribution system, discusses how its structure varies between countries, and looks at how appropriate distribution strategies vary from country to country.

Figure 16.1 illustrates a typical distribution system consisting of a channel that includes a wholesale distributor and a retailer. If the firm manufactures its product in the particular country, it can sell directly to the consumer, to the retailer, or to the wholesaler. The same options are available to a firm that manufactures outside the country. Plus, this firm may decide to sell to an import agent, which then deals with the wholesale distributor, the retailer, or the consumer. Later in the chapter we will consider the factors that determine the firm’s choice of channel.

FIGURE 16.1 A Typical Distribution System

DIFFERENCES BETWEEN COUNTRIES

The four main differences between distribution systems are retail concentration, channel length, channel exclusivity, and channel quality.

Retail Concentration

In some countries, the retail system is very concentrated, but it is fragmented in others. In a concentrated retail system, a few retailers supply most of the market. A fragmented retail system is one in which there are many retailers, none of which has a major share of the market. Many of the differences in concentration are rooted in history and tradition. In the United States, the importance of the automobile and the relative youth of many urban areas have resulted in a retail system centered on large stores or shopping malls to which people can drive. This has facilitated system concentration. Japan, with a much greater population density and a large number of urban centers that grew up before the automobile, has a more fragmented retail system, with many small stores serving local neighborhoods and to which people frequently walk. In addition, the Japanese legal system protects small retailers. Small retailers can try to block the establishment of a large retail outlet by petitioning their local government.