![]() ![]() Most multinationals stumble onto a stepwise strategy for penetrating markets in emerging countries through a series of unplanned actions to reinvigorate sales. In the long run, multinationals come to see that it makes sense to continue working with independent local distributors who handle sales and a distribution system, even after the international companies have taken control of marketing strategy and major global accounts. Below, I’ll look at what goes wrong with most distribution arrangements in developing countries and then present seven guidelines to head off potential problems. I learned that a corporation could avoid this scenario by overseeing marketing strategy from the start. ![]() The research showed that avoiding the pattern of underperformance and correction meant accepting that, in most cases, the problem wasn’t as simple as the distributor’s being poorly run. These companies had entered almost 250 new country-markets, and I looked at their international distribution strategies in these markets. I examined this pattern of imbalance and correction in a two-year field study of eight corporations in the consumer, industrial, and service sectors. But we still need local distributors for entry, and we are still searching for strategies to get us through the transitions without battles over control and performance.” specialty chemical company: “In the end, we always do a better job with our own subsidiaries: sales improve, and we have greater control over the business. The frustrations are summed up by the CEO of a major U.S. ![]() It can also create new problems that come to the surface only in the long term: executives may discover a few years later that they’ve gone too far in correcting a number of situations like this, saddling the multinational with a dense and inefficient network of national distributors. A transition from indirect to direct sales is usually costly and disruptive. They rush in and make major changes, in some cases buying the local distributor or, more often, reacquiring the distribution rights and starting their own subsidiary. Over time, a corporation’s executives decide that the distribution organization isn’t run as they would like. This pattern is repeated again and again as multinationals expand into new markets in developing countries. They soon settle on what they perceive to be the main obstacle to sustained growth: the local distributor that got the company off to a flying start has run out of ideas and is now underperforming. Alarmed, the multinational’s managers try to discover what happened. But after a while, stagnation sets in and sales plateau. At first, sales take off, revenues grow pleasingly, and the entry is praised as a smart move. An established corporation looking for new international markets makes a foray into an emerging market, carefully limiting its exposure by appointing an independent local distributor. ![]()
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