Basic Requirements for Selecting a Distribution Channel

In any country, industrially developed or developing economy, and in any market, urban or rural, rich or poor, all consumer and industrial goods are distributed. This process includes the very trade, the distribution of goods, the transfer of ownership of goods and, important from the point of view of marketing strategy, negotiations for sale and purchase between intermediaries, producers and consumers.

The facts that are taken into account when deciding whether to choose a distribution channel are as follows:

- availability of intermediaries in the market;

- placement, selection, motivation and termination of the work of intermediaries;

- control of the distribution channels.

To complete the marketing plan and to reach the target market, it is necessary to develop distribution channels. Each country or target market provides a specialist in international marketing with a unique system of intermediaries and distribution methods. The task of the marketer is to combine the existing intermediary system in the market that meets the requirements of the target market, with the constraints imposed by the company's policies and resources.

In Fig. 6.1 shows some possible distribution channels. The arrows indicate to whom the manufacturer or intermediary can sell the goods. The process includes all stages, from the producer of the goods and ending with the end user.

International Distribution Cables

Fig. 6.1. International distribution ropes

The ultimate goal is to get the target product market in a way that will satisfy the consumer. This means that the seller must influence the two distribution channel systems: in their country and in the country of the consumer market. In your country, the seller should have an organization (usually an international marketing department) working with participants in the distribution channels necessary for the movement of goods between countries. In a foreign country, the seller also has to watch the channels that supply the product to the end user. Ideally, the company controls the entire process or itself participates in it, following all the stages of distribution to the final consumer.

Otherwise, the result may be unsatisfactory distribution and failure in achieving marketing goals. However, in practice, full participation in the distribution is not always effective in terms of costs. As a result, the choice of distribution participants and effective control become priorities for the process or distribution channel by studying the specifics of a particular market.

The manager of international marketing meets with the problems of politics and strategy of the host country. The differences in the policy and problems of the foreign market from the problems faced by the producing country are not very significant, but the decisions taken are different, because market models and distribution channel variants are different.

Prior to the selection of intermediaries, the international marketing manager should clearly present the characteristics of the market, develop a policy of work and consider the following factors:

1) the precise marketing goals expressed in the requirements for the aggregate market volume of a particular product and the company's share in this market, as well as the net profit;

2) Exact financial and personal decisions on the development of international distribution;

3) control the length of the channel, terms of sale and ownership of the distribution channel.

The choice of the distribution channel and the form of its organization, ensuring the safety of the functioning of commodity-cash flows determine the successful operation in the subsequent stages of international marketing and ultimately give a positive or negative final result. It is no coincidence that the choice of distribution channel is one of the main components of international marketing.

The choice of the distribution channel is the decision to physically move and transfer the ownership of the goods (service) from the producer to the consumer, including transportation, storage and execution of transactions.

Tovarodvizhenie carried out through the appropriate channels. The ropes of commodity circulation are a set of organizations and persons acting as intermediaries or participants in the sale, accepting or helping to transfer ownership of the goods to another person. In other words, the channel of commodity circulation is the way goods move from producer to consumer.

Well-organized commodity circulation channels should perform the following functions:

- explore the existing market;

- provide information about the characteristics and needs of consumers;

- determine the conditions for the purchase and sale of products; establish contacts directly with consumers and final buyers of goods, conduct negotiations; distribute and sell the products; participate in the planning of the product range; distribute risks; to organize commodity circulation;

- stimulate the promotion of goods to the consumer, carry out promotional activities, sales, exhibition work, etc .; participate in pricing.

Such a wide range of traditional and specific functions performed by sales companies ensures the most effective sales of goods with less costs per unit of output.

Channels for the distribution of goods can be divided into the following types: direct, indirect and mixed.


Direct distribution channel consists of the producer and the consumer, it is also called the zero-level channel.

In the indirect distribution channel there is an intermediary (or intermediaries) between the producer and the consumer, which may be:

- supply and marketing organizations;

- wholesale bases;

- Exchange structures;

- trading houses and shops, etc.

Intermediaries are independent and dependent.

Depending on the number of intermediaries, one-level, two-level and multi-level channels are allocated. The more levels a channel has, the more difficult it is for a manufacturer to control it.

Choosing a distribution channel, the company creates a set of measures to create an optimal sales network. To effectively sell products, you should create a network of wholesale and retail stores, intermediate storage warehouses, maintenance points; determine the routes of goods movement; organize transportation of goods; ensure effective operation of the channel; prepare and conduct negotiations; conclude contracts and monitor their implementation.

An important role is played by the sales forecast, which shows how much a particular product (service) the firm will be able to sell to a certain group of consumers during the specified period with the appropriate software marketing support.

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