Chapter 11 - Foreign Distributors

Question 1

Why do MNEs establish relationships with distributors?

Answer 1

To reduce their costs and minimise the risks associated with expanding abroad.

Question 2

Issue of using distributors

Answer 2

Costly

Time consuming

Question 3

Low hanging fruit

Answer 3

MNE sells its core products to the distributor

If it is captured, it leads to a fight between the MNE and distributor

Question 4

Arnold’s Observation

Answer 4

MNEs often select new countries for market seeking purposes in a largely unplanned or reactive manner

Question 5

Beginning of Arnold’s observations

Answer 5

Starts with a positive response to the unsolicited proposal from local distributors

MNEs invest very little in marketing and expect the distributor to do so instead

Question 6

Beachheads

Answer 6

The MNE waits and sees what can be achieved with minimal effort, and if it seems to work out, the MNE jumps in and overtakes the distributor.

Question 7

How to solve problems of international distribution in developing countries

Answer 7

Not to use the beachhead strategy

Maintain strategic control over important customers

To benefit from the local partner’s market knowledge and market access

Reduce risk associated with high demand uncertainty in the host market

Question 8

The 7 guidelines in order to avoid commonly observed patterns of local market underperformance

Answer 8

Proactively select location and only then distributors

Focus on distribution market development

Manage distributors as long term partners

Provide resources

Do not delegate marketing strategy to distributors

Secure, shared access to the distributor’s critical market

Link national distributors with each other