Why and how does a firm's distribution strategy vary among countries?
- Differences between countries
Retail concentration
Concentrated system → few retailers supply most of the market.
This system is more common in developed countries due to the use of cars, shared households with higher income and ownerships of fridges and freezers.
Fragmented system → many retailers supply the market, none with major a market share.
In contrast, fragmented systems are often found in developing countries where most consumers go by foot and rely on the community stores.
Channel length
Short channel length → concentrated system
Cheaper since firms don't have as many retailers to make contact with.
Long channel length → fragmented system
More expensive as the amount of retailers to contact increases.
Channel exclusivity
Refers to how difficult in is for a foreign firm to access a market. The main reason for high channel exclusivity is because retailers prefer to promote and sell products of established firms with whom they often have a long history.
Channel quality
Refers to the expertise, competencies, and skills of established retailers in a nation and their ability to sell and support the products of international businesses. Lack of a high quality channel may impede market entry.
- Choice of distribution strategy