Many companies are exploring opportunities to expand their business to emerging markets or to new distribution channels. It is key to determine the right route to market and the right set-up of the supply chain to efficiently facilitate customers.

Distribution analysis and market entry strategy

Determining the right market entry strategy through a distribution analysis is the key to success. Markets across the globe are different and companies need to understand these differences when developing a tailormade market entry strategy. Such differences can include for instance economic, political, geographical, cultural, tax, legal and demographical factors, buying behavior, competition, distribution channels, available logistics infrastructure etc. When entering a new market or changing the distribution channel, companies need to assess the opportunities and related risks. Several market entry strategies exist including:

• The indirect sales model, utilizing a master importer or distributors for importing, sales & marketing, and distribution to the customers in this market
• The direct sales model, which requires an own legal entity responsible for import/export which gives the company the ability to control its own destiny
• Hybrid alternatives, for instance, a direct model for serving the large key accounts in a market and using distributors to serve the remainder of the customer base

Distribution strategy: route to market selection

The selected distribution channel will impact the required value chain and logistics set up. Key questions companies need to ask themselves when assessing the right route to market include:

• What is the right distribution network to serve the customer base?
• What is the impact of a legal entity in a market?
• What are the implications related to taxation, laws and regulations?
• What are the effects on the P&L? For example: A more direct model could increase the top line revenue and risk due to among others exchange rate volatility, inventory holding in a market and sales & marketing expenses
• What is the right operating model for a (more) direct model – which activities to insource or outsource?
• Which IT systems support the proposed market entry strategy?

These are just a few questions companies are asking when they are making a choice for a go to market model and/or distribution channel. The answers to these questions are different for various companies for various geographic markets and customer channels.

International Business Strategy & BCI advice

BCI Global supports companies in developing and implementing go to market strategies by:

• Evaluating market entry options
• Estimating the impact on revenue and positioning of the different distribution channel alternatives i.e. direct vs. indirect, central vs. decentral, etc.
• Determining the financial implications of the various alternatives
• Benchmarking what other companies have done in the same geography
• Investigating implications from taxation, legal and regulatory (compliance), import, IT and supply chain perspectives

Result: a well based business case with concrete recommendations and a detailed implementation plan.

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