Global distribution channels are the way in which a company distributes and sells its products or services to end consumers. A global distribution channel is defined as selling and marketing a product to consumers across the world.
As noted in your text, the complexity of a global distribution channel is determined by two main factors. The first is the number of markets that a company must operate in and manage. The second is the number of ways in which a company must market and sell its products or services across these markets.
How complex these factors are depends on the type of business and product. For example, a business may find it easier to market and sell their product across different markets if it is a non-perishable good that can be delivered via shipping.
This article will discuss more about how to develop your global distribution channel depending on your type of business and product.
Number of companies
The more companies involved in the supply chain, the more chances there are for something to go wrong.
If one company goes out of business or has a production issue, then the whole supply chain is compromised. This can lead to excess inventory or lack of inventory, both of which are bad.
Companies around the world vary in quality and reliability, so choosing ones that are high quality and reliable is important. By researching companies before using them, you can prevent any issues down the line.
When doing business with foreign companies, it is important to have a written contract that details what will happen if one party fails to fulfill their part of the agreement. This way, neither party is left hanging and there is some sort of resolution.
These are just two ways that anyone can be more aware of international collaboration and precaution against issues later on.
Language barriers
Distributing your product internationally requires that people all over the world can understand how to use it. If your product is difficult to use, then it needs to be marketed and advertised well so people know how to use it.
Many companies invest in international advertising campaigns to create awareness of their products. This can be very expensive depending on the country you are targeting.
For example, many countries have banned advertising for cigarettes due to the health concerns related to them. As a result, it is very hard for cigarette companies to market their products in other countries because people do not know what they are.
When marketing your product internationally, make sure you hire staff that speak the native language of the country you are targeting and can convey your message clearly.
Cultural differences
When doing business with people from different countries, you will encounter different cultural norms.
For example, in some countries, it is common to negotiate prices. In other countries, this is considered an insult and a price cannot be negotiated.
Knowing these differences can help you market your product internationally as well as sell it at a fair price.
Additionally, marketing may differ depending on the culture. For example, in some cultures color is a bigger factor in marketing than in others. This may affect the way you design your packaging or advertise your product.
When expanding your business internationally, it is important to research the country and find professionals to help you navigate the culture.
Transportation distances
The farther a product has to travel, the more expensive it will be. This is because there are several stages of the supply chain where costs can be added.
If your product is made in one country and sold in another, then the cost of transporting your product to the selling country will be added to the production cost. If your product is made in one country and sold in another, then the cost of importing it into the other country will be added to the production cost.
If your product is made in one country and sold in another, then the cost of exporting it (shipping it abroad) will be added to the production cost. If your product is made in one country and sold in another, then the cost of internal transportation within that country will be added to the production cost.
There are many ways to try and cut down on these costs, but it all depends on where your manufacturer is located and what resources are available there.
Complexity increases with increased geographic fragmentation
As mentioned before, the complexity of a global distribution channel is determined by the number of countries involved in the distribution process, and by the number of steps required to transport goods from the point of origin to the point of destination.
When both of these factors increase, so does the complexity of the channel. More countries involved in the distribution process means more expenses, logistical challenges, and time required to complete the distribution process.
More steps in the process mean more opportunities for something to go wrong. For example, if customs checks are not performed properly at one stage, then all subsequent stages will be affected.
Additionally, different countries have different regulations regarding things like safety standards or taxation. Failure to comply with these can also disrupt the entire distribution channel.
Fragmentation leads to duplication of resources which increases cost
As mentioned before, the way in which industries are structured influences how global distribution channels are constructed.
If an industry is highly fragmented, then it is likely that there are many countries producing the same goods and/or providing the same services. These countries each have their own production systems and markets, which leads to duplication of resources.
For example, if there are many countries that produce cars, then all of these countries must invest in the infrastructure to build cars. This includes facilities, machines, and employees with specific skills to produce cars.
Similarly, if there are many countries that provide healthcare services, then all of these countries must invest in the infrastructure to provide these services. This includes hospitals and other facilities and staff.
These fragmentation effects lead to an increase in cost due to duplication of resources.
Increased cost leads to customer dissatisfaction
When you order a product online, you expect it to arrive quickly and without problems.
If the shipping takes too long, or if it takes too long to process the order, then the customer will be dissatisfied. Your customers will either have to wait longer for their purchase or go to another seller who can deliver quicker.
Shipping costs can also be a problem. If your business is based in the United States and your products are made there, then your shipping costs are probably not going to be cheap. This may lead customers who are located in other countries to go find a seller that is based in their country that offers cheaper shipping.
Having a complex global distribution channel means having different shipping costs depending on where the customer is located and what they are ordering. Having different prices for different people may cause customer dissatisfaction.
Customer dissatisfaction leads to loss in sales
Customer satisfaction leads to gain in sales, so it’s important to ensure your customers are satisfied with your products. If a customer purchases a product and is not satisfied with its quality or performance, they are likely not to purchase from that brand or store again.
Customer satisfaction is determined by the price, brand reputation, customer service, and product performance. If any of these are lacking, then the customer will be dissatisfied.
In order to have satisfied customers, you need to have a good supply chain management system in place that monitors all aspects of the chain-from sourcing materials to delivering the finished product to the customer.
As noted in your text, the complexity of a global distribution channel is determined by four factors: supplier selection criteria; logistics service provider selection; design of quality control procedures; and implementation of sustainability initiatives.
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