March 2002; Vol. 11 Issue 3  
  
The Resource for Small and Emerging Businesses
www.kcsmallbiz.com     www.thebizstream.com
    
In Focus: 
  

Global Distribution: The Three P's for Success

By Brian Gauler, Director Business Development, EDI


Applying these simple marketing principles can lead to success in international markets.

By Brian Gauler

Often the words global distribution are used to refer to the logistics of getting goods to market. As a result, when global distribution is mentioned, most people tend to think of shipping, warehousing, documentation and freight-related issues.
For the marketing manager, however, these words have a much broader meaning than transportation they describe the process of establishing trade relationships with intermediaries that sell their products in select international markets. This is often just referred to as establishing distribution.
So how do you establish these trade relationships (that is, global distribution) with intermediaries? After all, until you establish a network of trade distributors, representatives and agents, you won't need to worry about the transportation logistics noted earlier.
Quite simply, establishing success in global distribution involves following these three P's: planning, programs and pricing. Planning involves developing market strategies and action plans. Programs refers to creating a system for meeting the needs of your intermediaries. Pricing involves creating strategies to support the costs of your programs while remaining competitive. A company that focuses on these aspects can be more assured of initial success in establishing distribution.
Let's take a look at each one in a bit more detail.
Planning
The single most important aspect of planning is the marketing plan. As important as this document can be, it is often the one that that companies give the least attention.
A market plan should identify your company's current situation, determine problems and opportunities (often referred to as a S.W.O. T. analysis; that is determining strengths, weaknesses, opportunities and threats), establish measurable goals, define strategies, and create action plans to accomplish your goals and objectives.
In short, the marketing plan serves as the rudder for keeping your company on course as it traverses unfamiliar waters.

Programming
Programming generally involves creating systems to meet your intermediaries identified needs. Two key areas to consider are communication and trade support. For example, descriptions of your products and services, your company's capabilities/areas of specialty, technical information, and terms and conditions of sale are just some of the things you should include in any communication program you develop for intermediaries. Don't let the word program overwhelm you. Usually, a form that contains basic information about your company is all that is needed. The form serves as a program for letting others know about your company.
Developing a program to support trade intermediaries is essential for advertising and promotion (creating an advertising co-op program), sales and marketing (what are your terms and conditions) and after-sales support (warranty program; training program; parts program). By developing programs to meet these needs, you will be prepared to establish and serve a global distribution network.

Pricing
An obvious key element for developing global distribution is price. The question is, how do you convey pricing information to the intermediaries you are establishing? Equally important, how do you maintain confidentiality so your competitors don't know your prices?
Often these challenges can be overcome by creating a price list based on list price (no, this is not a play on words!). By communicating your prices as list prices, you can use discounts to reach the net price you will charge.
You can provide your list prices to anyone and treat your discounts as confidential. Usually, the tricky part isn't confidentiality; it's developing prices that are competitive yet provide sufficient margins for you to offer support services (programs).
For example, most overseas distributors prefer an FAS Port quote for your products since that includes the freight costs for getting your the goods to the U.S. port of departure. That means your company pays the freight costs, an additional expense that should be covered in the list price of your products. As noted previously, many U.S. firms create a program that includes trade discounts off their list prices (quantity discounts, freight costs, etc.) to assist their trade intermediaries in buying their goods.


As you can see, global distribution is much more than the logistics of getting your goods to the marketplace. And although establishing global distribution involves elements other than the three P's of planning, programming and pricing, they are nonetheless the keys to focus on as you prepare for your initial contacts with trade prospects.

Brian Gauler is Director of Business Development for Environmental Dynamics, Inc. in Columbia, Mo. He can be reached at (573) 474-9456 or Brian.Gauler@wasterwater.com