Seven Rules Distribution

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Companies entering markets in developing countries learn quickly that they need to work with local distributors-but those

partnerships nearly always blow up in the end. Much ofthe blame lies with the multinationals themselves. They need to understand how their new partners are different from the ones at home.

Seven Rules o/lnternational Distribution by David Arnold

new international markets makes a foray into an / \ emerging market, carefully limiting its exposure by appointing an independent local distributor. At first, sales take off, revenues grow pleasingly, and tbe entry is praised as a smart move. But after a wbile, stagnation sets in and sales plateau. Alarmed, tbe multinational 's
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For many multinationals, it 's a foregone conclusion that local distributors bave merely been vehicles for market entry, temporary part-

For distributors in emerging markets seeking to sell multinationals 'products, my research findings are alarming. In the eyes of many corporations, the independent distributor is an endangered species. Virtually all executives of multinationals I interviewed bemoaned the lack of strategic marketing by distributor organizations, and many predicted that the gradual globalization of competition would lead to the disappearance of many such distributors. The track record of distributors in new markets seems to support this bleak view: in thegreatmajority of cases, multinationals bought or fired their distributors at some point during the partnerships or created their own direct-sales subsidiaries. In only 5% of the 250 cases I studied, multinationals switched to new distributors. A few distributors have managed to continue as representatives of multinationals over the long run (in some cases, for more than ten years). Most, it 's true, were located in countries not considered strategic by the multinationals-a characteristic over which the
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